<PAGE>
As filed with the Securities and Exchange Commission on March 20, 2000
Registration No. 333-32754
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
MEDIAPLEX, INC.
(Exact name of Registrant as specified in its charter)
----------------
<TABLE>
<S> <C> <C>
Delaware 7372 94-3295822
<CAPTION>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
177 Steuart Street, Second Floor
San Francisco, California 94105
(415) 808-1900
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
----------------
Gregory R. Raifman
Chairman and Chief Executive Officer
Mediaplex, Inc.
177 Steuart Street, Second Floor
San Francisco, California 94105
(415) 808-1900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
Aaron J. Alter, Esq. Gregory C. Smith, Esq.
Michelle L. Whipkey, Esq. Matthew M. Greenberg, Esq.
Linda M. Cuny, Esq. Jason P. Fiorillo, Esq.
Alicia Morga, Esq. Skadden, Arps, Slate, Meagher & Flom LLP
Wilson Sonsini Goodrich & Rosati 525 University Avenue
Professional Corporation Palo Alto, California 94301
650 Page Mill Road (650) 470-4500
Palo Alto, California 94304
(650) 493-9300 ----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
----------------
The Registrant hereby amends this Registration Statement on such dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 20, 2000
5,500,000 Shares
[LOGO OF MEDIAPLEX]
Common Stock
--------
We are selling 4,125,000 shares of common stock and the selling stockholders
are selling 1,375,000 shares of common stock. We will not receive any of the
proceeds from shares sold by the selling stockholders.
Our common stock is listed for trading on The Nasdaq Stock Market's National
Market under the symbol "MPLX." On March 16, 2000, the last reported sales
price for our common stock was $60.125 per share.
The underwriters have an option to purchase a maximum of 825,000 additional
shares from us to cover over-allotments of shares.
Investing in the common stock involves risks. See "Risk Factors" on page 7.
<TABLE>
<CAPTION>
Underwriting
Discounts Proceeds to
Price to and Proceeds to Selling
Public Commissions Mediaplex Stockholders
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total................... $ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about April ,
2000.
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.
Joint Book Running Managers
Credit Suisse First Boston Lehman Brothers
--------
Salomon Smith Barney
SG Cowen
U.S. Bancorp Piper Jaffray
The date of this prospectus is , 2000
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Note Regarding Forward-Looking Statements................................ 19
Use of Proceeds.......................................................... 20
Price Range of Common Stock.............................................. 20
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Dilution................................................................. 22
Selected Financial Data.................................................. 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business................................................................. 33
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 51
Related Party Transactions................................................. 63
Principal and Selling Stockholders......................................... 66
Description of Capital Stock............................................... 68
Shares Eligible For Future Sale............................................ 71
Underwriting............................................................... 73
Notice To Canadian Residents............................................... 75
Legal Matters.............................................................. 76
Experts.................................................................... 76
Where You Can Find More Information........................................ 76
Index to Financial Statements.............................................. F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information different. This document may only be used where it is legal to sell
these securities. The information contained in this document may only be
accurate as of the date of this document.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the securities being sold in this
offering and the financial statements and notes to those statements appearing
elsewhere in this prospectus.
Mediaplex
We provide technology-based services that enable companies to integrate
their internal business data with their online advertising and direct marketing
activities to deliver customized messages and offers to Web site visitors. Our
services encompass planning, executing, monitoring and analyzing Web-based
advertising and marketing campaigns, and are based upon our proprietary
technology, tradenamed "MOJO." MOJO is an acronym for "mobile Java objects,"
which are discrete pieces of software written in Java code that perform
specialized functions and communicate with each other. The objects are mobile
because they can reside on our servers or our clients' servers, and can be
moved with ease. Our technology, which was designed with the privacy of
consumers in mind, can automatically change the content of an advertiser's
Internet messages and offers in real time, or virtually instantaneously, in
response to changes in their underlying business variables, such as inventory
levels, product pricing and customer data.
For example, companies try to avoid marketing goods that are out of stock,
and often want to discount items that are overstocked or perishable, such as
hotel rooms or airline seats. In addition, marketers may wish to target a
particular geographic area or group of consumers. Our technology draws upon a
company's up-to-the-minute business data to tailor the message for an adjusted
price, a different product or mix of products, or any other message the company
would like to communicate. We believe the real-time customization of messages
will increase consumer response to online advertisements and marketing, thereby
improving companies' returns on advertising and marketing expenditures.
The rapid growth in the worldwide online population and spending related to
e-commerce, or commerce conducted over the Internet, has established the
Internet as an important advertising medium. Forrester Research, Inc.
anticipates that U.S. online advertising spending will grow from $2.8 billion
in 1999 to $17.2 billion in 2003. To date, online advertising has not achieved
effective "one-to-one" marketing, which entails delivery of the right message
to the right consumer at the right time. The ability to send a customized
message in real time and in compliance with privacy standards remains a
significant challenge, which if met, would enable companies to use the Internet
as an effective marketing and sales channel.
We believe we are the first company to offer a solution for businesses that
integrates their internal business data with online advertising and direct
marketing campaigns to deliver customized messages to consumers in real time.
The benefits of our services include the following:
. Comprehensive Online Advertising Campaigns. We provide a wide range of
online campaign services including strategic planning, consumer
targeting, media buying, ad serving, and results measurement and
reporting for advertisements that have been designed and created by our
clients or their advertising agencies.
. Real-time Tracking and Measuring of Campaign Results. We continually
monitor a variety of measures, such as click-through and conversion
rates, and provide Internet access to performance reports 24 hours a
day.
. Message Re-targeting. We can use Internet browser-based tracking tools
to capture and analyze data on site visitation patterns, although we do
not maintain, share or sell any personally identifiable data or
anonymous user profile information. We can, however, use this data to
refine future messages to consumers whose visitation patterns we have
tracked.
3
<PAGE>
. Real-time Messaging. We can change the content and site placement of
online advertisements in real time. This enables a company to tailor a
message based on predefined business parameters and a Web site visitor's
general profile in order to deliver the right message virtually
instantaneously.
. Integration of Customers' Business Information. Our MOJO technology
enables us to integrate business information with an online advertising
campaign to customize and deliver advertisements in real time based on
Web site visitors' general profiles and a client's relevant business
information such as inventory and pricing levels.
. Consumer Privacy. Our MOJO architecture was designed with the privacy of
consumers in mind. MOJO does not rely on personally identifiable
information or anonymous user profiles to deliver a message.
We currently generate the substantial majority of our revenues from
advertising campaign management services. We have also deployed campaigns for
eleven clients utilizing varying features of our message management services.
To date, we have not generated material revenue from our message management
services. Although our revenues have increased from $3.6 million for 1998 to
$26.4 million for 1999, we have lost approximately $39.6 million since
inception. We have not been profitable in any quarter and expect to continue to
incur losses for the foreseeable future.
After the consummation of this offering, our executive officers and
directors will, directly or indirectly, control approximately 18,580,351 shares
of our common stock, representing approximately 51.9% of the total shares that
will be outstanding. As a result, these persons will be able to control the
election of our directors and other matters requiring stockholder approval.
Our principal executive offices are located at 177 Steuart Street, Second
Floor, San Francisco, California 94105 and our telephone number is (415) 808-
1900. Our Web site is located at www.mediaplex.com. Information contained on
our Web site does not constitute part of this prospectus.
We were incorporated in California in September 1996 as Internet Extra
Corporation. On April 1, 1998, we set up a wholly-owned subsidiary, MediaPlex,
Inc., a California corporation, to conduct our current business. We merged
MediaPlex, Inc. with Internet Extra Corporation and reincorporated the merged
entity under the name "Mediaplex, Inc." in Delaware in November 1999. As used
in this prospectus, "we" and "us" refers to Mediaplex, Inc. and not to the
underwriters.
Mediaplex(TM), MOJO(TM), the Mediaplex logo, Storyboard Messaging SM,
Multiple Messaging SM, eBusiness Messaging SM and Queued Creative SM are our
trademarks and service marks. We have applied to register Mediaplex and MOJO,
our trademarks. All trademarks, service marks and trade names appearing in this
prospectus are the property of their respective holders.
4
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by Mediaplex................. 4,125,000 shares
Common stock offered by the selling stockholders.. 1,375,000 shares
Common stock outstanding after the offering....... 35,824,980 shares
Use of proceeds................................... For working capital,
capital expenditures,
potential acquisitions and
other general corporate
purposes, including
expenses associated with
international expansion.
See "Use of Proceeds."
Nasdaq National Market symbol..................... MPLX
</TABLE>
The share amounts in this table are based on shares outstanding as of
February 29, 2000. This table excludes:
. 9,505,621 shares underlying options outstanding at a weighted average
exercise price of $2.39 per share, of which 5,508,052 were exercisable
under the 1997 Stock Plan and the Amended and Restated 1999 Stock Plan;
. 2,403,939 shares available for future issuance under the Amended and
Restated 1999 Stock Plan;
. 875,000 shares issuable upon the exercise of warrants outstanding at a
weighted average exercise price of $0.97 per share; and
. 800,000 shares available for issuance under our 1999 Employee Stock
Purchase Plan.
--------
Except as otherwise indicated, all information in this prospectus assumes
that the underwriters do not exercise the option granted by us to purchase
additional shares of common stock in this offering. See "Underwriting."
5
<PAGE>
Summary Financial Data
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1997 1998 1999
--------------- --------------- ----------------
(in thousands, except share and per share data)
<S> <C> <C> <C>
Statement of Operations
Data:
Revenues................... $ 426 $ 3,588 $ 26,405
Gross (loss) profit........ (19) 818 5,987
Loss from operations....... (1,115) (1,772) (22,727)
Net loss................... (1,117) (2,019) (21,815)
Net loss attributable to
common stockholders....... (1,117) (2,019) (36,175)
Net loss per share
attributable to common
stockholders--basic and
diluted................... $ (0.13) $ (0.25) $ (2.34)
Weighted average shares
used to compute net loss
per share--basic and
diluted................... 8,457,464 8,186,127 15,426,913
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1999
---------------------------
Actual As Adjusted
------------ --------------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................ $ 78,052 313,067
Working capital...................................... 84,085 319,100
Total assets......................................... 103,442 338,457
Long-term debt....................................... 280 280
Total stockholders' equity........................... 90,713 325,728
</TABLE>
The as adjusted column reflects our receipt of the estimated net proceeds
from the sale of the 4,125,000 shares of common stock offered by us in this
offering at an assumed public price of $60.125 per share, and after deducting
the underwriting discount and estimated offering expenses payable by us.
6
<PAGE>
RISK FACTORS
An investment in our common stock is very risky. You should carefully
consider the risks described below, together with all other information in this
prospectus, before buying shares in this offering.
Risks Related to Our Company
Our limited operating history makes financial forecasting and evaluation of our
business difficult.
We were founded in 1996 and only began selling our advertising campaign
management services in April 1998. In addition, we have only recently begun
deploying our MOJO technology in client advertising campaigns. In the year
ended December 31, 1999, we employed portions of our MOJO technology in six
clients' campaigns, two of which were new clients in the fourth quarter of
1999. Consequently, we have only slightly more than one year of relevant
operating history upon which you may evaluate our operations and financial
prospects. Our limited operating history makes it difficult to forecast our
future operating results, and for you to evaluate our future revenue and income
potential, as well as your investment in our common stock. In particular, our
limited operating history makes it difficult to evaluate our ability to:
. purchase appropriate media space at reasonable costs;
. attract new advertisers and maintain current client relationships;
. achieve effective ad campaign results for our clients;
. develop new relationships and maintain existing relationships with
advertising agencies, our marketing alliance partners and other third
parties;
. continue to develop and upgrade our MOJO platform and other technology to
keep pace with the growth of the Internet advertising industry and
changes in technology; and
. continue to expand the number of services we offer.
We have a history of losses, expect future losses and may never become
profitable.
We have not achieved profitability in any period to date and, given the
level of planned operating and capital expenditures, we expect to continue to
incur losses and negative cash flows for the foreseeable future. Our
accumulated deficit as of December 31, 1999 was approximately $39.6 million. We
incurred losses of $21.8 million for the year ended December 31, 1999 and $2.0
million for the year ended December 31, 1998. If our revenues decrease or grow
more slowly than we anticipate, or if our operating expenses exceed our
expectations and cannot be adjusted accordingly, our business will be harmed.
Furthermore, if we are unable to generate a long-term profit, we will
eventually have to cease operations.
Variations in quarterly operating results, due to factors such as changes in
demand and the mix of services we provide, may cause our stock price to
decline.
It is possible that in future periods our results of operations will be
below the expectations of securities analysts. If so, the market price of your
shares would likely decline. Our quarterly operating results have fluctuated in
the past and are likely to continue to do so in the future. We believe that
quarter-to-quarter comparisons of our operating results are not a good
indication of our future performance and should not be relied upon to predict
our future performance or our stock price.
Our quarterly revenues, expenses and operating results could vary
significantly from quarter-to-quarter for several other reasons, many of which
are beyond our control. These factors include:
. demand for our advertising services and mix of services we provide;
7
<PAGE>
. addition of new or loss of current advertisers and advertising agencies;
. decisions by advertisers or advertising agencies to implement or delay
campaigns;
. deployment of new services we may offer;
. changes in availability and pricing of advertising space;
. changes in our pricing policies or the pricing policies of our
competitors; and
. costs related to acquisitions of technology or businesses.
Our current and future expense estimates are based, in large part, on
estimates of future revenues, which are difficult to predict, and on our
investment plans. In particular, we plan to increase our operating expenses
significantly in order to expand our sales and marketing operations, to enhance
our proprietary software and to expand internationally. We may be unable to, or
may elect not to, adjust spending quickly enough to offset any unexpected
revenues shortfall. If these expenses are not accompanied by increased
revenues, our results of operations and financial condition would be harmed.
Further, we are subject to employer payroll taxes when our employees
exercise their non-qualified stock options. The employer payroll taxes are
assessed on each employee's gain, which is the difference between the price of
our common stock on the date of exercise and the exercise price. These employer
payroll taxes will be recorded as operating expenses in the period those
options are exercised based on the aggregate gains realized by employees.
During a particular period, these payroll taxes could be material. However,
because we are unable to predict our future stock price and the number of
optionees who may exercise during any particular period, we cannot predict
what, if any, expense will be recorded in a future period and the impact on our
future financial results.
Our revenues depend upon a few key clients, and if we lose a major client, our
revenues may be significantly reduced.
Our revenues have been derived from a limited number of advertisers and
advertising agencies that use our services. Our quarterly and annual results of
operations would be harmed by the loss of any of these clients. In 1998, DATEK
Online and uBid accounted for approximately 56% and 21% of our revenues,
respectively. In 1999, ShopNow.com and DATEK Online accounted for approximately
12% and 10% of our revenues, respectively. In addition, four customers
accounted for 76% of our outstanding accounts receivable at December 31, 1998
and one customer accounted for 12% of our outstanding accounts receivable at
December 31, 1999. We expect that some of these entities may continue to
account for a significant percentage of our revenues for the foreseeable
future. Advertisers typically purchase advertising that runs for a limited time
under short-term arrangements ranging from 30 days to one year. Currently only
a limited number of our clients purchase our advertising services under a long-
term contract. Current advertisers may not continue to purchase advertising
from us or we may not be able to successfully attract additional advertisers.
In addition, the non-payment or late payment of amounts due to us from a
significant advertiser or ad agency could harm our financial condition.
Further, our advertising agency customers may develop online message management
capabilities in-house, thus eliminating their need for our services.
We could be held liable for failing to comply with current federal, state and
foreign laws governing consumer privacy or our own stated privacy policies.
Failure to comply with applicable foreign, federal and state laws and
regulatory requirements of regulatory authorities may result in, among other
things, indemnification liability to our clients and the advertising agencies
we work with, administrative enforcement actions and fines, class action
lawsuits, cease and desist orders, and civil and criminal liability. Our stated
privacy policy is to not maintain, share, or sell any personally identifiable
data or anonymous user profile information, and our clients retain the sole and
exclusive right to use any data that they have obtained through explicit
permission from an Internet user. Our failure to comply with this stated policy
could result in similar consequences under federal and state fair trade acts.
8
<PAGE>
The Federal Trade Commission and state attorneys general have been
investigating Internet service providers regarding their use of personal
information. Recently, class action lawsuits have been filed alleging
violations of privacy laws by Internet service providers. In October 1998, the
European Union adopted a directive addressing data privacy that may result in
limitations on our ability to collect and use information regarding Internet
users. These restrictions may limit our ability to target advertising in most
European countries. Our failure to comply with these or other federal, state or
foreign laws could result in liability and materially harm our business.
Future governmental or industry restrictions or regulations related to privacy
on the Internet could limit the effectiveness and reduce the demand for
Internet advertising.
Federal and state legislatures have recently proposed limitations on the
collection and use of information regarding Internet users. For instance, one
proposed restriction would require Web sites to obtain the permission of their
Web visitors before aggregating, sharing or selling any information related to
those Web visitors. Similarly, the high-technology and direct marketing
industries are considering various new, additional or different self-regulatory
standards. If the gathering of profiling information were to be curtailed,
Internet advertising would be less effective, which would reduce demand for
Internet advertising and harm our business.
We may be held liable for our clients' non-compliance with privacy regulations
or their own stated privacy policies.
Our customers are also subject to various federal and state regulations
concerning the collection and use of information regarding individuals. These
laws include the Children's Online Privacy Protection Act, the Federal Drivers
Privacy Protection Act of 1994, the privacy provisions of the Gramm-Leach-
Bliley Act, as well as other laws that govern the collection and use of
consumer credit information. We cannot assure you that our clients are
currently in compliance, or will remain in compliance, with these laws and
their own privacy policies. We may be held liable if our clients use our
technology in a manner that is not in compliance with these laws or their own
stated privacy standards.
If we fail to establish, maintain and expand our business and marketing
alliances, our ability to grow could be limited, we may not achieve desired
revenues and our stock price may decline.
In order to grow our business, we must generate, retain and strengthen
successful business and marketing alliances with companies in industries
including:
. Internet and traditional media advertising;
. business software;
. enterprise resource planning;
. Web site development and consulting; and
. information technology consultants.
We depend, and expect to continue to depend, on our business and marketing
alliances, which are companies with which we have written or oral agreements to
work together to provide services to our clients, to refer business from their
clients and customers to us. If companies with which we have business and
marketing alliances do not refer their clients and customers to us to perform
their online campaign and message management, our revenues and results of
operations would be severely harmed. We currently expect that a significant
amount of our future revenues will need to be generated through these
relationships. In addition, if companies with which we have business and
marketing alliances do not provide high quality products and services to our
mutual clients, our sales could suffer. We have little control over the amount
of resources these companies will devote to online advertising or referring
their clients to our services. We may not be able to generate and maintain
adequate relationships to offset the significant resources that are necessary
to develop marketing efforts to reach clients of our business and marketing
alliances.
9
<PAGE>
We are substantially dependent upon our MOJO technology for our future
revenues, and if our MOJO technology does not generate revenues, our business
may fail.
We believe that our future revenues are substantially dependent on the
acceptance by clients of the use of our MOJO technology, which we believe is
the cornerstone of our business. If our MOJO technology does not perform as
anticipated or otherwise does not attract clients to use our services, our
operations will suffer. We began using our MOJO technology to provide
advertising and direct marketing services in April 1999, and have used it in
six campaigns as of December 31, 1999. We have only recently introduced message
management services using our MOJO technology and these services remain largely
untested. To date, we have not generated any material revenues from message
management services. In addition, we have incurred and will continue to incur
significant costs in developing our MOJO technology. If our revenues generated
from the use of our MOJO technology do not cover these development costs, our
financial condition would suffer.
Our MOJO technology is relatively new and untested; if our MOJO technology does
not perform as anticipated, we would need to devote significant resources to
address defects, and our reputation would be damaged.
Our MOJO technology is complex and has had, and may have in the future,
errors, defects or performance problems. In particular, we may encounter
problems when it is more broadly used or when it is updated to expand and
enhance its capabilities. Although we have internally tested our MOJO
technology extensively, we have only used portions of it in six campaigns as of
December 31, 1999. Consequently, our technology may still malfunction or suffer
from design defects. If our technology malfunctions or contains such defects,
our services may not be reliable or compatible in certain online environments
used by our clients. In such instances, we would need to devote significant
resources to address these defects, and any problems could result in lost
revenues and damage to our reputation.
If our MOJO technology suffers from design defects, we may need to expend
significant resources to address resulting product liability claims.
Our business will be harmed if our MOJO technology suffers from design
defects and, as a result, we may become subject to significant product
liability claims. Technology as complex as ours may contain design defects
which are not detectable even after extensive internal testing. Such defects
may become apparent only after widespread commercial use. Our contracts with
our clients currently do not contain provisions to limit our exposure to
liabilities resulting from product liability claims. We currently do not carry
any insurance against product liabilities. Although we have not experienced any
product liability claims to date, we cannot assure you that we will not do so
in the future. Any product liability claim brought against us could materially
harm our business.
If we fail to effectively manage our growth, our management and resources could
be strained and our ability to capture new business could suffer.
We have grown significantly since our inception and in order to succeed we
must grow quickly in the future. Future expansion could be expensive and strain
our management and other resources. As we continue to increase the scope of our
operations, we will need an effective planning and management process to
implement our business plan successfully in the rapidly evolving market for
Internet advertising. Our failure to manage this growth could seriously harm
our business. We have increased our number of employees from 19 at December 31,
1998 to 140 at December 31, 1999. In addition, we have recently opened an
office in Germany, and we anticipate that we will further expand international
operations in 2000.
The loss of our key personnel, including our chief executive officer, president
and chief operating officer, or any inability to attract and retain additional
personnel, could affect our ability to grow our business.
Our future success depends to a significant extent on the continued service
of our key senior management, technical and professional service and support
personnel. The loss of the services of any member of our
10
<PAGE>
management team, in particular our chief executive officer, president and chief
operating officer, would harm our business. Although we have employment
agreements with some of our key senior management, namely, Gregory R. Raifman,
Jon L. Edwards, Barclay Jiang and Walter Haefeker, any of these individuals
could nonetheless terminate their employment with us at any time. All of our
other employees are at-will. Because of the substantial competition for
qualified personnel in Northern California, we could suffer substantial
attrition and could lose key members of our management. We would also be harmed
if one or more of our officers or key employees decided to join a competitor or
otherwise compete with us. In addition, because many of our executives,
including our chief financial officer, have only recently joined us, our
management team has only worked together for a short time and may not work
effectively together.
Our future success also depends on our continuing ability to attract, retain
and motivate highly skilled employees. Competition for qualified personnel in
the high technology industry is intense, particularly in the San Francisco Bay
region of Northern California, where our principal offices are located. If we
fail to hire and retain a sufficient number of sales, marketing, technical,
service and support personnel, we will not be able to maintain or expand our
business.
Our sales and implementation cycle is lengthy, which could divert our financial
and other resources, and is subject to delays, which could result in delayed
revenues.
If the sales and implementation cycle of our services is delayed, our
revenues will likewise be delayed. Our sales and implementation cycle is
lengthy, causing us to recognize revenues long after our initial contact with a
client. During our sales effort, we spend significant time educating
prospective clients on the use and benefit of our campaign and message
management services. As a result, the sales cycle for our products and services
is long, ranging from a few weeks to several months for our larger clients. The
sales cycle for our new message management services is likely to be longer than
the sales cycle for our other current campaign management services because we
believe that clients may require more extensive approval processes related to
integrating internal business information with their online advertising
campaigns. In addition, in order for a client to implement our services, the
client must commit a significant amount of resources over an extended period of
time. Furthermore, even after a client purchases our services, the
implementation cycle is subject to delays. These delays may be caused by
factors within our control, such as possible technology defects, as well as
those outside our control, such as clients' budgetary constraints, internal
acceptance reviews and the complexity of clients' online advertising needs.
Sustained or repeated system failures could significantly disrupt our
operations, cause client dissatisfaction and reduce our revenues.
The continuing and uninterrupted performance of our computer systems is
critical to our success. Our operations depend on our ability to protect our
computer systems against damage from fire, power loss, water damage,
telecommunications failures, viruses, vandalism and other malicious acts, and
similar unexpected adverse events, including earthquakes. Although we maintain
system backup and auxiliary systems to mitigate the damage from the occurrence
of any of these events, we may not have taken adequate steps to guard against
every difficulty that could occur. Clients may become dissatisfied by any
system failure that interrupts our ability to provide our services to them,
including failures affecting the ability to deliver advertisements quickly and
accurately to the targeted audiences. Sustained or repeated system failures
would reduce significantly the attractiveness of our services to advertisers.
In addition, interruptions in our services could result from the failure of
our telecommunications providers to provide the necessary data communications
capacity in the time frame required. Our ad network operations and computer
hardware is primarily housed at Verio, Inc. and AboveNet Communications, Inc.,
third-party providers of Internet communication services located in San
Francisco and San Jose, California, respectively. In addition, the failure of
any advertising server system such as ours, including failures that delay the
delivery of advertisements to Internet sites, could reduce client satisfaction
and severely harm our business, results of operations and financial condition.
11
<PAGE>
In the past, users have occasionally experienced difficulties due to
software incompatibility or system failures unrelated to our systems. In
particular, on two occasions our network operations and computer hardware
located in San Francisco experienced power failures that affected our ability
to deliver our ad serving services for fifteen minutes and one hour,
respectively. On another occasion, the same facility had network routing
problems that caused a high number of retries to serve ads, which slowed down
our ad serving operations. Although these disruptions have not had a material
effect on our business, any further disruption in the Internet access provided
by third-party providers or any failure of third-party providers to handle
higher volumes of user traffic could seriously harm our business, results of
operations and financial condition.
Our technology has not yet been fully tested at higher capacities, and capacity
constraints could reduce our advertising revenues.
The volume of advertising delivered through our servers has increased from 1
million impressions per day in January 1999 to up to 39 million impressions per
day as of December 31, 1999, representing approximately one-third of our
capacity at that date. Although to date we have not had difficulties in meeting
demand for our services, further increases in the volume of advertising
delivered through our servers could strain the capacity of our MOJO technology
platform, which could lead to slower response times or system failures. This
would adversely affect the availability of advertisements, the number of
impressions received by advertisers and our advertising revenues. If we do not
effectively address capacity constraints or system failures, our business,
results of operations and financial condition would be harmed.
Acquisitions or strategic investments may divert our management's attention and
consume resources necessary to sustain our business.
In March 1999, we acquired Netranscend Software, Inc., a Java-based business
automation solutions software company. We intend to continue pursuing selective
acquisitions of businesses and technologies to complement our current business.
Any future acquisition or investment may result in the use of significant
amounts of cash, potentially dilutive issuances of equity securities, the
incurrence of debt, and amortization expenses related to goodwill and other
intangible assets. In addition, acquisitions involve numerous risks, any of
which could harm our business, operating results or financial condition
including:
. difficulties in the integration and assimilation of the operations,
technologies, services and personnel of an acquired business;
. diversion of management's attention from other business concerns
. unavailability of favorable financing for future acquisitions; and
. potential loss of key employees in any acquired business.
If we fail to develop new technology-based services or improve our existing
technology-based services to adapt to the changing needs and standards of the
Internet advertising industry, sales of our services will decline.
The Internet advertising markets are characterized by rapidly changing
technologies, evolving industry standards, frequent new product and service
introductions and changing client demands. The introduction of new services
embodying new technologies and the emergence of new industry standards and
practices could render our existing services obsolete and unmarketable or
require unanticipated investments in research and development. Our failure to
adapt successfully to these changes could harm our business, results of
operations and financial condition.
Our future success will depend on our ability to adapt to rapidly changing
technologies, to enhance existing technologies and to partner or develop and
introduce a variety of new technology-based services to address our clients'
changing demands. For example, advertisers may require the ability to deliver
12
<PAGE>
advertisements utilizing new rich media formats and more precise consumer
targeting techniques. In addition, increased availability of broadband Internet
access is expected to enable the development of new services that take
advantage of this expansion in delivery capability. We may also experience
difficulties that could delay or prevent the successful design, development,
introduction or marketing of our technology-based services. In addition, any
new technologies or enhancements that we develop must meet the requirements of
our current and prospective clients and must achieve significant market
acceptance. Material delays in introducing new technology-based services and
enhancements may cause clients to forego purchases of our services and purchase
those of our competitors.
A key component of our strategy is to enhance the return on investment and
other performance measurements for our advertiser and advertising agency
clients. We have limited experience in implementing and following such a
strategy and this strategy may not succeed.
We intend to expand our international sales efforts but do not have substantial
experience in international markets.
We intend to expand our international sales effects in the future. We opened
an office in Germany in August 1999 and expect to initiate operations in
selected additional international markets in 2000. As of December 31, 1999, we
had not generated any material revenues from international operations. We have
limited experience in marketing, selling and supporting our services abroad,
and we consequently may not be successful in these international markets.
Expansion into international markets will require extensive management
attention and resources.
We also may enter into a number of international alliances as part of our
international strategy and rely on these prospective business alliances to
conduct operations, establish local networks, aggregate Internet sites and
coordinate sales and marketing efforts. Our success in international markets
will depend on the success of our business alliances and their willingness to
dedicate sufficient resources to our relationships. In the future, any
international operations we commence will be subject to other risks, including:
. difficulties and costs of staffing and managing foreign operations;
. seasonal reductions in business activity;
. the impact of recessions in economies outside the United States;
. privacy laws and regulations outside the United States;
. changes in regulatory requirements;
. export restrictions, including export controls relating to encryption
technology;
. reduced protection for intellectual property rights in some countries;
. potentially adverse tax consequences;
. political and economic instability;
. tariffs and other trade barriers; and
. fluctuations in currency exchange rates.
Our failure to address these risks adequately may severely harm our ability
to expand our operations internationally.
If others claim that we are infringing their intellectual property, we could
incur significant expenses or be prevented from selling our services.
Third parties may claim that we are infringing their intellectual property
rights. In particular, third parties may claim that our MOJO technology, on
which our success depends in large part, infringes their intellectual
13
<PAGE>
property rights. The intellectual property rights of others may cover some of
our technology. Claims of intellectual property infringement might require us
to enter into royalty or license agreements; however, we may not be able to
obtain royalty or license agreements on terms acceptable to us, or at all. We
also may be subject to significant damages or an injunction against the use of
our services.
If any claims of infringement are brought against us, we could incur
significant expenses defending against those claims, and suffer additional
damages if our defense is not successful. Any litigation regarding our
intellectual property could be costly and time-consuming and divert the
attention of our management and key personnel from our business operations. The
complexity of the technology involved and the uncertainty of intellectual
property litigation increase these risks. A successful claim of patent or other
intellectual property infringement against us would immediately harm our
business and financial condition.
We may not be able to protect our technology from unauthorized use, which could
diminish the value of our services, weaken our competitive position and reduce
our revenues.
Our success depends in large part on our proprietary technology, including
our MOJO platform. In addition, we believe that our Mediaplex and MOJO
trademarks are key to identifying and differentiating our services from those
of our competitors. We may be required to spend significant resources to
monitor and police our intellectual property rights. If we fail to successfully
enforce our intellectual property rights, the value of our services could be
diminished and our competitive position may suffer.
We rely on a combination of patent, copyright, trademark and trade secret
laws, confidentiality procedures and licensing arrangements to establish and
protect our proprietary rights. Third-party software providers could copy or
otherwise obtain and use our technology without authorization or develop
similar technology independently which may infringe our proprietary rights. We
may not be able to detect infringement and may lose competitive position in the
market before we do so. In addition, competitors may design around our
technology or develop competing technologies. Intellectual property protection
may also be unavailable or limited in some foreign countries.
We generally enter into confidentiality or license agreements with our
employees, consultants, vendor clients and corporate partners, and generally
control access to and distribution of our technologies, documentation and other
proprietary information. Despite these efforts, unauthorized parties may
attempt to disclose, obtain or use our services or technologies. Our
precautions may not prevent misappropriation of our services or technologies,
particularly in foreign countries where laws or law enforcement practices may
not protect our proprietary rights as fully as in the United States.
Risks Related to Our Industry
Inadequate security on the Internet could limit the effectiveness of and reduce
the demand for our services and technology.
The failure of the Internet to continue to develop as a medium for the
purchase of goods and services would decrease the demand for online
advertising. Concerns over the security of transactions conducted over the
Internet and the privacy of consumers may inhibit the growth of the Internet
and online advertisers. Our clients generally have implemented security
features to protect the privacy and integrity of the data collected from their
users. However, this information may be susceptible to hacker interception,
break-ins and disruption. If any of these were to occur, or if a well-
publicized compromise of security were to occur, Internet usage may not
increase at the rate we expect and, consequently, our services would be
perceived as less effective or desirable by our clients.
Increased usage of filtering software could limit the effectiveness of and
reduce the demand for our services and technology.
Visitors to Web sites on which our advertising messages are placed may not
be aware that information regarding them is being collected by third-party data
profiling companies. There currently exists software that
14
<PAGE>
can limit the effectiveness of data profiling technology in capturing
information for a particular visitor to a Web site. Widespread use of this
limiting or inhibiting technology would decrease the effectiveness of our
services for our clients that are dependent upon the reliability of the
information we obtain from profiling companies, which would decrease the
attractiveness of those services to our clients. If this occurs, our business
would be significantly harmed.
Our business model and ability to generate significant revenues depend upon
broad market acceptance of Internet advertising.
Our business model relies on revenues generated primarily by providing
Internet advertising services to response-oriented advertisers. The Internet as
an advertising medium has not been in existence for a sufficient period of time
to demonstrate its effectiveness. Internet advertising, as well as technology-
based methods for targeting advertising and tracking, measuring and reporting
the results of Internet advertising may not achieve broad market acceptance.
Our ability to generate significant revenues from advertisers will depend, in
part, on our ability to:
. demonstrate to advertisers that advertising on the Internet will add
value and increase marketing effectiveness;
. attract and retain advertisers and advertising agencies by
differentiating the services and technology we offer; and
. obtain adequate available advertising inventory from a large base of
Internet sites.
Intense competition in the Internet advertising industry could reduce our
ability to gain clients and might require us to reduce prices, which could
reduce our revenues.
We face intense competition in the Internet advertising services industry.
Our primary competitor for providers of online media planning and buying
services is Avenue A, and our primary competitor for third party ad serving is
DoubleClick. We are in the process of terminating our contractual relationship
with DoubleClick. As a result, we expect competitive pressure from DoubleClick
to increase in the future.
The following categories represent current and potential competition:
. providers of online media planning and buying services, such as Avenue A;
. ad serving companies, such as AdForce, DoubleClick and Engage
Technologies;
. publisher networks that provide services directly to clients, such as
Flycast Communications, Adsmart and 24/7 Media;
. organizations that manage affiliate programs, such as LinkShare; and
. advertising agencies that have or elect to develop in-house online media
management capabilities, such as Lowe Interactive.
We believe that our ability to compete depends upon many factors both within
and outside of our control, including:
. the effectiveness, ease of use, performance and features of our
technology;
. client perceptions of the effectiveness of our services and technology;
. the price of our services;
. our ability to service our clients effectively over a broad geographic
basis; and
. the timing and acceptance of new services and enhancements to existing
solutions developed by us or our competitors.
15
<PAGE>
The intense competition among Internet sites has led to the creation of a
number of pricing alternatives for Internet advertising. These alternatives
make it difficult for us to project future levels of advertising revenues and
applicable gross margins that can be sustained either by us or the Internet
advertising industry in general.
We expect competition to continue to increase in our industry because there
are no substantial barriers to entry. In particular, advertising agencies
without in-house online media management capabilities, including those with
which we currently work, may develop these capabilities in the future. We
believe that, in addition, competition will continue to increase as a result of
industry mergers, partnerships and consolidations. For example, AdForce and
Flycast have been acquired by CMGI, AdKnowledge has been acquired by Engage
Technologies, a subsidiary of CMGI, and NetGravity has recently been acquired
by DoubleClick. As we expand internationally, we expect to face competition
from internationally-based competitors such as Mindshare Digital and Publicis
Technology, as well as our domestic competitors with international operations,
such as BBDO Interactive, Leo Burnett and the Interpublic Group. Companies
doing business on the Internet, including ours, must also compete with
television, radio, cable and print media for a share of advertisers' total
advertising budgets. Advertisers may be reluctant to devote a significant
portion of their advertising budget to Internet advertising if they perceive
the Internet to be a limited or ineffective advertising medium. In addition, as
we expand the scope of our Internet advertising and direct marketing services,
we may compete with a greater number of Internet sites and other media
companies across a wide range of different Internet services. Competitive
pressures could prevent us from growing, reduce our market share or require us
to reduce prices on our services, any of which could harm our business.
Many of our existing competitors have significantly greater financial,
technical, marketing, service and other resources, have a larger installed base
of users, have been in business longer or have greater name recognition than we
do. Some of our competitors' services may be more effective than our services
at performing particular functions or be more customized for particular needs.
Some large companies may attempt to build functions into their services that
are similar to functions of our services. Even if these functions are more
limited than those provided by our services, those services could discourage
potential clients from purchasing our services, as well as lead to price
reductions that could harm our revenues. In addition, companies larger than
ourselves may be more successful in purchasing advertising space.
Seasonality and cyclical spending may cause fluctuations in our quarterly
revenue, which may cause us to miss our revenue projections and result in a
decline in our stock price.
We believe that our revenues will be subject to seasonal fluctuations
because advertisers generally place fewer advertisements during the first and
third calendar quarters of each year. In addition, expenditures by advertisers
tend to be cyclical, reflecting overall economic conditions as well as
budgeting and buying patterns. Due to our short operating history and recent
revenue growth, the effect of seasonality on our quarterly revenue may not be
fully apparent until future quarters. A decline in the economic prospects of
advertisers or the economy generally could cause companies to discontinue,
delay or reduce online advertising spending. These events could reduce the
demand for our services and cause a decline in our stock price.
Potential clients in specific industries may require us to refuse business from
their competitors, limiting our business opportunities and stunting our revenue
growth.
To use our services most effectively, advertisers must integrate their
internal business data into their advertising campaigns to deliver a targeted
message. This type of integration may raise privacy concerns and prompt our
clients to require us to contract with them exclusively within their specific
industry. If our clients impose these restrictions on us, our potential client
base and revenue growth would be limited.
To fully utilize our MOJO-based services, we must have access to our
clients' proprietary business data. Many companies are wary of third parties
having access to their business information, because access by third parties
increases the risk that confidential business data may become known, even if
unintentionally, to outsiders who are not the intended recipients of the data.
These privacy concerns may be so great as to prompt
16
<PAGE>
our clients to attempt to contractually prohibit us from managing the online
advertising campaigns of their competitors. If our potential client base in a
particular industry was limited in this way, our business and future revenues
could be harmed. To date, a few clients have requested that we do not service
their competitors; however, we have not agreed to these requests. To address
our clients' concerns, we have established procedures to ensure the protection
of our clients' data, such as the use of separate teams to work with each
client and the use of separate, secure servers for clients' advertising and
message campaigns where a conflict may exist. However, we cannot assure you
that these measures will be adequate for our clients to continue to use our
services.
Government regulation and legal uncertainties of doing business on the Internet
may inhibit the commercial acceptance of the Internet and result in decreased
demand for our services.
Laws and regulations that apply to Internet communications, commerce and
advertising are becoming more prevalent. These regulations could affect the
costs of communicating on the Internet and adversely affect the growth in use
of the Internet. In turn, these regulations could result in decreased demand
for our services or otherwise harm our business.
Recently, the United States Congress enacted Internet legislation regarding
children's privacy, copyrights and taxation. A number of other laws and
regulations may be adopted covering issues such as user privacy, pricing,
acceptable content, taxation and quality of products and services. This
legislation could hinder growth in the use of the Internet generally and
decrease the acceptance of the Internet as a communications, commercial and
advertising medium. In addition, the growing use of the Internet has burdened
existing telecommunications infrastructure and has caused interruptions in
telephone service. Certain telephone carriers have petitioned the government to
regulate and impose fees on Internet service providers and online service
providers in a manner similar to long distance carriers.
Due to the global nature of the Internet, it is possible that, while our
transmissions originate in California, the governments of other states or
foreign countries might attempt to regulate our transmissions or levy sales or
other taxes relating to our activities. The laws governing the Internet remain
largely unsettled, even in areas where there has been some legislative action.
It may take years to determine whether and how existing laws including those
governing intellectual property, privacy, libel and taxation apply to the
Internet and Internet advertising. In addition, the growth and development of
the market for Internet commerce may prompt calls for more stringent consumer
protection laws, both in the United States and abroad, that may impose
additional burdens on companies conducting business over the Internet. Our
business could be adversely affected by the adoption or modification of laws or
regulations relating to the Internet.
Additional Risks That May Cause Your Investment in Our Stock to Decline
Because our directors and executive officers together own a large percentage of
our voting stock, your voting power may be limited, which may prevent an
acquisition of our company or depress our stock price.
After this offering, it is anticipated that our executive officers and
directors will beneficially own or control, directly or indirectly, 18,580,351
shares of common stock, which in the aggregate will represent approximately
51.9% of the outstanding shares of common stock. As a result, if these persons
act together, they will have the ability to control all matters submitted to
our stockholders for approval, including the election and removal of directors
and the approval of any business combination. This may delay or prevent an
acquisition or affect the market price of our stock.
Future sales of our common stock, including those purchased in this offering,
may depress our stock price.
A substantial number of our shares of common stock will become available for
sale on May 19, 2000, or within 90 days after the date of this prospectus.
Sales of such shares could depress the market price of our
17
<PAGE>
common stock. For a more detailed discussion of shares becoming available for
sale in the future, see "Shares Eligible for Future Sale."
We have adopted anti-takeover provisions in our charter documents that could
delay or prevent an acquisition of our company.
Our certificate of incorporation and bylaws contain provisions, such as
undesignated preferred stock, a staggered board and the restriction on the
persons that can call special board or stockholder meetings, which could make
it more difficult for a third-party to acquire us without the consent of our
board of directors. While we believe these provisions provide for an
opportunity to receive a higher bid by requiring potential acquirors to
negotiate with our board of directors, these provisions may apply even if the
offer may be considered beneficial by some stockholders.
18
<PAGE>
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under the captions "Prospectus Summary," "Risk Factors,"
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" and elsewhere in this prospectus are
forward-looking statements. These forward-looking statements include, but are
not limited to, statements about our plans, objectives, expectations and
intentions and other statements contained in the prospectus that are not
historical facts. When used in this prospectus, the words "expects,"
"anticipates," "intends," "plans," "believes," "seeks" and "estimates" and
similar expressions are generally intended to identify forward-looking
statements. The forward-looking statements contained in this prospectus are
subject to the provisions of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Because these forward-
looking statements involve risks and uncertainties, there are important factors
that could cause actual results to differ materially from those expressed or
implied by these forward-looking statements, including our plans, objectives,
expectations and intentions and other factors discussed under "Risk Factors."
19
<PAGE>
USE OF PROCEEDS
Our net proceeds from the sale of the 4,125,000 shares of common stock
offered by us in this offering, after deducting the underwriting discount and
estimated offering expenses payable by us, will be approximately $235.0
million. If the underwriters' over-allotment option is exercised in full, our
net proceeds from this offering will be approximately $282.1 million.
We expect to use the net proceeds from this offering for working capital,
capital expenditures and other general corporate purposes including expenses
associated with international expansion. In addition, we may use a portion of
the net proceeds to acquire complementary products, technologies or businesses;
however, we currently have no commitments or agreements and are not involved in
any negotiations to do so.
Pending use of the net proceeds of this offering, we intend to invest the
net proceeds in short-term, interest-bearing, investment-grade marketable
securities.
PRICE RANGE OF COMMON STOCK
Our common stock has been traded on the Nasdaq Stock Market's National
Market under the symbol "MPLX" since November 19, 1999, the date of our initial
public offering. The following table sets forth, for the periods indicated, the
high and low sales prices for our common stock as reported by the Nasdaq Stock
Market's National Market:
<TABLE>
<CAPTION>
High Low
------- ------
<S> <C> <C>
Fourth Quarter 1999 (from November 19, 1999).................... $ 78.13 $20.75
First Quarter 2000 (through March 16, 2000)..................... $104.13 $43.00
</TABLE>
The last reported sale for our common stock on the Nasdaq Stock Market's
National Market was $60.125 per share on March 16, 2000. As of February 29,
2000, we estimate that there were approximately 172 holders of record of our
common stock. This does not include the number of persons whose stock is in
nominee or "street name" accounts through brokers.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation
and expansion of our business and do not anticipate paying any cash dividends
in the foreseeable future.
20
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999.
Our capitalization is presented:
. on an actual basis; and
. on an as adjusted basis, to reflect our receipt of the estimated net
proceeds from the sale of the 4,125,000 shares of common stock offered by
us in this offering, at an assumed public offering price of $60.125 per
share, after deducting the underwriting discount and estimated offering
expenses payable by us.
<TABLE>
<CAPTION>
December 31, 1999
------------------
As
Actual Adjusted
-------- --------
(in thousands)
<S> <C> <C>
Long-term debt............................................. $ 280 $ 280
-------- --------
Stockholders' equity:
Common stock, $0.0001 par value; 150,000,000 shares
authorized, 31,690,855 shares issued and outstanding,
actual, 35,815,855 shares issued and outstanding, as
adjusted................................................ 3 4
Additional paid-in capital................................. 134,325 369,339
Warrants................................................... 2,472 2,472
Deferred stock compensation................................ (6,521) (6,521)
Accumulated deficit........................................ (39,566) (39,566)
-------- --------
Total stockholders' equity................................. 90,713 325,728
-------- --------
Total capitalization................................... $ 90,993 $326,008
======== ========
</TABLE>
The share amounts in this table are based on common stock outstanding as of
February 29, 2000. The foregoing table excludes:
. 9,505,621 shares underlying options outstanding under our stock option
plans at a weighted average exercise price of $2.39 per share, of which
5,508,052 were exercisable under the 1997 Stock Plan and the Amended and
Restated 1999 Stock Plan;
. 2,403,939 shares available for future issuance under the Amended and
Restated 1999 Stock Plan;
. 875,000 shares issuable upon the exercise of warrants outstanding at a
weighted average exercise price of $0.97 per share; and
. 800,000 shares available for issuance under our 1999 Employee Stock
Purchase Plan.
Please read the capitalization table together with the sections of this
prospectus entitled "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements included in this prospectus.
21
<PAGE>
DILUTION
As of December 31, 1999, our net tangible book value was $90.7 million, or
$2.862 per share of common stock. "Net tangible book value" per share
represents the amount of our total tangible assets reduced by the amount of our
total liabilities, divided by the number of shares of common stock outstanding.
As of December 31, 1999, our net tangible book value, on a pro forma basis to
give effect to the sale of the 4,125,000 shares offered in this offering, at an
assumed public offering price of $60.125 per share, and after deducting the
underwriting discount and estimated offering expenses payable by us, would have
been approximately $3.152 per share. This represents an immediate increase of
$6.233 per share to existing stockholders and an immediate dilution of $51.030
per share to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Public offering price per share $60.125
Pro forma net tangible book value per share as of December 31,
1999 $2.862
Increase per share attributable to new investors $6.233
------
Pro forma net tangible book value per share after the offering $ 9.095
-------
Dilution per share to new investors $51.030
=======
</TABLE>
The foregoing table excludes warrants and options to purchase 10,356,896
shares. Exercise of these warrants and options would result in additional
dilution.
22
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes included elsewhere
in this prospectus. The balance sheet data as of December 31, 1998 and 1999 and
the statement of operations data for the years ended December 31, 1997, 1998
and 1999 have been derived from our audited financial statements and related
notes included elsewhere in this prospectus. The balance sheet data as of
December 31, 1996 and 1997 and the statement of operations data for the period
from September 10, 1996 (inception) to December 31, 1996 are derived from
audited financial statements which have not been included in this prospectus.
Historical results are not necessarily indicative of the results to be expected
in the future.
<TABLE>
<CAPTION>
September 10,
1996
(inception) Years Ended December 31,
to December -----------------------------------
31, 1996 1997 1998 1999
------------- ---------- ---------- -----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................... $ -- $ 426 $ 3,588 $ 26,405
Cost of revenues........... -- 445 2,770 20,418
---------- ---------- ---------- -----------
Gross profit (loss)........ -- (19) 818 5,987
---------- ---------- ---------- -----------
Operating expenses:
Sales and marketing...... 23 481 820 7,399
Research and
development............. 49 347 556 4,135
General and
administrative.......... 31 256 636 5,067
Stock-based
compensation............ 152 11 578 11,360
Amortization of goodwill
and intangibles......... -- -- -- 753
---------- ---------- ---------- -----------
Total operating
expenses.............. 255 1,095 2,590 28,714
---------- ---------- ---------- -----------
Loss from operations....... (255) (1,115) (1,772) (22,727)
Interest income (expense),
net....................... -- (2) (247) 912
---------- ---------- ---------- -----------
Net loss................... (255) (1,117) (2,019) (21,815)
Beneficial conversion
feature of Series C
convertible preferred
stock..................... -- -- -- (14,360)
---------- ---------- ---------- -----------
Net loss attributable to
common stockholders....... $ (255) $ (1,117) $ (2,019) $ (36,175)
========== ========== ========== ===========
Net loss per share--basic
and diluted............... $ (0.07) $ (0.13) $ (0.25) $ (2.34)
========== ========== ========== ===========
Weighted average shares
outstanding............... 3,795,714 8,457,464 8,186,127 15,426,913
========== ========== ========== ===========
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1996 1997 1998 1999
------------- ---------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.. $ 27 $ 142 $ 375 $ 78,052
Working capital............ (46) (586) (1,863) 84,085
Total assets............... 52 262 1,444 103,442
Long-term debt............. -- 65 232 280
Accumulated deficit ....... (255) (1,373) (3,392) (39,566)
Total stockholders' equity
(deficit)................. (22) (558) (1,962) 90,713
</TABLE>
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read together with the financial statements and related
notes that are included later in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under
"Risk Factors" or in other parts of this prospectus.
Overview
We provide technology-based advertising and marketing services for companies
and advertising agencies that seek to optimize their Internet marketing
campaigns. Although we were incorporated in September 1996, we did not begin
offering our advertising campaign management services until April 1998. Before
April 1998, we operated under a different business model that generated
revenues primarily from the sale of advertising space on two Web sites formerly
operated by us that delivered sports and business news and information. We
decided to cease the operation of these sites because we determined that the
sites were not generating satisfactory operating results and because we
believed that our present business model represented a superior opportunity.
During the first half of 1998, we devoted most of our resources to developing
our new business plan and technology and establishing our technical and sales
organizations.
In the second quarter of 1998, we began generating revenues from our
advertising campaign management services, and since the fourth quarter of 1998
we have derived substantially all of our revenues from this source. Our
campaign management services include planning the online campaign, coordinating
the online and offline portions of the campaign, purchasing and placing online
media, and tracking, analyzing and reporting the results of the media campaign.
In the second quarter of 1999, we began utilizing our mobile Java objects, or
MOJO, architecture to enhance our service offerings and expand our business. We
have begun to broaden our revenue sources by leveraging the capabilities of our
MOJO architecture to offer message management services, which will allow
advertisers to integrate their internal business information into an online
advertising campaign and to tailor their advertising messages or offers in real
time. Currently we have eleven clients who use our message management services,
as compared to five clients who used our message management services in the
fourth quarter 1999. To date, we have not generated significant revenues from
message management services.
We currently provide advertising management services for a fixed fee, which
varies from client to client. This fee is principally based on the extent of
services provided and the direct cost of media placement. This cost of
purchasing advertising space on an Internet site is typically determined by the
cost per thousand impressions. Revenues from advertising management services
are recognized in the period that advertising impressions are delivered, or
placed on an Internet site, provided that no significant obligations on our
part remain at the end of the period and the collection of the resulting
receivable is reasonably assured. Our obligations often include, for instance,
guarantees of a minimum number of impressions. To the extent that significant
obligations remain, we defer recognition of the corresponding portion of the
revenues until these obligations are met.
In addition, we generate revenues from clients obtained through or referred
to us by an ad agency. If an ad agency is used, we will usually bill the ad
agency for work done on behalf of the agency's clients, and the ad agency will
then be responsible for obtaining full payment from the client. Sometimes,
although less frequently, we will directly bill that ad agency's client. We
expect the percentage of our total revenues that we obtain from clients
referred to us by ad agencies to increase in future periods. To date, we have
paid no referral fees to any ad agencies, nor have any ad agencies paid
referral fees to us, for referring clients. However, we expect to pay referral
fees to ad agencies in a limited number of cases. In addition, we may receive
referral fees in the future.
24
<PAGE>
Cost of revenues consists primarily of the cost of procuring advertising
space on third-party Internet sites and, to a lesser extent, of the
telecommunications and other costs related to maintaining our ad servers at
third-party locations. These costs are recorded in the period that the
advertising impressions are delivered and the related revenues are recorded.
Currently, we purchase advertising space on Internet sites for a particular
media campaign. In the future, we may enter into purchase commitments to obtain
advertising space in bulk without a particular media campaign identified in
order to obtain more favorable pricing.
To date, we have expensed all of our research and development costs in the
period in which we incur these costs. The period from achievement of
technological feasibility to the general availability of our software to
clients has been short, and therefore software development costs qualifying for
capitalization have been insignificant.
In March 1999, we acquired Netranscend Software, Inc., a Java-based business
automation solutions software company, for a note payable of $430,000, due in
four annual installments beginning in March 2000, and 1,979,000 shares of
common stock, with an estimated fair value of $1.29 per share. This acquisition
was accounted for under the purchase method of accounting. We recorded $3.0
million of goodwill and other identifiable intangible assets in connection with
this acquisition, which are being amortized over a three-year period.
We have a limited operating history upon which you may evaluate our business
and prospects. We incurred net losses of $255,000 in 1996, $1.1 million in
1997, $2.0 million in 1998 and $21.8 million in 1999. At December 31, 1999, our
accumulated deficit was $39.6 million, which includes $14.4 million related to
the beneficial conversion feature incurred for the issuance of our Series C
preferred stock. We anticipate that we will incur additional operating losses
for the foreseeable future.
Results of Operations
The following table sets forth our statement of operations data expressed as
a percentage of revenues:
<TABLE>
<CAPTION>
Years Ended
December 31,
-----------------------
1997 1998 1999
------ ----- ------
<S> <C> <C> <C>
Revenues............................................ 100.0% 100.0% 100.0%
Cost of revenues.................................... 104.6 77.2 77.3
------ ----- ------
Gross profit (loss)................................. (4.6) 22.8 22.7
------ ----- ------
Operating expenses:
Sales and marketing............................... 112.9 22.8 28.0
Research and development.......................... 81.5 15.5 15.7
General and administrative........................ 60.0 17.8 19.2
Stock-based compensation.......................... 2.6 16.1 43.0
Amortization of goodwill and intangibles.......... -- -- 2.9
------ ----- ------
Total operating expenses........................ 257.2 72.2 108.8
------ ----- ------
Loss from operations................................ (261.8) (49.4) (86.1)
Interest income (expense), net...................... (0.6) (6.9) 3.5
------ ----- ------
Net loss............................................ (262.4) (56.3) (82.6)
Beneficial conversion feature of Series C
convertible preferred stock........................ -- -- (54.4)
------ ----- ------
Net loss attributable to common stockholders........ (262.4)% (56.3)% (137.0)%
====== ===== ======
</TABLE>
Years Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenues. Revenues increased to $26.4 million for the year ended December
31, 1999 from $3.6 million for the year ended December 31, 1998. The period-to-
period increase was primarily due to the growth of our
25
<PAGE>
selling of campaign management services to a broad set of advertisers,
including advertising agencies, which we began in April 1998. In 1999,
substantially all of our revenues consisted of fees received for providing
campaign management services. In 1998, our revenues were primarily derived from
the sale of advertising on our Internet content sites.
Cost of Revenues. Cost of revenues increased to $20.4 million, or 77.3% of
revenues, for the year ended December 31, 1999 from $2.8 million, or 77.2% of
revenues, for the year ended December 31, 1998. The increase in cost of
revenues in 1999 was primarily due to the increase in our revenues. The cost of
revenues for the year ended December 31, 1999 comprised primarily media
placement costs, including the telecommunications and other costs related to
maintaining our ad servers at third-party sites, while the cost of revenues for
the year ended December 31, 1998 consisted primarily of the cost of maintaining
our Internet content sites.
Sales and Marketing. Sales and marketing expenses consist primarily of
compensation expenses, including salaries, commissions and related payroll
expenses, recruiting costs, and marketing expenses, including those expenses
associated with customer service and support. Sales and marketing expenses
increased to $7.4 million, or 28.0% of revenues, for the year ended December
31, 1999 from $820,000, or 22.8% of revenues, for the year ended December 31,
1998. The increase in sales and marketing expenses in both dollars and as a
percentage of revenue during 1999 was primarily due to the significant growth
of our sales and marketing organization in 1999 as we focused on selling
advertising campaign management services. The number of sales and marketing
personnel increased from 13 as of December 31, 1998 to 71 as of December 31,
1999. We expect that sales and marketing expenses will continue to increase.
Research and Development. Research and development expenses consist
primarily of compensation and related expenses for our internal development
staff and fees for contractor services. Research and development expenses
increased to $4.1 million, or 15.7% of revenues, for the year ended December
31, 1999 from $556,000, or 15.5% of revenues, for the year ended December 31,
1998. This dollar increase in research and development expenses in both dollars
and as a percentage of revenue was due primarily to an increase in the number
of development engineers in our research and development organization. The
number of development engineers increased from 2 as of December 31, 1998 to 43
as of December 31, 1999. We expect to continue to spend significant amounts on
research and development as we continue to develop and upgrade our technology.
Accordingly, we expect that research and development expenses will continue to
increase.
General and Administrative. General and administrative expenses consist
primarily of compensation and related expenses and fees for contractor
services. General and administrative expenses increased to $5.1 million, or
19.2% of revenues, for the year ended December 31, 1999 from $636,000, or 17.8%
of revenues, for the year ended December 31, 1998. The dollar increase in
general and administrative expenses was due primarily to the hiring of general
and administrative personnel. We had 4 general and administrative personnel as
of December 31, 1998 and 26 persons as of December 31, 1999. We expect that
general and administrative expenses will continue to increase.
Stock-based Compensation. Stock-based compensation expense increased to
$11.4 million, or 43.0% of revenues, for the year ended December 31, 1999 from
$578,000, or 16.1% of revenues, for the year ended December 31, 1998. For
accounting purposes, we recognize stock-based compensation in connection with
the issuance of shares of our common stock and the granting of options or
warrants to purchase our common stock to employees and consultants with
purchase or exercise prices that are less than the deemed fair market value at
the grant date. Stock-based compensation related to the issuance of shares of
common stock has been expensed in the period in which the common stock was
issued. Stock-based compensation related to the issuance of options and
warrants to purchase common stock is being amortized over the vesting period of
the stock options. Total deferred stock compensation as of December 31, 1999
was $6.5 million. The deferred stock compensation associated with 66,667
options requires remeasurement at the end of each period and is directly
related to the then current fair value of our common stock.
26
<PAGE>
Therefore, as our stock price increases, the stock-based compensation, or the
amortization of these deferred stock compensation amounts, will proportionately
increase.
Amortization of Goodwill and Intangible Assets. Amortization expense was
$753,000, or 2.9% of revenues, for the year ended December 31, 1999, due to the
amortization of goodwill and intangible assets recorded in connection with our
acquisition of Netranscend Software, Inc. in March 1999. We recorded no
goodwill amortization expense in 1998. We expect to recognize $251,000 of
amortization expense for this transaction in each quarter through the first
quarter of 2002.
Interest Income (Expense), Net. Interest income, net was $912,000 for the
year ended December 31, 1999, representing primarily interest earned on the
cash and cash equivalents we generated in 1999 from private placements of
convertible preferred stock and the initial public offering. The net interest
expense of $247,000 for the year ended December 31, 1998 was primarily due to
the beneficial conversion feature of a note payable to stockholders.
Net Loss. Net loss was $21.8 million for the year ended December 31, 1999,
and $2.0 million for the year ended December 31, 1998. The increase in net loss
of $19.8 million from 1998 to 1999 was primarily due to the increase in
operating expenses of $26.1 million, which includes a $10.8 million increase in
stock-based compensation expense, from 1998 to 1999.
Beneficial Conversion Feature of the Series C Convertible Preferred
Stock. In August 1999, Mediaplex issued 4,000,000 shares of Series C
convertible preferred stock at a purchase price of $3.59 per share. These
shares were converted into shares of common stock on a one-for-one basis.
Because the conversion price was less than our initial public offering price,
the Series C preferred stock was deemed to have an embedded beneficial
conversion feature. This feature allows the holders to acquire common stock at
a purchase price below its deemed fair value. The amount of the discount
assigned to the beneficial conversion feature is limited to the amount of the
proceeds. Consequently, the issuance and sale of the Series C preferred stock
resulted in a beneficial conversion feature of $14.4 million, which has been
reflected as a preferred dividend in our 1999 statement of operations.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenues. Revenues increased to $3.6 million for the year ended December 31,
1998 from $426,000 for the year ended December 31, 1997. The increase in
revenues in 1998 from 1997 was primarily due to the commencement of selling
advertising campaign management services in April 1998. In 1997, we were
selling advertising space on our Internet content sites under our prior
business model. In 1998, we began providing our advertising campaign management
services and increased our sales force, resulting in significant revenue growth
in 1998.
Cost of Revenues. Cost of revenues increased to $2.8 million, or 77.2% of
revenues, for the year ended December 31, 1998 from $445,000, or 104.6% of
revenues, for the year ended December 31, 1997. The increase in cost of
revenues in 1999 was primarily due to the increase in our revenues. The cost of
revenues for the year ended December 31, 1998 comprised primarily media
placement costs, while the cost of revenues for the year ended December 31,
1997 consisted primarily of the cost of maintaining our Internet content sites.
Sales and Marketing. Sales and marketing expenses increased to $820,000, or
22.8% of revenues, for the year ended December 31, 1998 from $481,000, or
112.9% of revenues, for the year ended December 31, 1997. The dollar increase
in sales and marketing expenses was due primarily to an increase in the number
of sales and marketing personnel.
Research and Development. Research and development expenses increased to
$556,000, or 15.5% of revenues, for the year ended December 31, 1998 from
$347,000, or 81.5% of revenues, for the year ended December 31, 1997. This
dollar increase in research and development expenses was due primarily to an
27
<PAGE>
increase in the number of development engineers in our research and development
organization throughout most of the year.
General and Administrative. General and administrative expenses increased to
$636,000, or 17.8% of revenues, for the year ended December 31, 1998 from
$256,000, or 60.0% of revenues, for the year ended December 31, 1997. The
dollar increase in general and administrative expenses was due primarily to the
hiring of general and administrative personnel.
Stock-based Compensation. Stock-based compensation expense increased to
$578,000, or 16.1% of revenues, for the year ended December 31, 1998 from
$11,000, or 2.6% of revenues, for the year ended December 31, 1997. Total
deferred stock compensation as of December 31, 1998 was $53,000.
Interest Income (Expense), Net. Interest expense, net increased to $247,000
for the year ended December 31, 1998 from $3,000 for the year ended December
31, 1997.
Net Loss. Net loss was $2.0 million for the year ended December 31, 1998,
and $1.1 million for the year ended December 31, 1997. The increase in net loss
of $1.1 million from 1997 to 1998 was primarily due to the increase in
operating expenses of $1.5 million from 1997 to 1998. In particular, stock-
based compensation increased $567,000 from 1997 to 1998.
28
<PAGE>
Quarterly Results of Operations (unaudited)
The following table presents statement of operations data for the eight
quarters ended December 31, 1999. We believe that this unaudited information
has been prepared on the same basis as the audited annual financial statements
and includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the unaudited financial information for
the quarters presented. You should read this in conjunction with our financial
statements, including the accompanying notes, included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- --------- --------- --------- -------- --------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Revenues................ $ 586 $ 935 $1,069 $ 997 $ 1,634 $ 5,689 $ 6,618 $12,464
Cost of revenues........ 480 733 756 802 1,340 4,421 5,187 9,469
------ ------- ------ ------ ------- ------- -------- -------
Gross profit........... 106 202 313 195 294 1,268 1,431 2,995
------ ------- ------ ------ ------- ------- -------- -------
Operating expenses:
Sales and marketing.... 193 201 87 338 543 1,104 1,876 3,517
Research and
development........... 125 95 195 140 308 507 1,388 2,503
General and
administrative........ 117 207 132 180 456 626 1,804 1,969
Stock-based
compensation.......... -- 151 -- 427 1,953 1,338 3,414 4,655
Amortization of
goodwill and
intangibles........... -- -- -- -- -- 251 251 251
------ ------- ------ ------ ------- ------- -------- -------
Total operating
expenses............ 435 654 414 1,085 3,260 3,826 8,733 12,895
------ ------- ------ ------ ------- ------- -------- -------
Loss from operations.... (329) (452) (101) (890) (2,966) (2,558) (7,302) (9,900)
Interest income
(expense), net......... (1) (1) (230) (15) 1 12 173 725
------ ------- ------ ------ ------- ------- -------- -------
Net loss................ (330) (453) (331) (905) (2,965) (2,546) (7,129) (9,175)
Beneficial conversion
feature of Series C
convertible preferred
stock.................. -- -- -- -- -- -- (14,360) --
------ ------- ------ ------ ------- ------- -------- -------
Net loss attributable to
common stockholders.... $ (330) $ (453) $ (331) $ (905) $(2,965) $(2,546) $(21,489) $(9,175)
====== ======= ====== ====== ======= ======= ======== =======
Net loss per share
attributable to common
stockholders--basic and
diluted................ $(0.03) $ (0.05) $(0.05) $(0.13) $ (0.32) $ (0.17) $ (1.45) $ (0.41)
====== ======= ====== ====== ======= ======= ======== =======
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- --------- --------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
As a Percentage of
Revenues:
Revenues................ 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenues........ 81.9 78.3 70.7 80.4 82.0 77.7 78.4 76.0
------ ------- ------ ------ ------- ------- -------- -------
Gross profit........... 18.1 21.7 29.3 19.6 18.0 22.3 21.6 24.0
Operating expenses:
Sales and marketing.... 33.0 21.5 8.1 33.9 33.2 19.4 28.3 28.2
Research and
development........... 21.3 10.2 18.3 14.1 18.9 8.9 21.0 20.1
General and
administrative........ 19.9 22.2 12.3 18.0 27.9 11.0 27.2 15.8
Stock-based
compensation.......... -- 16.2 -- 42.8 119.6 23.6 51.6 37.3
Amortization of
goodwill and
intangibles........... -- -- -- -- -- 4.4 3.8 2.0
------ ------- ------ ------ ------- ------- -------- -------
Total operating
expenses............ 74.2 70.1 38.7 108.8 199.6 67.3 131.9 103.5
------ ------- ------ ------ ------- ------- -------- -------
Loss from operations.... (56.1) (48.4) (9.4) (89.2) (181.6) (45.0) (110.3) (79.4)
Interest income
(expense), net......... (0.2) (0.1) (21.5) (1.5) 0.1 0.2 2.6 5.8
------ ------- ------ ------ ------- ------- -------- -------
Net loss................ (56.3) (48.5) (30.9) (90.7) (181.5) (44.8) (107.7) (73.6)
Beneficial conversion
feature of Series C
convertible preferred
stock.................. -- -- -- -- -- -- (217.0) --
------ ------- ------ ------ ------- ------- -------- -------
Net loss attributable to
common stockholders.... (56.3)% (48.5)% (30.9)% (90.7)% (181.5)% (44.8)% (324.7)% (73.6)%
====== ======= ====== ====== ======= ======= ======== =======
</TABLE>
29
<PAGE>
Due to the early stage of our company and the commencement of selling
advertising campaign management services in April 1998, period-to-period
comparisons of our interim period historical operating results should not be
relied upon as indicative of future performance. During the second and third
quarters of 1998, our results reflect the transition from our prior business of
managing Internet content sites to our advertising campaign management services
business. The quarter ended September 30, 1998 was the last quarter in which we
generated revenues from our prior business model. Beginning in the fourth
quarter of 1998, our financial performance solely reflected our current
advertising campaign management services.
The increases in sales and marketing expenses, research and development
expenses, and general and administrative expenses from the quarter ended
December 31, 1998 through the quarter ended December 30, 1999 are primarily due
to increased compensation and related expenses as a result of the increased
headcount required to support the growth in advertising campaign management
services revenues.
Although we have experienced revenue growth in recent periods, we anticipate
that we will incur operating losses for the foreseeable future due to the high
level of planned operating and capital expenditures. In addition, our quarterly
revenues, expenses and operating results have fluctuated in the past and could
vary significantly from quarter-to-quarter for several reasons, many of which
are beyond our control. These factors include:
. demand for our advertising services and mix of services we provide;
. addition of new or loss of current advertisers and advertising agencies;
. decisions by advertisers or advertising agencies to implement or delay
campaigns;
. deployment of new services we may offer;
. changes in availability and pricing of advertising space;
. changes in our pricing policies or the pricing policies of our
competitors;
. costs related to acquisitions of technology or businesses; and
. governmental and industry regulation.
Liquidity and Capital Resources
From our inception in September 1996 through August 1999, we financed our
operations primarily through the private placement of preferred stock, which
has generated net proceeds of $24.2 million. In November 1999, we completed an
initial public offering of our common stock, which generated net proceeds of
$75.5 million. As of December 31, 1999, we had $78.1 million in cash and cash
equivalents.
Net cash used in operating activities for the year ended December 31, 1999,
1998, and 1997 was $9.1 million, $240,000 and $150,000, respectively. Net cash
used in operating activities in each of these periods was primarily the result
of net losses before non-cash charges and net increases in accounts receivable,
offset by increases in accrued liabilities, deferred revenues, and accounts
payable.
Net cash used in investing activities for the year ended December 31, 1999,
1998, and 1997 was $12.7 million, $79,000 and $70,000, respectively. Net cash
used in investing activities in all periods presented was due principally to
the acquisition of computer equipment and software. As of December 31, 1999, we
invested the proceeds from our initial public offering of common stock into
short-term investments.
Net cash provided by financing for the year ended December 31, 1999, 1998,
and 1997 was $99.5 million, $551,000 and $335,000, respectively. In 1999, net
cash provided by financing activities was primarily due to issuance of shares
of our common stock and our preferred stock. In 1999 and 1998 the funds
borrowed from stockholders under notes payable bore interest at 6% per annum.
These notes payable were paid off in 1999. As of December 31, 1999, we
currently have no other borrowings.
30
<PAGE>
Although we have no material commitments for capital expenditures, we
anticipate an increase in the rate of capital expenditures consistent with our
anticipated growth in operations, infrastructure and personnel. We believe that
our current level of cash and cash equivalents will be sufficient to meet our
anticipated liquidity needs for working capital and capital expenditures for at
least twelve months from December 31, 1999. After that time, we may need
additional funds to expand or to meet all of our operating needs. Our forecast
of the period of time through which our financial resources will be adequate to
support operations is a forward-looking statement that involves risks and
uncertainties, and actual results could vary materially as a result of the
factors described above. If we require additional capital resources to grow our
business internally or to acquire complementary technologies and businesses, we
may seek to sell additional equity or debt securities or secure a bank line of
credit. The sale of additional equity or convertible debt securities could
result in additional dilution to our stockholders. We cannot assure you that
any financing arrangements will be available in amounts or on terms acceptable
to us.
Market Risk Disclosure
The following discusses our exposure to market risk related to changes in
foreign currency exchange rates and interest rates. This discussion contains
forward-looking statements that are subject to risks and uncertainties. Actual
results could vary materially as a result of a number of factors including
those set forth in the risk factors section of this prospectus.
Foreign Currency Exchange Rate Risk. To date, we have not had any revenues
from international operations. All of our revenues have been denominated in
U.S. dollars from clients in the United States. We expect, however, that some
future revenues may be derived from international markets and may be
denominated in the currency of the applicable market. As a result, our
operating results may become subject to significant fluctuations in the
exchange rates of foreign currencies. Furthermore, to the extent that we engage
in international sales denominated in U.S. dollars, an increase in the value of
the U.S. dollar relative to foreign currencies could make our products less
competitive in international markets. Although we expect to monitor our
exposure to currency fluctuations as we expand into international markets and,
when appropriate, we may use financial hedging techniques in the future to
minimize the effect of these fluctuations, exchange rate fluctuations could
harm our financial results in the future. We do not presently enter into any
derivative financial instruments.
Interest Rate Risk. As of December 31, 1999, we had cash equivalents and
short term investment of $88.0 million, which consisted of cash and highly
liquid short-term investments. Our short-term investments will decline in value
by an immaterial amount if market interest rates increase. Declines of interest
rates over time will, however, reduce our interest income from our short-term
investments.
Recent Accounting Pronouncements
In March 1998, the Accounting Standards Executive Committee, or ASEC, issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 provides guidance on when
costs related to software developed or obtained for internal use should be
capitalized or expensed. SOP 98-1 is effective for transactions entered into
for fiscal years beginning after December 15, 1998. The adoption of this
statement did not have a material effect upon our statement of operations.
In April 1998, the ASEC issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 requires the cost of start-up activities, including
organization costs, to be expensed as incurred. The adoption of this statement
did not have a material effect upon our statement of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which requires companies to record derivative
financial instruments on the balance sheet as assets or liabilities, measured
at
31
<PAGE>
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedging accounting. The key criterion for hedge
accounting is that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows. SFAS No. 133 is
effective for all fiscal quarters of all fiscal years beginning after June 15,
1999. This statement did not have a significant effect upon our statement of
operations.
In December 1998, the American Institute of Certified Public Accountants
issued SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, with
Respect to Certain Transactions." SOP 98-9 amends SOP 97-2 and SOP 98-4 by
extending the deferral of the application of certain provisions of SOP 97-2
amended by SOP 98-4 through fiscal years beginning on or before March 15, 1999.
All other provisions of SOP 98-9 are effective for transactions entered into in
fiscal years beginning after March 15, 1999. We do not anticipate that the
adoption of these statements will have a material effect upon our statement of
operations.
In November 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 100, "Restructuring and Impairment Charges." In
December 1999, the SEC issued SAB No. 101, "Revenue Recognition in Financial
Statements." SAB No. 100 expresses the views of the SEC staff regarding the
accounting for and disclosure of certain expenses not commonly reported in
connection with exit activities and business combinations. This includes the
accrual of exit and employee termination costs and the recognition of
impairment charges. SAB No. 101 expresses the views of the SEC staff in
applying generally accepted accounting principles to certain revenue
recognition issues. Mediaplex does not anticipate that these SABs will have a
material impact on its financial position, results of operations, or cash
flows.
32
<PAGE>
BUSINESS
This prospectus contains forward-looking statements that involve results and
uncertainties. Actual results may differ materially from those indicated.
We provide technology-based services that enable companies to integrate
their internal business information, such as inventory and price levels, into
their online advertising activities to deliver customized messages and offers
to Web site visitors. Our services encompass planning, executing, monitoring
and analyzing Web-based campaigns, and are based upon proprietary technology,
tradenamed "MOJO," which is an acronym for "mobile Java objects." Our
technology, which was designed with the privacy of consumers in mind, can
automatically change the content of an advertiser's Internet messages and
offers in real time, or virtually instantaneously, in response to changes in
their underlying business variables, such as inventory levels, product pricing
and customer data. For example, our technology can continually update
advertising messages for an airline across all Web sites in a particular
campaign to reflect changes in seat availability and prices.
Industry Background
The Internet as an Advertising Medium for Direct Marketing and Branding
The Internet is rapidly becoming an important advertising medium for direct
marketing and product branding. Forrester Research, Inc. anticipates that U.S.
online advertising spending will grow from $2.8 billion in 1999 to $17.2
billion in 2003, driven by a number of factors, including the growing online
population, the acceleration of e-commerce, or commerce conducted over the
Internet, and the advancement of online marketing technologies. According to
International Data Corporation, the U.S. online population is projected to grow
from 80.8 million in 1999 to 177.0 million by 2003, and U.S. e-commerce
spending is projected to increase from $74.4 billion in 1999 to $707.9 billion
by the end of 2003.
To date, the major spenders in online advertising have been Internet,
computer and technology companies and financial institutions. We believe other
advertisers, who have historically used more traditional media, are
increasingly becoming attracted to the Internet because of its global reach,
potential to enable one-to-one marketing and ability to track and measure
campaign results in real time. Advertisers are beginning to recognize the
effectiveness of the Internet to build long-term brand awareness, perform
valuable market testing, and facilitate immediate trial and sales of products
and services. In contrast to traditional, or off-line advertising, the
interactive nature of the Internet gives companies the ability to send
advertising messages to consumers and enables consumers to immediately respond
to the advertising. Furthermore, the Internet enhances client-specific
marketing campaigns to promote customer retention and loyalty.
Despite the emergence of the Internet as a medium for advertising,
expenditures for online advertising represent only a small portion of all media
spending. Forrester Research, Inc. estimates that by 2003, U.S. total media
spending will reach approximately $260.6 billion, of which the online component
of $17.2 billion will represent only 6.6%. We believe online media spending has
the potential to capture a larger portion of total media spending as new
technologies improve the effectiveness of online advertising and attract more
traditional media advertisers to the Internet.
We believe the rapid growth of e-commerce has changed the nature and pace of
business operations and competition. Companies are increasingly realizing the
importance of using the Internet to manage and transact business, and
communicate with consumers, clients, suppliers and partners, far beyond the
simple sale of products and services over the Internet. In addition, we believe
companies are increasingly leveraging their significant financial and technical
investments in software applications that manage and store critical business
information, such as business resource planning and supply and distribution
management systems.
The Challenges of Online Advertising
An effective online marketing campaign requires a wide range of
implementation, management and technology expertise in campaign development,
advertising execution and results analysis. The real-time delivery, measurement
and analysis of multiple advertising campaigns encompassing thousands of Web
sites is
33
<PAGE>
complex and difficult to execute and manage. We believe traditional advertising
agencies and most companies typically do not have the expertise in the Internet
medium to address these delivery and management requirements.
The increase in online advertising spending has heightened expectations for
more effective advertising campaigns and improved return on investment of
advertising dollars spent. The standard benchmarks to measure the impact of an
advertising campaign are banner impressions, viewer click-through rates to
advertisers' sites from online messages, and conversion rates, which are the
percentage of consumers who complete a purchase or other transaction. We
believe click-through rates have been declining as advertisers increasingly
compete for the attention of online consumers, and as a result, companies are
searching for more effective advertising messaging techniques in order to
increase click-through and conversion rates.
To date, online advertising has not achieved effective "one-to-one"
marketing, which entails delivery of the right message to the right consumer in
real time. Ideally, advertisers seek to identify potential customers most
likely to purchase their products, send them a message tailored to their
individual preferences, and do so at a time when they are most likely to make a
purchase decision. Most current technologies are focused on identifying
prospective consumers based on their demographic, geographic or consumer
preference data. The use of customer profile information by Web sites and
advertisers may result in stricter regulations in areas such as consumer
privacy. Identifying prospective consumers, while complying with privacy
standards, however, represents only one component of true one-to-one marketing.
The ability to send the right message in real time remains a significant
challenge.
Sending a customized message in real time would enable companies to use the
Internet as an effective online marketing and sales channel. The right message
includes appropriate product information for a particular consumer based on the
existing status of a company's underlying business variables including, for
example, product pricing and availability. In order to achieve this, companies
must access and integrate their existing business information into the online
advertising process, enabling them to incorporate their business information in
targeted messages and turn an advertisement into an effective marketing tool.
For example, a hotel with excess availability in New York City would seek to
advertise discounts to consumers booking flights to New York.
We believe that there is a significant opportunity for a vendor who can
provide a comprehensive, technology-based solution for online advertising
campaigns. We believe that this solution must provide the following key
capabilities:
. the expertise to manage and execute all aspects of online marketing
campaigns;
. the ability to accumulate valuable data on non-personally identifiable
customer behavior;
. the ability to perform detailed return on advertising investment analyses
in a timely fashion;
. the ability to customize messages and offers in real time;
. the ability to integrate important business data, such as product and
pricing information, into online advertising message content; and
. the flexibility to comply with varying privacy standards in different
countries, as well as complying with the individual privacy preferences
of Web sites and Internet users.
Solution
We provide technology-based services that enable companies to deliver
customized online advertising messages and offers that reflect their internal
business data in real time. Our MOJO technology allows companies to adjust
their online advertising virtually instantaneously in response to changes in
their underlying business variables, such as inventory levels, product pricing
and customer data. Our services encompass planning, executing, monitoring and
analyzing online marketing campaigns. Our clients either develop the
34
<PAGE>
advertisements themselves, or contract with an advertising agency to perform
the creative development of the ad campaign. We believe the wide range of
services we offer will enable advertisers to deliver more effective online
campaigns and improve their return on advertising investment.
Our solution includes the following benefits:
. Comprehensive Online Advertising Campaigns. We provide a wide range of
online campaign services, including strategic planning, media buying, ad
serving and results measurement and reporting for advertisements that
have been designed and created by our clients or their advertising
agencies.
. Real-time Tracking and Measuring of Campaign Results. We continually
monitor a variety of measures for our clients, such as click-through and
conversion rates, and provide Internet access to performance reports 24
hours a day.
. Message Re-targeting. We can use Internet browser-based tracking tools to
capture and analyze data on site visitation patterns, although we do not
maintain, share, or sell any personally identifiable data or anonymous
user profile information. We can, however, use this data to refine future
messages to consumers whose site visitation patterns we have tracked.
. Real-time Messaging. We can change the content and site placement of
online advertisements in real time. This enables a company to tailor a
message based on predefined business parameters and a Web site visitor's
general profile in order to deliver the right message virtually
instantaneously.
. Integration of Customers' Business Information. Our MOJO technology
enables us to integrate business information with an online advertising
campaign to customize and deliver advertisements in real time based on
Web site visitors' general profiles and a client's relevant business
information such as inventory and pricing levels.
. Consumer Privacy. Our MOJO architecture was designed with the privacy of
users in mind. MOJO does not rely on personally identifiable information
or anonymous user profiles to deliver a message.
Strategy
Our objective is to become the leading provider of technology-enabled
marketing solutions. Our strategy includes the following key elements:
. Expand Alliances with Advertising Agencies. We intend to expand and
strengthen our alliances with traditional advertising agencies to extend
our direct sales efforts. We will continue to provide agencies with
critical online media technology expertise, which we believe will
accelerate our penetration of medium to large-sized corporate clients. We
have already established alliances with major agency networks and holding
companies such as Young & Rubicam, and its direct marketing entity,
Impiric (previously Wunderman Cato Johnson); The Interpublic Group of
Companies and its subsidiaries McCann-Erickson/A&L and DraftWorldwide;
and Publicis & Hal Riney. We are also working with other advertising
agencies, such as KSL Media, Critical Mass and Tonic 360 in efforts to
offer our services to and generate business from their clients. We intend
to pursue relationships with other advertising agencies by providing
technology-enabled services and support for online advertising that can
be fully integrated with their off-line initiatives.
. Target Global 1000 and e-Commerce Companies. We can provide significant
benefits to large companies that require online advertising management
and technology expertise for the Internet and have made a significant
investment in software applications which manage and store critical
internal business information. We also intend to target companies that
rely on the Internet to conduct electronic commerce. We target these
constituencies through our direct sales force, business development teams
and international sales offices.
. Maintain Technology Differentiation. We believe that our technology is a
key competitive differentiator. Our MOJO technology platform enables us
to efficiently deploy services that give our
35
<PAGE>
clients innovative advertising capabilities while providing the ability
to integrate their internal business information into their online
messages in real time. Our Java objects-based architecture enables our
services to scale geographically across the Internet and a large number
of transactions and advertisers.
. Enhance Sales Capabilities Through Marketing and Business
Relationships. We plan to broaden our existing marketing and business
relationships with companies such as Ariba, SAP Labs, Post
Communications, Net Perceptions and Icon Medialab, and to build
relationships with additional companies for our campaign and message
management capabilities. We are seeking to work with traditional and
interactive advertising agencies, online ad serving companies, ad
publishing representatives, Web development and consulting firms,
business application companies and systems integrators. Our objective
is to establish alliances with these companies and accelerate our sales
penetration into clients that would benefit from our services. In
addition, we expect to develop and manage affiliate and sponsorship
programs which generate shared revenues derived from prospective e-
commerce-based services.
. Leverage the MOJO Technology Platform to Expand Service Offering. We
intend to establish our MOJO technology as the leading platform for
next generation online and offline messaging services. We designed the
MOJO technology as a broad-based platform to enable additional
functionality and services. As such, our platform can be extended to
include a number of different messaging applications and services
specific to our customers needs. We will continue to evaluate
additional messaging services to drive demand and sales of our
offering. Such services may include, but are not limited to, wireless
messaging, e-mail direct marketing and interactive television.
. Deliver Flexible Online Marketing Solutions. We believe that online
advertisers will increasingly demand greater flexibility and
accountability in their advertising programs. Because we can unbundle
our technology-enabled services, our services can be deployed together
with the capabilities offered by some other advertising and technology
providers, such as Engage Technologies, Sabela and DoubleClick. By
working with third-party providers, we can offer specific services,
such as dynamic tailored messaging, that complement their advertising
services. This flexibility creates enhanced revenue opportunities and
accelerates market adoption of our services and technology by targeting
clients interested in unbundled elements of our services.
. Broaden International Presence. We plan to expand our capabilities and
presence internationally in order to capitalize on the global reach of
the Internet. We also believe there is a significant opportunity to
provide our services to companies based outside of the United States
that require technology-enabled advertising services tailored for their
local markets. We have opened an office in Hamburg and we expect to
establish offices in London, Paris and Tokyo in the future.
Our Services
Our technology-based marketing services encompass campaign planning and
execution, online message management and campaign analysis. Our services can be
delivered individually or as a suite of services and are principally priced
based on cost per thousand impressions, cost per click, or cost per
acquisition, which can include sales and registrations.
Our services can be offered as part of a complementary solution provided in
conjunction with services provided by other advertising and technology vendors.
In particular, our MOJO technology can be deployed with the ad serving
capabilities provided by other companies, and interactive ad agencies. This
allows us to work with clients of these service and technology providers who do
not wish to purchase all of our campaign management capabilities, but still
want to deploy our MOJO technology or any of our other services.
The creative portion of our clients' advertisements are created by our
clients' advertising agencies, or internally by our clients' marketing staffs.
For example, we have worked with the ad agencies Publicis & Hal
36
<PAGE>
Riney, Tonic 360 and McCann-Erickson/A&L, and Web design companies, such as
Critical Mass, to develop and implement advertising services for companies such
as Hewlett-Packard and macys.com. If the ad agencies with which we currently
work were to develop technology that provides their clients with the same
services that our technology currently provides, our ability to generate
revenues from the ad agencies' clients could be harmed.
<TABLE>
<CAPTION>
Services Description of Services
-------- -----------------------
<C> <S>
Campaign Planning and Execution . Develop an online media strategy based on
the client's business objectives and the
appropriate Internet media opportunities.
. Plan and purchase media across Internet
advertising networks and independent Web
sites, employing various price structures.
- -------------------------------------------------------------------------------
Message Management . Apply targeting goals based on the specific
capabilities of each Web site or
advertising network considered for the
marketing campaign.
. Manage the electronic delivery of online
advertisements by serving the ads ourselves
or contracting with established third-party
ad-serving companies.
. Adjust campaigns in real time across all
Web sites based on predetermined schedules
or the occurrence of defined events.
. Customize messages in real time based on
nonpersonally identifiable customer
profiling, changes in internal business
information, market events and campaign
performance as measured by standard metrics
or return on investment analysis.
. Use Web browser-based tracking tools to re-
target consumers
- -------------------------------------------------------------------------------
Campaign Analysis . Track and monitor campaigns for results as
measured by Web site and advertisement.
. Provide real-time reports customized by
performance data, including impressions,
click-throughs and conversions for each Web
site and advertisement.
. Generate campaign return on investment
statistics summarizing results by
categories such as user-targeting data,
inventory changes, Internet sites and
date/time.
. Optimize campaigns based on ongoing
performance data.
</TABLE>
Campaign Planning and Execution
. Campaign Planning. We develop Internet media strategies based on
advertisers' business goals and advertising objectives, such as brand
awareness, product trial and sales, and previous online performance, if
available. We determine target audiences using demographic, geographic
and consumer preference information, or consumers' areas of interest. Our
online media programs can be developed independently or in conjunction
with clients' off-line campaigns to deliver a consistent brand message at
each point of contact.
. Media Buying and Placement. We leverage our wholesale buying power in
planning and buying across all advertising networks and independent Web
sites. Each campaign is customized, incorporating sponsorships, keywords,
run of site, specific position and remnant space, where applicable. Media
purchases can be based on several models including cost per thousand
impressions, cost per click, cost per acquisition and revenue-sharing
programs. Our MOJO technology processes insertion orders systematically
across networks and individual Web sites to deliver accurate ad
placement.
37
<PAGE>
. Ad Serving. Our third-party ad serving capabilities allow adjustments to
be managed quickly and efficiently because the only changes required to
the advertisements are effected on our servers rather than on each
individual Web site where the advertisements appear.
. Message Re-targeting. We can use Internet browser-based tracking tools to
capture and analyze data on site visitation patterns, although we do not
maintain, share, or sell any personally identifiable data or anonymous
user profile information. We can, however, use this data to refine future
messages to consumers whose visitation patterns we have tracked.
Message Management
. Dynamic Messaging. We enable advertisers to modify advertising messages
dynamically, that is, at any point in time. Online advertisements contain
"data fields" where messages can change, such as products, prices or
special offers. Message modification can be automated by establishing
predefined events that determine message content, such as product
rotations or price reductions. Advertisers can also make modifications
manually, directly from their desktop computers.
. Targeted Messaging Integrated with Business Data. Our messaging
capabilities enable advertisers to use up-to-the-minute business
information, such as product availability and pricing, to deliver a
customized message to each viewer. We assist advertisers with the
development of business rules based on product database or business
system information. During a campaign, our MOJO technology can make
automatic modifications to the advertisements on the basis of these
business rules. We believe that clients with time-sensitive inventory are
particularly well-suited to take advantage of these capabilities. For
example:
. An airline promotes roundtrip fares between San Francisco and New
York to business travelers. Fourteen days prior to the flight, the
airline advertises seats at $956. The airline could specify that
seven days before the flight, the price on the banner message would
systematically change to $1,499. Based on excess seat availability
two days prior to departure, the fare offered for a limited number of
the seats would be automatically discounted to $799.
. A hotel chain focuses its advertising campaign on reaching an 80%
occupancy rate. When the occupancy rate of a particular hotel reaches
this level, the message is automatically directed to promote another
property within the chain.
. Queued Creative. Advertising based on specific schedules or time-
sensitive information can be pre-programmed across all campaign sites.
For example, a banner for a promotion that starts and ends at an exact
time or day can be queued to start and stop automatically at the
appropriate times.
. Storyboard Messaging. Using our technology, a "storyboard" of advertising
messages can be constructed in a series. The campaign can be designed to
show a set of advertisements in a predefined sequence for a particular
consumer, regardless of which Web site in the campaign is viewed. This
choreographs a series of customized messages based on the consumer's
interests and online activity. For example, a viewer purchasing a
computer online can be presented with advertisements for accessories the
next time he or she accesses a Web site within the campaign.
. Multiple Messaging. MOJO technology enables single advertisements to
provide multiple promotional opportunities and click-through message
options. The choice of message is determined by the location of the
advertisement on which the consumer clicks. For example, if a consumer
received a banner depicting a map of the United States and clicked on the
state of California, the consumer would receive a different message than
if he or she were to click on the state of Maryland.
. URL Matching. A targeted message can be delivered based on the context of
the universal record locator, more commonly known as the URL, which
enables advertisers to purchase a run-of-site schedule, but ensure that
specific ad messages related to the content of the URL are served. For
example, a travel advertiser could buy "Yahoo" and a California travel
advertisement could be served to viewers of the subsection "Yahoo/Yahoo
Travel/California."
38
<PAGE>
Currently we have eleven customers who use our message management services,
as compared to five customers who used our message management services in the
fourth quarter 1999. To date, we have not generated material revenues from
message management services.
Campaign Analysis
. Campaign Tracking. We track performance statistics such as impressions,
click-throughs and conversions, which include sales and other types of
transaction activity such as registrations and requests for information,
across all campaign sites. Activity is monitored by site, creative unit,
such as a banner or side panel, and message content. Our technology
enables tracking of performance metrics for standard advertisements and
for the more difficult to monitor advertisements that incorporate audio
and video components. We can also track advertising that is served by
independent third-party ad servers.
. Campaign Reporting. We provide a broad range of accurate and timely
reporting capabilities customized to meet individual advertiser's needs.
Clients are able to view secure, real-time campaign reports by
performance statistics, including impressions, click-throughs, conversion
rates and sales, at any time over the Internet in a summary format that
provides results categorized by site and by advertisement.
. Return on Investment Analysis. Return on investment reporting is
customized to each advertiser and integrates sales and conversion data to
generate campaign statistics in real time. Reports provide measurements
on performance by tracking sales and other conversions criteria, such as
registrations and information requests, as well as by tracking the number
of visitors who did not act immediately, but subsequently returned to the
Web site and purchased.
. Real-time Campaign Optimization. Our MOJO technology allows predefined
business rules to automatically optimize campaigns. In addition, we can
make real-time changes to campaigns based on ongoing performance data.
Our customized, real-time reports facilitate quick determination of the
effectiveness of sites and advertisements based on performance metrics,
such as lowest cost per sale and highest sales volume.
39
<PAGE>
Technology
Description of Our MOJO Technology Platform
Our proprietary MOJO technology platform utilizes a mobile Java object
architecture, each object being a discrete piece of software written in Java
code. These objects store critical information relevant to the execution of a
campaign, and can be controlled remotely, or through a computer not physically
located at the same place as the servers containing the advertisements. In
addition, these objects can exchange data with each other using the Java
language over our publish and subscribe-based messaging communication network.
"Publish and subscribe" is a communication method that allows the exchange of
information anonymously, which means that an advertiser's proprietary
information is not revealed or stored in the process. These objects are mobile
and platform-independent, meaning they can reside and be controlled on servers
operated by Mediaplex, the advertiser or any other third-party ad server using
different operating systems. We believe our MOJO technology facilitates
timely, efficient and accurate campaign execution and management as well as a
secure and efficient means of integrating a client's proprietary internal
business systems with the online advertising campaign. Our architecture is
designed for scalability and high performance to manage multiple advertising
campaigns across thousands of Web sites.
[Graphic of a triangle containing the caption "Advertising Objects," connected
by two arrows pointing away from and towards a circle containing the caption
"Network Services," connected by two arrows pointing away from and towards a
square containing the caption "Business Integration." Adjacent to the caption
"Advertising Objects" is the following text:
.Stores campaign profile and settings
.Determines context of an ad request
.Determines which advertisement to display
.Manages the display of advertisements
.Manages ad serving rules
Adjacent to the caption "Network Services" is the following text:
.Publish and subscribe network
.Coordinates communication between objects
.Generates reports
.Maintains business rules
Adjacent to the caption "Business Integration" is the following text:
.Contains relevant business data
.Facilitates two-way communication of events representing changes in internal
business data and results of ad serving activities
.Maintains security and integrity of internal business data]
40
<PAGE>
Mediaplex's MOJO architecture has three primary technical components:
advertising objects, network services and business integration:
Advertising Objects. Advertising objects contain all information
relevant to a campaign and manage the serving of each advertisement.
Targeting rules residing in an ad-serving object determine, for example,
the targeting profile upon which to focus and which message to send to a
particular consumer. Tracking functions for an advertising campaign are
also performed by these objects, which can be stored and executed on any
server. The advertising objects may be modified or transferred in real time
using computers physically located in the same facility and in facilities
different from the servers on which the advertising objects are stored.
Network Services. This component manages the entire campaign and
coordinates communication between other objects and with our clients
through our publish and subscribe messaging capability. This messaging
capability receives events published or transmitted by various objects and
forwards that information to other objects that are authorized to receive
such information. This component contains the business rules for a campaign
that determine, for example, which product information will be advertised
and at what price, in response to changes in inventory levels. Reporting
functions are also performed in this layer, which also provides access to
relevant campaign data, through the publish and subscribe messaging
capability. This network services layer applies predefined business rules
to modify an advertising message on the basis of events summarized and
stored within other objects within the network. This component is
administered remotely, residing in our two co-location data centers, and
communicates with the other technical components, namely, advertising
objects and business integration, while executing the campaign.
Business Integration. This component consists of objects that store the
client's internal business data relevant to the campaign and generate
events that are communicated to the network services layer and advertising
objects. The underlying internal business information is not transferred
and, thus, the integrity of a client's business information is protected
and preserved under our architecture. In addition to communicating client
events to the campaign, actual campaign results are communicated back to
the client for analysis by the client and for updating the client's
internal business data.
Competitive Advantages of Our Technology
We believe our technology provides these distinct competitive advantages:
Real Time. Campaign customization and optimization occurs in or near real
time. Our MOJO technology is structured to enable our clients to establish
business rules which will automatically customize an advertising message in
response to predefined events the moment, or shortly after, the event occurs.
Real-time adjustments can also be made manually based on reports received
during ongoing campaigns.
Flexibility. Our MOJO platform is designed to be flexible, supporting both
simple operations such as remote banner serving and click-through tracking and
more sophisticated operations, such as return on investment tracking and
automated feedback. Marketing campaigns can be modified in real time
automatically or manually, based on changes in the data stored in various
objects. These changes are communicated between objects through a continuous
communication loop facilitated by the publish and subscribe messaging
capabilities. Our architecture is also designed to be open and compatible with
most major business software applications and systems. Our MOJO technology is
easy to integrate and implement because it uses an industry standard language,
extensible mark-up language, commonly known as XML, for its data encoding and
communication. MOJO also supports major industry standards for programming
languages, operating systems and Internet protocols.
Scalability and Reliability. Our MOJO architecture is designed to scale in
anticipation of increased transaction demand and the ability of our systems to
process the transactions. Our technology is scalable by simply adding more
servers to accommodate system data traffic. The application logic of our
technology is
41
<PAGE>
designed to remain unchanged as the transaction volume grows. In addition, our
technology uses automatic failure protection combined with fault tolerance,
which allows campaign requests to be served even if one or more servers are
down.
Flexibility to Comply with Privacy Standards. Our technology is designed in
anticipation of privacy concerns and is engineered to be compliant with both
domestic and international privacy standards. MOJO technology relies on
principally the advertiser's business information, such as pricing and
inventory levels, rather than on a viewer's profile. As a result, we use non-
personally identifiable information provided by the Web sites about their
viewers' general demographics and interests. We do not maintain, share or sell
any personally identifiable data or anonymous user profile information.
Server Capacity Limitations
Based on our available servers and technology as of December 31, 1999, our
ad serving capacity was approximately 120 million impressions per day. At that
date, the highest number of impressions served on any particular day was
approximately 39 million. If we determine that our capacity will become
significantly constrained in the near future, we intend to increase the number
of servers and related technology to meet the additional capacity. In addition,
because of the significant fluctuations in the number of impressions served
from day to day, it is difficult to estimate the impact of a limitation on our
capacity. To date, capacity limitations have not been a problem for our ad
serving activities.
Sales and Marketing
We market and sell our services primarily through our field sales force,
which included 71 sales people as of December 31, 1999. Currently, we have
sales offices and support operations in San Francisco, New York City and
Hamburg, and plan to open additional sales offices in Western Europe and Tokyo.
We intend to broaden our global presence by expanding our international sales
force and by entering into marketing agreements with international partners.
Sales leads are primarily of two types: direct leads and leads from business
alliances. Direct leads are derived through field sales, client referrals, our
Web site, trade shows, and responses to our public relations and marketing
efforts. Business alliance leads are derived from companies that offer
complementary Internet services. These companies include traditional
advertising agencies, Web site design companies, Internet development and
consulting firms, business resource planning vendors, interactive ad agencies,
system integrators, and creative and software tool kit companies. Our sales
account teams typically include an account manager, associate account managers,
a campaign manager and an account coordinator.
We use a variety of marketing programs to build awareness of Mediaplex and
its service offerings. These include collateral marketing materials, online and
off-line advertising, press coverage and other public relations efforts, trade
shows, seminars and conferences, relationships with recognized industry
analysts, and the Mediaplex Web site.
Business and Marketing Alliances
An integral part of our strategy is to develop alliances and relationships
with complementary service providers to enhance our sales, marketing and client
development efforts in the United States, Europe and Asia. The alliances and
relationships that we have established to date are, except as described below,
non-exclusive and contain terms of six months to five years, some with renewal
options. We have established alliances within industries that we believe are
most appropriate for the propagation of our technology and services, as
follows:
Enterprise Resource Planning. In August 1999, we entered into an
agreement with SAP Labs, Inc., a subsidiary of SAP AG, an enterprise
resource planning, or ERP, software company. Enterprise resource planning
refers to a business management system that integrates various aspects of a
business, such as
42
<PAGE>
planning, manufacturing, sales and marketing. Enterprise resource planning
software enables the exchange of information within and among businesses
and their suppliers, customers and partners. Under the terms of our
agreement with SAP Labs, Inc., we are in the process of creating an
interface to SAP's R3 ERP system that will enable SAP's enterprise
customers to implement our MOJO technology in their e-commerce marketing
programs.
Operating Resource Management. In September 1999, we entered into a non-
binding memorandum of understanding with Ariba, Inc. to integrate our real-
time online media buying technology into the Ariba Network. Ariba provides
an Internet-based system that enables companies to automate their online
procurement of goods and services. The Mediaplex and Ariba integrated
service is expected to enhance the efficiency of managing online
advertising campaigns for the Ariba Network customers by providing an
automated system for the transmittal and acknowledgement of advertisement
insertion and change orders using adXML, our version of XML.
System Integration. In September 1999, we entered into an agreement with
OTP Software, Inc., a systems integrator specializing in Oracle and IBM
software. OTP Software will provide interfaces for MOJO technology into
Oracle and IBM applications. Our relationship with Active Software, a
leading provider of eBusiness integration software, combines the
capabilities of Active's ActiveWorks Integration System that is designed to
retrieve a company's business data contained within disparate enterprise
applications, with MOJO's ability to change advertising messages based on
this business data in real time.
Internet Development and Consulting. In May 1999, we entered into a
preferred provider agreement with Icon Medialab, a global Internet
architect for companies integrating Internet-based technology with business
strategies. Icon Medialab's services include strategy consulting, system
integration, interface design and usability testing for enhanced customer
relations. Under our agreement with Icon Medialab, we may cross-refer
clients and collaborate on joint marketing and strategic consumer
development programs. We also believe that we will benefit from Icon
Medialab's presence and marketing capabilities in Europe.
Cable Television Providers. In August 1999, we entered into an agreement
with Across Media Networks to offer marketers the capability to deliver
targeted offers, both on cable television and the Internet, driven by
business rules and relevant marketing data. Across Media Networks designs
and operates private label cable channels to enable cable operators to
outsource the creation of branded, advertiser-supported subscriber
information channels, and serves over three million subscribers in more
than 75 cities nationwide. We will provide MOJO technology to Across Media
Networks exclusively in conjunction with online marketing and advertising
programs for its CityHits Internet business and clients.
Wireless Messaging. In December 1999, we entered into a letter of intent
with OpenGrid to extend the MOJO technology to the wireless communications
medium. The Mediaplex/OpenGrid integration will overlay the MOJO technology
with the OpenGrid Interchange platform to deliver customized wireless
advertising in real time to customers using mobile devices, such as
cellular phones.
adXML. adXML.org is Mediaplex's sponsored initiative as a global open
communication language for automating transactions between business sectors
within the advertising industry, including advertisers, advertising
agencies and media vendors. adXML is designed to streamline the buying,
placement and procurement of inventory information by using a standardized
language, XML, or extensible mark-up language. The adXML organization has
completed an initial beta test of adXML. To date, the adXML organization is
comprised of 88 companies categorized in nine subcommittees including
online, print, television, radio, out of home, wireless, process, return on
investment and broadband. The membership includes Motorola, Nokia, ABC TV,
Flycast and DoubleClick.
E-mail Communications. In November 1999, we entered into an agreement
with Post Communications to extend the MOJO technology to the e-mail
communications medium. The Mediaplex/Post integration will use Post's
proprietary datamart customer profiles to generate customized and up-to-
the-minute new advertisements within e-mails.
43
<PAGE>
Opt-in Promotional Offers. In November 1999, we entered into an
agreement with SoftCoin through which we plan to enhance our dynamic
messaging capability by integrating SoftCoin's off line promotion data with
the online promotion data accessed by MOJO. We believe this will enable
MOJO to target online users based on their off-line purchase behavior,
through opt-in promotional offers, which are offers that require a consumer
to affirmatively choose to participate in the promotion and disclose
certain information.
Rich Media. In January 2000, we entered into an alliance with FreeStyle
Interactive that allows us to provide online advertising in a more
compelling format. FreeStyle can create rich media ads that read data
directly from the MOJO system, so that dynamic messaging features can be
combined with animations, games and various visual and audio effects.
In the first quarter of 2000, we also established a relationship with
Broadbase, a leading provider of customer analytic solutions. Broadbase
provides prices, analytical information on customers and call data information,
which enhances the ability of clients to react quickly to market changes.
In July 1999, we entered into a technology integration and services
agreement with DoubleClick, a provider of online advertising services, which
provided for mutual services and obligations. We and DoubleClick have recently
agreed to terminate this agreement. As a result, we and DoubleClick will be
unable to realize the benefits under that agreement. However, we and
DoubleClick may continue to explore ways of integrating our MOJO technology
with DoubleClick's ad serving technology, known as DART. Although we expect to
continue to purchase media in DoubleClick's publisher network, we expect
competitive pressure from DoubleClick to increase in other areas.
44
<PAGE>
Our Clients
As of February 29, 2000, Mediaplex had over 75 active clients. The following
is a list of all of our clients that purchased more than $50,000 in services
from January 1, 1999 to February 29, 2000:
Clients
<TABLE>
<S> <C>
1800DAYTRADE.COM ShopMattel.com
AdAuction.com more.com
Akamai Technologies, Inc. musicmaker.com
AnyDay.com MyShopNow.com
Ashford.com myTrack
Le Club des Createurs de Beaute National Discount Brokers
BigVine NextPlanetOver
Capstone Studio OfficeMax.com
Cassava Enterprises Ltd. Orbis Online
DATEK Online PCMall/Creative Computers, Inc.
Deutsche Bank Providian Financial Corporation
DoveBid Reflect.com
DriveSavers Replay TV, Inc.
eCOST.com sales.com
eFax.com School Specialty, Inc.
eTranslate SelfCare.com
Evite ShopNow.com
Financial Engines Silicon Graphics (SGI)
Fisher Investments, Inc. Sprint PCS
Flowerfarm.com Strong Funds
FreeShop.com Sun Microsystems, Inc.
FreshFlowerSource.com, Inc. The Media Edge
Hewlett-Packard ToyTime, Inc.
HomeGain uBid.com
Investor's Business Daily Virtumundo, Inc.
LuckySurf.com Visto Corporation
macys.com WinStar Interactive
Mamma.com
</TABLE>
The following is a list of advertising agencies with whom we have
established alliances and which have referred to us clients that purchased more
than $50,000 in services from January 1, 1999 to February 29, 2000:
Advertising Agencies
Critical Mass
Lowe & Partners
DynaMind, LLC.
McCann-Ericson/A&L
Gardner, Geary, Coll & Young
Publicis & Hal Riney
Hample Stefanides
Tonic 360
KellTech Internet Services
Winkler Advertising
KSL Media, Inc. Young & Rubicam
45
<PAGE>
Client Case Studies
Publicis & Hal Riney for Hewlett-Packard
Mediaplex worked with Publicis & Hal Riney to develop an online marketing
program for Hewlett-Packard, one of the world's largest computer companies
producing more than 29,000 products for personal use and use in industry,
business, engineering, science, medicine and education.
. Challenge: Hewlett-Packard required an online marketing program that
entailed extensive tracking, reporting and analysis for four separate
products as it began to market its full line of business PCs and servers
over the Internet.
. Mediaplex Solution: Mediaplex developed and managed an online advertising
campaign for Hewlett-Packard's laptop, business PC, server and high-end
work station products. Working closely with Hewlett-Packard and Publicis
& Hal Riney, Mediaplex developed four strategic media plans to reach
targeted audiences based on each product's specific user profile. The Web
pages that housed the product information resided on Mediaplex servers,
which enabled Mediaplex to accurately track both the time spent viewing
product information, and the viewer's next step. Mediaplex provided a
comprehensive analysis of customized metrics reflecting the results of
the campaigns as they progressed, including numbers of impressions and
click-through rates achieved for each banner.
. Results: Using MOJO technology, Mediaplex modified advertisements and
placements, in real time, based on a continuous analysis of the
campaign's performance. By tracking movements made on each product page,
Mediaplex was able to determine for Hewlett-Packard, on a product by
product basis, whether consumers were clicking through to gather
information, make a purchase, reach a sales representative or were merely
browsing.
eCOST.com
eCOST.com is a retailer of computer products, consumer electronics, games
and game systems, and is one of the fastest growing multi-category Internet
retailers. eCOST.com's parent company, Creative Computers/IdeaMall, focuses on
electronic commerce markets.
. Challenge: In a highly competitive e-commerce arena, eCOST.com's
objectives were two-fold: achieve a higher conversion rate and lower cost
per acquisition, specifically on its hand-held electronic devices, by
increasing qualified traffic to the eCOST.com site; and improve
performance measurability.
. Mediaplex Solution: Mediaplex implemented a customized Multiple Messaging
campaign, enabled by its MOJO technology. Designed to promote multiple
offers and deliver separate click-through paths within a single banner
ad, Multiple Messaging was the solution chosen for generating customer
interest because it allows the simultaneous promotion of multiple
products. The choice of message is determined by the position on the
banner on which the site visitor clicks. For example, the eCOST.com
banner advertised both the Palm V Organizer and the Palm IIIx. Unique
URLs attached to each image linked the viewer directly to the appropriate
"Buy Now" page on eCOST.com's site.
. Results: The Mediaplex reporting system collected all delivered clicks
associated with each creative component within the single banner,
breaking out the clicks by product, such as Palm V Organizer versus Palm
IIIx. eCOST.com has expanded its use of the MOJO technology to include
real-time price and product information through eBusiness Messaging.
Technical Support
We provide extensive technical strategy and support throughout the
implementation and maintenance phases of the deployment of our services. This
support is comprised of three key components: Network Operations, Technical
Account Coordination and MOJO Implementation.
46
<PAGE>
Network Operations
Our network operations organization is responsible for ensuring that our
network and servers are fault-tolerant. We have organized our network of
servers to provide significant protection against potential breakdown or
outages.
Technical Account Coordination
We believe that our technical account procedures protect the client from
data loss. Each account team, comprised of a customer support manager, software
engineer and director of systems operations, holds frequent meetings to discuss
each ad campaign currently being conducted. These teams review each client's
campaign for which the team is responsible to ensure the client's program is
operating trouble-free.
Our account coordinators also work with each publisher to provide smooth
technical implementation of the campaign, and test each technical aspect of the
campaign before it is launched.
MOJO Implementation
Our engineering organization takes an in-depth and focused approach to the
implementation of our MOJO technology for each client's online campaign. Each
team meets with its clients to fully understand the client's environment, its
computer systems and exactly how the MOJO technology needs to work with the
client's specific computer systems. The team also works with the client to
define the campaign needs and then implements an appropriate plan based on the
campaign goals set by the client. Once MOJO is installed, the team performs
ongoing implementation and support of the client's campaign.
Privacy of Client Data
Our clients generally have implemented security features to protect the
privacy and integrity of the data collected from their users. However, this
information may be susceptible to hacker interception, break-ins and
disruption. We face privacy issues related to our ability to access our
clients' internal business information data. In some cases, our clients have
expressed concern that, because we manage advertising campaigns for them as
well as for their competitors, their confidential business information may be
exposed to these competitors. In order to prevent the unintentional exposure of
confidential business information of our clients, we have created safeguards
for their data, including the use of separate secure servers for clients with
any potential product overlap, independent client teams with no overlapping
personnel, and confidentiality agreements on behalf of the advertising agencies
with which we work and on behalf of the client. In addition, we maintain a
strict policy that no client data should be shared, sold or aggregated with any
other client's data.
Consumer Privacy
Our MOJO architecture was designed with the privacy of consumers in mind.
For example, in Germany, strict privacy rules require that in order to set a
cookie on a consumer's hard drive, a party must have a relationship with that
consumer. Cookies are small files of information stored in a user's computer
which allow us to recognize that user's browser when we serve advertisements.
This means that in Germany, an e-commerce Web site can set cookies, but an ad
network cannot. Because our mobile Java objects can reside on the client's
server, we can serve ads from the e-commerce site's servers, thus incorporating
valuable cookie information in the targeted ad-serving process. In Germany,
traditional third-party ad serving architectures could not get access to such
data because they do not generally have the ability to serve ads from the e-
commerce site's data center.
Government and Industry Privacy Regulation
Within the United States, the legal landscape for Internet privacy is new
and rapidly evolving. Collectors and users of consumer information over the
Internet face potential tort liability for public disclosure of private
47
<PAGE>
information; and liability under federal and state fair trade acts when
information sharing practices do not mirror stated privacy policies. The
Federal Trade Commission and state attorneys general have been investigating
Internet service providers regarding their use of personal information.
Recently, class action lawsuits have been filed alleging violations of privacy
laws by Internet service providers. In addition, there are a growing number of
federal laws that regulate privacy practices, including: the Children's Online
Privacy Protection Act, which applies to commercial Web sites and online
services that are targeted at children or that have actual knowledge that
information is being collected from a child; The Fair Credit Reporting Act,
which applies to entities that regularly collect and furnish to others certain
types of information, including information bearing on a consumer's credit
worthiness, personal characteristics or mode of living; and the recently
enacted privacy provisions of the Gramm-Leach-Bliley Act, which impose
substantive restrictions on the disclosure to non-affiliated third parties of
personally identifiable financial information acquired by financial
institutions and requires financial institutions to adopt and provide to
customers their privacy policies. We may be liable for either our failure or
the failure of our clients to comply with these laws.
The application of privacy laws of foreign subsidiaries to United States
companies doing business with consumers in foreign jurisdictions is also
evolving. In October 1998, the European Union adopted a privacy directive that
sets minimum standards for personal information processing within the European
Union. In addition, most European nations have had comprehensive privacy
statutes for some time. Germany, in particular, has adopted significant
restrictions on the use of some kinds of profiling techniques, including
techniques that are often used by third-party profiling companies. These
restrictions limit the effectiveness of our services in Germany. Restrictions
in other countries could decrease our ability to provide our advertising and
direct marketing services effectively in those countries, which would hamper
our ability to expand our operations internationally.
The Network Advertising Initiative, an industry self-regulatory group
comprised of third-party ad servers has proposed a series of self-regulatory
principles, which may be more stringent than those currently proposed by
federal and state governmental entities. Other trade associations are active as
well. For instance, the Online Privacy Alliance, a broad coalition of high-
technology companies, is examining fair information practices and may offer
proposals for industry acceptance. The Direct Marketing Association, the
leading trade association of direct marketers, has adopted guidelines regarding
the fair use of information for industry participants to follow.
Intellectual Property
To protect our proprietary rights, we rely generally on patent, copyright,
trademark and trade secret laws, and confidentiality agreements or licenses
with employees, consultants, vendors, clients and corporate parties. Despite
these protections, a third party could, without authorization, disclose, copy
or otherwise obtain and use our technology or develop similar technology
independently.
We currently have one provisional patent application pending in the United
States relating to our MOJO architecture. We cannot assure you that our
pending, or any future, patent application will be granted, that any existing
or future patent will not be challenged, invalidated or circumvented, or that
the rights granted under or any patent that may issue will provide competitive
advantages to us. Many of our current and potential competitors dedicate
substantially greater resources to the protection and enforcement of
intellectual property rights, especially patents. If a blocking patent has
issued or issues in the future to a third party, we would need either to obtain
a license to, or to design around, that patent. We may not be able to obtain a
license on acceptable terms, if at all, or design around the patent, which
could harm our ability to provide our services.
We pursue the registration of our trademarks and service marks in the U.S.
and in other countries, although we have not secured registration of all of our
marks. As of December 31, 1999, we had registered U.S. trademarks or
service marks; however, we have applied for registration of our Mediaplex and
MOJO trademarks, which we believe are key to identifying and differentiating
our services from those of our competitors. In addition, the laws of some
foreign countries will not protect our proprietary rights to the same
48
<PAGE>
extent as do the laws of the U.S., and effective patent, copyright, trademark
and trade secret protection may not be available in these jurisdictions.
We may, in the future, license our proprietary rights, in particular our
MOJO technology, to third parties. These licensees may fail to abide by
compliance and quality control guidelines with respect to our proprietary
rights or take actions that would severely harm our ability to use our
proprietary rights and our business.
In addition, it is difficult to proceed with certainty in a rapidly evolving
technological environment in which there exist numerous patent applications
pending, many of which are confidential when filed, with regard to similar
technologies. If we were to discover that our technology violates third-party
proprietary rights, we might not be able to obtain licenses or continue
offering our services based on our technology without substantial
reengineering. Any efforts to undertake this reengineering might not be
successful, and any necessary licenses might not be available on commercially
reasonable terms, if at all.
Litigation for claims of infringement might not be avoided or settled
without incurring substantial expenses and damage awards. In addition, any of
these claims, even if not meritorious, could result in the expenditure of
significant financial and managerial resources and could result in injunctions
preventing us from delivering our services based on our technology or licensing
our technology to third parties or clients. These claims could harm our
business.
In the future, we may license technology that will be integrated with our
internally developed software and used in our services. We cannot assure you
that third-party technology licenses will become or will continue to be
available to us on commercially reasonable terms. The loss of any of these
technologies could harm our business. In addition, by licensing technology from
third parties, we may become susceptible to claims for infringement with
respect to this third-party technology. Even if we receive broad
indemnification from our licensors, third-party indemnitors are not always well
capitalized and may not be able to indemnify us in the event of infringement,
resulting in substantial exposure to us. Any infringement claims, even if not
meritorious, could result in the expenditure of significant financial and
managerial resources in addition to potential product redevelopment costs and
delays, all of which could harm our business.
Competition
The Internet media services market, which includes planning media campaigns,
buying advertising space, ad serving and tracking and reporting results of
advertising, is extremely competitive and likely to become more intense due to
the lack of significant barriers to entry. In particular, advertising agencies
without in-house online media management capabilities, including those with
which we currently work, may develop these capabilities in the future. Our
primary competition for providers of online media planning and buying services
is Avenue A, and our primary competitor for third-party ad serving is
DoubleClick. Many of our existing competitors, as well as a number of potential
new competitors, have longer operating histories, greater name recognition,
larger client bases and significantly greater financial, technical and
marketing resources than we have. The following categories represent current
and potential competition:
. online media planning and buying services, such as Avenue A;
. ad serving companies, such as AdForce, DoubleClick and Engage
Technologies;
. publisher networks that provide services directly to clients, such as
Flycast Communications, Adsmart and 24/7 Media;
. organizations that manage affiliate programs, such as LinkShare; and
. advertising agencies that have or elect to develop in-house online media
management capabilities, such as Lowe Interactive.
49
<PAGE>
We believe that our ability to compete depends upon many factors both within
and outside of our control, including:
. effectiveness, ease of use, performance and features of our technology;
. client perceptions of the effectiveness of our services and technology;
. the price of our services;
. our ability to service our clients effectively over a broad geographic
basis; and
. the timing and acceptance of new services and enhancements to existing
services developed by us or our competitors.
We believe that, in addition, competition will continue to increase as a
result of industry mergers, partnerships and consolidation. For example,
AdForce, AdSmart and Flycast have recently been acquired by CMGI, AdKnowledge
has been acquired by Engage Technologies, a subsidiary of CMGI, and NetGravity
has been acquired by DoubleClick. As we expand internationally, we expect to
face competition from internationally based competitors, such as Mindshare
Digital and Publicis Technology, as well as our domestic competitors with
international operations, such as BBDO Interactive, Leo Burnett and The
Interpublic Group.
Employees
As of February 29, 2000, we had 154 full-time employees. Of these employees,
38 were engaged in research and development, 89 were engaged in sales and
marketing and 27 were engaged in finance and administration. None of our
employees is represented by a labor union or a collective bargaining agreement.
We have not experienced any work stoppages and consider our relations with our
employees to be good.
Facilities
We currently lease approximately 33,200 square feet of office space for our
headquarters in two buildings, located in San Francisco, California. We also
lease approximately 13,200 square feet of a facility in San Jose, California
that houses our research and development organization and approximately 7,700
square feet in New York City for a sales office. We also lease space for our
office in Hamburg, Germany. In addition, we use two third-party, fully
redundant co-location facilities that house our Web servers in San Francisco
and San Jose, California and we are currently seeking to obtain additional co-
location facilities in other areas in the United States. We cannot assure you
that we will be able to locate and lease additional acceptable co-location
space at a reasonable price.
Legal Proceedings
From time to time, we may become involved in litigation relating to claims
arising from the ordinary course of our business.
50
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information with respect to our
directors and executive officers as of February 29, 2000:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Gregory R. Raifman...... 40 Chairman of the Board of Directors and Chief Executive Officer
Jon L. Edwards.......... 40 President and Director
Walter Haefeker......... 39 Chief Operating Officer
Ruiqing "Barclay"
Jiang.................. 37 Chief Technology Officer
Timothy M. Favia........ 37 Executive Vice President, Sales and Development
Michael E. Stanek....... 36 Senior Vice President and Chief Financial Officer
Robert M. Henely........ 48 Senior Vice President, Technical Operations
M. Joy Fauvre........... 48 Senior Vice President, Marketing
Brian J. Powley......... 38 Senior Vice President, Client Services
Alan M. Raifman......... 45 Vice President, Business and Legal Affairs
James DeSorrento........ 57 Director
Lawrence D. Lenihan,
Jr..................... 35 Director
Peter S. Sealey......... 59 Director
A. Brooke Seawell....... 52 Director
</TABLE>
Gregory R. Raifman has served as our Chairman of the Board of Directors and
Chief Executive Officer since September 1998, and Chief Executive Officer and
sole director of MediaPlex, Inc., our former wholly-owned subsidiary since
April 1998. Since August 1993, Mr. Raifman has also served as a general partner
of Raifman & Edwards LLP, a law firm. Since September 1994, Mr. Raifman has
also served as a managing member of PointBreak Ventures, LLC, a venture capital
firm. Mr. Raifman received an A.B. in economics and history from the University
of Michigan and a J.D. from Georgetown University Law Center.
Jon L. Edwards has served as our President and a member of our board of
directors since April 1998. Since August 1993, Mr. Edwards has also served as a
general partner of Raifman & Edwards LLP. Since September 1994, Mr. Edwards has
also served as a managing member of PointBreak Ventures, LLC. Mr. Edwards
received an A.B. in engineering science from Dartmouth College and a J.D. from
Georgetown University Law Center.
Walter Haefeker has served as our Chief Operating Officer since January
1999. Since September 1994, Mr. Haefeker has served as a managing member for
PointBreak Ventures, LLC. From March 1994 to April 1995, Mr. Haefeker served as
chairman of the board of directors for CADIS Software, Ltd., a software
company. Mr. Haefeker received an Abitur in chemistry and physics from Theodor-
Heass Gymnasium, Pinneberg, Germany.
Ruiqing "Barclay" Jiang has served as our Chief Technology Officer since
March 1999. Prior to joining Mediaplex, Mr. Jiang served as president of
Netranscend Software, Inc., a business software company, from November 1996
until it was acquired by Mediaplex in March 1999. From October 1993 to
September 1997, Mr. Jiang served as a project manager for FutureLabs, Inc., a
software company. Mr. Jiang received a B.S. in computer science from Xi'an
Jiaotong University, China and an M.S. in applied statistics from Louisiana
State University.
Timothy M. Favia has served as our Executive Vice President, Sales and
Development since January 1999. Prior to joining Mediaplex, Mr. Favia was a co-
founder of Oxygen Electronics, LLC, a distributor of electronic components,
where he served as managing partner from June 1997 to December 1998. From
January 1996 to May 1997, Mr. Favia served as vice president, western region,
of Open Port Technology, an Internet messaging
51
<PAGE>
services company. From July 1988 to January 1996, he served as director of
international sales for Thomson Software Products, a software company. Mr.
Favia received a B.A. in political science from Fairfield University.
Michael E. Stanek has served as our Senior Vice President and Chief
Financial Officer since March 2000. Prior to joining Mediaplex, he served as
Senior Vice President and Senior Research Analyst for Internet infrastructure
and enterprise software companies at Lehman Brothers from June 1996 to March
2000. Prior to his tenure with Lehman Brothers, Mr. Stanek was a Partner and
Managing Director of Equity Research for Dain Rauscher Wessels from October
1994 to May 1996. He served as Senior Vice President in Equity Research for
U.S. Bancorp Piper Jaffray from June 1992 to October 1994, and as Senior Vice
President and Portfolio Manager for Mutual of Omaha Capital from September 1989
to June 1992. Mr. Stanek received a B.S. degree in economics from the
University of Nebraska.
Robert M. Henely has served as our Senior Vice President, Technical
Operations since March 1999. Prior to joining Mediaplex, Mr. Henely served as
director of engineering for Boole & Babbage, Inc., a software company, from
December 1997 to March 1999. From November 1981 to December 1997, Mr. Henely
served as a research and development manager at Hewlett-Packard Company. Mr.
Henely received a B.S. in economics from California State University, Chico and
an M.S. in econometrics from the University of California, San Diego.
M. Joy Fauvre has served as our Senior Vice President, Marketing since July
1999. Prior to joining Mediaplex, Ms. Fauvre served as a marketing director for
Heller Financial, Inc., a commercial lender, from October 1994 to July 1999.
From June 1994 to October 1994, Ms. Fauvre served as acting advertising manager
for Qantas Airways, a commercial airline, and from August 1991 to January 1994,
she served as an account supervisor for D'Arcy Masius Benton & Bowles, an
advertising agency. Ms. Fauvre received a B.A. in theatre from the University
of California, Santa Barbara and an M.A. in theatre from Ball State University.
Brian J. Powley has served as our Senior Vice President, Client Services
since October 1999. Prior to joining Mediaplex, Mr. Powley served as Partner,
Worldwide Account Director for Ogilvy Interactive, the interactive division of
Ogilvy Worldwide, from February 1994 to September 1999, where he was
responsible for global strategic direction and management of IBM's Interactive
Brand Advertising. He also held positions at Ziff-Davis from January 1994 to
February 1995, and at EMAP Computing from May 1992 to January 1994. Mr. Powley
received a degree in management studies from London Guildhall University.
Alan M. Raifman has served as our Vice President, Business and Legal Affairs
since February 1999. Prior to joining Mediaplex, Mr. Raifman served as an
associate for Albert A. Rettig & Associates, a business services company, from
June 1997 through January 1999. From July 1989 to June 1997, Mr. Raifman served
as President and a director of Little Cargo, Inc., a juvenile product
development company that he co-founded. Mr. Raifman is currently on the board
of directors of Little Cargo, Inc. Mr. Raifman received a B.A. in history and a
J.D. from Washington University.
James DeSorrento has served as a member of our board of directors since
August 1999. From June 1982 until its acquisition by Mediacom LLC in May 1999,
Mr. DeSorrento served as chief executive officer and chairman of the board of
Triax Telecommunications Company, LLC and its predecessor, Triax Communications
Corporation, a cable television operating company. Mr. DeSorrento received a
B.A. in English from St. Michael's College.
Lawrence D. Lenihan, Jr. has served as a member of our board of directors
since August 1999. Since January 1999, Mr. Lenihan has served as fund manager
for Pequot Capital Management, Inc., a venture capital firm. From October 1996
to December 1998, Mr. Lenihan served as fund manager for Dawson-Sanberg Capital
Management, a venture capital firm. From August 1993 to October 1996, Mr.
Lenihan served as a principal for Broadview Associates, an investment bank. Mr.
Lenihan also serves as a member of the boards of directors of
52
<PAGE>
Digital Generation Systems, Inc., a provider of distribution services for ad
agencies and broadcasters, STM Wireless, Inc., a satellite and wireless-based
communications company, and Triken Technologies, Inc., a semiconductor-
processing equipment company, as well as several private companies. Mr. Lenihan
received a B.S.E.E. in electrical engineering from Duke University and an
M.B.A. from the Wharton School of Business at the University of Pennsylvania.
Peter S. Sealey has served as a member of our board of directors since
August 1999. Since September 1994, Dr. Sealey has served as an adjunct
professor of marketing at the Haas School of Business at the University of
California, Berkeley where he also has served as a co-director of the Center
for Marketing and Technology. Prior to that, Dr. Sealey was employed by the
Coca Cola Company for 24 years, where he held a series of senior management
positions, including senior vice president, global marketing. Dr. Sealey serves
as a member of the boards of directors of Autoweb.com Inc., a consumer
automotive Internet site, L90, a provider of Internet advertising and direct
marketing solutions for advertisers and web publishers, and Cybergold, Inc., an
Internet-based direct marketing and advertising company, as well as several
private companies. Dr. Sealey received a B.S.B.A. in business from the
University of Florida, an M.I.A. in industrial administration from Yale
University, and an M.A. in management and Ph.D. in management and information
technology from the Peter F. Drucker Graduate Management Center at The
Claremont Graduate University.
A. Brooke Seawell has served as a member of our board of directors since
August 1999. From April 1997 to September 1998, Mr. Seawell served as the
executive vice president of NetDynamics Inc., a business network applications
server software company. From March 1991 to April 1997, Mr. Seawell served as
the senior vice president of finance and operations of Synopsys Inc., an
electronic design automation company. Mr. Seawell serves as a member of the
boards of directors of NVIDIA Corporation, a three-dimensional graphics
processor, Informatica Corporation, a data integration software company, and
Accrue Software, Inc., an Internet data collection and analysis software
company, as well as several private companies. Mr. Seawell received a B.A. in
economics and an M.B.A. in finance from Stanford University.
Board of Directors
Our board of directors is currently comprised of six directors. Our board of
directors is divided into three classes as nearly equal in size as possible
with staggered, three-year terms. The term of office of our Class I directors
will expire at the annual meeting of stockholders to be held in 2000; the term
of office of our Class II directors will expire at the annual meeting of
stockholders to be held in 2001; and the term of office of our Class III
directors will expire at the annual meeting of the stockholders to be held in
2002. Messrs. Lenihan and Sealey have been designated as Class I directors;
Messrs. Edwards and DeSorrento have been designated as Class II directors; and
Messrs. Raifman and Seawell have been designated as Class III directors. At
each annual meeting of the stockholders after the initial classification, the
successors to the directors whose terms have expired will be elected to serve
from the time of election and qualification until the third annual meeting
following their election or until their successors have been duly elected and
qualified, or until their earlier resignation or removal, if any. In addition,
our bylaws provide that the authorized number of directors may be changed by
resolution of the board of directors. Any additional directorships resulting
from an increase in the number of directors will be distributed among the three
classes so that, as nearly as possible, each class will consist of one-third of
the total number of directors. The classification of our board of directors
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from acquiring, control of Mediaplex. See
"Description of Capital Stock."
Each officer is elected by, and serves at the discretion of, the board of
directors or until his or her successor has been duly elected and qualified.
Each of our executive officers and directors, other than non-employee
directors, devotes his or her full time to our affairs. Our non-employee
directors devote the amount of time necessary to discharge their duties to us.
Gregory R. Raifman, our Chairman of the Board of Directors
53
<PAGE>
and Chief Executive Officer is the brother of Alan M. Raifman, our Vice
President, Business and Legal Affairs. Jon Edwards, our President, is the
brother of Michael Edwards, our Vice President, Business Development. There are
otherwise no family relationships among any of our directors, officers or key
employees.
Board Committees
The board of directors has established an audit committee to meet with and
consider suggestions from members of management and our internal accounting
personnel, as well as our independent accountants, concerning our financial
operations. The audit committee also has the responsibility to review our
audited financial statements and consider and recommend the employment of, and
approve the fee arrangements with, independent accountants for both audit
functions and for advisory and other consulting services. The audit committee
is currently comprised of Messrs. DeSorrento and Seawell.
The board of directors has also established a compensation committee to
review and approve the compensation and benefits for our key executive
officers, administer our equity incentive plans and make recommendations to the
board of directors regarding such matters. The compensation committee is
currently comprised of Messrs. Lenihan and Sealey.
Compensation Committee Interlocks and Insider Participation
Prior to establishing the compensation committee, the board of directors as
a whole performed the functions delegated to the compensation committee. No
member of the board of directors or the compensation committee serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of
directors or compensation committee.
Director Compensation
Directors do not currently receive any cash compensation from us for their
service as members of the board of directors; however, directors are reimbursed
for all reasonable expenses incurred by them in attending board and committee
meetings. Employee and non-employee directors are also eligible to receive
discretionary options under our 1999 stock plan and employee directors are
eligible to participate in our 1999 employee stock purchase plan. In August
1999, Messrs. DeSorrento and Seawell and Dr. Sealey were each granted an option
to acquire 50,000 shares of common stock at an exercise price of $3.25 per
share upon their appointment to our board of directors. The foregoing options
vest over a four year period but may be exercised at any time subject to our
right of repurchase for unvested shares at the time of the director's
termination at the exercise price paid by the director. Our 1999 stock plan
also provides that each non-employee director who first becomes a director
after November 19, 1999, the effective date of our initial public offering,
will automatically receive a grant to purchase 50,000 shares of our common
stock on the date such person first becomes a director. In addition, our 1999
stock plan provides that each of our non-employee directors will automatically
receive a grant to purchase 10,000 shares of our common stock on the date of
our annual stockholders' meeting if such non-employee director has served as a
director for at least the preceding six months. The exercise price for
automatic grants to non-employee directors under our 1999 stock plan is equal
to the fair market value on the date of grant. Automatic options grants to non-
employee directors vest over a four year period. See "--Equity Incentive
Plans."
54
<PAGE>
Executive Compensation
The following table sets forth the total compensation received for services
rendered to us during 1998 and 1999 by our Chief Executive Officer and our next
four most highly paid executive officers who earned compensation in excess of
$100,000 during 1999. These four officers are referred to as the named
executive officers in this prospectus. The table also sets forth the total
compensation received for services rendered to us during 1998 by our Chief
Executive Officer and two of our other executive officers. In 1998, Messrs.
Gregory Raifman and Jon Edwards, general partners of Raifman & Edwards, LLP,
provided legal and management services to us, for which Raifman & Edwards, LLP
was paid approximately $197,000. See "Related Party Transactions." Except as
disclosed below and in "Related Party Transactions," we gave no bonuses, stock-
based compensation or other compensation to our named executive officers in
1998 and 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation ------------
------------------ Securities
Salary Underlying
Name and Principal Position ($) Bonus ($) Options (#)
- --------------------------- -------- --------- ------------
<S> <C> <C> <C> <C>
Gregory R. Raifman, Chief Executive
Officer (1)............................. 1999 $231,583 $ 500 1,750,000
1998 35,000 -- --
Jon L. Edwards, President (2)............ 1999 231,583 500 1,500,000
1998 35,000 -- --
Walter Haefeker, Chief Operating Officer
(3)..................................... 1999 198,333 500 1,250,000
1998 41,100 -- --
Ruiqing "Barclay" Jiang, Chief Technology
Officer (4)............................. 1999 131,762 12,612 688,000
Timothy M. Favia, Executive Vice
President, Sales and Development (5).... 1999 151,682 500 500,000
</TABLE>
- --------
(1) Mr. Raifman began employment with us in September 1998.
(2) Mr. Edwards began employment with us in April 1998.
(3) Mr. Haefeker began employment with us in September 1998.
(4) Mr. Jiang began employment with us in March 1999.
(5) Mr. Favia began employment with us in January 1999.
55
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth information with respect to stock options
granted to each of the named executive officers in the fiscal year ended
December 31, 1999, including the potential realizable value over the ten-year
term of the options, based on assumed rates of stock appreciation of 0%, 5% and
10%, compounded annually. These assumed rates of appreciation comply with the
rules of the Securities and Exchange Commission and do not represent our
estimate of future stock price. Actual gains, if any, on stock option exercises
will be dependent on the future performance of our common stock.
In the fiscal year ended December 31, 1999, we granted options to purchase
up to an aggregate of 9,659,721 shares to employees, directors and consultants.
All options were granted under our amended and restated 1999 stock plan at
exercise prices at or above the fair market value of our common stock on the
date of grant, as determined in good faith by the board of directors. All
options have a term of ten years. Optionees may pay the exercise price by cash,
check, cancellation of any outstanding indebtedness of the option holder to us
or delivery of already-owned shares of our common stock. Options listed below
for Messrs. Raifman, Edwards, and Haefeker are immediately exercisable upon
grant; however, any unvested shares are subject to repurchase by us at their
cost if the optionee's service with us terminates. Option shares for Messrs.
Raifman, Edwards, and Haefeker vest at the rate of 1/6th of the shares on the
six-month anniversary of the vesting commencement date, and 1/36th of the
shares per month thereafter as long as the optionee is employed by us. Option
shares listed in the table below for Messrs. Jiang and Favia vest over four
years, with 25% of the option shares vesting one year after the option grant
date, and the remaining option shares vesting ratably each month thereafter.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------
% of Total Potential Realizable Value
Number of Options Deemed at Assumed Annual Rates
Securities Granted to Value of Stock Price Appreciation for
Underlying Employees Exercise Per Share Option Term
Options In Last Price on Date Expiration --------------------------------
Name Granted Fiscal Year Per Share of Grant Date 0% 5% 10%
---- ---------- ----------- --------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gregory R. Raifman...... 1,750,000 18.12% $0.50 $1.125 2/19/09 $1,968,750 $3,206,886 $5,106,430
Jon L. Edwards.......... 1,500,000 15.53 0.50 1.125 2/19/09 1,687,500 2,748,760 4,376,940
Walter Haefeker......... 1,250,000 12.94 0.50 1.125 2/19/09 1,406,250 2,290,633 3,647,450
Ruiqing "Barclay"
Jiang.................. 688,000 7.12 0.50 1.125 3/25/09 774,000 1,260,764 2,007,557
Timothy M. Favia........ 500,000 5.18 0.50 1.125 2/19/09 562,500 916,253 1,458,980
</TABLE>
56
<PAGE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table describes for the named executive officers their option
exercises for the fiscal year ended December 31, 1999, and exercisable and
unexercisable options held by them as of December 31, 1999.
The "Value of Unexercised In-the-Money Options at December 31, 1999" is
based on a value of $62.75 per share, the closing price of our common stock on
the Nasdaq Stock Market's National Market as of December 31, 1999, less the per
share exercise price, multiplied by the number of shares issued upon exercise
of the option. Options were granted under our amended and restated 1999 stock
plan. Options listed below for Messrs. Gregory Raifman, Jon Edwards, and Walter
Haefeker are immediately exercisable; however, as a condition of exercise, the
optionee must enter into a restricted stock purchase agreement granting us the
right to repurchase any unvested portion of the shares issuable by such
exercise at their cost in the event of the optionee's termination of
employment. Options for Messrs Raifman, Edwards, and Haefeker vest at the rate
of 1/6th of the shares on the six-months anniversary of the vesting
commencement date, and 1/36th of the shares per month thereafter as long as the
optionee is employed by us. Option shares for Messrs. Jiang and Favia vest over
four years, with 25% of the shares vesting one year after the grant date and
the remaining shares vesting ratably each month thereafter.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Number Options at In-the-Money Options at
of Shares December 31, 1999 December 31, 1999
Acquired on Value ------------------------- --------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gregory R. Raifman...... 1,750,000 $108,937,500 1,750,000 -- $108,937,500 --
Jon L. Edwards.......... 1,500,000 93,375,000 1,500,000 -- 93,375,000 --
Walter Haefeker......... 1,250,000 77,812,500 1,250,000 -- 77,812,500 --
Ruiqing "Barclay"
Jiang.................. 688,000 42,828,000 166,500 521,500 10,364,625 $32,463,375
Timothy M. Favia........ 500,000 31,125,000 -- 500,000 -- 31,125,000
</TABLE>
Employment Agreements
In connection with our hiring and retention of each of Gregory R. Raifman,
Jon L. Edwards and Walter Haefeker, we entered into employment agreements, each
dated February 19, 1999, in which we agreed to pay each of them a specified
base salary and grant each of them options to purchase our common stock, and
each executive officer agreed to enter into a three-year employment term with
us. Upon the expiration of the three-year term, employment with us becomes
terminable at will. All options vest at the rate of 1/6th of the shares on the
six-month anniversary of the vesting commencement date, and 1/36th of the
shares per month thereafter as long as the optionee is employed by us. Under
the terms of each employment agreement, if we terminate employment with the
executive officer without cause, we are required to pay him severance payments
of 1/13th of his base salary for each complete month previously worked;
however, the aggregate severance payments are not to exceed his annual base
salary.
In connection with the hiring and retention of each of Michael Stanek and
Brian Powley, we entered into employment agreements, dated March 7, 2000 and
September 21, 1999, respectively, in which we agreed to pay each of them a
specified base salary and performance bonus, and grant each of them options to
purchase our common stock, and each executive officer agreed to enter into an
at-will employment with us. Mr. Stanek was granted an option to purchase
293,385 shares. Of these shares, 75,000 vested on the commencement of his
employment (March 7, 2000); 121,325 shares will vest on the one-year
anniversary of his vesting commencement date; and the remaining 97,060 shares
will vest as 24,265 shares on the one-year anniversary of his vesting
commencement date, and an additional 2,022 shares on the last day of each month
for a three-year period thereafter, as long as the optionee is employed by us.
Mr. Powley was granted an option to purchase 45,000 shares. Mr. Powley's
options will vest over four years, with 25% of the option shares vesting one
year after October 18, 1999, the option grant date, and the remaining option
shares vesting ratably each month thereafter. Under the terms of Mr. Stanek's
employment agreement, if we terminate employment with him without cause, we
57
<PAGE>
are required to pay him two weeks of compensation for every four weeks Mr.
Stanek was employed by us, up to a maximum amount of six months salary.
Further, under his employment agreement, Mr. Stanek received a loan from us in
the amount of $1,000,000. The loan will be forgiven upon the expiration of four
years from the date of the commencement of his employment. In the event his
employment is terminated for cause or he voluntarily terminates his employment,
Mr. Stanek shall be responsible to pay us the remaining balance of the loan at
the time of his termination, including interest on the remaining principal, at
the annual rate of six percent.
The following table sets forth the stock options granted to each executive
officer under his employment agreement with us:
<TABLE>
<CAPTION>
Options Exercise Price
Name Granted Per Share
- ---- --------- --------------
<S> <C> <C>
Gregory R. Raifman..................................... 1,750,000 $0.50
Jon L. Edwards......................................... 1,500,000 0.50
Walter Haefeker........................................ 1,250,000 0.50
Michael E. Stanek...................................... 293,385 12.00
Brian J. Powley........................................ 45,000 8.00
</TABLE>
Additionally, each executive officer has agreed to not compete with us or
not solicit others from us for a period of one year following his termination
with us.
Equity Incentive Plans
1997 Stock Plan. Our 1997 Stock Plan provides for the granting to employees
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and for the granting to employees and
consultants of nonstatutory stock options and stock purchase rights. As of
December 31, 1999, options to purchase 243,000 shares of common stock were
outstanding under our 1997 Stock Plan. Our board of directors determined not to
grant any further options under the 1997 Stock Plan after our initial public
offering. The 1997 Stock Plan provides that, if we merge with or into another
corporation or sell substantially all of our assets, each outstanding option
must be assumed or substituted for by the successor corporation. If the
successor corporation refuses to assume or substitute for the Mediaplex
options, the Mediaplex options will terminate as of the closing of the merger
or sale of assets.
Amended and Restated 1999 Stock Plan. Our 1999 Stock Plan was initially
adopted by our board of directors and shareholders in February 1999. It was
amended and restated by our board of directors in August 1999, and by approved
our stockholders in September 1999.
The Amended and Restated 1999 Stock Plan provides for the grant of incentive
stock options to employees, including officers and employee directors, and for
the grant of nonstatutory stock options and stock purchase rights to employees,
directors and consultants.
We initially reserved 12,000,000 shares of our common stock for issuance
pursuant to the Amended and Restated 1999 Stock Plan. In addition, on January
1, 2000, the number of shares reserved for issuance under the Amended and
Restated 1999 Stock Plan was automatically increased by 400,000 shares.
Subject to obtaining approval of the holders of a majority of our
outstanding shares of common stock, we plan to amend the Amended and Restated
1999 Stock Plan to increase the number of shares reserved for issuance, and
increase the annual increases to the number of shares reserved for issuance in
future years, to allow us to attract and retain the most qualified employees,
officers and directors. Our Amended and Revised 1999 Stock Plan currently
provides for annual increases of the number of shares reserved for issuance
thereunder by an amount equal to the lesser of (a) 1,000,000 shares, (b) 4% of
the outstanding shares or (c) an amount determined by our board of directors.
However,we plan to amend our 1999 Stock Plan to reserve an additional 1,000,000
shares of our common stock for issuance thereunder. We also plan to amend the
1999 Plan to provide for a higher annual increase, to be added on the first day
of the fiscal year commencing in
58
<PAGE>
2001, equal to the lesser of (a) 3,000,000 shares, (b) 5% of the outstanding
shares of our capital stock, or (c) such lesser amount as may be determined by
the board of directors.
Unless terminated sooner, the Amended and Restated 1999 Stock Plan will
automatically terminate on November 19, 2009.
The administrator of our stock plan has the power to determine:
. the terms of the options or stock purchase rights granted, including the
exercise prices of the options or stock purchase rights;
. the number of shares subject to each option or stock purchase right;
. the exercisability of each option or stock purchase right; and
. the form of consideration payable upon the exercise of each option or
stock purchase right.
In addition, the administrator has the authority to amend, suspend or
terminate the stock plan, so long as this action does not affect any shares of
common stock previously issued and sold or any option previously granted under
the Amended and Restated 1999 Stock Plan. The maximum number of shares covered
by an option that each optionee may be granted during a fiscal year is 500,000
shares. In addition, in connection with an optionee's initial employment with
us, the optionee may be granted an option covering an additional 500,000
shares.
Option and stock purchase rights granted under our Amended and Restated 1999
Stock Plan are generally not transferable by the optionee, and each option and
stock purchase right is exercisable during the lifetime of the optionee only by
the optionee. Options granted under the Amended and Restated 1999 Stock Plan
must generally be exercised within three months after the end of the optionee's
status as an employee, director or consultant of Mediaplex, or within 12 months
after the optionee's termination by death or disability, but in no event later
than the expiration of the option's term.
In the case of stock purchase rights, unless the administrator determines
otherwise, the restricted stock purchase agreement must grant us a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment or consulting relationship with us for any reason,
including death or disability. The purchase price for shares repurchased
pursuant to the restricted stock purchase agreement will be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of
the purchaser to us. The repurchase option will lapse at a rate determined by
the administrator.
The exercise price of all incentive stock options granted under the Amended
and Restated 1999 Stock Plan must be at least equal to the fair market value on
the date of grant of the common stock underlying the option. The exercise price
of nonstatutory stock options and stock purchase rights granted under the
Amended and Restated 1999 Stock Plan is determined by the administrator, but
with respect to nonstatutory stock options intended to qualify as "performance-
based compensation" within the meaning of Section 162(m) of the Code, the
exercise price must be at least equal to the fair market value on the date of
grant of the common stock underlying the option. With respect to any
participant who owns stock possessing more than 10% of the voting power of all
classes of our outstanding capital stock, the exercise price of any incentive
stock option granted must be at least equal to 110% of the fair market value on
the grant date and the term of the incentive stock option must not exceed five
years. The term of all other options granted under the Amended and Restated
1999 Stock Plan may not exceed ten years.
The Amended and Restated 1999 Stock Plan provides that, in the event of a
merger of Mediaplex with or into another corporation, or a sale of
substantially all of our assets, each option and stock purchase right must be
assumed, or an equivalent option or stock purchase right substituted, by the
successor corporation. If the outstanding options and stock purchase rights are
not assumed or substituted for by the successor corporation, the optionees will
fully vest in and have the right to exercise their options or stock purchase
rights. If an option
59
<PAGE>
or stock purchase right becomes fully vested and exercisable in the event of a
merger or sale of assets, the administrator must notify the optionee that the
option or stock purchase right will be fully exercisable for a period of 15
days from the date of notice and that the option or stock purchase right will
terminate upon the expiration of the 15-day period.
1999 Employee Stock Purchase Plan. Our 1999 Employee Stock Purchase Plan was
adopted by our board of directors in August 1999, and approved by our
stockholders in September 1999. The 1999 Employee Stock Purchase Plan became
effective upon our initial public offering. This plan is designed to allow our
eligible employees and the eligible employees of any participating subsidiaries
to purchase shares of common stock, at semi-annual intervals, with their
accumulated payroll deductions.
We have reserved 400,000 shares of our common stock for issuance pursuant to
the 1999 Employee Stock Purchase Plan. In addition, commencing January 1, 2000,
the number of shares reserved for issuance under the 1999 Employee Stock
Purchase Plan will be increased by an amount equal to the least of: (a) 400,000
shares, (b) 2% of the outstanding shares on such date or (c) an amount
determined by our board of directors. As of the date of this prospectus, no
shares had been issued under the 1999 Employee Stock Purchase Plan.
Our 1999 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the Code, contains consecutive, overlapping, 24-month offering
periods. Each offering period includes four six-month purchase periods. The
offering periods generally start on the first trading day on or after May 1 and
November 1 of each year, except for the first offering period, which commences
on the first trading day on or after the effective date of this offering and
ends on the last trading day on or before October 31, 2001.
Employees are eligible to participate if they are customarily employed by us
or any participating subsidiary for at least 20 hours per week and more than
five months in any calendar year. However, employees may not be granted an
option to purchase stock under the 1999 Employee Stock Purchase Plan if they
either:
. immediately after grant, own stock possessing 5% or more of the total
combined voting power or value of all classes of our capital stock; or
. hold rights to purchase stock under our 1999 Employee Stock Purchase
Plan that accrue at a rate which exceeds $25,000 worth of stock for each
calendar year.
The 1999 Employee Stock Purchase Plan permits each participant to purchase
our common stock through payroll deductions of up to 10% of his or her
"compensation." Compensation is defined as the participant's base straight-time
gross earnings, and commissions, but excludes overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation. The
maximum number of shares a participant may purchase during a single purchase
period is 1,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each purchase period. The price of stock
purchased under the 1999 Employee Stock Purchase Plan is generally 85% of the
lower of the fair market value of the common stock either:
. at the beginning of the offering period; or
. at the end of the purchase period.
In the event the fair market value at the end of a purchase period is less
than the fair market value at the beginning of the offering period, the
participants will be withdrawn from the current offering period following
exercise and automatically re-enrolled in a new offering period. The new
offering period will use the lower fair market value as of the first date of
the new offering period to determine the purchase price for future purchase
periods. Participants may end their participation at any time during an
offering period, and they will be paid their payroll deductions to date.
Participation ends automatically upon termination of employment with us.
Rights granted under the 1999 Employee Stock Purchase Plan are not
transferable by a participant other than by will, the laws of descent and
distribution, or as otherwise provided under the 1999 Employee Stock
60
<PAGE>
Purchase Plan. The 1999 Employee Stock Purchase Plan provides that, in the
event of a merger of Mediaplex with or into another corporation or a sale of
substantially all of our assets, each outstanding option may be assumed or
substituted for by the successor corporation. If the successor corporation
refuses to assume or substitute for the outstanding options, the offering
period then in progress will be shortened and a new exercise date will be set.
Our board of directors has the authority to amend or terminate the 1999
Employee Stock Purchase Plan, except that no such action may adversely affect
any outstanding rights to purchase stock under the 1999 Employee Stock Purchase
Plan, provided that the board of directors may terminate an offering period on
any exercise date if the board of directors determines that the termination of
the 1999 Employee Stock Purchase Plan is in our best interests and the best
interests of our stockholders. The board of directors may in its sole
discretion amend the 1999 Employee Stock Purchase Plan to the extent necessary
and desirable to avoid unfavorable financial accounting consequences by
altering the purchase price for any offering period, shortening any offering
period or allocating remaining shares among the participants. Unless sooner
terminated by our board of directors, the 1999 Employee Stock Purchase Plan
will terminate automatically ten years from the effective date of this
offering.
401(k) Plan
In February 1997, we adopted a 401(k) plan to provide eligible employees
with a tax preferential savings and investment program. Employees become
eligible to participate in the 401(k) plan on the first day they perform an
hour of service for us, at which point we classify them as participants. They
may elect to reduce their current compensation by up to the lesser of 15% of
eligible compensation or the statutorily prescribed annual limit, currently
$10,000, and have this reduction contributed to the 401(k) plan. The 401(k)
plan permits, but does not require, us to make additional matching
contributions to the 401(k) plan on behalf of eligible participants. All
contributions made by and on behalf of participants are subject to a maximum
contribution limitation currently equal to the lesser of 25% of their
compensation or $30,000 per year. At the direction of each participant, the
trustee of the 401(k) plan invests the assets of the 401(k) plan in selected
investment options. Contributions by participants or by us to the 401(k) plan,
and income earned on plan contributions, are generally not taxable to the
participants until withdrawn, and contributions by us, if any, are generally
deductible by us when made. To date, we have made no contributions to the
401(k) plan on behalf of participants.
Limitations on Directors' Liability and Indemnification
Our amended and restated certificate of incorporation limits the liability
of directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for any of the following:
. any breach of their duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our amended and restated certificate of incorporation provides that we may
indemnify our directors, officers and employees to the fullest extent permitted
by law. We believe that indemnification under our bylaws covers at least
negligence and gross negligence on the part of indemnified parties. Our bylaws
also permit us to secure insurance on behalf of any officer, director, employee
or other agent for any liability arising out of his or her actions in such
capacity, regardless of whether our bylaws would permit indemnification.
61
<PAGE>
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our bylaws. These
agreements, among other things, provide for indemnification of our directors
and executive officers for expenses, judgments, fines and settlement amounts
incurred by them in any action or proceeding arising out of their services as
directors or executive officers or at our request. We believe that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and executive officers.
At present, there is no material litigation or proceeding pending involving
any of our directors or officers in which indemnification is required or
permitted, and we are not aware of any threatened material litigation or
proceeding that might result in a claim for indemnification.
62
<PAGE>
RELATED PARTY TRANSACTIONS
Since our inception in September 1996, we have never been party to, and we
have no plan to be a party to, any transaction or series of similar
transactions in which the amount involved exceeded or will exceed $60,000 and
in which any director, executive officer or holder of more than 5% of our
common stock had or will have an interest, other than as described under
"Management" and the transactions described below.
Transactions with Founders
Michael Schwartz, Eugene Jarvis, Raifman & Edwards LLP and PointBreak
Ventures, LLC were involved in our initial funding. Messrs. Schwartz and Jarvis
served as our initial officers and directors. Neither Mr. Schwartz nor Mr.
Jarvis is currently affiliated with Mediaplex.
Michael Schwartz and Eugene Jarvis
Following our inception, in September 1996 and October 1996, we issued
2,460,000 shares of our common stock to Michael Schwartz at a purchase price of
$0.0001 per share for a total purchase price of $246 and 800,000 shares of our
common stock to Eugene Jarvis at a purchase price of $0.05 per share for a
total purchase price of $40,000. In December 1996, we issued 800,000 shares of
our common stock to Kuni Research, of which Mr. Jarvis is a stockholder, at a
purchase price of $0.05 per share for a total purchase price of $40,000, and in
January 1997, we issued an additional 800,000 shares of our common stock to
Eugene Jarvis, at a purchase price of $0.05 per share for a total purchase
price of $40,000.
In June 1997, we issued a convertible promissory note to Michael Schwartz in
consideration for past services rendered. In June 1997, $232,161 of the
outstanding amount of the convertible promissory note was converted into
4,643,228 shares of our common stock at a conversion rate of $0.05 per share.
In April 1998, we repurchased these shares at the original conversion price of
$0.05 per share with a convertible promissory note.
Raifman & Edwards LLP
Gregory R. Raifman and Jon L. Edwards, two of our current executive
officers, are general partners of Raifman & Edwards LLP. In September 1996, we
issued 350,000 shares of our common stock to Raifman & Edwards LLP at a
purchase price of $0.0001 per share for a total purchase price of $35. In July
1997, we issued a convertible promissory note to Raifman & Edwards LLP, in
consideration for past services rendered, for $64,569. This convertible
promissory note bore interest at a rate of 6% per annum, and had a due date of
July 1999. In March 1999, Mediaplex converted the outstanding amount and
accrued interest of $6,458 into 947,009 shares of our common stock at a
conversion rate of $0.075 per share for a total purchase price of $71,027. In
July 1998, Michael Schwartz transferred a convertible promissory note, issued
by us, to Raifman & Edwards LLP, which in March 1999 was converted into
4,643,228 shares of our common stock at a conversion rate of $0.05 per share
for a total purchase price of $23,216.
All shares initially issued to, or subsequently purchased by, Raifman &
Edwards LLP have been transferred to R&E Holdings, LLC, a limited liability
company in which Gregory R. Raifman and Jon L. Edwards are managing members.
PointBreak Ventures, LLC
Gregory R. Raifman and Jon L. Edwards are managing members of, and hold
substantial interest in, PointBreak Ventures, LLC. Walter Haefeker, a current
executive officer, also holds a substantial interest in PointBreak Ventures,
LLC. In October 1996, we issued 250,000 shares of our common stock to
PointBreak Ventures, LLC at a purchase price of $0.0001 per share for a total
purchase price of $25.
63
<PAGE>
Certain Business Relationships
Raifman & Edwards LLP provided legal and management services to us in the
period from inception to December 31, 1996, and the years ended December 31,
1997 and 1998 of approximately $22,000, $67,000 and $197,000, respectively. No
legal services were provided by Raifman & Edwards LLP to us in the year ended
December 31, 1999.
In May 1998, we entered into an oral agreement with Raifman & Edwards LLP to
sublease a portion of the office space we currently occupy at our headquarters
in San Francisco, California. The sublease terms and payments made by us to
Raifman & Edwards LLP are substantially similar to the lease terms and payments
made by Raifman & Edwards LLP to the landlord. Since May 1998, we have paid
Raifman & Edwards LLP a total of approximately $121,000 for these lease
payments.
Transactions with Management and Others
In connection with his employment by us in January 1999, we issued a warrant
to purchase 500,000 shares of our common stock at an exercise price of $0.50
per share to Timothy M. Favia, one of our current executive officers. The
warrant may be exercised prior to January 10, 2002 by Mr. Favia.
Since June 1999, we have employed Michael Edwards, brother of our President,
Jon L. Edwards, as our Vice President, Business Development. We paid Michael
Edwards compensation of $53,000 in 1999. During this time, we also granted
Michael Edwards options to purchase 25,000 shares of our common stock at an
exercise price of $0.50 per share. Since February 1999, we have employed Alan
Raifman, brother of our Chief Executive Officer, Gregory R. Raifman, as our
Vice President, Business and Legal Affairs. We paid Alan Raifman compensation
of $71,750 in 1999. During this time, we also granted Alan Raifman options to
purchase 100,000 shares of our common stock at an exercise price of $0.50 per
share.
In connection with our acquisition of Netranscend Software, Inc. in March
1999, we issued to Ruiqing "Barclay" Jiang, one of our current executive
officers and formerly the sole shareholder of Netranscend Software, Inc., a
promissory note in the principal amount of $430,000, payable in four annual
installments and an aggregate of 1,979,000 shares of common stock valued at
$2.6 million. Of the shares issued, 300,000 are currently being held in escrow
to cover breaches of representations and warranties made by Mr. Jiang and
Netranscend Software, Inc. in the agreement and plan of reorganization executed
in connection with the acquisition.
In February 1999, we sold an aggregate of 1,206,000 shares of Series A
preferred stock to investors at a purchase price of $1.25 per share or
$1,507,500 in the aggregate. In June 1999, we sold an aggregate of 4,500,000
shares of Series B preferred stock to investors at a purchase price of $2.00
per share or $9,000,000 in the aggregate. In August 1999, we sold an aggregate
of 4,000,000 shares of Series C preferred stock to investors at a purchase
price of $3.59 per share or $14,360,000 in the aggregate. The shares of Series
A, Series B and Series C preferred stock automatically converted into an
aggregate of 9,706,000 shares of common stock upon the closing of our initial
public offering.
In August 1999, Mediaplex issued 4,000,000 shares of Series C convertible
preferred stock at a purchase price of $3.59 per share. These shares were
converted into shares of common stock on a one-for-one basis. Because the
conversion price was less than our initial public offering price, the Series C
preferred stock was deemed to have an embedded beneficial conversion feature.
This feature allows the holders to acquire common stock at a purchase price
below its deemed fair value. The amount of the discount assigned to the
beneficial conversion feature is limited to the amount of the proceeds.
Consequently, the issuance and sale of the Series C preferred stock resulted in
a beneficial conversion feature of $14,360,000, which has been reflected as a
preferred dividend in our 1999 statement of operations. Further, the holders of
converted shares of Series C preferred stock are entitled to demand and piggy-
back registration rights. See "Description of Capital Stock--Registration
Rights."
64
<PAGE>
The investors in the preferred stock included the following entities that
hold 5% or more of our stock or that are affiliated with our directors or
executive officers, or both:
<TABLE>
<CAPTION>
Shares of Shares of Shares of Aggregate
Series A Series B Series C Purchase
Investor Preferred Stock Preferred Stock Preferred Stock Price
- -------- --------------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
5% Stockholder Entities
Affiliated with a Mediaplex
Director or Executive Officer:
Entity affiliated with James
DeSorrento (1)(2)............... 160,000 140,000 -- $ 480,000
Entity affiliated with A. Brooke
Seawell (1)(3).................. -- 75,000 -- 150,000
Entity affiliated with Gregory R.
Raifman and Jon L. Edwards
(1)(4).......................... -- -- 19,360 69,502
Entities affiliated with
Lawrence D. Lenihan, Jr.(1)(5).. -- -- 1,671,309 5,999,999
Other 5% Stockholders:
Zeron Capital Ltd. (6)........... -- 2,625,000 -- 5,250,000
The Goldman Sachs Group, Inc.
(7)............................. -- -- 1,392,758 5,000,001
</TABLE>
- --------
(1) James DeSorrento, A. Brooke Seawell, Gregory R. Raifman, Jon L. Edwards and
Lawrence D. Lenihan, Jr. are each members of our board of directors.
(2) All shares are held of record by DeSorrento Revocable Trust under an
agreement dated 12/17/80.
(3) All shares are held of record by Seawell Revocable Trust, A. Brooke Seawell
& Patricia C. Seawell, trustees.
(4) All shares are held of record by R&E Holdings, LLC. Messrs. Gregory R.
Raifman and Jon L. Edwards are the managing members and beneficial owners
of R&E Holdings, LLC. Each of Mr. Raifman and Mr. Edwards disclaims
beneficial ownership of these shares, except to the extent of his
respective pecuniary interest therein.
(5) Represents 1,483,484 shares of Series C preferred stock held of record by
Pequot Private Equity Fund, L.P. and 187,825 shares of Series C preferred
stock held of record by Pequot Offshore Private Equity Fund, Inc. Mr.
Lenihan is the fund manager for Pequot Capital Management, Inc. He
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein.
(6) Includes 1,500,000 shares held of record by Odyssey Venture Partners and
1,000,000 shares held of record by Argossy Limited. Argossy Limited and
Odyssey Venture Partners are funds affiliated with Zeron Capital Ltd. Zeron
Capital Ltd. also holds a warrant to purchase 125,000 shares of Series B
preferred stock.
(7) Includes 139,276 shares of Series C preferred stock purchased by Stone
Street Fund 1999 L.P., an affiliate of The Goldman Sachs Group, Inc.
In connection with the sale of our Series B preferred stock in June 1999, we
issued a warrant to purchase 125,000 shares of Series B preferred stock, at an
exercise price of $2.00 per share, to Zeron Capital, Ltd., a 5% stockholder.
After our initial public offering, the warrant became exercisable for a like
number of shares of our common stock. The warrant may be exercised at any time
prior to its expiration in June 2002.
In connection with the sale of our Series B preferred stock in June 1999 to
Zeron Capital, Ltd., we issued a warrant to purchase 150,000 shares of Series B
preferred stock, at an exercise price of $2.00 per share, and a warrant to
purchase 100,000 shares of common stock, at a purchase price of $0.50 per
share, to Retail Ventures International, Inc., a financial advisor to us. After
our initial public offering, the warrant to purchase Series B preferred stock
became exercisable for a like number of shares of our common stock. The
warrants may be exercised at any time prior to their expiration in June 2002.
In connection with his employment by us in March 2000, we issued to Michael
E. Stanek a loan in the amount of $1,000,000. The loan will be forgiven upon
the expiration of four years from the date of the commencement of his
employment. In the event his employment is terminated for cause or he
voluntarily terminates his employment, Mr. Stanek shall be responsible to pay
us the remaining balance of the loan at the time of his termination, including
interest on the remaining principal, at the annual rate of six percent.
65
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our common stock before and after the offering by:
. each person or entity who beneficially owns more than 5% of our common
stock;
. each of our named executive officers;
. each of our directors;
. all executive officers and directors as a group; and
. all other selling stockholders.
Except as otherwise noted, the address of each 5% stockholder listed in the
table is c/o Mediaplex, Inc., 177 Steuart Street, Second Floor, San Francisco,
California 94105. The table includes all shares of common stock issuable within
60 days of February 29, 2000, upon the exercise of options and warrants
beneficially owned by the indicated stockholders on that date based on options
and warrants outstanding as of February 29, 2000. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and includes voting and investment power with respect to shares. To
our knowledge, except under applicable community property laws or as otherwise
indicated, the persons named in the table have sole voting and sole investment
control with respect to all shares beneficially owned. The applicable
percentage of ownership for each stockholder is based on shares of common stock
outstanding as of February 29, 2000, together with applicable options and
warrants for that stockholder. Shares of common stock issuable upon exercise of
options and warrants beneficially owned are deemed outstanding for the purpose
of computing the percentage ownership of the person holding those options and
warrants, but are not deemed outstanding for computing the percentage ownership
of any other person.
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Beneficially Owned Beneficially Owned
Prior to Offering Subsequent to
Shares Being Offering
--------------------- Shares Being ---------------------
Name Number Percentage Offered Number Percentage
- ---- ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
R & E Holdings, LLC
(1).................... 10,296,265 32.5% 500,000 9,796,265 27.3%
Zeron Capital Ltd. (2).. 2,625,000 8.3 0 2,625,000 7.3
44 Church Street
Hamilton HM12
Bermuda
Pequot Capital
Management, Inc. (3)... 1,671,309 5.3 0 1,671,309 4.6
500 Nyala Farm Road
Westport, CT 06880
Gregory R. Raifman (4).. 12,296,265 36.8 250,000 12,046,265 33.6
Jon L. Edwards (5)...... 12,046,265 36.3 250,000 11,796,265 32.9
Walter Haefeker (6)..... 1,125,000 3.4 100,000 1,025,000 2.9
Ruiqing "Barclay" Jiang
(7).................... 2,189,333 6.9 150,000 2,039,333 5.7
Timothy M. Favia (8).... 500,000 1.6 75,000 425,000 1.2
James DeSorrento (9).... 350,000 1.1 35,000 315,000 *
Lawrence D. Lenihan, Jr.
(10)................... 1,671,309 5.3 0 1,671,309 4.6
Peter S. Sealey (11).... 50,000 * 0 50,000 *
A. Brooke Seawell (12).. 125,000 * 0 125,000 *
All executive officers
and directors as a
group (14 persons)
(13)................... 19,470,351 53.4 890,000 18,580,351 51.9
The Goldman Sachs Group,
Inc. (14).............. 1,392,758 4.4 150,000 1,242,758 3.5
85 Broad Street
New York, NY 10002
Additional selling
stockholders, each
holding less than 1% of
our outstanding common
stock prior to this
offering............... * 335,000
</TABLE>
- --------
*Less than 1%
66
<PAGE>
(1) Messrs. Raifman and Edwards are the managing members and the beneficial
owners of R&E Holdings, LLC. In connection with this offering, R&E
Holdings will transfer 250,000 shares of common stock to each Messrs.
Raifman and Edwards, who will then sell those shares in this offering.
(2) Includes 1,500,000 shares held of record by Odyssey Venture Partners and
1,000,000 shares held of record by Argossy Limited. Odyssey Venture
Partners and Argossy Limited are venture funds affiliated with Zeron
Capital Ltd. Also includes a warrant held by Zeron Capital Ltd. to
purchase 125,000 shares.
(3) Represents 1,483,484 shares held of record by Pequot Private Equity Fund,
L.P. and 187,825 shares held of record by Pequot Offshore Private Equity
Fund, Inc. Pequot Private Equity Fund, L.P. and Pequot Offshore Private
Equity Fund, Inc. are managed by Pequot Capital Management, Inc.
(4) Represents 10,296,265 shares held of record by R&E Holdings, LLC, 250,000
shares held of record by PointBreak Ventures, LLC and 1,750,000 shares
issuable upon the exercise of options exercisable within 60 days of
February 29, 2000. Mr. Raifman is one of the beneficial owners of R&E
Holdings, LLC and PointBreak Ventures, LLC. Mr. Raifman disclaims
beneficial interest of the shares held by R&E Holdings, LLC and
PointBreak Ventures, LLC, except to the extent of his pecuniary interest
in those entities.
(5) Represents 10,296,265 shares held of record by R&E Holdings, LLC, 250,000
shares held of record by PointBreak Ventures, LLC and 1,500,000 shares of
common stock issuable upon the exercise of options exercisable within 60
days of February 29, 2000. Mr. Edwards is one of the beneficial owners of
R&E Holdings, LLC and PointBreak Ventures, LLC. Mr. Edwards disclaims
beneficial interest of the shares held by R&E Holdings, LLC and
PointBreak Ventures, LLC, except to the extent of his pecuniary interest
in those entities.
(6) Represents 1,125,000 shares issuable upon the exercise of options
exercisable within 60 days of February 29, 2000.
(7) Includes 210,333 shares issuable upon the exercise of options exercisable
within 60 days of February 29, 2000.
(8) Includes a warrant to purchase 500,000 shares exercisable within 60 days
of February 29, 2000.
(9) Represents 300,000 shares held of record by DeSorrento Revocable Trust,
of which Mr. DeSorrento is the beneficial owner, and 50,000 shares held
by Mr. DeSorrento.
(10) Represents 1,671,309 shares beneficially owned by Pequot Capital
Management, Inc. See note (3). Mr. Lenihan is the fund manager of Pequot
Capital Management, Inc. Mr. Lenihan disclaims beneficial ownership of
these shares, except to the extent of his pecuniary interest in that
entity.
(11) Represents 50,000 shares issuable upon the exercise of options
exercisable within 60 days of February 29, 2000.
(12) Represents 75,000 shares held of record by Seawell Revocable Trust, A.
Brooke Seawell & Patricia C. Seawell, trustees, and 50,000 shares held by
Mr. Seawell. Mr. Seawell is one of the beneficial owners of the Seawell
Revocable Trust.
(13) See notes (5) through (12). Includes an aggregate of 5,254,777 shares
issuable upon exercise of options held by our executive officers and
directors exercisable within 60 days of February 29, 2000.
(14) Includes 139,276 shares held of record by Stone Street Fund 1999, L.P.,
an affiliate of The Goldman Sachs Group, Inc.
67
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Our restated certificate of incorporation, authorizes the issuance of up to
150,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000
shares of undesignated preferred stock, par value $0.0001 per share, the rights
and preferences of which may be established from time to time by our board of
directors. As of February 29, 2000, we had outstanding 31,699,980 shares of
common stock and no shares of preferred stock outstanding. As of February 29,
2000, we had 172 registered stockholders.
Common Stock
Each holder of common stock will be entitled to one vote for each share on
all matters to be voted upon by the stockholders, and there will be no
cumulative voting rights. Subject to preferences to which holders of preferred
stock issued after the sale of the common stock in this offering may be
entitled, holders of common stock will be entitled to receive ratably any
dividends that may be declared from time to time by the board of directors out
of funds legally available for that purpose. Please see "Dividend Policy." In
the event of our liquidation, dissolution or winding up, holders of our common
stock will be entitled to share in our assets remaining after the payment of
liabilities and the satisfaction of any liquidation preference granted to the
holders of any outstanding shares of preferred stock. Holders of common stock
have no preemptive or conversion rights or other subscription rights and there
are no redemption or sinking fund provisions applicable to the common stock.
All outstanding shares of common stock are, and the shares of common stock
offered by us in this offering, when issued and paid for, will be, fully paid
and nonassessable. The rights, preferences and privileges of the holders of
common stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of preferred stock that we may designate in
the future.
Preferred Stock
The board of directors is authorized, subject to any limitations prescribed
by law, without stockholder approval, from time to time to issue up to an
aggregate of 10,000,000 shares of preferred stock, par value $0.0001 per share,
in one or more series, each series to have rights and preferences, including
voting rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences, as may be determined by the board of directors. The
issuance of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, a majority of our
outstanding voting stock. We have no present plans to issue any shares of
preferred stock.
Warrants
At February 29, 2000, there were outstanding warrants to purchase up to
275,000 shares of common stock at an exercise price of $2.00 per share and
warrants to purchase up to 600,000 shares of common stock at an exercise price
of $0.50 per share.
Registration Rights
The holders of 4,000,000 shares of common stock, referred to as "registrable
securities," are entitled to certain rights with respect to registration of
such shares under the Securities Act. These rights are provided under the terms
of an investor rights agreement between us and the holders of registrable
securities.
Holders of least 25% of the then outstanding registrable securities may
require on up to two occasions that we register for public resale at least 25%
of their registrable securities or a lesser amount, provided that the aggregate
proceeds of that offering would exceed $5.5 million. We need not register these
shares if the
68
<PAGE>
requested registration would occur within six months following the effective
date of any other registration statement we have filed. Also, we may defer the
registration of these shares for up to 120 days if, in the good faith judgment
of our board of directors, it would be seriously detrimental to us and our
stockholders for the registration statement to be filed. Also, holders of
registrable securities may require once per 12-month period that we register
their shares for public resale on Form S-3 or similar short-form registration,
provided we are eligible to use that form, if the value of the securities to be
registered is at least $1.0 million; however, we may defer this registration
for 120 days in view of market conditions. Furthermore, in the event we elect
to register any of our shares of common stock for purposes of effecting any
public offering, the holders of registrable securities are entitled to include
their shares of common stock in the registration, but we may reduce the number
of shares proposed to be registered in view of market conditions. All expenses
in connection with any registration, other than underwriting discounts and
commissions, will be borne by us. All registration rights will terminate on
November 19, 2004, or, with respect to each holder of registrable securities,
at the time the holder is entitled to sell all of its shares in any three-month
period under Rule 144 of the Securities Act.
Anti-Takeover Effects of Our Certificate of Incorporation and Bylaws and
Delaware Law
Certain provisions of Delaware law and our amended and restated certificate
of incorporation and bylaws could make the following more difficult:
. the acquisition of us by means of a tender offer;
. the acquisition of us by means of a proxy contest or otherwise; or
. the removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage certain types
of coercive takeover practices and inadequate takeover bids. These provisions
are also designed to encourage persons seeking to acquire control of us to
negotiate first with our board. We believe that the benefits of increased
protection of our potential ability to negotiate with the proponent of an
unfriendly or unsolicited proposal to acquire or restructure us outweigh the
disadvantages of discouraging such proposals because negotiation of these
proposals could result in an improvement of their terms.
Election and Removal of Directors. Our board of directors is divided into
three classes. The directors in each class serve for a three-year term, one
class being elected each year by our stockholders. For more information on the
classified board, see the section entitled "Management--Board of Directors."
This system of electing and removing directors may tend to discourage a third
party from making a tender offer or otherwise attempting to obtain control of
us because it generally makes it more difficult for stockholders to replace a
majority of the directors.
Stockholder Meetings. Under our bylaws, only the board of directors, the
chairman of the board, the chief executive officer and the president may call
special meetings of stockholders.
Requirements for Advance Notification of Stockholder Nominations and
Proposals. Our bylaws establish advance notice procedures with respect to
stockholder proposals and the nomination of candidates for election as
directors, other than nominations made by or at the direction of the board of
directors or a committee of the board.
Delaware Anti-Takeover Law. We are subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a business
combination with an interested stockholder for a period of three years
following the date the person became an interested stockholder, unless the
business combination or the transaction in which the person became an
interested stockholder is approved in a prescribed manner. Generally, a
business combination includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested
69
<PAGE>
stockholder. Generally, an interested stockholder is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status did own, 15% or more of a
corporation's voting stock. The existence of this provision may have an anti-
takeover effect with respect to transactions not approved in advance by the
board of directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by
stockholders.
Elimination of Stockholder Action By Written Consent. Our certificate of
incorporation does not permit the stockholders to act by written consent
without a meeting.
Elimination of Cumulative Voting. Our certificate of incorporation and
bylaws do not provide for cumulative voting in the election of directors.
Undesignated Preferred Stock. The authorization of undesignated preferred
stock makes it possible for the board of directors to issue preferred stock
with voting or other rights or preferences that could impede the success of
any attempt to change control of us. These and other provisions may have the
effect of deferring hostile takeovers or delaying changes in control or
management of us.
Amendment of Charter Provisions. The amendment of any of the above
provisions would require approval by holders of at least 66 2/3% of the
outstanding common stock.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services.
Nasdaq National Market Listing
Our common stock is traded on The Nasdaq Stock Market's National Market
under the symbol MPLX.
70
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market after
the offering could adversely affect the market price of our common stock and
our ability to raise equity capital in the future on terms favorable to us.
After this offering, 35,824,980 shares of our common stock will be
outstanding, assuming that the underwriters do not exercise the over-allotment
option, and based on shares outstanding as of February 29, 2000. Of these
shares, all of the 5,500,000 shares sold in this offering (or 6,325,000 shares
if the underwriters' over-allotment option is exercised in full) as well as the
6,900,000 shares sold in our initial public offering will be freely tradable
without restriction or further registration under the Securities Act, unless
these shares are purchased by "affiliates" as that term is defined in Rule 144
under the Securities Act. The remaining shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rule 144 or 701 under the Securities Act, which rules are summarized
below.
As a result of the contractual restrictions described below and the
provisions of Rules 144, 144(k) and 701, the 23,424,980 restricted shares will
be available for sale in the public market as follows:
Eligibility of Restricted Shares for Sale in the Public Market
<TABLE>
<S> <C>
At the effective date (April , 2000)............................... 130,814
May 19, 2000......................................................... 3,320,646
June 15, 2000........................................................ 2,937,500
90 days after the effective date (July , 2000)..................... 13,186,020
August 6, 2000....................................................... 3,850,000
</TABLE>
Resale of 13,781,574 of the restricted shares that will become available for
sale in the public market will be limited by volume and other resale
restrictions under Rule 144 because the holders are our affiliates.
Rule 144
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year is entitled
to sell, within any three-month period, a number of shares that is not more
than the greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately 358,250 shares immediately after this offering; or
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks before a notice of the
sale on Form 144 is filed.
Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about us.
Under Rule 144(k), a person who has not been one of our affiliates at any
time during the three months before a sale, and who has beneficially owned the
restricted shares for at least two years, is entitled to sell the shares
without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, any
of our employees, consultants or advisors who purchase shares from us under a
stock option plan or other written agreement can resell those shares in
reliance on Rule 144, but without complying with some of the restrictions,
including the holding period, contained in Rule 144.
71
<PAGE>
Lock-Up Arrangements
Holders of a total of 24,416,551 shares of common stock (including all stock
held by executive officers and directors), warrants to purchase a total of
875,000 shares of common stock, and options to purchase a total of 9,505,621
shares of common stock have agreed not to sell or otherwise dispose of any
unrestricted shares of common stock until May 19, 2000 (which is 180 days after
the date of our initial public offering) without the prior written consent of
Lehman Brothers, Inc., the lead underwriter in our initial public offering.
Holders of a total of 19,823,109 shares of common stock, warrants to
purchase a total of 125,000 shares of common stock, and options to purchase a
total of 205,000 shares of common stock have agreed not to sell or otherwise
dispose of any unrestricted shares of common stock for a period of 90 days
after the date of this prospectus without the prior written consent of Credit
Suisse First Boston Corporation.
72
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we and the selling stockholders have agreed to
sell to the underwriters named below, for whom Credit Suisse First Boston
Corporation and Lehman Brothers Inc. are acting as joint book-running managers
and as representatives, and for whom Salomon Smith Barney Inc., SG Cowen
Securities Corporation and U.S. Bancorp Piper Jaffray Inc. are acting as co-
managers and representatives the following respective numbers of shares of
common stock:
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
Lehman Brothers Inc. ..............................................
Salomon Smith Barney Inc. .........................................
SG Cowen Securities Corporation....................................
U.S. Bancorp Piper Jaffray Inc. ...................................
----
Total............................................................
====
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase up to
825,000 additional shares from us at the public offering price less the
underwriting discounts and commissions. The option may be exercised only to
cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
and the selling stockholders will pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and Commissions paid
by us.................. $ $ $ $
Expenses payable by us.. $ $ $ $
Underwriting Discounts
and Commissions paid by
selling stockholders... $ $ $ $
</TABLE>
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
relating to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 90 days after the date of this prospectus. These
restrictions do not prohibit us from issuing employee stock options and common
stock issuable upon the exercise of employee stock options outstanding on the
date of this prospectus or from issuing common stock pursuant to our employee
stock purchase plan.
73
<PAGE>
Our directors, officers, the selling stockholders and certain other
stockholders have agreed that they will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any shares of our
common stock or securities convertible into or exchangeable or exercisable for
any shares of our common stock, enter into a transaction which would have the
same effect, or enter into any swap, hedge or other arrangement that
transfers, in whole or in part, any of the economic consequences of ownership
of our common stock, whether any such aforementioned transaction is to be
settled by delivery of our common stock or such other securities, in cash or
otherwise, or publicly disclose the intention to make any such offer, sale,
pledge or disposition, or to enter into any such transaction, swap, hedge or
other arrangement, without, in each case, the prior written consent of Credit
Suisse First Boston Corporation for a period of 90 days after the date of this
prospectus.
We and the selling stockholders have agreed to indemnify the underwriters
against liabilities under the Securities Act, or contribute to payments which
the underwriters may be required to make in that respect.
Our common stock is traded on the Nasdaq Stock Market's National Market
under the symbol "MPLX."
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and passive market making in
accordance with Regulation M under the Securities Exchange Act of 1934.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
. In passive market making, market makers in the common stock who are
underwriters or prospective underwriters may, subject to limitations,
make bids for or purchases of the common stock until the time, if any,
at which a stabilizing bid is made.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
A prospectus in electronic format will be made available on the web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters
for sale to their online brokerage account holders. Internet distributions
will be allocated by the underwriters that will make internet distributions on
the same basis as other allocations.
74
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we and the selling
stockholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of common stock are effected.
Accordingly, any resale of the common stock in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling shareholders and
the dealer from whom such purchase confirmation is received that (i) such
purchaser is entitled under applicable provincial securities laws to purchase
such common stock without the benefit of a prospectus qualified under such
securities laws, (ii) where required by law, that such purchaser is purchasing
as principal and not as agent, and (iii) such purchaser has reviewed the text
above under "Resale Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein and the selling shareholders may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under
the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
75
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Skadden, Arps, Slate, Meagher & Flom LLP, Palo Alto,
California will pass upon legal matters for the underwriters. As of the date of
this prospectus, WS Investments, an investment partnership composed of certain
current and former members of and persons associated with Wilson Sonsini
Goodrich & Rosati, Professional Corporation, and certain individual attorneys
of this firm, beneficially own a total of 43,116 shares of our common stock.
EXPERTS
The financial statements of Mediaplex, Inc., as of December 31, 1998 and,
1999 and, for each of the three years in the period ended December 31, 1999
included in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission under the
Securities Act a registration statement on Form S-1, including the exhibits
filed with the registration statement, with respect to the shares to be sold in
this offering. This prospectus does not contain all the information contained
in the registration statement. For further information with respect to us and
the shares to be sold in this offering, we refer you to the registration
statement. Statements contained in this prospectus as to the contents of any
contract, agreement or other document to which we make reference are not
necessarily complete. In each instance, we refer you to the copy of the
contract, agreement or other document filed as an exhibit to the registration
statement, each statement being qualified in all respects by the more complete
description of the matter involved.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information we file at the Commission's public
reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of
these documents upon payment of a duplicating fee by writing to the Commission.
Please call the Commission at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. Our Commission filings, including the
registration statement, will also be available to you on the Commission's
Internet site, http://www.sec.gov.
We intend to send to our stockholders annual reports containing audited
consolidated financial statements and quarterly reports containing unaudited
financial statements for the first three quarters of each fiscal year.
76
<PAGE>
MEDIAPLEX, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----------------
<S> <C>
Report of Independent Accountants............................ F-2
Balance Sheets as of December 31, 1998 and 1999.............. F-3
Statements of Operations for the years ended December 31,
1997, 1998, and 1999........................................ F-4
Statements of Stockholders' (Deficit) Equity for the years
ended December 31, 1997, 1998 and 1999...................... F-5
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999......................................... F-6 through F-7
Notes to Financial Statements................................ F-8 through F-21
Report of Independent Accountants on Financial Statement
Schedule.................................................... F-22
Financial Statement Schedule II--Valuation and Qualifying
Accounts.................................................... F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Mediaplex, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' (deficit) equity and of cash flows present
fairly, in all material respects, the financial position of Mediaplex, Inc. at
December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
January 21, 2000,
except for Note 11 for which
the date is March 8, 2000
F-2
<PAGE>
MEDIAPLEX, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1999
----------- ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents........................... $ 374,567 $ 78,052,259
Accounts receivable, net............................ 936,497 7,629,628
Short-term investments.............................. -- 9,912,500
Other current assets................................ -- 939,939
----------- ------------
Total current assets............................ 1,311,064 96,534,326
Property and equipment, net......................... 105,921 4,039,459
Goodwill and intangible assets, net of accumulated
amortization of $753,187 as of December 31, 1999... -- 2,256,548
Other assets........................................ 27,030 612,154
----------- ------------
Total assets.................................... $ 1,444,015 $103,442,487
=========== ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable.................................. $ 1,528,600 $ 2,029,911
Accrued liabilities............................... 423,216 9,222,440
Deferred revenue.................................. 479,764 1,086,718
Notes payable to stockholders, current portion.... 339,569 110,000
Advance from stockholders......................... 262,750 --
Payables to stockholders.......................... 139,701 --
----------- ------------
Total current liabilities....................... 3,173,600 12,449,069
Notes payable to stockholders....................... 232,161 280,457
----------- ------------
Total liabilities............................... 3,405,761 12,729,526
----------- ------------
Commitments (Note 6)
Stockholders' (Deficit) Equity:
Common stock, $0.0001 par value; authorized
40,000,000 and 150,000,000 shares, respectively;
6,983,628 and 31,690,855 shares issued and
outstanding as of December 31, 1998 and 1999,
respectively..................................... 698 3,169
Additional paid-in capital........................ 1,482,685 134,324,423
Warrants.......................................... -- 2,472,354
Deferred stock compensation....................... (53,371) (6,520,700)
Accumulated deficit............................... (3,391,758) (39,566,285)
----------- ------------
Total stockholders' (deficit) equity ........... (1,961,746) 90,712,961
----------- ------------
Total liabilities and stockholders' (deficit)
equity ........................................ $ 1,444,015 $103,442,487
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
MEDIAPLEX, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Revenues.............................. $ 425,877 $ 3,588,094 $ 26,405,120
Cost of revenues...................... 445,372 2,770,567 20,417,637
----------- ----------- ------------
Gross (loss) profit................. (19,495) 817,527 5,987,483
----------- ----------- ------------
Operating expenses:
Sales and marketing................. 480,756 819,641 7,399,010
Research and development............ 347,130 555,736 4,135,030
General and administrative.......... 256,413 636,651 5,066,966
Stock-based compensation............ 11,000 577,525 11,360,106
Amortization of goodwill and
intangibles........................ -- -- 753,187
----------- ----------- ------------
Total operating expenses.......... 1,095,299 2,589,553 28,714,299
----------- ----------- ------------
Loss from operations.............. (1,114,794) (1,772,026) (22,726,816)
Interest (expense) income, net........ (2,572) (247,186) 912,289
----------- ----------- ------------
Net loss.......................... (1,117,366) (2,019,212) (21,814,527)
Beneficial conversion feature of
Series C convertible preferred
stock................................ -- -- (14,360,000)
----------- ----------- ------------
Net loss attributable to common
stockholders......................... $(1,117,366) $(2,019,212) $(36,174,527)
=========== =========== ============
Net loss per share attributable to
common stockholders--basic and
diluted.............................. $ (0.13) $ (0.25) $ (2.34)
=========== =========== ============
Weighted average shares used to
compute net loss per share--basic and
diluted.............................. 8,457,464 8,186,127 15,426,913
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
MEDIAPLEX, INC.
STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional Deferred
------------------ ------------------ Paid-In Stock
Shares Amount Shares Amount Capital Warrants Compensation Deficit Total
---------- ------ ---------- ------ ------------ ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December
31, 1996......... -- $ -- 4,660,000 $ 466 $ 232,259 $ -- $ -- $ (255,180) $ (22,455)
Issuance of
common stock..... 1,795,338 180 338,421 338,601
Conversion of
payable to
stockholder for
common stock..... 4,643,228 464 231,697 232,161
Issuance of
common stock for
services......... 220,000 22 10,978 11,000
Net loss......... (1,117,366) (1,117,366)
---------- ----- ---------- ------ ------------ ---------- ----------- ------------ -----------
Balance, December
31, 1997......... -- -- 11,318,566 1,132 813,355 -- -- (1,372,546) (558,059)
Repurchase of
common stock for
convertible note
payable.......... (4,643,228) (464) (231,697) (232,161)
Beneficial
conversion
feature of note
payable to
stockholder...... 232,161 232,161
Issuance of
common stock..... 76,000 7 37,993 38,000
Issuance of
common stock for
services......... 232,290 23 151,404 151,427
Options granted
to former
employees for
services
rendered......... 286,079 286,079
Deferred stock
compensation..... 193,390 (193,390) --
Amortization of
deferred stock
compensation..... 140,019 140,019
Net loss......... (2,019,212) (2,019,212)
---------- ----- ---------- ------ ------------ ---------- ----------- ------------ -----------
Balance, December
31, 1998......... -- -- 6,983,628 698 1,482,685 -- (53,371) (3,391,758) (1,961,746)
Issuance of
common stock for
services......... 92,633 9 416,838 416,847
Issuance of
common stock upon
acquisition of
Netranscend...... 1,979,000 198 2,569,068 2,569,266
Issuance of
common stock upon
exercise of
options.......... 239,357 24 361,104 361,128
Issuance of
Series A
convertible
preferred stock,
net of issuance
costs of
$46,701.......... 1,206,000 121 1,460,678 1,460,799
Conversion of
note payable to
stockholder for
common stock..... 947,009 95 70,931 71,026
Issuance of
Series B
convertible
preferred stock,
net of issuance
costs of
$741,632......... 4,500,000 450 8,257,918 432,354 8,690,722
Conversion of
note payable for
common stock..... 4,643,228 464 231,697 232,161
Issuance of
Series C
convertible
preferred stock,
net of issuance
costs of
$238,441......... 4,000,000 400 14,121,159 14,121,559
Dividend relative
to beneficial
conversion
feature related
to issuance of
Series C
convertible
preferred stock.. 14,360,000 (14,360,000) --
Issuance of
common stock upon
exercise of
options in
connection with
waiver of payable
to stockholder... 200,000 20 12,400 12,420
Issuance of
warrant for
services......... 2,040,000 2,040,000
Sale of common
stock, net of
issuance costs of
$7,354,862....... 6,900,000 690 75,444,448 75,445,138
Conversion of
convertible
preferred stock.. (9,706,000) (971) 9,706,000 971 --
Deferred stock
compensation..... 15,535,497 (15,535,497) --
Amortization of
deferred stock
compensation..... 9,068,168 9,068,168
Net loss......... (21,814,527) (21,814,527)
---------- ----- ---------- ------ ------------ ---------- ----------- ------------ -----------
Balance, December
31, 1999......... -- $ -- 31,690,855 $3,169 $134,324,423 $2,472,354 $(6,520,700) $(39,566,285) $90,712,961
========== ===== ========== ====== ============ ========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
MEDIAPLEX, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................. $(1,117,366) $(2,019,212) $(21,814,527)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization........ 20,023 54,810 1,210,658
Write-off of property and equipment.. -- 18,853 17,500
Allowance for sales credits and
doubtful accounts................... 20,211 109,156 3,475,327
Stock-based compensation expense..... 11,000 577,525 11,360,106
Gain on short-term investments....... -- -- (184,445)
Amortization of debt discount........ -- -- 17,692
Interest expense related to
beneficial conversion feature of
note payable........................ -- 232,161 --
Changes in assets and liabilities
Accounts receivable................. (24,178) (1,041,686) (10,168,457)
Other assets........................ (3,350) (22,030) (1,525,063)
Accounts payable.................... 378,322 1,149,477 386,889
Payables to stockholders............ 309,621 90,828 (77,281)
Accrued liabilities................. 112,864 273,149 7,568,265
Deferred revenue.................... 142,400 337,364 606,954
----------- ----------- ------------
Net cash used in operating activities.. (150,453) (239,605) (9,126,382)
----------- ----------- ------------
Cash flows from investing activities:
Purchase of property and equipment... (69,892) (78,819) (2,989,964)
Purchase of short-term investments... -- -- (9,728,056)
----------- ----------- ------------
Net cash used in investing
activities........................ (69,892) (78,819) (12,718,020)
----------- ----------- ------------
Cash flows from financing activities:
Net proceeds from issuance of common
stock............................... 338,601 38,000 75,445,138
Net proceeds from issuance of
preferred stock..................... -- -- 23,940,828
Proceeds from exercise of stock
options............................. -- -- 361,128
Payments of capital lease
obligations......................... (3,380) (24,753) --
Proceeds from notes payables--
stockholders........................ -- 275,000 --
Payment of notes payable--
stockholders........................ -- -- (225,000)
Advance from stockholder............. -- 262,750 --
----------- ----------- ------------
Net cash provided by financing
activities........................ 335,221 550,997 99,522,094
----------- ----------- ------------
Net increase in cash and cash
equivalents....................... 114,876 232,573 77,677,692
Cash and cash equivalents at beginning
of period............................. 27,118 141,994 374,567
----------- ----------- ------------
Cash and cash equivalents at end of
period................................ $ 141,994 $ 374,567 $ 78,052,259
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
MEDIAPLEX, INC.
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1997 1998 1999
-------- -------- -----------
<S> <C> <C> <C>
Cash paid for interest........................... $ 2,572 $ 1,804 $ 12,976
======== ======== ===========
Noncash financing and investing activities:
Issuance of common stock for acquisition....... $ -- $ -- $ 2,552,910
======== ======== ===========
Issuance of note payable for acquisition....... $ -- $ -- $ 430,000
======== ======== ===========
Conversion of payables to stockholders to
common stock.................................. $232,161 $ -- $ --
======== ======== ===========
Conversion of stockholder's notes payable to
common stock.................................. $ -- $ -- $ 303,187
======== ======== ===========
Repurchase of common stock in exchange for a
note payable.................................. $ -- $232,161 $ --
======== ======== ===========
Issuance of note payable to a stockholder for
settlement of outstanding payable to
stockholder................................... $ 64,569 $ -- $ --
======== ======== ===========
Issuance of warrant to purchase common and
preferred stock in connection with completing
Series B preferred stock financing.............. $ -- $ -- $ 597,254
======== ======== ===========
Conversion of advance from stockholder to Series
A preferred stock............................... $ -- $ -- $ 262,750
======== ======== ===========
Conversion of note payable and accrued interest
to Series C preferred stock..................... $ -- $ -- $ 69,502
======== ======== ===========
Beneficial conversion feature of Series C
convertible preferred stock..................... $ -- $ -- $14,360,000
======== ======== ===========
Beneficial conversion feature of notes payable... $ -- $232,261 $ --
======== ======== ===========
Conversion of convertible preferred stock to
common.......................................... $ -- $ -- $24,273,080
======== ======== ===========
Exercise of common stock options in connection
with waiver of payable to stockholder........... $ -- $ -- $ 12,420
======== ======== ===========
Purchase of equipment under capital leases....... $ 37,915 $ 3,036 $ --
======== ======== ===========
Deferred stock compensation from issuance of
options......................................... $ -- $193,390 $15,535,497
======== ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS
1. Business Activities and Summary of Significant Accounting Policies
Nature of Business
Mediaplex, Inc. provides technology-based advertising and marketing services
for companies and advertising agencies that seek to optimize their internet
marketing campaigns. The Company's service offerings include planning and
execution of online media and marketing campaigns, proprietary third-party ad
serving to advertisers, and tracking and reporting of an advertiser's return on
investment ("ROI"), including evaluation of online transactions. The Company's
technology-based services enable companies to deliver customized online
advertising messages in response to changes in their underlying business
variables, such as inventory levels, product pricing and customer data.
Reincorporation
In August 1999, the Company's board of directors approved reincorporating in
Delaware and changing its name to Mediaplex, Inc. In connection with the
reincorporation, the Company authorized (i) an increase in the number of
authorized shares of common stock to 150,000,000 and (ii) 10,000,000 shares of
undesignated preferred stock. All share data and stock option plan information
has been restated to reflect the reincorporation.
Netranscend Software, Inc. Acquisition
On March 25, 1999, the Company acquired Netranscend Software, Inc., a Java-
based business automation solutions software company, for a non-interest
bearing note payable of $430,000, due in four annual installments (Note 5)
beginning on the first anniversary of the acquisition, and 1,979,000 shares of
the Company's common stock with an estimated fair value of $1.29 per share. The
Company incurred transaction costs of $68,231.
The acquisition was accounted for using the purchase method of accounting.
The aggregate purchase price of $2,993,906, together with $15,826 of net
liabilities assumed, has been allocated based on the fair value of the assets
acquired. Goodwill and intangible assets, consisting of proprietary technology,
totaling $3,009,732 are being amortized over three years.
The following unaudited pro forma results of operations reflect the combined
results of the Company and Netranscend Software, Inc. for the fiscal years
ended December 31, 1997, 1998 and 1999 and have been prepared as though the
entities had been combined as of January 1, 1997, 1998 and 1999, respectively.
The unaudited pro forma results do not reflect any nonrecurring charges that
resulted directly from the transaction.
<TABLE>
<CAPTION>
1997 1998 1999
------------ ------------ ------------
(unaudited)
----------------------------------------
<S> <C> <C> <C>
Revenues......................... $ 425,877 $ 3,558,094 $ 26,405,120
Net loss attributable to common
stockholders.................... $ (2,124,951) $ (3,032,444) $ 36,192,111
Net loss per share attributable
to common stockholders--basic
and diluted..................... $ (0.20) $ (0.30) $ (2.28)
Weighted average shares used to
compute net loss per share--
basic and diluted............... 10,436,464 10,165,127 15,866,088
</TABLE>
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-8
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of cash equivalents and accounts receivable.
The Company has cash equivalents and short-term investment policies that
require placement of these funds in financial institutions evaluated as highly
credit-worthy. The Company's credit risk is mitigated by the Company's ongoing
credit evaluation of its customers' financial condition. The Company does not
require collateral or other security to support accounts receivable and
maintains an allowance for doubtful accounts. Four customers accounted for 76%
of the outstanding accounts receivable at December 31, 1998. At December 31,
1999, one customer represented 12% of outstanding accounts receivable. One,
two, and two customers accounted for 91%, 77%, and 22% of revenues for the
years ended December 31, 1997, 1998 and 1999, respectively.
Risks and Uncertainties
The Company is subject to all of the risks inherent in an early stage
company in the Internet advertising industry. These risks include, but are not
limited to, a limited operating history, limited management resources,
dependence upon consumer acceptance of the Internet, Internet-related security
risks and the changing nature of the electronic commerce industry. The
Company's operating results may be materially affected by the foregoing
factors.
Cash, Cash Equivalents, and Investments in Marketable Securities
All highly liquid instruments purchased with an original maturity of three
months or less are considered to be cash equivalents.
The Company's financial instruments include cash and cash equivalents,
borrowings and accounts payable, and are carried at cost, which approximates
their fair value due to their short-term maturities.
The Company classifies its investments in marketable securities as
available-for-sale. Accordingly, these investments are carried at fair value,
with the unrealized gains and losses, net of tax, reported as a separate
component of stockholders' equity. Unrealized gains and losses at December 31,
1999 were insignificant. The Company recognizes gains and losses when
securities are sold using the specific identification method. For the years
ended December 31, 1997, 1998, and 1999, the Company did not recognize any
material gains or losses upon the sale of securities.
At December 31, 1999, cash and cash equivalents and short-term investments
consist of the following:
<TABLE>
<CAPTION>
Cost
-----------
<S> <C>
Cash and cash equivalents:
Cash.......................................................... $(1,766,118)
Money market funds.......................................... 2,334,801
Commercial papers........................................... 77,483,576
-----------
$78,052,259
===========
Short-term investments:
Commercial papers........................................... $ 9,912,500
===========
</TABLE>
F-9
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Maintenance and repairs are charged to operations as incurred.
Depreciation and amortization are based on the straight-line method over the
estimated useful lives of the related assets, which range from three to five
years. When assets are retired or otherwise disposed of, the cost and
accumulated depreciation and amortization are removed from the accounts, and
any resulting gain or loss is reflected in operations in the period realized.
Goodwill and Intangible Assets
Goodwill and intangible assets consist of the excess of the purchase price
paid over the value of identified intangible and tangible net assets resulting
from the acquisition of Netranscend Software, Inc. Due to the rapid
technological changes occurring in the Internet industry, the goodwill and
intangible assets are amortized using the straight-line method over three
years, the period of expected benefit. Valuation of goodwill and intangible
assets is based on forecasted discounted cash flows and is reassessed
periodically. Cash flow forecasts are based on trends of historical performance
and management's estimate of future performance, giving consideration to
existing and anticipated competitive and economic conditions.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
Revenue Recognition
Revenues are generated primarily from fixed fees for campaign management
services. Such revenues are recognized ratably as impressions are delivered
over the period in which the advertisement is displayed, provided that no
significant Company obligations remain at the end of a period and collection of
the resulting receivable is probable. Company obligations typically includes
guarantees of minimum number of "impressions," or times that an advertisement
appears in pages viewed by users of the Company's online properties. To the
extent minimum guaranteed impressions are not met, the Company defers
recognition of the corresponding revenues until the remaining guaranteed
impression levels are achieved.
Amounts payable to third-party Web sites for providing advertising space are
recorded as cost of revenues in the period the advertising impressions are
delivered.
Deferred Revenues
Deferred revenues consist of advertising fees received or billed in advance
of delivery of the advertisement.
Research and Development Expenses
Research and development expenses and enhancements to existing products are
charged to operations as incurred. Software development costs are required to
be capitalized when a product's technological feasibility has been established
by completion of a working model of the product and ending when a product is
available for general release to customers. To date, completion of a working
model of Mediaplex's products and general release have substantially coincided.
As a result, Mediaplex has not capitalized any software development costs.
F-10
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Advertising Expenses
The Company expenses the cost of advertising and promoting its services as
incurred. These costs are included in sales and marketing on the statements of
operations. The Company has not incurred any advertising expenses to date.
Stock-based Compensation
The Company accounts for stock-based employee compensation arrangements
under the intrinsic value method and complies with the disclosure provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." Under the intrinsic value method, compensation cost
is recognized based on the difference, if any, on the measurement date between
the fair value of the Company's stock and the amount an employee must pay to
acquire the stock.
The Company accounts for non-employee stock-based awards in which goods or
services are the consideration received for the equity instruments issued in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force
No. 96-18, "Accounting for Equity Instruments that are Issued to Employees for
Acquiring, or in Conjunction with Selling, Goods or Services."
The Company amortizes deferred stock-based compensation recorded in
connection with certain stock option grants over the vesting periods of the
related options.
Income Taxes
In accordance with SFAS No. 109, "Accounting for Income Taxes," deferred
income taxes are recognized for the differences between the tax bases of assets
and liabilities and their financial reporting amounts based on enacted tax laws
and statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. A valuation allowance is recognized for
deferred tax assets when it is more likely than not, based on available
evidence, that some portion or all of the deferred tax asset will not be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in
deferred tax assets and liabilities.
Net Loss Per Share
Net loss per share is presented in accordance with the provisions of SFAS
No. 128, "Earnings per Share," and Staff Accounting Bulletin No. 98. Basic net
loss per share is computed based on the weighted average number of shares of
common stock outstanding, while diluted net loss per share reflects the
potential dilution that would occur if preferred stock had been converted and
stock options and warrants had been exercised. Because of the Company's
operating losses, common equivalent shares from stock options and warrants have
been excluded from the computation of diluted net loss per share as their
effect would be antidilutive.
Comprehensive Income
The Company complies with the provisions of SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements. Comprehensive
income, as defined, includes all changes in equity (net assets) during a period
from non-owner sources. To date, the Company has not had any significant
transactions that are required to be reported in comprehensive income.
F-11
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Segment Information
The Company complies with the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company operates in a
single business segment providing advertising campaign management services in
the United States.
Reclassifications
Certain reclassifications have been made to the prior year's financial
statements to conform with the current year presentation.
2. Recently Issued Accounting Standards
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which defines derivatives, requires that
all derivatives be carried at fair value, and provides for hedge accounting
when certain conditions are met. SFAS No. 133 is effective for the Company in
fiscal 2000. Although the Company has not fully assessed the implications of
SFAS No. 133, the Company does not believe the adoption of this statement will
have a material effect on the Company's financial position, results of
operations or cash flows.
In March 1998, the Accounting Standards Executive Committee ("ASEC") issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 provides guidance on
when costs related to software developed or obtained for internal use should
the capitalized or expensed. The SOP is effective for transactions entered into
for fiscal years beginning after December 15, 1998. The adoption of this
statement did not have a material effect on the Company's financial position,
results of operations or cash flows.
In December 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." SOP 98-9
amends SOP 97-2 and SOP 98-4 by extending the deferral of the application of
certain provisions of SOP 97-2 amended by SOP 98-4 through fiscal years
beginning on or before March 15, 1999. All other provisions of SOP 98-9 are
effective for transactions entered into in fiscal years beginning after March
15, 1999. The Company does not anticipate adoption of this statement to have a
material effect on the Company's financial position, results of operations or
cash flows.
In November 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 100, Restructuring and Impairment Charges.' In
December 1999, the SEC issued SAB No. 101, Revenue Recognition in Financial
Statements.' SAB No. 100 expresses the views of the SEC staff regarding the
accounting for and disclosure of certain expenses not commonly reported in
connection with exit activities and business combinations. This includes the
accrual of exit and employee termination costs and the recognition of
impairment charges. SAB No. 101 expresses the views of the SEC staff in
applying accounting principles generally accepted in the United States to
certain revenue recognition issues. The Company does not anticipate that these
SABs will have a material impact on its financial position, results of
operations, or cash flows.
F-12
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. Balance Sheet Data
Accounts receivable as of December 31, 1998 and 1999 are summarized as
follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
---------- -----------
<S> <C> <C>
Accounts receivable, net:
Accounts receivable................................. $1,065,864 $11,234,321
Less: Allowance for sales credits................. (92,000) (2,577,575)
Less: Allowance for bad debts..................... (37,367) (1,027,118)
---------- -----------
$936,497 $ 7,629,628
========== ===========
</TABLE>
Allowances for sales credits was $0, $126,103, and $3,327,019 for the years
ended December 31, 1997, 1998 and 1999, respectively. Bad debt expense was
$20,211, $17,156, and $1,038,380 for the years ended December 31, 1997, 1998
and 1999, respectively.
Property and equipment as of December 31, 1998 and 1999 are summarized as
follows:
<TABLE>
<CAPTION>
December 31,
--------------------
1998 1999
-------- ----------
<S> <C> <C>
Property and equipment, net:
Computer equipment and software...................... $161,336 $4,021,324
Furniture............................................ 5,369 461,166
Less: Accumulated depreciation....................... (60,784) (443,031)
-------- ----------
$105,921 $4,039,459
======== ==========
</TABLE>
Depreciation and amortization expense related to property and equipment was
$20,023, $54,810, and $457,471 for the years ended December 31, 1997, 1998 and
1999, respectively.
Accrued liabilities as of December 31, 1998 and 1999 are summarized as
follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
-------- ----------
<S> <C> <C>
Accrued liabilities:
Accrued cost of revenues.............................. $293,590 $6,102,036
Accrued cost for property and equipment............... -- 1,312,771
Accrued legal fees.................................... -- 310,112
Accrued payroll-related costs......................... 24,090 724,932
Other accrued liabilities............................. 105,536 772,589
-------- ----------
$423,216 $9,222,440
======== ==========
</TABLE>
F-13
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. Income Taxes
The Company has incurred losses from inception through December 31, 1999.
Management believes that, based on its history of losses and other factors, the
weight of available evidence indicates it is more likely than not that the
Company will not be able to realize its deferred tax assets. Thus, a full
valuation reserve has been recorded at December 31, 1998 and 1999. The
Company's net deferred tax asset is comprised as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Net operating loss carryforwards................... $ 896,000 $ 2,900,000
Deferred stock compensation........................ -- 2,509,000
Allowances against accounts receivables............ 55,000 1,544,000
Deferred revenue................................... 205,000 466,000
Other.............................................. (99,000) 165,000
----------- -----------
1,057,000 7,584,000
Less valuation allowance........................... (1,057,000) (7,584,000)
----------- -----------
Net deferred tax asset............................. $ -- $ --
=========== ===========
</TABLE>
As of December 31, 1999, the Company has net operating loss carryforwards of
approximately $6,790,000 and $6,674,000 for federal and state income tax
purposes, respectively. The carryforwards will begin to expire in 2017 and 2012
for federal and state income tax purposes, respectively. For federal and state
income tax purposes, a portion of the Company's net operating loss may be
subject to certain limitations on annual utilization due to changes in
ownership, as defined by federal and state tax laws. The amount of such
limitations, if any, has not yet been determined.
The components of income tax provision are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
--------- -----------
<S> <C> <C>
Deferred:
Federal............................................ $ 445,000 $ 5,058,000
State.............................................. 130,000 1,469,000
--------- -----------
Total deferred................................... 575,000 6,527,000
Change in valuation allowance........................ (575,000) (6,527,000)
--------- -----------
Total............................................ $ -- $ --
========= ===========
</TABLE>
The principal items accounting for the difference between income taxes
computed at the U.S. statutory rate and the provision for income taxes are as
follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
U.S. statutory rate..................................... 34.0% 34.0% 34.0%
Permanent difference.................................... (0.3) (9.8) (9.6)
Adjustment to increase valuation allowance.............. (33.7) (24.2) (25.0)
Research and development credits........................ -- -- 0.6
----- ----- -----
-- -- --
===== ===== =====
</TABLE>
F-14
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Notes Payable to Stockholders
The Company's notes payable to stockholders consisted of the following:
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
-------- --------
<S> <C> <C>
Note payable to stockholder.............................. $ -- $390,457
Convertible note payable to stockholder, 6% per annum,
due July 1999........................................... 64,569 --
Convertible notes payable to stockholder, 6% per annum,
due April 2000.......................................... 232,161 --
Convertible notes payable to stockholder, 6% per annum,
due August 1999......................................... 150,000 --
Notes payable to stockholders, 6% per annum, due August
1999.................................................... 125,000 --
-------- --------
Total notes payable to stockholders.................... 571,730 390,457
Less current portion..................................... 339,569 110,000
-------- --------
$232,161 $280,457
======== ========
</TABLE>
In connection with the Netranscend Software, Inc. acquisition in March 1999,
the Company agreed to pay $430,000 as a part of the purchase consideration.
This non-interest bearing note is payable over four years, with the first
payment of $110,000 due on the first anniversary, $110,000 due on the second
anniversary, $100,000 due on the third anniversary and $110,000 due on the
fourth anniversary. The note payable has been recorded at $372,765, net of a
discount. The discount will be amortized as interest expense over the four-year
term of the note.
In May 1998, the Company entered into two senior subordinated secured
convertible promissory notes and two senior subordinated secured promissory
notes with a stockholder. Under these agreements, the stockholder advanced to
the Company a total of $275,000 bearing interest at the rate of 6% per annum.
The unpaid principal and accrued interest were payable on August 1, 1999, but
could be prepaid without penalty. In the event of any default, as defined in
the agreement, the holder could convert the outstanding amount and accrued
interest into preferred stock at the price that was applicable to preferred
stock issued in the most recent round of financing. At December 31, 1998, the
outstanding notes payable balance was $275,000. In May 1999, the Company paid
$225,000 along with the accrued interest to the stockholder. In August 1999,
the holder of the $50,000 note payable converted the note and the related
accrued interest into 19,360 shares of Series C convertible preferred stock. At
December 30, 1999, nothing remained outstanding.
During 1996 and 1997, a founder of the Company purchased certain assets and
incurred expenses on behalf of the Company (Note 8). In June 1997, $232,161 of
the outstanding amount was converted into 4,643,228 shares of common stock at
$0.05 per share. In April 1998, the Company repurchased the 4,643,228 shares
from the founder at the original conversion price of $0.05 per share with a
convertible promissory note payable. The note bore interest at the rate of 6%
per annum, was due in April 2000, and was convertible into common stock at
$0.05 per share. The Company recorded the difference between the conversion
price of the note and the fair value of the common stock, or the beneficial
conversion feature, on the date the note was issued as additional interest
expense. In March 1999, this outstanding promissory note payable was converted
into 4,643,228 shares of common stock at $0.05 per share.
A law firm affiliated with a stockholder performed legal services for the
Company during 1996 and 1997. In July 1997, the Company issued a convertible
note payable to the law firm for $64,569 for these services. This note bore
interest at a rate of 6% per annum, and had a due date of July 1999. In March
1999, the Company converted the outstanding amount and accrued interest of
$6,458 into 947,009 shares of common stock at $0.075 per share. The law firm
subsequently transferred the shares to the stockholder.
F-15
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company incurred interest expense of $17,015 and $17,692 for the years
ended December 31, 1998 and 1999, respectively, in connection with the notes
payable to stockholders.
6. Commitments and Contingencies
Lease Agreements
The Company leases office space under noncancelable operating lease
agreements that expire in 2002. The terms of the leases provide for rental
payments on a graduated scale. The Company recognizes rent expense on a
straight-line basis over the lease period, and has accrued for rent expense
incurred but not paid.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
<S> <C>
2000............................................................. $2,117,713
2001............................................................. 2,158,898
2002............................................................. 2,015,905
2003............................................................. 1,648,598
2004............................................................. 1,203,296
----------
$9,144,410
==========
</TABLE>
Rent expense was $41,555 , $92,550, and $629,653 for the years ended
December 31, 1997, 1998, and 1999, respectively.
Severance Payments
The Company has entered into employment agreements under which certain
employees would be entitled to receive severance payments totaling $825,000 if
their employment were terminated under defined conditions. As of December 31,
1999, none of these conditions have been met.
Legal Proceedings
From time to time, the Company is subject to legal proceedings and claims in
the ordinary course of business. The Company is not currently aware of any
legal proceedings or claims that it believes will have, individually or in the
aggregate, a material adverse effect on its business, financial condition or
operating results.
7. Stockholders' Equity
Common Stock
The Company is authorized to issue 40,000,000 shares of common stock. In
August 1999, the Company amended its certificate of incorporation to increase
the number of authorized shares of common stock to 150,000,000 shares.
In November 1999, the Company completed a public offering of 6,900,000
shares of common stock generating proceeds of $75,445,138, net of issuance
costs of $7,354,862.
The Company recognizes stock-based compensation upon the issuance of common
stock for less than the deemed fair market value and upon the issuance of
common stock in exchange for services. Accordingly, the
F-16
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Company recorded stock-based compensation of $11,000, $151,427, and $251,938
for the years ended December 31, 1997, 1998 and 1999, respectively.
Convertible Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock. In
1999, the Company issued 1,206,000 shares as Series A preferred stock,
4,775,000 shares as Series B preferred stock and 4,000,000 shares as Series C
preferred stock. All outstanding preferred stock was converted into the
Company's common stock on November 19, 1999, upon the completion of the initial
public offering.
In August 1999, the Company recorded a preferred dividend of $14,360,000
which represents the difference between the deemed fair value of the Company's
common stock and the purchase price of $3.59 per share of the Series C
convertible preferred stock.
Warrants
In January 1999, the Company issued a warrant to an employee to purchase
500,000 shares of common stock at $0.50 per share. The warrant became
exercisable only upon completion of certain milestones that were primarily
related to achievement of certain levels of earned revenues.
As of December 31, 1999, all milestones were completed and the warrant to
purchase 500,000 shares became exercisable. Accordingly, the Company recorded
compensation expense in the amount of $2,040,000 based on the difference
between the exercise price and the fair value of the Company's common stock on
the date the milestones were met.
In June 1999, in connection with services provided related to the issuance
of Series B preferred stock, the Company granted warrants to two non-employees,
exercisable for 275,000 and 100,000 shares of common stock at exercise prices
of $2.00 per share and $0.50 per share, respectively. The warrants are
exercisable by the holder at any time until June 2002. The holder of the
warrant is not entitled to any voting rights. The fair value of the warrants
calculated using Black-Scholes model was $432,354 and has been included in the
offering costs of the Series B convertible preferred stock.
1997 Stock Plan
The Company's 1997 Stock Plan provides for the granting to employees of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code and for the granting to employees and consultants of nonstatutory
stock options and stock purchase rights.
In November 1998, the Company granted options to purchase 505,667 shares of
common stock with exercise prices ranging from $0.05 to $0.50 to both former
and current employees for services previously rendered under the 1997 Stock
Plan. The options granted to former employees were immediately exercisable
until February 1999. At December 31, 1998, 347,063 shares were exercisable. For
those options granted to current employees, the Company recorded $193,390 in
deferred stock compensation for the difference between the exercise price and
the assumed fair value of the common stock at the measurement date. For the
years ended December 31, 1998 and 1999, the Company recorded stock compensation
charge of $140,019 and $35,454, respectively.
The Company recorded the fair value for the options granted to former
employees as stock-based compensation expense of $286,079 in 1998. The fair
value of the options granted to the former employees was determined using a
Black-Scholes option-pricing model using a weighted average risk-free rate of
4.65%, weighted average expected life of three months and price volatility of
103%. No dividend yield was assumed as the Company has not paid dividends and
has no plans to do so.
Options generally become exercisable in equal increments over a four-year
vesting period and expire at the end of ten years from the date of grant, or
sooner if terminated by the Board of Directors.
F-17
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Amended and Restated 1999 Stock Plan
In February 1999, the Company adopted the 1999 Stock Plan (the "1999 Plan").
Options granted under the 1999 Plan may be either incentive stock options
("ISOs") or nonstatutory stock options ("NSOs"). ISOs may be granted only to
Company employees. NSOs may be granted to Company employees, directors and
consultants. The Company originally reserved 9,000,000 shares of common stock
for issuance under the 1999 Plan. The 1999 Plan was amended in August 1999,
raising the number of shares reserved for issuance to 12,000,000. Commencing
January 1, 2000, the number of shares reserved for issuance under the 1999 Plan
will be increased by an amount equal to the least of (a) 1,000,000 shares, (b)
4% of the outstanding shares or (c) an amount determined by our board of
directors.
In the case of ISOs granted to an employee who, at the time of the option
was granted, owns stock representing more than 10% of the voting power of all
classes of stock, the term of the option cannot exceed five years. The exercise
price of an ISO or NSO may not be less than 100% or 85%, respectively, of the
estimated fair value of the underlying stock on the date of grant and the
exercise price of an ISO or NSO granted to a 10% shareholder may not be less
than 100% of the estimated fair value of the underlying stock on the date of
grant. Options generally become exercisable in equal increments over a four-
year vesting period and expire at the end of ten years from the date of grant,
or sooner if terminated by the Board of Directors.
For the year ended December 31, 1999, the Company recorded stock
compensation charge of $9,748,105 in connection with stock option grants to
employees and $5,787,392 of stock compensation charge related to options
granted to non-employees. The deferred stock compensation charge of $15,535,497
will be amortized over the vesting periods of the related stock options through
2003. The fair value of the options granted to the non-employees were
determined using Black-Scholes option-pricing model using a weighted average
risk-free rate of 4.60%, a weighted average expected life of 1.5 years and
price volatility of 77%. No dividend yield was assumed as the Company has not
paid dividends and has no plans to do so. The stock options to non-employees
require the Company to account for them under variable accounting
pronouncements which requires remeasurement of the deferred expense for the
unvested portion of the options each interim period based on the then fair
value of the Company's common stock.
The following table summarizes option activity through December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding
---------------------------------------------
Weighted
Shares Average
Available Number of Exercise Aggregate Exercise
For Grants Shares Price Price Price
---------- --------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Shares authorized under
the 1997 plan.......... 505,667 --
Granted................. (505,667) 505,667 $0.05-$ 0.50 $ 35,685 $0.07
---------- --------- ------------ ----------- -----
Balance, December 31,
1998................... -- 505,667 $0.05-$ 0.50 35,685 $0.07
Shares authorized under
the 1999 plan.......... 12,000,000 --
Granted................. (9,659,721) 9,659,721 $0.50-$67.88 11,024,078 $1.14
Cancelled............... 244,135 (244,135) $0.50-$ 8.00 (561,258) $2.30
Exercised............... -- (439,357) $0.05-$ 3.25 (371,130) $0.84
---------- --------- ------------ ----------- -----
Balance, December 31,
1999................... 2,584,414 9,481,896 $0.05-$67.88 $10,127,375 $1.07
========== ========= ============ =========== =====
</TABLE>
F-18
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table summarizes information for stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------- --------------------
Weighted
Average
Remaining Weighted Weighted
Range Contractual Average Average
of Exercise Number Life Exercise Number Exercise
Prices Outstanding (Years) Price Exercisable Price
----------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.05-$0.50........... 8,099,958 9.2 $ .49 5,397,903 $0.49
$1.80-$3.25........... 1,019,538 9.6 $ 2.88 91,521 $2.59
$6.50-$12.00.......... 355,500 9.9 $ 8.29 -- --
$32.50-$67.88......... 6,900 9.9 $41.77 -- --
--------- ---------
9,481,896 5,489,424
--------- ---------
</TABLE>
For the years ended December 31, 1997, 1998 and 1999, the Company recorded
stock compensation expenses, resulting from issuance of common stock, of
$11,000, $151,427 and $251,938, respectively. In connection with issuance of
warrants, the Company recorded stock compensation expenses of $2,040,000 for
the year ended December 31, 1999. For the years ended December 31, 1998 and
1999, the Company recorded stock compensation expenses, resulting from option
granted under 1997 Stock Plan, of $426,098 and $35,454, respectively. In
connection with stock option grants made under the Amended and Restated 1999
Stock Plan, the Company recorded total stock compensation of $9,032,714 for the
year ended December 31, 1999.
Under SFAS No. 123, the Company is required to calculate the pro forma fair
market value of options granted to employees and report the impact that would
result from recording the compensation expense. The fair value of option grants
has been estimated on the date of grant using the Black-Scholes option-pricing
model using a weighted average risk-free interest rate of 5.14%, a weighted
average expected life of 3 years, and a price volatility of 118%. No dividend
yield was assumed as the Company has not paid dividends and has no plans to do
so.
The weighted average expected life was calculated based on the vesting
period and the expected life at the date of grant. The risk-free interest rate
was calculated based on rates prevailing during the grant periods and expected
lives of options at the date of grants.
The weighted average fair values of options granted to employees for the
year ended December 31, 1999 was $1.70.
Had compensation expenses for option grants to employees been determined
under SFAS No. 123 the Company's net loss would have been as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net loss attributable to common
stockholders--as reported.......... $(1,117,366) $(2,019,212) $(36,174,527)
Net loss attributable to common
stockholders--SFAS No. 123
adjusted........................... $(1,117,366) $(2,019,212) $(38,364,527)
Net loss per share--basic and
diluted as reported................ $ (0.13) $ (0.25) $ (2.34)
Net loss per share--basic and
diluted SFAS No. 123 adjusted...... $ (0.13) $ (0.25) $ (2.49)
Antidilutive securities including
options, warrants and convertible
preferred stock not included in
historical net loss per share
calculations....................... -- 505,667 10,356,896
</TABLE>
F-19
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The pro forma net loss disclosures made above are not necessarily
representative of the effects on pro forma net income (loss) for future years
as options typically vest over several years and additional option grants are
expected to be made in future years.
8. Related Party Transactions
In relation to the related party obligations discussed in Note 5, the
Company had the following related party balances as of December 31, 1998.
<TABLE>
<S> <C>
Payables to stockholders........................................... $ 71,781
Payables to founders............................................... 67,920
--------
Total payables to stockholders................................... $139,701
--------
</TABLE>
In June 1999, the Company entered into an agreement with a former employee
and stockholder, under which the stockholder will receive commissions on the
net proceeds (defined as gross revenue minus associated costs) generated from
certain customers. The agreement expires in July 2000. The Company expensed
$680,000 during 1999 related to this agreement.
In January 1999, the Company converted $12,420 of the payables to founders
into 200,000 shares of common stock in connection with the founder's exercise
of stock options.
In May 1998, the Company entered into a sublease agreement, on a month-to-
month basis, for office space with a stockholder, who was the original tenant
of the office space. The Company paid $41,000 and $79,753 during the years
ended December 31, 1998 and 1999, respectively, to the stockholder.
During 1996 and 1997, founders of the Company purchased certain assets and
incurred expenses on behalf of the Company for a total of $274,661. In June
1997, $232,161 of the outstanding amount was converted into common stock (see
Note 5). During 1997 and 1998, $12,830 and $11,750 was paid back to the
founders, respectively. In 1998, a founder advanced the Company $50,000, which
the Company repaid in 1999.
The Company incurred expenses of $66,546 and $196,611 for the years ended
December 31, 1997 and 1998, respectively, in connection with legal and
consulting services performed by a law firm affiliated with a stockholder.
9. Employee Benefit Plan
The Company maintains a retirement and deferred savings plan for its
employees (the "401(k) Plan") that is intended to qualify as a tax-qualified
plan under the Internal Revenue Code. The 401(k) Plan provides that each
participant may contribute up to 15% of his or her pre-tax gross compensation
(up to a statutory limit). All amounts contributed by participants and earnings
on these contributions are fully vested at all times. To date, the Company has
not made discretionary contributions under the 401(k) Plan.
10. Employee Stock Purchase Plan
In August 1999, the Board of Directors adopted the 1999 Employee Stock
Purchase Plan (the "Purchase Plan") effective on the date of the Company's
initial public offering. The Company has reserved 400,000 shares for issuance
there under. Employees generally will be eligible to participate in the
Purchase
F-20
<PAGE>
MEDIAPLEX, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Plan if they are customarily employed by the Company for more than 20 hours per
week and more than five months in a calendar year and are not 5% or greater
stockholders. Under the Purchase Plan, eligible employees may select a rate of
payroll deduction up to 10% of their compensation subject to certain maximum
purchase limitations. The Purchase Plan will be implemented in a series of
overlapping twenty-four month offering periods beginning on the effective date
of the Company's initial public offering. Subsequent offering periods will
begin on the first trading day on or after May 1 and November 1 of each year.
Purchases will occur on each April 30 and October 31 (the "purchase dates")
during each participation period. Under the Purchase Plan, eligible employees
will be granted an option to purchase shares of common stock at a purchase
price equal to 85% of the fair market value per share of common stock on either
the start date of the offering period or the end date of the offering period,
whichever is less. If the fair market value of the common stock at the end of
the purchase period is lower than the fair market value on the start date of
that offering period, then all participants in that offering period will be
automatically withdrawn from such offering period and re-enrolled in the
offering period immediately following.
11. Subsequent Events
In March 2000, the Company filed on Form S-8, registering 1997 Stock Plan,
1999 Amended and Restated Plan and 1999 Employee Stock Purchase Plan.
In March 2000, the Company granted options to purchase 20,000 shares to an
advisory board member. The Company will record stock compensation expenses on
these options using variable accounting method.
In March 2000, the Company granted options to purchase 293,385 shares to an
officer. The Company will record deferred stock compensation of $18.1 million
in connection with these grants. In addition, the Company gave a loan of
$1,000,000, which will be forgiven upon expiration of four years from the date
of employment. In the event the Company terminates the employment for cause or
the officer voluntarily leaves the employment, the officer shall be responsible
to pay the remaining balance of the loan at the time of the termination,
including interest on the remaining principal, at the rate of 6%.
In March 2000, the Company paid $157,500 in severance fees to a former
officer. In addition the Company accelerated vesting for this former officer to
purchase 125,000 shares within 30 days of the effective date at $3.25 per
share. The accelerated vesting is subject to approval of the Board of
Directors. The Company will record stock compensation expense of $8.4 million,
resulting from the acceleration.
F-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of Mediaplex, Inc.
Our report on the financial statements of Mediaplex, Inc. is included on
page F-2 of this Registration Statement on Form S-1. In connection with our
audits of such financial statements, we have also audited the financial
statement schedule listed on page F-23 of this Registration Statement on Form
S-1.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
PRICEWATERHOUSECOOPERS LLP
San Francisco, CA
January 21, 2000
F-22
<PAGE>
SCHEDULE II
MEDIAPLEX, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE
AT ADDITIONS
BEGINNING CHARGED TO BALANCE AT
OF COSTS AND END OF
DESCRIPTION PERIOD EXPENSES DEDUCTIONS PERIOD
- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1997:
Allowances deducted from accounts
receivable:
Allowances for sales credits...... $ -- $ -- $ -- $ --
Allowance for doubtful accounts... -- 20,211 -- 20,211
-------- ---------- -------- ----------
Total........................... $ -- $ 20,211 $ -- $ 20,211
======== ========== ======== ==========
1998:
Allowances deducted from accounts
receivable:
Allowances for sales credits...... $ -- $ 126,103 $ 34,103 $ 92,000
Allowance for doubtful accounts... 20,211 17,156 -- 37,367
-------- ---------- -------- ----------
Total........................... $ 20,211 $ 143,259 $ 34,103 $ 129,367
======== ========== ======== ==========
1999:
Allowances deducted from accounts
receivable:
Allowances for sales credits...... $ 92,000 $3,327,019 $841,444 $2,577,575
Allowance for doubtful accounts... 37,367 1,038,380 48,629 1,027,118
-------- ---------- -------- ----------
Total........................... $129,367 $4,365,399 $890,073 $3,604,693
======== ========== ======== ==========
</TABLE>
F-23
<PAGE>
[LOGO OF MEDIAPLEX]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than the
underwriting discount payable by Mediaplex in connection with the offer and
sale of common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $108,537
NASD filing fee.................................................. 30,500
Nasdaq National Market listing fee............................... 17,500
Printing and engraving costs..................................... 70,000
Legal fees and expenses.......................................... 200,000
Accounting fees and expenses..................................... 120,000
Blue Sky fees and expenses....................................... 5,000
Transfer agent and registrar fees................................ 10,000
Miscellaneous expenses........................................... 38,463
--------
Total.......................................................... $600,000
========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.
Article IX of the Registrant's Amended and Restated Certificate of
Incorporation provides for the indemnification of directors to the fullest
extent permissible under Delaware law.
Article VI of the Registrant's Amended and Restated Bylaws provides for the
indemnification of officers, directors and third parties acting on behalf of
the Registrant if such persons act in good faith and in a manner reasonably
believed to be in and not opposed to the best interests of the Registrant, and,
with respect to any criminal action or proceeding, the indemnified party had no
reason to believe his or her conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for
in the Registrant's Amended and Restated Bylaws, and intends to enter into
indemnification agreements with any new directors and executive officers in the
future.
The Underwriting Agreement (Exhibit 1.1 hereto) provides for indemnification
by the Underwriters of the Registrant and its executive officers and directors
for certain liabilities, including liabilities arising under the Securities
Act, in connection with matters specifically provided in writing by the
Underwriters for inclusion in the Registration Statement.
Item 15. Recent Sales of Unregistered Securities
During the past three years, the Registrant has issued unregistered
securities to a limited number of entities and persons as described below:
(a) From March 1, 1997 to February 29, 2000, the Registrant issued and
sold common stock to various entities and persons at per share purchase
prices, as follows:
(1) During 1997, the Registrant issued and sold 220,000 shares and
995,338 shares to non-employee investors at a purchase price of $0.05
per share and $0.50 per share, respectively;
II-1
<PAGE>
(2) In June 1997, the Registrant issued a convertible promissory
note to Michael Schwartz in payment for past services rendered, which
was converted into 4,643,228 shares at a conversion rate of $0.05 per
share in June 1997. In April 1998, the Registrant repurchased these
shares, and issued in exchange a convertible promissory note to Michael
Schwartz. In July 1998, Michael Schwartz transferred these shares to
Raifman & Edwards, LLP. In March 1999, Raifman & Edwards converted the
principal and interest of this note into 4,643,228 shares at a
conversion rate of $0.05 per share;
(3) In July 1997, the Registrant issued a convertible promissory
note to Raifman & Edwards, LLP, in payment for past services rendered,
which in March 1999 was converted into 947,009 shares at a conversion
rate of $0.075 per share;
(4) In February 1998, the Registrant issued and sold to non-employee
investors 76,000 shares at a purchase price of $0.50 per share;
(5) In June 1998, the Registrant issued and sold to a former
employee, Joshua Grant, 232,290 shares at a purchase price of $0.65 per
share;
(6) In January and March 1999, the Registrant issued and sold to an
employee, Jay Goodman, 13,333 shares and to a non employee, Seth
Harmon, 10,000 shares, in payment for past services rendered at prices
of $1.13 and $1.29 per share, respectively; and
(7) In January 1999, the Registrant, in exchange for services
rendered, issued and sold to Glenn Argenbright, an employee, 200,000
shares for a purchase price of $0.62 per share under our 1997 Stock
Plan.
(b) From March 1, 1997 to February 29, 2000, the Registrant issued to
certain of its employees, officers, directors and consultants options to
purchase an aggregate of 10,339,488 shares of common stock of the
Registrant, at exercise prices ranging from $0.05 per share to $102.00 per
share, pursuant to the Registrant's 1997 Stock Plan and 1999 Stock Plan,
and Amended and Restated 1999 Stock Plan.
(c) From March 1, 1997 to February 29, 2000, the Registrant issued an
aggregate of 569,107 shares of common stock to employees, directors and
consultants of the Registrant upon the exercise of options at exercise
prices ranging from $0.05 to $3.25 per share.
(d) On January 11, 1999, the Registrant issued to Timothy Favia, an
employee, a warrant to purchase an aggregate of 500,000 shares of common
stock at an exercise price of $0.50 per share.
(e) On January 26, 1999, the Registrant issued and sold an aggregate of
1,206,000 shares of Series A preferred stock to 37 investors at a purchase
price of $1.25 per share or an aggregate purchase price of $1,507,500.
(f) On March 25, 1999, the Registrant issued and sold an aggregate of
1,979,000 shares of common stock valued at $1.31 per share to Ruiqing Jiang
in connection with the Registrant's acquisition of Netranscend Software,
Inc., of which Mr. Jiang was the sole shareholder.
(g) On June 15, 1999, the Registrant issued and sold an aggregate of
4,500,000 shares of Series B preferred stock to 36 investors at a purchase
price of $2.00 per share, or an aggregate purchase price of $9,000,000.
(h) On June 15, 1999, the Registrant issued to Retail Ventures
International, Inc. and Zeron Capital, Inc. warrants to purchase 150,000
shares and 125,000 shares of Series B preferred stock at an exercise price
of $2.00 per share.
(i) On June 15, 1999, the Registrant issued to Retail Ventures
International, Inc. a warrant to purchase an aggregate of 100,000 shares of
common stock at an exercise price of $0.50 per share.
(j) On August 6, 1999, the Registrant issued and sold an aggregate of
4,000,000 shares of Series C preferred stock to 14 investors at a purchase
price of $3.59 per share, or an aggregate purchase price of $14,360,000.
II-2
<PAGE>
The issuances described in paragraphs (a) (1) through (6) and (d) through
(j) above were deemed to be exempt from registration under the Securities Act
in reliance on Section 4(2) of the Securities Act as transactions by an issuer
not involving a public offering. The sales of securities described in
paragraphs a(7), (b) and (c) above were deemed to be exempt from the
registration requirements of the Securities Act in reliance on Rule 701
promulgated under Section 3(b) of the Securities Act as transactions by an
issuer pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The recipients of securities in
each such transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions. The issuance of
warrants to purchase stock described in paragraphs (h) and (i) above did not
require registration under the Securities Act, or an exemption therefrom,
insofar as such grants did not involve a "sale" of securities as such term is
used in Section 2(3) of the Securities Act. All recipients either received
adequate information about the Registrant or had access, through employment or
other relationships, to information about the Registrant.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
1.1 Form of Underwriting Agreement.
2.1* Agreement and Plan of Reorganization between Registrant, Netranscend
Software, Inc. and Ruiqing "Barclay" Jiang, dated March 8, 1999.
3.1* Form of the Amended and Restated Certificate of Incorporation of the
Registrant to be in effect after the closing of the offering made
under this Registration Statement.
3.2* Form of the Amended and Restated Bylaws of the Registrant to be in
effect after the closing of the offering made under this Registration
Statement.
4.1* Warrant to purchase 500,000 shares of Common Stock of the Registrant,
dated January 11, 1999,held by Timothy Favia.
4.2* Warrant to purchase 100,000 shares of Common Stock of the Registrant,
dated June 15, 1999, held by Retail Ventures International, Inc.
4.3* Warrant to purchase 150,000 shares of Series B Preferred Stock of the
Registrant, dated June 15, 1999 ,held by Retail Ventures
International, Inc.
4.4* Warrant to purchase 125,000 shares of Series B Preferred Stock of the
Registrant, dated June 15, 1999,held by Zeron Capital, Inc.
4.5* Specimen Common Stock Certificate.
5.1** Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1* Form of Indemnification Agreement between the Registrant and each of
its directors and officers.
10.2* Amended and Restated 1999 Stock Plan and form of agreements
thereunder.
10.3* 1999 Employee Stock Purchase Plan and form of agreements thereunder.
10.4* 1997 Stock Plan and form of agreements thereunder.
10.5* Basic Lease Agreement, First Amendment and Basic Lease Information
thereto, between R&E Holdings, LLC and Persis Corporation and BidCom,
Inc., dated September 24, 1999,February 1, 1997 and July 31, 1998,
respectively.
10.6* Sublease, dated July 9, 1999, with Telocity, Inc.
10.7* Employment Agreement with Gregory R. Raifman, dated February 19, 1999.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number
<S> <C>
10.8* Employment Agreement with Jon L. Edwards, dated February 19, 1999.
10.9* Employment Agreement with Walter Haefeker, dated February 19, 1999.
10.10* Employment Agreement with Ruiqing "Barclay" Jiang, dated March 24, 1999.
10.11* Employment Agreement with Sandra L. Abbott, dated August 6, 1999.
10.12** Employment Agreement with Michael E. Stanek, dated March 7, 2000.
10.13** Employment Agreement with Brian Powley, dated September 21, 1999.
10.14+* Technology Integration and Services Agreement between the Registrant and DoubleClick, Inc.,
dated July 22, 1999, and Letter Amendment, dated November 17, 1999.
10.15* Developer Package Agreement, dated July 26, 1999, between the Registrant and SAP Labs, Inc.
10.16* Memorandum of Understanding, dated September 22, 1999, between the Registrant and
Ariba Technologies, Inc.
10.17* Letter Agreement, dated September 23, 1999, between the Registrant and OTP Software, Inc.
10.18* Letter Agreement, dated May 20, 1999, between the Registrant and Icon Medialab Inc.
10.19* Letter Agreement, dated August 5, 1999, between the Registrant and Across Media Networks, L.L.C.
10.20* Shareholders' Rights Agreement, dated July 30, 1999.
10.21* First Amendment to Lease, dated October 18, 1999, and Lease Agreement, dated September 8, 1999,
by and between the Registrant and 188 Embarcadero Associates, L.P.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2** Consent of Counsel (see Exhibit 5.1).
24.1** Power of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- --------
* Incorporated by reference to Mediaplex's Registration Statement on Form S-1
(File No. 333-86459) declared effective on November 19, 1999.
** Previously filed.
+ Certain portions of this exhibit have been granted confidential treatment by
the Commission. The omitted portions have been separately filed with the
Commission.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act, 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 a
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-4
<PAGE>
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of San Francisco, State of California, on the 20th day of March, 2000.
MEDIAPLEX, INC.
/s/ Gregory R. Raifman
By: _________________________________
Gregory R. Raifman
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gregory R. Raifman Chairman and Chief March 20, 2000
______________________________________ Executive Officer
Gregory R. Raifman (Principal Executive
Officer)
* Senior Vice President and March 20, 2000
______________________________________ Chief Financial Officer
Michael E. Stanek (Principal Accounting
Officer)
* President and Director March 20, 2000
______________________________________
Jon L. Edwards
* Director March 20, 2000
______________________________________
Lawrence D. Lenihan, Jr.
* Director March 20, 2000
______________________________________
Peter S. Sealey
* Director March 20, 2000
______________________________________
A. Brooke Seawell
* Director March 20, 2000
______________________________________
James DeSorrento
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Gregory R. Raifman March 20, 2000
*By: _________________________________
Gregory R. Raifman
Attorney-in-fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
1.1 Form of Underwriting Agreement.
2.1* Agreement and Plan of Reorganization between Registrant, Netranscend
Software, Inc. and Ruiqing "Barclay" Jiang, dated March 8, 1999.
3.1* Form of the Amended and Restated Certificate of Incorporation of the
Registrant to be in effect after the closing of the offering made
under this Registration Statement.
3.2* Form of the Amended and Restated Certificate of Incorporation of the
Registrant to be in effect after the closing of the offering made
under this Registration Statement.
4.1* Warrant to purchase 500,000 shares of Common Stock of the Registrant,
dated January 11, 1999, held by Timothy Favia.
4.2* Warrant to purchase 100,000 shares of Common Stock of the Registrant,
dated June 15, 1999, held by Retail Ventures International, Inc.
4.3* Warrant to purchase 150,000 shares of Series B Preferred Stock of the
Registrant, dated June 15, 1999, held by Retail Ventures
International, Inc.
4.4* Warrant to purchase 125,000 shares of Series B Preferred Stock of the
Registrant, dated June 15, 1999, held by Zeron Capital, Inc.
4.5* Specimen Common Stock Certificate.
5.1** Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1* Form of Indemnification Agreement between the Registrant and each of
its directors and officers.
10.2* Amended and Restated 1999 Stock Plan and form of agreements
thereunder.
10.3* 1999 Employee Stock Purchase Plan and form of agreements thereunder.
10.4* 1997 Stock Plan and form of agreements thereunder.
10.5* Basic Lease Agreement, First Amendment and Basic Lease Information
thereto, between R&E Holdings, LLC and Persis Corporation and BidCom,
Inc., dated September 24, 1999, February 1, 1997 and July 31, 1998,
respectively.
10.6* Sublease, dated July 9, 1999, with Telocity, Inc.
10.7* Employment Agreement with Gregory R. Raifman, dated February 19, 1999.
10.8* Employment Agreement with Jon L. Edwards, dated February 19, 1999.
10.9* Employment Agreement with Walter Haefeker, dated February 19, 1999.
10.10* Employment Agreement with Ruiqing "Barclay" Jiang, dated March 24,
1999.
10.11* Employment Agreement with Sandra L. Abbott, dated August 6, 1999.
10.12** Employment Agreement with Michael E. Stanek, dated March 7, 2000.
10.13** Employment Agreement with Brian Powley, dated September 21, 1999.
10.14+* Technology Integration and Services Agreement between the Registrant
and DoubleClick, Inc., dated July 22, 1999, and Letter Amendment,
dated November 17, 1999.
10.15* Developer Package Agreement, dated July 26, 1999, between the
Registrant and SAP Labs, Inc.
10.16* Memorandum of Understanding, dated September 22, 1999, between the
Registrant and Ariba Technologies, Inc.
10.17* Letter Agreement, dated September 23, 1999, between the Registrant and
OTP Software, Inc.
10.18* Letter Agreement, dated May 20, 1999, between the Registrant and Icon
Medialab Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.19* Letter Agreement, dated August 5, 1999, between the Registrant and Across Media Networks, L.L.C.
10.20* Shareholders' Rights Agreement, dated July 30, 1999.
10.21* First Amendment to Lease, dated October 18, 1999, and Lease Agreement, dated September 8, 1999,
by and between the Registrant and 188 Embarcadero Associates, L.P.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2** Consent of Counsel (see Exhibit 5.1).
24.1** Power of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- --------
* Incorporated by reference to Mediaplex's Registration Statement on Form S-1
(File No. 333-86459) declared effective on November 19, 1999.
** Previously filed.
+ Certain portions of this exhibit have been granted confidential treatment
by the Commission. The omitted portions have been separately filed with the
Commission.
<PAGE>
Exhibit 1.1
5,500,000 Shares
MEDIAPLEX, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
[ ], 2000
Credit Suisse First Boston Corporation
Lehman Brothers Inc.
Salomon Smith Barney Inc.
SG Cowen Securities Corporation
U.S. Bancorp Piper Jaffray Inc.
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1 . Introductory. Mediaplex, Inc., a Delaware corporation ("Company"), proposes
to issue and sell 4,125,000 shares of its common stock, $0.000l par value
("Securities") and the stockholders listed in Schedule A hereto ("Selling
Stockholder") propose severally to sell an aggregate of 1,375,000 outstanding
shares of the Securities (such 5,500,000 shares of Securities being hereinafter
referred to as the "Firm Securities"). The Selling Stockholders listed in
Schedule B hereto are herein referred to as the "Principal Selling
Stockholders". The Company also proposes to sell to the Underwriters, at the
option of the Underwriters, an aggregate of not more than 825,000 additional
shares of its Securities (such 825,000 additional shares being hereinafter
referred to as the "Optional Securities"). The Firm Securities and the Optional
Securities are herein collectively called the "Offered Securities". The Company
and the Selling Stockholders hereby agree with the several Underwriters named in
Schedule C hereto ("Underwriters") as follows:
2 . Representations and Warranties of the Company, the Principal Selling
Stockholders and the Selling Stockholders.
(a) The Company and each of the Principal Selling Stockholders severally
represents and warrants to, the several Underwriters that:
(i) A registration statement (No. 333-32754) relating to the Offered
Securities, including a form of prospectus, has been filed with the
Securities and Exchange Commission ("Commission") and either (A) has been
declared effective under the Securities Act of 1933, as amended ("Act") and
is not proposed to be amended or (B) is proposed to be amended by amendment
or post-effective amendment. If such registration statement (the "initial
registration statement") has been declared effective, either (A) an
additional registration statement (the "additional registration statement")
relating to the Offered Securities may have been filed with the Commission
pursuant to Rule 462(b) ("Rule 462(b)") under the Act
<PAGE>
and, if so filed, has become effective upon filing pursuant to such Rule
and the Offered Securities all have been duly registered under the Act
pursuant to the initial registration statement and, if applicable, the
additional registration statement or (B) such an additional registration
statement is proposed to be filed with the Commission pursuant to Rule
462(b) and will become effective upon filing pursuant to such Rule and upon
such filing the Offered Securities will all have been duly registered under
the Act pursuant to the initial registration statement and such additional
registration statement. If the Company does not propose to amend the
initial registration statement or if an additional registration statement
has been filed and the Company does not propose to amend it, and if any
post-effective amendment to either such registration statement has been
filed with the Commission prior to the execution and delivery of this
Agreement, the most recent amendment (if any) to each such registration
statement has been declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c) ("Rule 462(c)") under the Act
or, in the case of the additional registration statement, Rule 462(b). For
purposes of this Agreement, "Effective Time" with respect to the initial
registration statement or, if filed prior to the execution and delivery of
this Agreement, the additional registration statement means (A) if the
Company has advised the Representatives that it does not propose to amend
such registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment thereto
(if any) filed prior to the execution and delivery of this Agreement, was
declared effective by the Commission or has become effective upon filing
pursuant to Rule 462(c), or (B) if the Company has advised the
Representatives that it proposes to file an amendment or post-effective
amendment to such registration statement, the date and time as of which
such registration statement, as amended by such amendment or post-effective
amendment, as the case may be, is declared effective by the Commission. If
an additional registration statement has not been filed prior to the
execution and delivery of this Agreement but the Company has advised the
Representatives that it proposes to file one, "Effective Time" with respect
to such additional registration statement means the date and time as of
which such registration statement is filed and becomes effective pursuant
to Rule 462(b). "Effective Date" with respect to the initial registration
statement or the additional registration statement (if any) means the date
of the Effective Time thereof. The initial registration statement, as
amended at its Effective Time, including all information contained in the
additional registration statement (if any) and deemed to be a part of the
initial registration statement as of the Effective Time of the additional
registration statement pursuant to the General Instructions of the Form on
which it is filed and including all information (if any) deemed to be a
part of the initial registration statement as of its Effective Time
pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is hereinafter
referred to as the "Initial Registration Statement". The additional
registration statement, as amended at its Effective Time, including the
contents of the initial registration statement incorporated by reference
therein and including all information (if any) deemed to be a part of the
additional registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "Additional Registration
Statement". The Initial Registration Statement and the Additional
Registration Statement are hereinafter referred to collectively as the
"Registration Statements" and individually as a "Registration Statement".
The form of prospectus relating to the Offered Securities, as first filed
with the Commission pursuant to and in accordance with Rule 424(1,) ("Rule
424(b)") under the Act or (if no such filing is required) as included in a
Registration Statement is hereinafter referred to as the "Prospectus". No
document has been or will be prepared or distributed in reliance on Rule
434 under the Act.
<PAGE>
(ii) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (A) on the Effective
Date of the Initial Registration Statement, the Initial Registration
Statement conformed in all respects to the requirements of the Act and the
rules and regulations of the Commission ("Rules and Regulations") and did
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, (B) on the Effective Date of the
Additional Registration Statement (if any), each Registration Statement
conformed or will conform, in all respects to the requirements of the Act
and the Rules and Regulations and did not include, or will not include, any
untrue statement of a material fact and did not omit, or will not omit, to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and (C) on the date of this
Agreement, the Initial Registration Statement and, if the Effective Time of
the Additional Registration Statement is prior to the execution and
delivery of this Agreement, the Additional Registration Statement each
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b) or (if no such filing is required) at the Effective Date of the
Additional Registration Statement in which the Prospectus is included, each
Registration Statement and the Prospectus will conform, in all respects to
the requirements of the Act and the Rules and Regulations, and neither of
such documents includes, or will include, any untrue statement of a
material fact or omits, or will omit, to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading. If the Effective Time of the Initial Registration Statement is
subsequent to the execution and delivery of this Agreement: on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement and the Prospectus will conform in all respects to
the requirements of the Act and the Rules and Regulations, neither of such
documents will include any untrue statement of a material fact or will omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and no Additional Registration
Statement has been or will be filed. The two preceding sentences do not
apply to statements in or omissions from a Registration Statement or the
Prospectus based upon written information furnished to the Company by any
Underwriter through the Representatives specifically for use therein, it
being understood and agreed that the only such information is that
described as such in Section 7(c) hereof.
(iii) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus; and the Company is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification.
(iv) Each subsidiary of the Company has been duly incorporated and is an
existing corporation in good standing under the laws of the jurisdiction of
its incorporation, with power and authority (corporate and other) to own
its properties and conduct its business as described in the Prospectus; and
each subsidiary of the Company is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business requires
such qualification; all of the issued and outstanding capital stock of each
subsidiary of the Company has been duly authorized and validly issued and
is fully paid and nonassessable; and the capital stock of
<PAGE>
each subsidiary owned by the Company, directly or through subsidiaries
owned free from liens, encumbrances and defects.
(v) The Offered Securities and all other outstanding shares of capital
stock of the Company have been duly authorized, all outstanding shares of
capital stock of the Company are, and when the Offered Securities have
been delivered and paid for in accordance with this Agreement on each
Closing Date (as defined below), such Offered Securities will have been
validly issued, fully paid and nonassessable and conform to the description
thereof contained in the Prospectus; and the stockholders of the Company
and other third parties have no preemptive rights with respect to the
Securities.
(vi) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person that would
give rise to a valid claim against the Company or any underwriter for a
brokerage commission, finder's fee or other like payment in connection with
this offering.
(viii) Except as disclosed Prospectus and except for such rights which
have been waived, there are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities registered to a Registration Statement or in any securities
being registered pursuant to any other registration statement filed by the
Company under the Act.)
(viii) The Securities are listed or have been approved for listing,
subject to issuance, on the Nasdaq Stock Market's National Market.
(ix) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in
connection with the issuance and sale of the Offered Securities, except
such as have been obtained and made under the Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and such may be
required under state securities laws.
(x) The execution, delivery and performance of this Agreement, and the
consummation of the transactions herein contemplated will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any statute, any rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any subsidiary of the Company or any of
their properties, or any agreement or instrument to which the Company or
any such subsidiary is a party or by which the Company or any such
subsidiary is bound or to which any of the properties of the Company or
any such subsidiary is subject, or the charger or by-laws of the Company or
any such subsidiary and the Company has full power and authority to issue
and sell the Offered Securities as contemplated by this Agreement.
(xi) This Agreement has been duly authorized execute and delivered by
the Company.
<PAGE>
(xii) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and all
other properties and assets owned by them, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by them; and
except as disclosed in the Prospectus, the Company and its subsidiaries
hold any leased real or personal property under valid and enforceable
leases with no exceptions that would materially interfere with the use made
or to be made thereof by them.
(xiii) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
condition (financial or other), business, properties, prospects or results
of operations of the Company and its subsidiaries taken as a whole
("Material Adverse Effect").
(xiv) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company or each Principal
Selling Stockholder, is imminent that might have a Material Adverse Effect.
(xv) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and
other intellectual property (collectively, "intellectual property rights")
necessary to conduct the business now operated by them, or presently
employed by them, and have not received any notice of infringement of or
conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material
Adverse Effect.
(xvi) Except as disclosed in the Prospectus, neither the Company nor any
of its subsidiaries is in violation of any statute, any rule, regulation,
decision or order of any governmental agency or body or any court, domestic
or foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively,
"environmental laws"), owns or operates any real property contaminated with
any substance that is subject to any environmental laws, is liable for any
off-site disposal or contamination pursuant to any environmental laws, or
is subject to any claim relating to any environmental laws, which
violation, contamination, liability or claim would individually or in the
aggregate have Material Adverse Effect; and neither the Company nor the
Principal Selling Stockholders is not aware of any pending investigation
which might lead to such a claim.
(xvii) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company, any of its
subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, would individually or
in the aggregate have a Material Adverse Effect, or would materially and
adversely affect the ability of the Company to perform its obligations
under this Agreement, or which are otherwise material in the context of the
sale of the Offered
<PAGE>
Securities; and no such actions, suits or proceedings are threatened or, to
the Company's or any of the Principal Selling Stockholders' knowledge,
contemplated.
(xviii) The financial statements included in each Registration Statement
and the Prospectus present fairly the financial position of the Company and
its consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent basis
and the schedules included in each Registration Statement present fairly
the information required to be stated therein; and the assumptions used in
preparing the pro forma financial statements included in each Registration
Statement and the Prospectus provide a reasonable basis for presenting the
significant effects directly attributable to the transactions or events
described therein, the related pro forma adjustments give appropriate
effect to those assumptions, and the pro forma columns therein reflect the
proper application of those adjustments to the corresponding historical
financial statement amounts.
(xix) Except as disclosed in the Prospectus, since the date of the
latest audited financial statements included in the Prospectus there has
been no material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or other),
business, properties, prospects or results of operations of the Company and
its subsidiaries taken as a whole, and, except as disclosed in or
contemplated by the Prospectus, there has been no dividend or distribution
of any kind declared, paid or made by the Company on any class of its
capital stock.
(xx) The Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company" as
defined in the Investment Company Act of 1940.
(xxi) All material Tax returns required to be filed by the Company have
been filed and all such returns are true, complete, and correct in all
material respects. All material Taxes that are due or claimed to be due
from the Company have been paid other than those (i) currently payable
without penalty or interest or (ii) being contested in good faith and by
appropriate proceedings and for which, in the case of both clauses (i) and
(ii), adequate reserves have been established on the books and records of
the Company in accordance with GAAP. There are no proposed, material Tax
assessments against the Company. To the best knowledge and belief of the
Company or each Principal Selling Stockholder, the accruals and reserves on
the books and records of the Company in respect of any material Tax
liability for any Taxable period not finally determined are adequate to
meet any assessments of Tax for any such period. For purposes of this
Agreement, the term "Tax" and "Taxes" shall mean all Federal, state, local,
and foreign taxes, and other assessments of a similar nature (whether
imposed directly or through withholding), including any interest, additions
to tax, or penalties applicable thereto.
(xxii) Neither the Company, nor any of its affiliates, has taken,
directly or indirectly, any action designed to cause or result in, or which
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of the Securities
to facilitate the sale or resale of the Offered Securities.
<PAGE>
(xxiii) PricewaterhouseCoopers LLP, who have certified the financial
statements filed with the Commission as part of each Registration
Statement, are independent public auditors as required by the Act and the
Rules and Regulations. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or
specific authorization; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
and (C) access to assets is permitted only in accordance with management's
general or specific authorization.
(xxiv) The Company carries, or is covered by, insurance in such amounts
and covering such risks as is adequate for the conduct of their respective
businesses and the value of their respective properties and as is customary
for companies engaged in similar industries.
(xxv) The Company is in compliance with all material respects with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Section 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder
("Code"); and each "pension plan" for which the Company and each of its
subsidiaries would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects
and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
(xxvi) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the heading "Actual" and
after giving effect to the offering will be as set forth under the heading
"As Adjusted", in each case under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or options
referred to in the Prospectus) and the number of authorized, issued and
outstanding options and other rights is set forth in the footnotes under
such caption. The shares of issued and outstanding capital stock of the
Company have been issued in compliance, in all material respects, with all
federal and state securities laws. Except as disclosed in the Prospectus,
there are no outstanding options to purchase, or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares
of the Company's capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's stock option
and purchase plans and the options or other rights granted and exercised
thereunder set forth in the Prospectus accurately and fairly describe, in
all material respects, the information required to be shown with respect to
such plans, arrangements, options and rights.
(xxvii) The statistical and market-related data included in the
Registration Statement and the Prospectus are derived from sources which
the Company and each of the Principal Selling Stockholders reasonably and
in good faith believes to be accurate, reasonable and
<PAGE>
reliable, and such data agrees in all material respects with the sources
from which they were derived.
(b) Each Selling Stockholder severally represents and warrants to, and
agrees with, the several Underwriters that:
(i) Such Selling Stockholder has and on each Closing Date
hereinafter mentioned will have valid and unencumbered title to the Offered
Securities to be delivered by such Selling Stockholder on such Closing Date
and full right, power and authority to enter into this Agreement and to
sell, assign, transfer and deliver the Offered Securities to be delivered
by such Selling Stockholder on such Closing Date hereunder; and upon the
delivery of and payment for the Offered Securities on each Closing Date
hereunder the several Underwriters will acquire valid and unencumbered
title to the Offered Securities to be delivered by such Selling Stockholder
on such Closing Date.
(ii) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (A) on the Effective
Date of the Initial Registration Statement, the Initial Registration
Statement conformed in all respects to the requirements of the Act and the
Rules and Regulations and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, (B) on
the Effective Date of the Additional Registration Statement (if any), each
Registration Statement conformed, or will conform, in all respects to the
requirements of the Act and the Rules and Regulations did not include, or
will not include, any untrue statement of a material fact and did not omit,
or will not omit, to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (C) on the
date of this Agreement, the Initial Registration Statement and, if the
Effective Time of the Additional Registration Statement is prior to the
execution and delivery of this Agreement, the Additional Registration
Statement each conforms, and at the time of filing of the Prospectus
pursuant to Rule 424(b) or (if no such filing is required) at the Effective
Date of the Additional Registration Statement in which the Prospectus is
included, each Registration Statement and the Prospectus will conform, in
all respects to the requirements of the Act and the Rules and Regulations,
and neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading. If the Effective Time of the Initial Registration
Statement is subsequent to the execution and delivery of this Agreement: on
the Effective Date of the Initial Registration Statement, the Initial
Registration Statement and the Prospectus will conform in all respects to
the requirements of the Act and the Rules and Regulations, neither of such
documents will include any untrue statement of a material fact or will omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The two preceding sentences
apply only to the extent that any statements in or omissions from a
Registration Statement or the Prospectus are based on written information
furnished to the Company by such Selling Stockholders specifically for use
therein.
(iii) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between such Selling Stockholder and any
person that would give rise to a valid claim against such Selling
Stockholder or any Underwriter for a brokerage commission, finder's fee or
other like payment in connection with this offering.
<PAGE>
3 . Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company and each Selling Stockholder
agree, severally and not jointly, to sell to each Underwriter, and each
Underwriter agrees, severally and not jointly, to purchase from the Company and
each Selling Stockholder, at a purchase price of $ per share, that number of
Firm Securities (rounded up or down, as determined by Credit Suisse First Boston
Corporation ("CSFBC") in its discretion, in order to avoid fractions) obtained
by multiplying 4,125,000 Firm Securities in the case of the Company and the
number of Firm Securities set forth opposite the name of such Selling
Stockholder in Schedule A hereto, in the case of a Selling Stockholder, in each
case by a fraction the numerator of which is the number of Firm Securities set
forth opposite the name of such Underwriter in Schedule C hereto and the
denominator of which is the total number of Firm Securities.
Certificates in negotiable form for the Offered Securities to be sold by
the Selling Stockholders hereunder have been placed in custody, for delivery
under this Agreement, under Custody Agreements made with Chase Manhattan Bank
and Trust Company N.A. as custodian ("Custodian"). Each Selling Stockholder
agrees that the shares represented by the certificates held in custody for the
Selling Stockholders under such Custody Agreements are subject to the
interests of the Underwriters hereunder, that the arrangements made by the
Selling Stockholders for such custody are to that extent irrevocable, and that
the obligations of the Selling Stockholders hereunder shall not be terminated
by operation of law, whether by the death of any individual Selling
Stockholder or the occurrence of any other event, or in the case of a trust,
by the death of any trustee or trustees or the termination of such trust. If
any individual Selling Stockholder or any such trustee or trustees should die,
or if any other such event should occur, or if any of such trusts should
terminate, before the delivery of the Offered Securities hereunder,
certificates for such Offered Securities shall be delivered by the Custodian
in accordance with the terms and conditions of this Agreement as if such death
or other event or termination had not occurred, regardless of whether or not
the Custodian shall have received notice of such death or other event or
termination.
The Company and the Custodian will deliver the Firm Securities to the
Representative for the accounts of the Underwriters, against payment of the
purchase price in Federal (same day) funds by official bank check or checks or
wire transfer to an account at a bank acceptable to CSFBC drawn to the order of
Mediaplex, Inc. in the case of 4,125,000 shares of Firm Securities and [ ] in
the case of 1,325,000 shares of Firm Securities, at the office of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, CA
94304, at 10:00 A.M., New York time, on [ , 2000], or at such other time not
later than seven full business days thereafter as CSFBC and the Company
determine, such time being herein referred to as the "First Closing Date". For
purposes of Rule 15c6-1 under the Exchange Act, the First Closing Date (if later
than the otherwise applicable settlement date) shall be the settlement date for
payment of funds and delivery of securities for all the Offered Securities sold
pursuant to the offering. The certificates for the Firm Securities so to be
delivered will be in definitive form, in such denominations and registered in
such names as CSFBC requests and will be made available for checking and
packaging at the above office at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company and the
Selling Stockholders from time to time not more than 30 days subsequent to the
date of the Prospectus, the Underwriters may purchase all or less than all of
the Optional Securities at the purchase price per Security to be paid for the
Firm Securities. The Company agrees to sell to the Underwriters the number of
Optional Securities specified in such notice and the Underwriters agree,
severally and not
<PAGE>
jointly, to purchase such Optional Securities. Such Optional Securities shall be
purchased from the Company for the account of each Underwriter in the same
proportion as the number of shares of Firm Securities set forth opposite such
Underwriter's name bears to the total number of shares of Firm Securities
(subject to adjustment by CSFBC to eliminate fractions) and may be purchased by
the Underwriters only for the purpose of covering over-allotments made in
connection with the sale of the Firm Securities 5. No Optional Securities shall
be sold or delivered unless the Firm Securities previously have been, or
simultaneously are, sold and delivered. The right to purchase the Optional
Securities or any portion thereof may be exercised from time to time and to the
extent not previously exercised may be surrendered and terminated at any time
upon notice by CSFBC to the Company.
Each time for the delivery of and payment for the Optional Securities,
referred to as an "Optional Closing Date", which may be the First Closing Date
(the First Closing Date and each Optional Closing Date, if any, being sometimes
referred to as a "Closing Date"), shall be determined by CSFBC but shall be not
later than five full business days after written notice of election to purchase
Optional Securities is given. The Company will deliver the Optional Securities
being purchased on each Optional Closing Date to the Representatives for the
accounts of the several Underwriters, against payment of the purchase price
therefor in Federal (same day) funds by official bank check or checks or wire
transfer to an account at a bank acceptable to CSFBC drawn to the order of
Mediaplex, Inc. in the case of the Optional Securities at the above office of
[___________]. The certificates for the Optional Securities being purchased on
each Optional Closing Date will be in definitive form, in such denominations and
registered in such names as CSFBC requests upon reasonable notice prior to such
Optional Closing Date and will be made available for checking and packaging at
the above office of [________________] at a reasonable time in advance of such
Optional Closing Date.
4 . Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5 . Certain Agreements of the Company and the Selling Stockholders. The
Company agrees with the several Underwriters and the Selling Stockholders that:
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Company will
file the Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by CSFBC,
subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the
second business day following the execution and delivery of this Agreement
or (B) the fifteenth business day after the Effective Date of the Initial
Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to Rule
424(b). If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement and an additional
registration statement is necessary to register a portion of the Offered
Securities under the Act but the Effective Time thereof has not occurred as
of such execution and delivery, the Company will file the additional
registration statement or, if filed, will file a post-effective amendment
thereto with the Commission pursuant to and in accordance with Rule 462(b)
on or prior to 10:00 P.M., New York time, on the date of this Agreement or,
if earlier, on or prior to the time the Prospectus is printed and
distributed to
<PAGE>
any Underwriter, or will make such filing at such later date as shall have
been consented to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to amend or
supplement the initial or any additional registration statement as filed or
the related prospectus or the Initial Registration Statement, the
Additional Registration Statement (if any) or the Prospectus and will not
effect such amendment or supplementation without CSFBC's consent; and the
Company will also advise CSFBC promptly of the effectiveness of each
Registration Statement (if its Effective Time is subsequent to the
execution and delivery of this Agreement) and of any amendment or
supplementation of a Registration Statement or the Prospectus and of the
institution by the Commission of any stop order proceedings in respect of a
Registration Statement and will use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible its
lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered Securities
is required to be delivered under the Act in connection with sales by any
Underwriter or dealer, any event occurs as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company will promptly notify CSFBC
of such event and will promptly prepare and file with the Commission, at
its own expense, an amendment or supplement which will correct such
statement or omission or an amendment which will effect such compliance.
Neither CSFBC's consent to, nor the Underwriters' delivery of, any such
amendment or supplement shall constitute a waiver of any of the conditions
set forth in Section 6.
(d) As soon as practicable, but not later than the Availability Date (as
defined below), the Company will make generally available to its
securityholders an earnings statement covering a period of at least 12
months beginning after the Effective Date of the Initial Registration
Statement (or, if later, the Effective Date of the Additional Registration
Statement) which will satisfy the provisions of Section 11(a) of the Act.
For the purpose of the preceding sentence, "Availability Date" means the
45th day after the end of the fourth fiscal quarter following the fiscal
quarter that includes such Effective Date, except that, if such fourth
fiscal quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth fiscal
quarter.
(e) The Company will furnish to the Representatives copies of each
Registration Statement one copy of which will be signed and will include
all exhibits), each related preliminary prospectus, and, so long as a
prospectus relating to the Offered Securities is required to be delivered
under the Act in connection with sales by any Underwriter or dealer, the
Prospectus and all amendments and supplements to such documents, in each
case in such quantities as CSFBC requests. The Prospectus shall be so
furnished on or nor to 3:00 P.M., New York time, on the business day
following the later of the execution and delivery of this Agreement or the
Effective Time of the Initial Registration Statement. All other documents
shall be so furnished as soon as available. The Company will pay the
expenses of printing and distributing to the Underwriters all such
documents.
<PAGE>
(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC
designates and will continue such qualifications in effect so long as
required for the distribution.
(g) During the period of five years hereafter, the Company will furnish
to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year, a
copy of its annual report to stockholders for such year; and the Company
will furnish to the Representatives (i) as soon as available, a copy of
each report and any definitive proxy statement of the Company filed with
the Commission under the Exchange Act or mailed to stockholders, and (ii)
from time to time, such other information concerning the Company as CSFBC
may reasonably request.
(h) For a period of 90 days after the date of the public offering of the
Offered Securities, the Company will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the
Commission a registration statement under the Act relating to, any
additional shares of its Securities or securities convertible into or
exchangeable or exercisable for any shares of its Securities, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of CSFBC except grants of
employee stock options pursuant to the 1997 Employee Stock Plan, the
Amended and Restated 1999 Stock Plan and the 1999 Employee Stock Purchase
Plan of the Company (collectively, "Plans"), and (ii) options granted
pursuant to the Plans and issuances of Securities pursuant to the exercise
of such options granted pursuant to the Plans.
(i) The Company will pay all expenses incident to the performance of the
obligations of the Company and each Selling Stockholder, as the case may
be, under this Agreement, for any filing fees and other expenses (including
fees and disbursements of counsel) in connection with qualification of the
Offered Securities for sale under the laws of such jurisdictions as CSFBC
designates and the printing of memoranda relating thereto, for the filing
fee incident to, and the reasonable fees and disbursements of counsel to
the Underwriters in connection with, the review by the National Association
of Securities Dealers, Inc. of the Offered Securities, for any travel
expenses of the Company's officers and employees and any other expenses of
the Company in connection with attending or hosting meetings with
prospective purchasers of the Offered Securities, for any transfer taxes on
the sale by the Selling Stockholders of the Offered Securities to the
Underwriters and for expenses incurred in distributing preliminary
prospectuses and the Prospectus (including any amendments and supplements
thereto) to the Underwriters.
(j) Each Selling Stockholder agrees to deliver to CSFBC, attention:
Transactions Advisory Group on or prior to the First Closing Date a
properly completed and executed United States Treasury Department Form W-9
(or other applicable form or statement specified by Treasury Department
regulations in lieu thereof).
(k) Each Selling Stockholder agrees, for a period of 90 days after the
date of the initial public offering of the Offered Securities, not to
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any additional shares of the Securities of the Company or
securities convertible into or exchangeable or exercisable for any shares
of Securities, enter into a transaction which would have the same effect,
or enter into any swap, hedge or other arrangement that transfers, in whole
or in part, any of the economic
<PAGE>
consequences of ownership of the Securities, whether any such
aforementioned transaction is to be settled by delivery of the Securities
or such other securities, in cash or otherwise, or publicly disclose the
intention to make any such offer, sale, pledge or disposition, or enter
into any such transaction, swap, hedge or other arrangement, without, in
each case, the prior written consent of CSFBC.
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholders herein, to
the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Stockholders of their obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received a letter, dated the date of
delivery thereof (which, if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, shall
be on or prior to the date of this Agreement or, if the Effective Time of
the Initial Registration Statement is subsequent to the execution and
delivery of this Agreement, shall be prior to the filing of the amendment
or post-effective amendment to the registration statement to be filed
shortly prior to such Effective Time), of PricewaterhouseCoopers LLP
confirming that they are independent public accountants within the meaning
of the Act and the applicable published Rules and Regulations thereunder
and stating to the effect that:
(i) in their opinion the financial statements and schedules
examined by them and included in the Registration Statements comply as to
form in all material respects with the applicable accounting requirements
of the Act and the related published Rules and Regulations;
(ii) they have performed the procedures specified by the American
Institute of Certified Public Accountants for a review of interim
financial information as described in Statement of Auditing Standards No.
71, Interim Financial Information, the unaudited financial statements
included in the Registration Statements;
(iii) on the basis of the review referred to in clause (ii) above,
reading of the latest available interim financial statements of the
Company, inquiries of officials of the Company who have responsibility
for financial and accounting matters and other specified procedures,
nothing came to their attention that caused them to believe that:
(A) the unaudited financial statements included in the
Registration Statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the related published Rules and Regulations or any material
modifications should be made to such unaudited financial statements
for them to be in conformity with generally accepted accounting
principles;
(B) at the date of the latest available balance sheet read by
such accountants, or at a subsequent specified date not more than
three business days prior to the date of such letter, there was any
change in the capital stock or any
<PAGE>
increase in short-term indebtedness or long-term debt of the
Company and its consolidated subsidiaries or, at the date of the
latest available balance sheet read by such accountants, there was
any decrease in consolidated net assets, as compared with amounts
shown on the latest balance sheet included in the Prospectus; or
(C) for the period from the closing date of the latest income
statement included in the Prospectus to the closing date of the
latest available income statement read by such accountants there
were any decreases, as compared with the corresponding period of
the previous year [and with the period of corresponding length
ended the date of the latest income statement included in the
Prospectus], in consolidated net sales or net operating income in
the total or per share amounts of consolidated net income;
except in all cases set forth in clauses (B) and (C) above for changes,
increases or decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(iii) they have compared specified dollar amounts (or percentages derived
from such dollar amounts) and other financial information contained in the
Registration Statements (in each case to the extent that such dollar
amounts, percentages and other financial information are derived from the
general accounting records of the Company and its subsidiaries subject to
the internal controls of the Company's accounting system or are derived
directly from such records by analysis or computation) with the results
obtained from inquiries, a reading of such general accounting records and
other procedures specified in such letter and have found such dollar
amounts, percentages and other financial information to be in agreement
with such results, except as otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the Initial
Registration Statements is subsequent to the execution and delivery of this
Agreement, "Registration Statements" shall mean the Initial Registration
Statement as proposed to be amended by the amendment or post-effective amendment
to be filed shortly prior to its Effective Time, (ii) if the Effective Time of
the Initial Registration Statements is prior to the execution and delivery of
this Agreement but the Effective Time of the Additional Registration Statement
is subsequent to such execution and delivery, "Registration Statements" shall
mean the Initial Registration Statement and the additional registration
statement as proposed to be filed or as proposed to be amended by the post-
effective amendment to be filed shortly prior to its Effective Time, and (iii)
"Prospectus" shall mean the prospectus included in the Registration Statements.
(b) If the Effective Time of the Initial Registration Statement is not
prior to the execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 PM., New York time, on the date of this
Agreement or such later date as shall have been consented to by CSFBC. If the
Effective Time of the Additional Registration Statement (if any) is not prior to
the execution and delivery of this Agreement, such Effective Time shall have
occurred not later than 10:00 P.M., New York time, on the date of this Agreement
or, if earlier, the time the Prospectus is printed and distributed to any
Underwriter, or shall have occurred at such later date as shall have been
consented to by CSFBC. If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the
Prospectus shall have been filed with the Commission in accordance with the
Rules and Regulations and Section 5(a) of this Agreement. Prior to such
<PAGE>
Closing Date, no stop order suspending the effectiveness of a Registration
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or, to the knowledge of any Selling Stockholder, the Company or
the Representatives, shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement, there shall
not have occurred (i) any change, or any development or event involving a
prospective change, in the condition (financial or other), business, properties,
prospects or results of operations of the Company and its subsidiaries taken as
one enterprise which, in the judgment of a majority in interest of the
Underwriters including the Representatives, is material and adverse and makes it
impractical or inadvisable to proceed with completion of the public offering or
the sale of and payment for the Offered Securities; (ii) any material suspension
or material limitation of trading in securities generally on the New York Stock
Exchange, or any setting of minimum prices for trading on such exchange, or any
trading of any securities of the Company on any exchange or in the over-the-
counter market; (iii) any banking moratorium declared by U.S. Federal or New
York authorities; or (iv) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war by Congress or any
other substantial national or international calamity or emergency if, in the
judgment of a majority in interest of the Underwriters including the
Representatives, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the public offering or the sale of and payment for the Offered
Securities,
(d) The Representatives shall have received an opinion, dated such Closing
Date, of Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel for
the Company, to the effect that:
(i) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its
business as described in the Prospectus; and the Company is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of
its business requires such qualification;
(ii) The authorized, issued and outstanding capital stock of the
Company as of February 29, 2000 is as set forth under the heading "Actual"
under the caption "Capitalization" in the Prospectus. Since such date, the
Company has not issued any securities other than (A) common stock of the
Company pursuant to the exercise of previously outstanding and privately
granted options pursuant to Plans, and (B) options granted pursuant to the
Plans. To our knowledge, except as described in the Registration Statement
and the Prospectus, there are no outstanding securities of the Company
convertible or exchangeable into, or evidencing the right to purchase or
subscribe for, any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of a similar
character obligating the Company to issue any shares of its capital stock
or any securities convertible or exchangeable into, or evidencing the right
to purchase or subscribe for, any shares of such stock, except as disclosed
in the Prospectus.
(iii) The Offered Securities delivered on such Closing Date and all
other outstanding shares of the Common Stock of the Company have bee duly
authorized and validly issued, are fully paid and nonassessable and conform
to the description thereof contained in the Prospectus; each of the Plans
and the stock options granted by the Company
<PAGE>
in accordance with the Plans conforms in all material respects to the
descriptions thereof contained in the Registration Statement and the
Prospectus; and the stockholders of the Company and other third parties
have no preemptive rights with respect to the Securities;
(iv) There are no contracts, agreements or understandings known to
such counsel between the Company and any person granting such person the
right to require the Company to file a registration statement under the Act
with respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement
filed by the Company under the Act, except for such rights which have been
waived with respect to the filing of the Registration Statements;
(v) No consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required to be obtained or
made by the Company or any Selling Stockholder for the consummation of the
transactions contemplated by this Agreement or the Custody Agreement in
connection with the issuance and sale of the Offered Securities, except
such as have been obtained and made under the Act and the Exchange Act and
such as may be required under state securities laws;
(vi) The execution, delivery and performance of this Agreement or the
Custody Agreement and the consummation of the transactions herein or
therein contemplate will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any statute, any
rule, regulation or order of any governmental agency or body or any court
having jurisdiction over the Company or any subsidiary of the Company or
any of their properties, or any agreement or instrument to which the
Company or any such subsidiary is a party or by which the Company or any
such subsidiary is bound or to which any of the properties of the Company
or any such subsidiary is subject, or the charter or bylaws of the Company
or any such subsidiary;
(vii) The Initial Registration Statement was declared effective under
the Act as of the date and time specified in such opinion, the Additional
Registration Statement (if any) was filed and became effective under the
Act as of the date and time (if determinable) specified in such opinion,
the Prospectus either was filed with the Commission pursuant to the
subparagraph of Rule 424(b) specified in such opinion on the date specified
therein or was included in the Initial Registration Statement or the
Additional Registration Statement (as the case may be), and, to the best of
the knowledge of such counsel, no stop order suspending the effectiveness
of a Registration Statement or any part thereof has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act, and each Registration Statement and the
Prospectus, and each amendment or supplement thereto, as of their
respective effective or issue dates, complied as to form in all material
respects with the requirements of the Act and the Rules and Regulations;
such counsel have no reason to believe that any part of a Registration
Statement or any amendment thereto, as of its effective date or as of such
Closing Date, contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; or that the Prospectus or any
amendment or supplement thereto, as of its issue date or as of such Closing
Date, contained any untrue statement of a material fact or omitted to state
any material fact necessary in order
<PAGE>
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; the descriptions in the Registration
Statements and Prospectus of statutes, legal and governmental proceedings
and contracts and other documents are accurate and fairly present the
information required to be shown; and such counsel do not know of any legal
or governmental proceedings required to be described in a Registration
Statement or the Prospectus which are not described as required or of any
contracts or documents of a character required to be described in a
Registration Statement or the Prospectus or to be filed as exhibits to a
Registration Statement which are not described and filed as required; it
being understood that such counsel need express no opinion as to the
financial statements or other financial data contained in the Registration
Statements or the Prospectus; and
(viii) This Agreement has been duly authorized, executed and delivered
by the Company;
(ix) All of the Offered Securities have been duly authorized and
accepted for quotation on the Nasdaq Stock Market's National Market,
subject to official notice of issuance.
(x) The information required to be set forth in the Registration
Statement under the captions "Description of Capital Stock," and "Business
-- Legal Proceedings" is to such counsel's knowledge accurately and
adequately set forth therein in all material respects.
(xi) To such counsel's knowledge, all holders of securities of the
Company having rights to the registration of shares of common stock, or
other securities, because of the filing of the Registration Statement by
the Company have waived such rights or such rights have expired by reason
of lapse of time following notification of the Company's intent to file the
Registration Statement;
(xii) To our knowledge, the Company has not received any notice of
infringement of or conflict with asserted rights of any third party's
material patents, patent rights, licenses, inventions, copyrights, know-
how, (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, system or procedures), trademarks,
service marks and trade names that, singly or in the aggregate, if the
subject of an unfavorable decisions, ruling or finding, would result in any
material adverse effect on the business, properties, operations, conditions
(financial or otherwise), prospects or results of operations on the
Company.
(xiii) The Registration Statements and the Prospectus (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) comply as to form in all material respects
with the requirements of the Act and the Rules and Regulations.
(xiv) To such counsel's knowledge, there are no contracts or other
documents which are required to be described in the Prospectus or filed as
exhibits to the Registration Statements by the Act or by the Rules and
Regulations which have not been described or filed as exhibits to the
Registration Statements or incorporated therein by reference as permitted
by the Act and the Rules and Regulations.
<PAGE>
(e) The Representatives shall have received an opinion, dated such Closing
Date, of [ ], counsel for the Company, to the effect that:
(i) The Company is listed on the records of the United States Patent
and Trademark Office as the holder of each of the applications listed on a
schedule to this opinion (the "Applications"). To our knowledge, there are
no claims of third parties to any ownership interest or lien with respect
to any of the Applications. We are not aware of any material defect in
form in the preparation or filing of the Applications on behalf of the
Company. To our knowledge, the Applications are being pursued by the
Company. To our knowledge, the Company owns as its sole property the
pending Applications;
(ii) We have no knowledge of any reason why any patent to be issued as
a result of any Application would not be valid or would not afford the
Company useful patent protection with respect thereto;
(iii) Nothing has come to our attention which caused them to believe
that the above-mentioned sections of the Registration Statement and any
amendment or supplement thereto, at the time the Registration Statement
became effective and at all times subsequent thereto up to and on the
Closing date and on any later date on which Optional Securities are to be
purchased, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and
(iv) We know of no material action, suit, claim or proceeding relating
to patents, patent rights or licenses, trademarks or trademark rights,
copyrights, collaborative research, licenses or royalty arrangements or
agreements or trade secrets, know-how or proprietary techniques, including
processes and substances, owned by or affecting the business or operations
of the Company which are pending or, except as disclosed in the Prospectus,
threatened against the Company or any of its officers or directors.
(f) The Representatives shall have received the opinion contemplated in the
Power of Attorney executed and delivered by each Selling Stockholder and an
opinion, dated such Closing Date, of Wilson Sonsini Goodrich & Rosati, P.C.
counsel for the Selling Stockholders, to the effect that:
(i) Each Selling Stockholder had valid and unencumbered title to the
Offered Securities delivered by such Selling Stockholder on such Closing
Date and had hill right, power and authority to sell, assign, transfer and
deliver the Offered Securities delivered by such Selling Stockholder on
such Closing Date hereunder; and the several Underwriters have acquired
valid and unencumbered title to the Offered Securities purchased by them
from the Selling Stockholders on such Closing Date hereunder;
(ii) No consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required to be obtained or
made any Selling Stockholder for the consummation of the transactions
contemplated by the Custody Agreement or this Agreement in connection with
the sale of the Offered Securities sold by the Selling Stockholders, except
such as have been obtained and made under the Act and such as may be
required under state securities laws;
<PAGE>
(iii) The execution, delivery and performance of the Custody Agreement
and this Agreement and the consummation of the transactions therein and
herein contemplated will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any statute, any
rule, regulation or order of any governmental agency or body or any court
having jurisdiction over any Selling Stockholder or any of their properties
or any agreement or instrument to which any Selling Stockholder is a party
or by which any Selling Stockholder is bound or to which any of the
properties of any Selling Stockholder is subject, or the charter or by-laws
of any Selling Stockholder which is a corporation; and
(iv) The Power of Attorney and related Custody Agreement with respect
to each Selling Stockholder has been duly authorized, executed and
delivered by such Selling Stockholder and constitute valid and legally
binding obligations each such Selling Stockholder enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and
(v) This Agreement has been duly authorized, executed and delivered
by each Selling Stockholder.
(g) The Representatives shall have received from Skadden, Arps, Slate,
Meagher & Flom, LLP, counsel for the Underwriters, such opinion or opinions,
dated such Closing Date, with respect to the valid existence of the Company, the
validity of the Offered Securities delivered on such Closing Date, the
Registration Statements, the Prospectus and other related matters as the
Representatives may require, and the Selling Stockholders and the Company shall
have furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
(h) The Representatives shall have received a certificate, dated such
Closing Date, of the Chief Executive Officer or any Vice President and a
principal financial or accounting officer of the Company in which such officers,
to the best of their knowledge after reasonable investigation, shall state that:
the representations and warranties of the Company in this Agreement are true and
correct; the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
such Closing Date; no stop order suspending the effectiveness of any
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of subparagraphs (1)
and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment of
the applicable filing fee in accordance with Rule 111(a) or (b) under the Act,
prior to the time the Prospectus was printed and distributed to any
Underwriter; and, subsequent to the dates of the most recent financial
statements in the Prospectus, there has been no material adverse change, nor any
development or event involving a prospective material adverse change, in the
condition (financial or other), business, properties, prospects or results of
operations of the Company and its subsidiaries taken as a whole except as set
forth in or contemplated by the Prospectus or as described in such certificate.
(i) The Representatives shall have received a letter, dated such Closing
Date, of PricewaterhouseCoopers, LLP which meets the requirements of subsection
(a) of this Section, except that the specified date referred to in such
subsection will be a date not more than three days prior to such Closing Date
for the purposes of this subsection.
<PAGE>
(j) Not less than three (3) days prior to the date of this Agreement, the
Representatives shall have received lockup letters from each executive officer,
director, 5% Stockholder and all Selling Stockholders.
The Selling Stockholders and the Company will furnish the Representatives with
such conformed copies of such opinions, certificates, letters and documents the
Representatives reasonably requests. CSFBC may in its sole discretion waive on
behalf of the Underwriters compliance with any conditions to the obligations of
the Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Underwriter, its partners, directors and officers and each
person, if any who controls such Underwriter within the meaning of Section 15 of
the Act, against any losses, claims, damages or liabilities, joint or several,
to which such Underwriter may become subject, under the Act or otherwise,
insofar as such losses claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related preliminary
prospectus, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse each Underwriter
for any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based solely upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (c) below.
(b) The Selling Stockholders, severally and not jointly, will indemnify and
hold harmless each Underwriter, its partners, directors and officers and each
person who controls such Underwriter within the meaning of Section 15 of the
Act, against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement, the Prospectus, or
any amendment or supplement thereto, or any related preliminary prospectus, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that the Selling
Stockholders will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and unconformity with written information
furnished to the Company by an Underwriter through the Representatives
specifically for use therein, it being understood and agreed that the only such
information furnished by any Underwriter consists of the information described
as such in subsection (c) below; provided, further, that a Selling Stockholder
(other than a Principal Selling Stockholder) shall only be subject to such
liability to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission is based upon
<PAGE>
information provided by such Selling Stockholder or contained in a
representation or warranty given by such Selling Stockholder in this Agreement
or the Custody Agreement; and provided, further, that the liability under this
subsection of each Selling Stockholder shall be limited to an amount equal to
the aggregate gross proceeds less underwriting discounts and commissions to such
Selling Stockholder from the sale of Securities sold by such Selling Stockholder
hereunder.
(c) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company, its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the Act, and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based solely upon any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein, and will
reimburse any legal or other expenses reasonably incurred by the Company and
each Selling Stockholder in connection with investigating or defending any such
loss, claim, damage, liability or action as such expenses are incurred, it being
understood and agreed that the only such information furnished by any
Underwriter consists of the following information in the Prospectus furnished
on behalf of each Underwriter: the concession and reallowance figures appearing
in the [ ] paragraph under the cation "Underwriting" and the information
contained in the [______] paragraph regarding over-allotment, stabilization and
passive market making under the caption "Underwriting".
(d) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
subsection (a), (b) or (c) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a), (b) or (c) above. In case any such action
is brought against any indemnified party and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in is or could have been a
party and indemnity could have been sought unless such (i) settlement includes
an unconditional release of such any claims that are the subject matter of such
action and (ii) does not include a statement as to, or an admission of, fault,
culpability or failure to act by or on behalf of an indemnified party.
<PAGE>
(e) If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection (a), (b) or
(c) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a), (b) or (c) above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on
the other from the offering of the Securities or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Stockholders on
the one hand and the Underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company and the Selling Stockholders bear to the total underwriting discounts
and commissions received by the Underwriters. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company, the Selling
Stockholders or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (e).
Notwithstanding the provisions of this subsection (e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligation in this subsection
(e) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders under this
Section shall be in addition to any liability which the Company and the Selling
Stockholders may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
director of the Company, to each officer of the Company who has signed a
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Act.
(g) In addition, the Company and each of the Underwriters agree with each
of the Selling Stockholders that any claim of such Underwriter against such
Selling Stockholders for indemnification, reimbursement or advancement of
expenses pursuant to this Section 7 shall first be sought by such Underwriter to
be satisfied in full by the Company and shall be satisfied by the Selling
Stockholders only to the extent that such claim has not been satisfied in full
by the Company for any reason within the 30-day period following the date
requested for payment in accordance with the terms of this Agreement. The
Company and the Selling Stockholders may agree, as among
<PAGE>
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible, including, without limitation, allocating between the
Company and the Selling Stockholders the liability resulting from a breach of
the representations and warranties of the Company and the Selling Stockholders
hereunder. The indemnity provided for in this Section 7 shall be in addition to
any liability which such Selling Stockholder may otherwise have. No Selling
Stockholder will, without the prior written consent of the Representatives,
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
may be sought hereunder (whether or not any such Representatives or any person
who controls any such Representatives is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of all of the Underwriters and such controlling persons
from all liability arising out of such claim, action, suit or proceeding.
8. Default of Underwriters. If any Underwriter or Underwriters default in
their obligations to purchase Offered Securities hereunder on either the First
or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company and the Selling Stockholders for
the purchase of such Offered Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
non-defaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Underwriters agreed but failed to purchase on such Closing Date. If
any Underwriter or Underwriters so default and the aggregate number of shares of
Offered Securities with respect to which such default or defaults occur exceeds
10% of the total number of shares of Offered Securities that the Underwriters
are obligated to purchase on such Closing Date and arrangements satisfactory to
CSFBC, the Company and the Selling Stockholders for the purchase such Offered
Securities by other persons are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any non-
defaulting Underwriter, the Company or the Selling Stockholders, except as
provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination) used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. Nothing herein will
relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities agreements, representations, warranties and other statements of the
Selling Stockholders, the Company or its officers and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, any Selling
Stockholder, the Company or any of their respective representatives, officers or
directors or any controlling person, and will survive delivery of and payment
for the Offered Securities. If this Agreement is terminated pursuant to Section
8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company and the Selling Stockholders shall
remain responsible for the expenses to be paid or reimbursed by them pursuant to
Section 5 and the respective obligations of the Company, the Selling
Stockholders, and the Underwriters pursuant to Section 7 shall remain in effect,
and if any Offered Securities have been purchased hereunder the representations
and warranties in Section 2 and all obligations under Section 5 shall also
remain in effect. If the purchase of the Offered Securities by
<PAGE>
the Underwriters is not consummated for any reason other than solely because of
the termination of this Agreement pursuant to Section 8 or the occurrence of any
event specified in clause (ii), (iii) or (iv) of Section 6(c), the Company and
the Selling Stockholders shall, jointly and severally, reimburse the
Underwriters for all out-of-pocket expenses (including fees and disbursements of
counsel) reasonably incurred by them in connection with the offering of the
Offered Securities.
10. Notices. All communications hereunder will be in writing and, if sent
to the Underwriters, will be mailed, delivered or telegraphed and confirmed to
the Representatives c/o Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking Department -
Transactions Advisory Group, with a copy to Skadden, Arps, Slate, Meagher & Flom
LLP, 525 University Avenue, Palo Alto, California 94131, Attention: Gregory C.
Smith, or, if sent to the Company, will be mailed, delivered or telegraphed and
confirmed to it at Mediaplex, Inc. 177 Steuart Street, Second Floor, San
Francisco California 94105, Attention: Gregory R. Raifman, with a copy to
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, 650 Page Mill
Road, Palo Alto, California 94303, Attention: Aaron J. Alter, , or, if sent to
the Selling Stockholders or any of them, will be mailed, delivered or
telegraphed and confirmed to _______________________ at provided, however, that
any notice to an Underwriter pursuant to Section 7 will be mailed, delivered or
telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective personal representatives and
successors and the officers and directors and controlling persons referred to in
Section 7 and no other person will have any right or obligation hereunder.
12. Representation. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this Agreement,
and any action under this Agreement taken by the Representatives jointly or by
CSFBC will be binding upon all the Underwriters. __________________ will act
for the Selling Stockholders in connection with such transactions, and any
action under or in respect of this Agreement taken by _________________ will be
binding upon all the Selling Stockholders.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflicts of law. The Company hereby submits to the non-exclusive
jurisdiction of the Federal and state courts in the Borough of Manhattan in The
City of New York in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
<PAGE>
If the foregoing is in accordance with the Representatives' understanding
of our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement among the Selling
Stockholders, the Company and the several Underwriters in accordance with its
terms.
Very truly yours,
_____________________________
Selling Stockholder
MEDIAPLEX, INC.
By___________________________
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
Credit Suisse First Boston Corporation
Lehman Brothers Inc.
Salomon Smith Barney Inc.
SG Cowen Securities Corporation
U.S. Bancorp Piper Jaffray Inc.
Acting on behalf of themselves and as the
Representatives of the several
Underwriters.
By Credit Suisse First Boston Corporation
By ___________________________________
Name:
Title:
<PAGE>
SCHEDULE A
Number of
Firm Securities
Selling Stockholder to be Sold
___________________________________________________ ____________________
____________________
Total.............................................
====================
26
<PAGE>
SCHEDULE B
----------
Number of
Firm Securities
Principal Selling Stockholder to be Sold
__________________________________________________ _____________________
27
<PAGE>
Number of
Firm Securities
Principal Selling Stockholder to be Sold
__________________________________________________ _____________________
28
<PAGE>
Number of
Firm Securities
Principal Selling Stockholder to be Sold
__________________________________________________ _____________________
29
<PAGE>
Number of
Firm Securities
Principal Selling Stockholder to be Sold
__________________________________________________ _____________________
30
<PAGE>
SCHEDULE C
Number of Firm
Securities to be
Underwriter Purchased
____________________________________________________ ____________________
Credit Suisse First Boston Corporation
Lehman Brothers Inc.
Salomon Smith Barney Inc.
SG Cowen Securities Corporation
U.S. Bancorp Piper Jaffray Inc.
____________________
...............................................Total
====================
31
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
reports dated January 21, 2000, except for Note 11, which is as of March 8,
2000, relating to the financial statements and financial statement schedules of
Mediaplex, Inc., which appear in such Registration Statement. We also consent
to the references to us under the heading "Experts" in such Registration
Statement. We also consent to the incorporation by reference in the Registation
Statement on Form S-8 dated March 8, 2000 of our report appearing in this
Registration Statement.
PricewaterhouseCoopers LLP
San Francisco, California
March 17, 2000
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 374,567 78,052,259
<SECURITIES> 0 9,912,500
<RECEIVABLES> 1,065,864 11,234,321
<ALLOWANCES> 129,367 3,604,693
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,311,064 96,534,326
<PP&E> 166,705 4,482,490
<DEPRECIATION> 60,784 443,031
<TOTAL-ASSETS> 1,444,015 103,442,487
<CURRENT-LIABILITIES> 3,173,600 12,449,069
<BONDS> 0 0
0 0
0 0
<COMMON> 698 3,169
<OTHER-SE> 1,482,685 134,324,423
<TOTAL-LIABILITY-AND-EQUITY> 1,444,015 103,442,487
<SALES> 3,588,094 26,405,120
<TOTAL-REVENUES> 3,588,094 26,405,120
<CGS> 2,770,567 20,417,637
<TOTAL-COSTS> 2,770,567 20,417,637
<OTHER-EXPENSES> 2,589,553 28,714,299
<LOSS-PROVISION> (1,772,026) (22,726,816)
<INTEREST-EXPENSE> 247,186 (912,289)
<INCOME-PRETAX> (2,019,212) (21,814,527)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,019,212) (21,814,527)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,019,212) (21,814,527)
<EPS-BASIC> (0.25) (2.34)
<EPS-DILUTED> (0.25) (2.34)
</TABLE>
