<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 2000.
REGISTRATION NO. 333-96359
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
REAL MEDIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7310 13-3871342
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
260 FIFTH AVENUE
NEW YORK, NY 10001
(212) 725-4537
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CHRISTOPHER D. NEIMETH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
REAL MEDIA, INC.
260 FIFTH AVENUE
NEW YORK, NY 10001
(212) 725-4537
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
GIL C. TILY, ESQ. ANDREW R. KELLER, ESQ.
DECHERT PRICE & RHOADS SIMPSON THACHER & BARTLETT
4000 BELL ATLANTIC TOWER 425 LEXINGTON AVENUE
1717 ARCH STREET NEW YORK, NY 10017
PHILADELPHIA, PA 19103 (212) 455-2000
(215) 994-4000
</TABLE>
------------------------
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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
- ---------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
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 IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED FEBRUARY 28, 2000
Shares
[REALMEDIA LOGO]
REAL MEDIA, INC.
Common Stock
------------------
Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $ and $ per share. We have applied to list our common stock on
the Nasdaq Stock Market's National Market and on the SWX New Market of the SWX
Swiss Exchange under the symbol "RLMD."
The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 5.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS REAL MEDIA, INC.
------------------- ------------------- -------------------
<S> <C> <C> <C>
Per Share................................ $ $ $
Total.................................... $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about
, .
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.
CREDIT SUISSE FIRST BOSTON BANC OF AMERICA SECURITIES LLC
LAZARD FRERES & CO. LLC
The date of this prospectus is , .
<PAGE> 3
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY...................... 1
RISK FACTORS............................ 5
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS............................ 16
USE OF PROCEEDS......................... 16
DIVIDEND POLICY......................... 16
CAPITALIZATION.......................... 17
DILUTION................................ 18
SELECTED FINANCIAL INFORMATION OF REAL
MEDIA, INC. .......................... 19
SELECTED COMBINED FINANCIAL INFORMATION
OF REAL MEDIA EUROPE.................. 20
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION................. 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................ 25
BUSINESS................................ 34
MANAGEMENT.............................. 50
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RELATED PARTY TRANSACTIONS.............. 57
PRINCIPAL STOCKHOLDERS.................. 62
DESCRIPTION OF CAPITAL STOCK............ 64
SHARES ELIGIBLE FOR FUTURE SALE......... 67
PRINCIPAL TAX CONSEQUENCES TO NON-U.S.
HOLDERS............................... 69
UNDERWRITING............................ 73
NOTICE TO CANADIAN RESIDENTS............ 76
LEGAL MATTERS........................... 77
EXPERTS................................. 77
WHERE YOU CAN FIND MORE INFORMATION..... 77
TRANSFER OF SHARES ON THE SWX
SWISS EXCHANGE........................ 78
NOTICE TO HOLDERS OF SHARES TRADED ON
THE SWX NEW MARKET OF THE SWX SWISS
EXCHANGE.............................. 79
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 THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
------------------
Prior to the completion of the business combination described in this
prospectus, Real Media's business has been conducted by Real Media, Inc. in
North America, Latin America and Africa, and by a group of affiliated companies
in Europe. These European companies are owned by PubliGroupe S.A., one of our
principal stockholders. We refer to these European companies as "Real Media
Europe." Following the completion of the business combination described in this
prospectus, Real Media, Inc. will own 100% of the businesses of Real Media
Europe, except that Real Media, Inc. will own a 49% interest in Real Media S.A.
in Switzerland. PubliGroupe will own the remaining 51% interest in Real Media
S.A. Therefore, unless otherwise indicated, "Real Media" and "we," "us," "our,"
and similar terms refer to Real Media, Inc., Real Media Europe and other recent
acquisitions collectively and, subsequent to their formation or acquisition,
their subsidiaries.
------------------
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 4
[This page intentionally left blank]
<PAGE> 5
PROSPECTUS SUMMARY
This summary is not complete and may not contain all of the information
that may be important to you. You should read the entire prospectus carefully,
including the financial information and related notes, before making an
investment decision. Except as otherwise indicated, information in this
prospectus assumes that the underwriters do not exercise their over-allotment
option.
REAL MEDIA
Real Media provides comprehensive Internet advertising solutions for web
sites and advertisers throughout the world. Our solutions, which emphasize the
value of web site brands and user information, enable sites to maximize revenue
from Internet advertising. We focus on developing relationships with leading web
sites worldwide that have strong brands in their national or local markets.
These relationships allow us to offer advertisers opportunities to reach large,
targeted audiences in environments that stimulate user trust and loyalty.
Our comprehensive solutions consist of three complementary components:
The Real Media Network. We provide brand-focused ad sales representation
to a global network of over 1,000 web sites. We organize our network into
national and regional portfolios of selected sites in several categories,
including portals, general interest sites and vertical content sites.
Advertisers purchase ad space through standard network campaigns that use web
sites grouped into specific interest or geographic categories, and through
customized campaigns that use individually selected sites. Customized campaigns
may be event-related, involve sponsorships or combine the use of online and
offline advertising.
Open AdStream(TM) (OAS). Our proprietary ad management software provides
web sites with the technology infrastructure to manage all aspects of targeted
ad campaigns, including campaign planning, delivery, measurement and reporting,
and allows them to manage sales relationships with advertisers and ad agencies.
OAS enables web sites to collect information resulting from user interaction
with site content and advertisements and retain exclusive ownership over this
data. Currently, over 700 web sites worldwide use OAS. Our top 25 web sites use
OAS to serve over six billion advertisements per month.
Media and Marketing Services. We offer a suite of media and marketing
services to web sites that include user base analysis and profiling tools, as
well as consulting and other services.
We currently provide our products and services to over 1,400 web sites in
40 countries, including key operations in the United States (founded May 1995),
Switzerland (February 1996), Germany (October 1997), the United Kingdom (October
1997) and France (January 1998). Our clients include web sites of:
<TABLE>
<CAPTION>
EUROPE NORTH AMERICA LATIN AMERICA ASIA/PACIFIC AFRICA
------ ------------- ------------- ------------ ------
<S> <C> <C> <C> <C>
Excite@Home The New York Times Universo Online (UOL) Lycos Times Media
The Times Qualcomm Eudora Infosel South China Morning Post iAfrica
Suddeutsche Zeitung The Weather Channel El Tiempo Apple Daily Independent Online
Blue Window Bloomberg O Globo Pacific Internet SABC
Bonjour Playboy El Mercurio Netvigator Mweb
</TABLE>
In the online world, as in the offline world, strong brands attract loyal
audiences. We believe that this loyalty allows branded web sites to charge
higher rates for their advertising space, as audiences are more likely to act
upon ad messages on these sites. As the number of web sites worldwide continues
to grow, we believe that branded sites will become increasingly attractive to
advertisers. Over 900 advertisers throughout the world have used our network,
including British Telecom, Ford Motor Company, IBM, Intel, Microsoft, Swisscom
and UBS.
Our objective is to be the leading global provider of comprehensive
Internet advertising solutions to web sites with strong brand identities. We
will continue to focus on providing branded web sites with products and services
that help them maximize revenue from Internet advertising by emphasizing the
value of their brands and user information. In executing our strategy, we intend
to actively promote our brand-focused approach to both web sites and
advertisers.
1
<PAGE> 6
The key elements of our strategy are to:
- expand operations in existing global markets and extend into new markets;
- add selected sites to our portfolios;
- enhance and extend OAS capabilities;
- further develop media and marketing services;
- continue to develop cross-media platforms for our products and services;
and
- pursue selected acquisitions and joint ventures.
OUR RELATIONSHIP WITH PUBLIGROUPE
We maintain a strong strategic relationship with our principal stockholder,
PubliGroupe S.A., a leading seller of print advertising throughout the world,
with approximately $1.5 billion in revenue in 1998 and a 100-year history of
media representation. As we expand globally, we intend to continue to take
advantage of PubliGroupe's relationships with publishers, media buyers and
advertisers, and its extensive infrastructure in and operating knowledge of
local markets worldwide. Our relationship with PubliGroupe also provides
cross-promotional marketing opportunities, such as jointly planned and executed
ad campaigns that use both print and online media.
PubliGroupe currently owns the businesses that compose Real Media Europe.
On February 8, 2000, we finalized a stock purchase agreement with PubliGroupe,
under which PubliGroupe will transfer to Real Media, Inc. all of PubliGroupe's
Internet advertising operations in Europe and Asia, except for a part of its
Internet advertising operation in Switzerland. Immediately after this offering,
PubliGroupe will own approximately % of the issued and outstanding common
stock of Real Media, Inc. See "Related Party Transactions -- Business
Combination with Real Media Europe."
RECENT DEVELOPMENTS
In January 2000, we acquired a South African company to which we previously
licensed our technology and which has been selling our products and services in
South Africa. We also acquired a 25% interest in an Australian Internet
advertising company, and we have an option to increase our ownership to 51%.
------------------------
Our principal executive offices are located at 260 Fifth Avenue, New York,
NY 10001, and our telephone number at that location is (212) 725-4537. We
maintain a web site at www.realmedia.com. The information on our web site is not
part of this prospectus.
2
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common stock offered......................... shares
Common stock to be outstanding after this
offering................................... shares
Use of proceeds.............................. For general corporate purposes and to repay
loans from our principal stockholders.
Proposed Nasdaq National Market and SWX New
Market symbol.............................. RLMD
</TABLE>
The information in the above table excludes:
- 1,495,206 shares subject to outstanding stock options at a weighted
average exercise price of $4.11 as of December 31, 1999; and
- 99,938 shares issuable upon exercise of unissued stock options under our
1999 employee stock option plan as of December 31, 1999.
3
<PAGE> 8
SUMMARY CONDENSED AND PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following table presents summary condensed and pro forma combined
condensed financial information with respect to Real Media and has been derived
from (1) the audited financial statements of Real Media, Inc. for the three-year
period ended December 31, 1999, included elsewhere in this prospectus, (2) the
audited financial statements of Real Media, Inc. for the year ended December 31,
1996, which are not included in this prospectus, and (3) the unaudited pro forma
combined condensed financial information of Real Media included elsewhere in
this prospectus that gives effect to the business combination of Real Media,
Inc. and Real Media Europe to be completed before the completion of this
offering. The information set forth below should be read in conjunction with
"Unaudited Pro Forma Combined Condensed Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
financial statements of Real Media, Inc. and the notes thereto and the combined
financial statements of Real Media Europe and the notes thereto, included
elsewhere in this prospectus. Pro forma information assumes the completion of
the business combination of Real Media, Inc. and Real Media Europe as of January
1, 1999. The weighted average shares outstanding used to calculate pro forma net
loss per share assumes the issuance of 16,126,525 shares of Real Media's common
stock and 450,000 shares of Real Media's common stock issuable upon the
conversion of Real Media's Series A Convertible Preferred Stock, which will be
issued in connection with the business combination, as if such shares were
outstanding from the beginning of the periods presented. Pro forma as adjusted
information assumes the completion of the business combination and the
completion of this offering as of December 31, 1999, assuming the sale of
shares of our common stock at an assumed initial public offering price
of $ per share (the midpoint of the range of initial public offering prices
set forth on the cover page of this prospectus), after deducting the
underwriting discounts and estimated offering expenses, and the application of
the net proceeds of this offering.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
------------------------------------------------- ------------
YEAR ENDED DECEMBER 31, YEAR ENDED
------------------------------------------------- DECEMBER 31,
1996 1997 1998 1999 1999
---------- ---------- ---------- ---------- ------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS INFORMATION:
Revenue.............................................. $ 93 $ 553 $ 2,103 $ 8,115 $ 24,843
Cost of revenue...................................... 72 335 868 3,522 15,380
---------- ---------- ---------- ---------- ------------
Gross profit......................................... 21 218 1,235 4,593 9,463
Operating expenses................................... 491 1,997 3,389 14,323 22,470
Amortization of goodwill and intangibles............. -- -- -- -- 28,136
---------- ---------- ---------- ---------- ------------
Loss from operations................................. $ (470) $ (1,779) $ (2,154) $ (9,730) $ (41,143)
========== ========== ========== ========== ============
Net loss............................................. $ (476) $ (1,797) $ (2,116) $ (9,803) $ (41,430)
========== ========== ========== ========== ============
Net loss per share:
Basic and diluted.................................. $ (0.35) $ (0.30) $ (0.27) $ (1.05) $ (1.60)
========== ========== ========== ========== ============
Weighted average shares outstanding:
Basic and diluted.................................. 1,356,493 5,968,767 7,849,253 9,358,972 25,935,497
========== ========== ========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
------ ----------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET INFORMATION:
Cash and cash equivalents................................... $1,389 $ 7,154 $
Total assets................................................ 6,513 103,012
Total long-term debt........................................ -- --
Total stockholders' equity (deficiency)..................... (6,066) 89,746
</TABLE>
4
<PAGE> 9
RISK FACTORS
Investing in our common stock will provide you with an equity ownership
position in Real Media. As one of our stockholders, your investment will be
subject to risks inherent in our business. The price of our common stock may
decline. You should carefully consider the following factors as well as other
information contained in this prospectus before deciding to invest in shares of
our common stock.
RISKS RELATING TO REAL MEDIA
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU MAY EVALUATE US
We incorporated in 1995, and we have a limited operating history upon which
you can evaluate our business. Our prospects must be considered in light of the
risks, expenses and difficulties frequently encountered by early-stage companies
in the rapidly-evolving Internet advertising market. We may not be successful in
addressing these risks, and our business strategy may not succeed. These risks
include our ability to:
- maintain and increase the number of web sites and advertisers that use
our products and services;
- further develop our technology and expand the products and services that
we offer;
- sell additional products and services to web sites and advertisers with
whom we already have relationships;
- deploy our business model across the broad range of countries in which we
operate;
- implement and improve operational, financial and management information
systems;
- anticipate and respond to competitive developments and new market
entrants; and
- attract, retain and motivate qualified personnel.
If we are unable to address these risks, our stock price may decline and we
may be unable to compete effectively.
THE BUSINESS COMBINATION OF REAL MEDIA, INC. AND REAL MEDIA EUROPE MAY DISRUPT
OUR OPERATIONS
Pursuant to a stock purchase agreement among Real Media, Inc., Real Media
Europe Holding S.A., a holding company for Real Media Europe, and PubliGroupe
dated February 8, 2000, Real Media, Inc. and Real Media Europe will be combined
prior to the completion of this offering. See "Related Party
Transactions -- Business Combination with Real Media Europe." Prior to this
business combination, Real Media, Inc. and Real Media Europe have operated their
businesses in collaboration with each other but have not formally integrated
their management and operations. The formal integration of Real Media, Inc.'s
operations with Real Media Europe's operations may divert management's attention
from the day-to-day operations of the combined company. The difficulties of
combining the two companies may be increased by the necessity of:
- managing geographically separate organizations;
- integrating management and employees with disparate business backgrounds,
operating experiences and cultures; and
- combining our operational, financial and management information systems,
controls and internal reporting standards.
The process of combining the two organizations may cause an interruption
of, or loss of momentum in, the activities of the combined company. The failure
to integrate the two businesses effectively could have an adverse effect on our
ability to develop and execute our business strategy, which in turn could have
an adverse effect on our revenue and operating results in the near term or
longer.
5
<PAGE> 10
OUR BUSINESS MODEL IS UNPROVEN AND MAY NOT SUCCEED
Our business model is to generate revenue by selling Internet advertising
solutions, primarily to web sites with strong brand identities. The profit
potential of our business model is unproven. To be successful, we must continue
to enhance our solutions to achieve broad market acceptance. We cannot assure
you that Internet advertising and the potential value of branded web sites in
general, or our solutions addressed to branded web sites in particular, will
achieve sufficient market acceptance.
Even if Internet advertising gains broad acceptance, web sites,
particularly those with strong brand identities, may choose to sell and manage
advertising themselves and not to engage independent companies such as Real
Media. If the proportion of branded web sites that deploy exclusively in-house
ad sales forces increases, our ability to generate ad sales revenue will be
diminished. Moreover, web sites may choose not to use our technology for ad
management, which could decrease our revenue from technology sales.
Our ad sales representation pricing model is currently based primarily on
the number of users to whom advertising is delivered. We also use, to a lesser
extent, pricing models that depend on the number of users who respond to an
advertisement for more information, or who make purchases after viewing the
advertisement. If response-based pricing models become the market standard, or
if our primary pricing model ceases to be the market standard, we may have
difficulty sustaining revenue growth and maintaining profit margins. Because of
these uncertainties, we cannot assure you that our business model will succeed
in sustaining revenue growth and achieving profitability.
WE EXPECT TO CONTINUE TO INCUR LOSSES, AND WE MAY NEED ADDITIONAL FINANCING
We incurred a pro forma net loss of approximately $41.4 million for the
year ended December 31, 1999, which includes the amortization of goodwill and
intangibles of $28.1 million for the year ended December 31, 1999 incurred in
connection with the business combination with Real Media Europe. We anticipate
that our operating expenses will increase substantially in the foreseeable
future as we:
- expand our products and services and enter new markets;
- increase sales and marketing operations;
- increase advertising to establish our brand;
- fund greater levels of research and development;
- improve operational, financial and management information systems; and
- broaden customer support capabilities.
As a result of these expenses, we expect to incur additional losses which
may increase substantially from existing levels. If any of these and other
expenses are not accompanied by increased revenue, our losses may be greater
than we anticipate. Although we have experienced revenue growth in recent
periods, these results are not necessarily meaningful and you should not rely
upon them as an indication of future performance.
In the event of continuing losses, we may need to raise additional funds in
the future. All of our financing to date has been from investments by our
stockholders, particularly PubliGroupe and Advance Internet Inc. We cannot
assure you that we will be able to obtain additional financing from these
stockholders or other persons on favorable terms, if at all. If we are unable to
obtain any required financing in a timely manner or on acceptable terms, our
ability to operate our business could suffer.
WE MAY BE UNABLE TO MANAGE OUR GROWTH EFFECTIVELY
Our business may not succeed if we do not manage our growth successfully.
We have grown substantially since our formation, both in terms of the size of
our organization and the number of the markets that we serve. This rapid growth
has placed, and is expected to continue to place, a significant
6
<PAGE> 11
strain on our managerial, operational and financial resources. Since inception,
we have grown to 301 employees worldwide as of January 21, 2000. To better serve
the global marketplace, we plan to open new offices in our existing and new
national markets and to expand our sales and marketing, customer support and
other departments. To meet the demands of this anticipated growth, we expect to
continuously develop, monitor and update our financial and management controls
and our reporting and operating systems. We cannot assure you that these systems
will be adequate to manage our expanded operations or that we will otherwise be
able to manage our growth effectively. If we do not manage our growth
effectively, we may be unable to offer competitive services and implement our
business plan.
WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS AND PLANS FOR
EXPANSION
We operate in many countries in Europe, North America, Latin America,
Asia/Pacific and Africa, and our strategy relies heavily on continuing to expand
our operations by entering new national markets. Operating in multiple countries
involves many uncertainties and risks, including:
- complying with the laws and regulations of many countries, which may
change at any time;
- difficulties hiring qualified personnel and the higher costs of staffing
and managing operations in some countries;
- managing operations in multiple economies that may experience political,
economic and social instability;
- potentially adverse tax consequences;
- difficulties enforcing contracts and intellectual property rights in some
countries;
- fluctuations in currency exchange rates and difficulties in moving
capital across borders; and
- seasonal reductions in business activity in different parts of the world,
particularly in Europe during the summer.
Our inability to manage these risks effectively may materially and adversely
affect our business, results of operations and financial condition.
FUTURE ACQUISITIONS MAY ABSORB SIGNIFICANT RESOURCES AND MAY BE UNSUCCESSFUL
As part of our growth strategy, we expect to pursue acquisitions,
investments and other relationships involving products, technologies or
businesses. Acquisitions may involve significant cash expenditures, debt
incurrence, additional operating losses, dilutive issuances of equity
securities, and expenses that could have a material adverse effect on our
financial condition and results of operations. Acquisitions involve numerous
risks, including:
- difficulties integrating acquired technologies and personnel into our
business;
- diversion of management from daily operations;
- inability to obtain required financing on favorable terms;
- entering new markets in which we have little previous experience;
- potential loss of key employees or customers of acquired companies;
- assumption of the liabilities and exposure to unforeseen liabilities of
acquired companies; and
- amortization of the intangible assets of acquired companies.
We have a limited history of acquiring businesses, which may affect our ability
to complete transactions quickly and integrate them efficiently into our
business. We cannot assure you that any acquisition will accomplish its goals,
or that any acquisition will not ultimately have a negative impact on our
business and financial condition.
7
<PAGE> 12
OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL OR
IF MANAGEMENT DOES NOT WORK TOGETHER EFFECTIVELY
We depend on the services of our senior management and key technical and
sales personnel. In particular, our success depends on the continued efforts of
those key members of our management team who have extensive experience in this
rapidly evolving industry, including David Morgan, Christopher Neimeth, Pascal
Zahner and Gil Beyda. The loss of services of any key person could have a
material adverse effect on our business, financial condition and results of
operations. Our future success also depends on our continuing ability to attract
and retain highly qualified personnel, especially in the advertising sales area.
Competition for such personnel in the Internet industry is intense, and we
cannot assure you that we will be able to attract and retain qualified personnel
in the future.
We may experience difficulties as we integrate the separate management
teams of Real Media, Inc. and Real Media Europe, which may distract management
from their daily operational responsibilities. This integration process may take
significant time to complete, and we face the risk that key personnel may leave
the company due to changes in our operations and management.
CERTAIN STOCKHOLDERS WILL EXERCISE SIGNIFICANT CONTROL OVER US FOLLOWING THE
OFFERING
Immediately after this offering, PubliGroupe, Advance Internet and five
founders of our company will own %, % and %, respectively, of our
common stock. PubliGroupe, Advance Internet and these founders have entered into
a stockholders voting agreement that establishes the composition of our board of
directors. Subject to the terms of the stockholders voting agreement, these
stockholders, particularly PubliGroupe, may be able to affect or control the
outcome of corporate matters requiring stockholder approval, including business
combinations, amendments to our certificate of incorporation and bylaws, and
other extraordinary transactions. See "Related Party
Transactions -- Stockholders Voting Agreement." The interests of these
stockholders may conflict with our interests and the interests of our other
stockholders. In addition, the ownership or management of PubliGroupe could
change, which could disrupt our relationship with it.
WE WILL RELY ON PUBLIGROUPE TO PROVIDE US WITH KEY SERVICES
Prior to the business combination, Real Media Europe has depended on
PubliGroupe for various financial, business development, legal and other
functions that typically are performed by in-house personnel of public
companies. Following the business combination and for at least some period of
time thereafter, we will continue to rely on PubliGroupe for these services,
which will be made available under an interim administrative services agreement
between Real Media Europe Holding and PubliGroupe. See "Related Party
Transactions -- Interim Administrative Services Agreement." Except as expressly
required by the interim administrative services agreement, PubliGroupe could
choose not to provide these services. Failure to replicate these services
internally in a timely and cost-effective manner could cause a disruption to our
business, and we may incur higher costs as we fulfill these needs in other ways.
PUBLIGROUPE MAY COMPETE WITH US
PubliGroupe is a leading seller of print advertising throughout the world.
Subject to restrictions in a cooperation agreement, PubliGroupe may separately
enter the Internet advertising market and compete with us, directly or
indirectly. See "Related Party Transactions -- Cooperation Agreement." If this
were to occur, PubliGroupe would likely continue to have access to our business
plan and other confidential information through its board representation, giving
it a competitive advantage over us.
8
<PAGE> 13
IF OUR RELATIONSHIP WITH PUBLIGROUPE DETERIORATES, WE MAY LOSE THE STRATEGIC
BENEFITS OF THIS RELATIONSHIP
PubliGroupe has a long history operating globally in advertising sales,
particularly in print media. PubliGroupe has provided us with customer
introductions, helped to raise advertisers' awareness of our capabilities, and
provided a source for our management recruiting efforts. We anticipate continued
strategic benefits from our relationship with PubliGroupe, such as opportunities
in cross-selling. However, if our relationship with PubliGroupe deteriorates, we
may lose these benefits.
ANY FAILURE BY US TO PROTECT OUR INTELLECTUAL PROPERTY COULD HARM OUR BUSINESS
AND COMPETITIVE POSITION
To date, we have not sought patent protection or copyright registration for
our proprietary software and other technologies. As a result, we may not be able
to prevent others from using any inventions in our software and other
technologies, and we may not have adequate remedies to compensate us fully for
any infringement of our copyrights by others.
We have pending applications to register REAL MEDIA and other key
trademarks in the United States, Europe and other foreign jurisdictions.
However, we have not yet secured registrations for any of these marks. We cannot
guarantee that any of our applications will be approved by the applicable
governmental authorities. Moreover, even if the applications are approved, third
parties may seek to oppose or otherwise challenge such registrations. A failure
to obtain trademark registrations in jurisdictions outside the United States
could limit our ability to use the mark and impede our marketing efforts in
those jurisdictions. RealNetworks, Inc., a provider of Internet streaming
technology, has applied to register REAL MEDIA in connection with its products
in the United States and the European Community. We are negotiating an agreement
with RealNetworks regarding the use and registration of the mark REAL MEDIA.
However, we cannot assure you that in the future RealNetworks or another entity
will not assert the right to use or register marks that are the same as or
confusingly similar to our marks in a way that harms us.
We take reasonable measures to preserve the secrecy of our valuable trade
secrets and confidential information and require our employees to sign
confidentiality agreements prohibiting them from disclosing any of our trade
secrets, which we believe are enforceable. However, we cannot assure you that
these measures are sufficient to prevent others from obtaining our valuable
trade secrets, and we may not have adequate remedies to preserve our trade
secrets or to compensate us fully for their loss if our employees breach their
confidentiality agreements with us. In addition, we cannot assure you that our
trade secrets will provide us with any proprietary or competitive advantage, as
they may otherwise become known to or be independently developed by our
competitors, regardless of the success of any measures we may take to try to
preserve their confidentiality.
ENFORCEMENT OF THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS COULD HARM OUR BUSINESS
AND COMPETITIVE POSITION
Several of our competitors have sought patent protection for technology or
methods of doing business in the field of Internet advertising. For example,
DoubleClick, Inc. has obtained U.S. Pat. No. 5,948,061, entitled "Method of
Delivery, Targeting, and Measuring Advertising Over Networks." Another
competitor, 24/7 Media, Inc., has announced that it has received a notice of
allowance in connection with its application for a United States patent, which
purportedly relates to an ad delivery and management system. While we believe
that OAS, our proprietary ad management software, and our methods of doing
business are substantially different from those owned and used by our
competitors and do not violate any of their patent rights of which we are aware,
it is possible that any one of our competitors may file a suit against us,
alleging that we are infringing their patent rights. We are aware that
DoubleClick has filed patent infringement actions against two other companies
that provide Internet advertising solutions, at least one of which has filed a
countersuit against DoubleClick. In addition, our competitors or other persons
may have already obtained or may in the future obtain patents relating to one or
more aspects of our technology or methods of doing business. If we are sued for
patent infringement, we may be forced to incur substantial costs in defending
ourselves. If such litigation were to result in a judgment that we infringed a
valid and enforceable patent, a court may order us to pay substantial damages to
the owner of
9
<PAGE> 14
the patent and to cease using any infringing technology or method of doing
business. Such an order could cause a significant disruption in our business and
force us to incur substantial costs to develop and implement alternative,
non-infringing technology or methods of doing business, or to obtain a license
from the patent owner. We cannot assure you that we would be able to develop
non-infringing alternatives at a reasonable cost that would be commercially
acceptable, or that we would be able to obtain a license from any such patent
owner on commercially reasonable terms, if at all.
WE MAY BE LIABLE FOR CONTENT AVAILABLE OR POSTED ON WEB SITES
We may be held liable to third parties for content in the advertising we
serve if the music, artwork, text or other content involved is found to be
defamatory, to invade the privacy or publicity rights of such third parties, to
violate the copyright, trademark, or other intellectual property rights of such
third parties, or to violate any applicable laws or regulations. Defending any
claims or counterclaims regarding these types of liabilities could be
time-consuming, result in costly litigation or divert management's attention
from daily operations.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE, WHICH COULD AFFECT THE MARKET
PRICE OF YOUR SHARES
Our quarterly operating results may fluctuate significantly in the future
as a result of a variety of factors that may be beyond our control. These
factors include:
- the ability of web sites in the Real Media Network to maintain or
increase traffic on their sites;
- the addition or loss of web sites and advertisers that use our products
and services;
- the introduction of new Internet advertising solutions by us or our
competitors;
- changes in pricing policies resulting from competitive conditions;
- changes in our mix of products and services;
- the amount and timing of expenditures relating to expanding our
operations, improving ad management technology and further developing new
products and technologies;
- the demand for, and pricing of, Internet advertising;
- the growth of the Internet as a communications medium; and
- general economic conditions.
Expenditures by advertisers tend to vary in cycles that reflect overall economic
conditions. Our revenue could be materially reduced by a decline in the economic
prospects of advertisers or the economy in general, which could alter current or
prospective advertisers' spending priorities. In addition, we believe that our
revenue may be subject to seasonal fluctuations because advertisers generally
place fewer advertisements during the first and third quarters of each year.
Due to these factors, we believe that quarter-to-quarter comparisons of our
results of operations are not necessarily meaningful and should not be relied
upon as an indication of our future performance. Furthermore, it is possible
that in future periods our results of operations will be below the expectations
of securities analysts and investors. If so, the market price of your shares
would likely decline.
YEAR 2000 ISSUES COULD DISRUPT OUR OPERATIONS AND OUR CUSTOMERS' OPERATIONS
Many currently installed computer systems and software products only accept
two digits to identify the year in any date. Therefore, the year 2000 will
appear as "00", which the system or software may
10
<PAGE> 15
consider to be the year 1900 rather than the year 2000. The failure of any of
our computer systems or software to be Year 2000 compliant could result in
system failures, delays or miscalculations, which could:
- cause us to incur significant expenses to remedy any problems;
- affect the availability and performance of the software that we sell or
our ability to execute and manage campaigns and deliver reports for our
web sites and advertisers; or
- otherwise damage our business and our customer relationships.
In addition, the failure of Internet advertisers or web sites to have Year 2000
compliant systems may negatively impact these persons' businesses, causing a
decrease in the demand for our products and services. Any of these issues could
have a material adverse effect on our business, financial condition and results
of operations.
RISKS RELATING TO THE INTERNET ADVERTISING INDUSTRY
THE INTERNET ADVERTISING INDUSTRY IS HIGHLY COMPETITIVE
Our industry is highly competitive. Competition is likely to increase
because there are low barriers to entry in this market, and the evolving nature
of the Internet will present new opportunities for entrants to exploit. Our
ability to compete depends on many factors, some of which are outside of our
control, including:
- our ability to attract and retain effective sales people and other
personnel;
- the timing and market acceptance of new solutions that we may offer;
- our ability to scale technology to customer demands;
- our ability to deliver effective customer service and support;
- our ability to adapt to technology for converging media;
- the success of our sales and marketing efforts; and
- the ease of use, performance, price, features and reliability of our
products and services.
Numerous well-established companies and smaller entrepreneurial companies
are focusing significant resources on developing and marketing products and
services that compete with our products and services. See
"Business -- Competition." Many of our current and potential competitors have
longer operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than we do.
These competitors may be able to:
- respond more quickly to emerging technologies and changing customer
demands;
- devote more resources to product development and promotion;
- access capital markets more easily;
- adopt aggressive pricing policies; and
- develop superior products and services.
Increased competition is likely to result in price reductions, reduced
profit margins and loss of market share, any one of which could impede our
growth and hinder our ability to compete in the future. We cannot assure you
that we will be able to compete effectively against existing or future
competitors, or that competitive pressures will not have a material adverse
effect on our financial condition and competitive position.
We also compete with other advertising media, such as print, television and
radio, for a share of advertising budgets. To the extent that the Internet does
not develop as an attractive advertising medium, we may be unable to increase
our revenue and we may lose market share to these other media.
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<PAGE> 16
INDUSTRY CONSOLIDATION MAY INCREASE OUR COMPETITORS' RESOURCES
Our industry is consolidating rapidly, and a number of acquisitions have
been announced or completed recently. See "Business -- Competition." Our
competitors may also form joint ventures and other cooperative relationships
that will compete with us in our market. It is therefore possible that newer or
significantly larger competitors may emerge and attain significant market share
and brand recognition, which could have a material adverse effect on our ability
to maintain market share for our products and services.
OUR BUSINESS MAY NOT GROW IF THE MARKET FOR INTERNET ADVERTISING DOES NOT
CONTINUE TO DEVELOP
We expect to derive all of our revenue in the foreseeable future from the
products and services that we offer to the market for Internet advertising.
Therefore, our future success depends on the level of use of the Internet as an
advertising medium. If the market for Internet advertising fails to develop or
develops more slowly than we anticipate, we may be unable to increase or even
maintain our revenue. The Internet may not develop as a successful advertising
medium because it has not existed long enough to demonstrate its effectiveness
in communicating messages and establishing brand awareness when compared to
traditional advertising media. Companies that have relied on traditional media
for advertising may be reluctant to adopt the Internet as an advertising medium
because these companies:
- have limited or no experience using the Internet as an advertising
medium;
- have allocated only a limited portion of their advertising budgets to
Internet advertising and may be unwilling to reallocate their resources
from traditional media to Internet advertising; and
- may conclude that Internet advertising is less effective than traditional
advertising media.
There are no widely accepted standards for the measurement of the
effectiveness of Internet advertising, and we cannot assure you that such
standards will develop to support Internet advertising as a significant
advertising medium. In addition, the effectiveness of Internet advertising is
partly dependent upon the accuracy of information contained in the databases
used to target advertisements. Actual or perceived ineffectiveness of Internet
advertising in general, or inaccurate measurements or database information in
particular, could limit the long-term growth of Internet advertising and cause
our revenue to decline.
WE DEPEND ON THE CONTINUED GROWTH OF INTERNET USAGE AND INFRASTRUCTURE FOR OUR
BUSINESS
Our market is new and rapidly evolving. Our business would be adversely
affected if Internet usage does not continue to grow. Internet usage may be
inhibited for a number of reasons, such as:
- inadequate network infrastructure;
- security and privacy concerns;
- inconsistent quality of service; and
- limited availability of cost-effective, high-speed service.
If Internet usage grows, the Internet infrastructure may not be able to support
the demands placed on it by this growth, or its performance and reliability may
decline. In addition, web sites have experienced interruptions in their service
as a result of failures and delays occurring throughout the Internet
infrastructure. If use of the Internet does not continue to grow, or if the
Internet infrastructure does not effectively support the growth that may occur,
the demand for our products and services may not grow.
TECHNOLOGICAL CHANGES MAY RENDER OUR PRODUCTS AND SERVICES OBSOLETE
The market in which we compete is characterized by rapidly changing
technology, evolving industry standards, frequent new product and service
introductions, and evolving customer demands. These uncertainties are
exacerbated by the emerging nature of Internet use and advertising. For example,
12
<PAGE> 17
computer users may install "filter" programs that limit or prevent the display
of advertising on the users' monitors. The widespread adoption of filter
software could have a material adverse effect upon the commercial viability of
Internet advertising. Our future success will therefore depend on our ability to
modify our products and services to respond in a timely and cost-effective
manner to new technologies and changing customer demands. If we are unable to
adapt our technologies to these pressures or to develop products to address new
and converging technologies, we may be unable to compete successfully. We cannot
assure you that we will not experience difficulties that could delay or prevent
our introduction of new products and services, or that any new products and
services will be attractive to our customers. Any delay or inability to
introduce competitive solutions may cause customers to forgo our solutions and
purchase those of our competitors.
PRIVACY CONCERNS MAY LIMIT OUR SUCCESS
Potential governmental and consumer reactions to concerns about privacy and
the Internet pose a risk to our business. Many web sites, including our clients,
collect personal data through registrations and surveys and use that data to
build profiles for advertising. There is substantial public debate over the
collection and use of Internet user information. We are aware that one of our
competitors is being sued over user privacy concerns. Some United States
legislators have introduced bills that would regulate the collection and use of
personal data from Internet users. The European Union has adopted a directive
addressing data privacy that may result in limitations on the collection and use
of such information. Many proposals focus on requiring the consent of the
Internet user before collecting the user's information. While currently the more
common practice is to give users the option to prohibit the use of their
personal data for profiling uses, it may become the standard practice to require
users to approve the use of personal data. If a user must approve the use of
personal information, rather than not prohibit it, the number of users about
whom information can be collected and to whom targeted ads can be delivered may
decrease. This may limit the effectiveness of our sales and marketing efforts
and adversely affect our financial condition and results of operations.
A particular area of concern has been the use of "cookies," which are small
files placed on a user's hard drive without the user's knowledge or consent.
Cookies allow certain information to be collected without the users' knowledge.
Due to privacy concerns, some Internet commentators and governmental bodies have
called for the use of cookies to be limited or eliminated. For example, the use
of cookies in Germany, while legally permitted, has not been a widely accepted
practice. In addition, web browsers may allow users to prevent cookies from
being placed on users' hard drives. Our technology has features that rely on the
use of cookies. If the use of cookies is limited or eliminated, we may have to
employ alternative technologies to enable the gathering of demographic
information. We believe that alternative technologies that currently exist are
not as effective as cookies. Devising new technologies to replace cookies could
require significant engineering time and resources. We cannot assure you that we
could develop and market successful alternative technologies.
GOVERNMENT REGULATIONS COULD NEGATIVELY IMPACT OUR BUSINESS MODEL
In addition to regulation concerned with privacy issues, other forms of
government regulation could impact our industry and business. Due to the
increasing popularity and use of the Internet, a number of laws and regulations
may be adopted covering issues such as pricing, content, gambling, database
protection, unsolicited commercial e-mail and taxation. In addition, some local
telephone carriers are advocating the regulation of Internet service providers
in a manner similar to long distance telephone carriers. Any of these laws and
regulations could slow the growth of Internet use and decrease the Internet's
effectiveness as an advertising medium, which could impede our ability to
implement our business model. To date, none of these laws has materially
impacted our business. However, legislation that interferes with our business
operations may be adopted in the future. In addition, due to the global nature
of the Internet, it is possible that multiple jurisdictions might pass
inconsistent legislation. Any of the foregoing could have a material adverse
effect on our business, financial condition and results of operations.
13
<PAGE> 18
RISKS RELATING TO THE OFFERING
WE EXPECT TO EXPERIENCE VOLATILITY IN OUR STOCK PRICE THAT COULD AFFECT YOUR
INVESTMENT
Prior to this offering, there has been no public market for our common
stock. Accordingly, we cannot predict the extent to which investor interest in
our common stock will lead to the development of a trading market or how liquid
that market might become. The initial public offering price for the shares will
be determined by us and the representatives of the underwriters and may not be
indicative of prices that will prevail in the trading market. The price at which
our common stock will trade after this offering is likely to be highly volatile
and may fluctuate substantially due to factors such as:
- actual or anticipated fluctuations in our results of operations;
- changes in or failure by us to meet securities analysts' expectations;
- announcements of technological innovations;
- introduction of new services by us or our competitors;
- conditions and trends in the Internet and other technology industries;
and
- general market conditions.
In addition, the Nasdaq National Market has from time to time experienced
significant price and volume fluctuations that have affected the market prices
for the common stocks of technology companies, particularly Internet companies.
Some of these market fluctuations have been unrelated or disproportionate to the
operating performance of these companies. Any significant fluctuations in the
future might result in a material decline in the market price of our common
stock. The value of our common stock may also fluctuate because it will be
listed on both the Nasdaq National Market and the SWX New Market of the SWX
Swiss Exchange. We cannot be certain what effect, if any, the dual listing will
have on the price of our stock in either market. Listing on both exchanges may
increase stock price volatility due to trading in different time zones and
different trading volumes.
In the past, following periods of volatility in the market price of a
particular company's securities, securities class action litigation has often
been brought against the company. We may become involved in this type of
litigation in the future. Litigation is often expensive and diverts management's
attention and resources, which could have a material adverse effect upon our
business and results of operations.
WE HAVE BROAD DISCRETION IN THE USE OF THE PROCEEDS OF THIS OFFERING
The net proceeds of this offering will be added to our working capital and
will be available for general corporate purposes, including capital expenditures
and potential future acquisitions. We cannot specify with certainty the
particular uses for the net proceeds to be received upon completion of this
offering. Our management will have broad discretion in the application of the
net proceeds. See "Use of Proceeds."
SALES OF OUR SHARES AFTER THIS OFFERING COULD RESULT IN A DECLINE IN OUR STOCK
PRICE
If our stockholders sell substantial amounts of common stock in the public
market following this offering, the market price of our common stock could fall.
These sales also might make it more difficult for us to sell equity or
equity-related securities in the future at a time and price that we deem
appropriate. Based on shares outstanding as of December 31, 1999, upon
completion of this offering, we will have shares of common stock
outstanding. If the underwriters exercise their over-allotment option in
14
<PAGE> 19
full, we will have shares of common stock outstanding. Of these
shares, the shares being offered hereby will be freely tradable and 26,412,675
shares will become eligible for resale as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ---------------- ------------------------------------------------------------
<C> <S>
417,312 Beginning 91 days after the date of this prospectus
1,165,720 Beginning 181 days after the date of this prospectus,
subject to a stockholders voting agreement. See "Related
Party Transactions -- Stockholders Voting Agreement."
24,829,643 Beginning 181 days after the date of this prospectus,
subject to compliance with Rule 144, and in some cases,
subject to a stockholders voting agreement.
</TABLE>
We have applied to list our common stock on both the Nasdaq National Market
and the SWX New Market of the SWX Swiss Exchange. Sales on the SWX New Market
will still be subject to United States securities laws including Rule 144 and
Regulation S, which may restrict sales.
As of December 31, 1999, options to purchase 1,495,206 shares of common
stock were outstanding and, when exercised, these shares will be eligible for
resale, subject in some cases to Rule 144 volume limitations, lock-up agreements
with the underwriters, and/or a stockholders voting agreement. These stock
options generally have exercise prices significantly below the expected initial
public offering price of our common stock. The possible sale of a significant
number of these shares may cause the price of our common stock to decline. In
addition, prior to the completion of this offering, we expect to file a
registration statement on Form S-8 to register shares of our common
stock issuable under our 1999 employee stock option plan. See "Shares Eligible
for Future Sale."
PURCHASERS IN THIS OFFERING WILL INCUR AN IMMEDIATE DILUTION OF THEIR INVESTMENT
Investors purchasing shares of our common stock in this offering will incur
immediate and substantial dilution of their investment. To the extent
outstanding options to purchase our common stock are exercised, there will be
further dilution. If we elect to purchase, or PubliGroupe elects to sell to us,
the remaining interest in Real Media S.A., we may elect to pay the purchase
price in shares of our common stock. Issuing more common stock to pay the
purchase price for the remaining interest in Real Media S.A. may result in
further dilution. See "Dilution" and "Related Party Transactions -- Business
Combination with Real Media Europe."
WE HAVE ADOPTED ANTI-TAKEOVER MEASURES THAT MAY INHIBIT THE SALE OF REAL MEDIA
Following the closing of this offering, our board of directors will have
the authority to issue up to 9,000,000 shares of preferred stock without your
approval. These shares could be issued with voting, liquidation, dividend and
other rights superior to yours that could discourage a third party from
acquiring Real Media, even if the acquisition would be beneficial to you. Our
certificate of incorporation provides for a classified board of directors, and
our bylaws and Delaware law contain other provisions that could have the effect
of delaying or preventing a change in control of Real Media.
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<PAGE> 20
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify
forward-looking statements. This prospectus also contains forward-looking
statements attributed to third parties relating to their estimates regarding the
growth of Internet use, Internet advertising and electronic commerce. You should
not place undue reliance on these forward-looking statements, which apply only
as of the date of this prospectus. Because these forward-looking statements
involve risks and uncertainties, there are important factors discussed under
"Risk Factors" that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements.
USE OF PROCEEDS
Based on an assumed initial public offering price of $ per share (the
midpoint of the range of estimated initial public offering prices set forth on
the cover page of this prospectus), our net proceeds from the sale of the shares
of our common stock offered in this offering will be approximately $
million, or $ million if the underwriters' over-allotment option is
exercised in full, after deducting the estimated underwriting discounts and
commissions and estimated expenses that are payable by us in this offering.
Under a stockholders voting agreement with Real Media, Inc., PubliGroupe
and Advance Internet have agreed to make available to us from time to time prior
to the completion of this offering loans up to $13.0 million and $2.0 million,
respectively, for working capital. The loans from PubliGroupe and Advance
Internet will bear interest at an annual rate equal to the prime rate, as
published in the Wall Street Journal, Eastern Edition, and will be due upon the
completion of this offering. See "Related Party Transactions -- Stockholders
Voting Agreement." In addition, within 30 days following the completion of the
audit of Real Media Europe for the year ended December 31, 1999, we must repay
any intercompany loans made by PubliGroupe to Real Media Europe between January
1, 2000 and the completion of the business combination to fund Real Media
Europe's operations. See "Related Party Transactions -- Business Combination
with Real Media Europe." We intend to use some of the proceeds of this offering
to repay in full, with interest, the loans described above. We expect to use the
remaining net proceeds from this offering for general corporate purposes,
including expansion of our sales, marketing and operating capabilities, product
and technology development and possible acquisitions of or investments in
companies or assets. We are not currently involved in negotiations, and we have
no binding obligations, with respect to any acquisition of or investments in
other companies or assets.
Pending these uses, we intend to invest the net proceeds of this offering
in short-term, investment grade instruments, certificates of deposit, or direct
or guaranteed obligations of the United States.
DIVIDEND POLICY
We have never declared or paid dividends on our capital stock, and we do
not intend to pay dividends in the foreseeable future. We plan to retain any
earnings for use in the operation of our business and to fund future growth.
16
<PAGE> 21
CAPITALIZATION
The Actual column in the following table sets forth Real Media, Inc.'s
capitalization as of December 31, 1999. The Pro Forma column gives effect to the
business combination of Real Media, Inc. and Real Media Europe, including the
issuance of 16,126,525 shares of our common stock and 450,000 shares of our
Series A Convertible Preferred Stock to PubliGroupe.
The Pro Forma As Adjusted column gives effect to:
- the net proceeds from the sale of shares of common stock offered
at an assumed initial public offering price of $ per share (the
midpoint of the range of estimated initial public offering prices set
forth on the cover page of this prospectus), after deducting underwriting
discounts and commissions and estimated offering expenses;
- the application of those proceeds to repay $ in loans from our
principal stockholders, PubliGroupe and Advance Internet; and
- the conversion of 450,000 shares of our Series A Convertible Preferred
Stock into 450,000 shares of our common stock.
You should read this table with the "Unaudited Pro Forma Combined Condensed
Financial Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and each of Real Media, Inc.'s and Real
Media Europe's audited financial statements and the related notes included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Total debt................................................. $ -- $ -- $
Stockholders' equity (deficiency):
Preferred stock, $.001 par value, 9,000,000 shares
authorized, no shares issued and outstanding, actual;
9,000,000 shares authorized, 450,000 shares issued and
outstanding, pro forma; 9,000,000 shares authorized,
no shares issued and outstanding, pro forma as
adjusted.............................................. -- 1 --
Common stock, $.001 par value, 18,000,000 shares
authorized, 9,836,150 shares issued and outstanding,
actual; 120,000,000 shares authorized, 25,962,675
shares issued and outstanding, pro forma; 120,000,000
shares authorized, shares issued and
outstanding, pro forma as adjusted.................... 10 26
Additional paid-in capital............................... 8,278 104,073
Accumulated deficit...................................... (14,192) (14,192)
Deferred compensation.................................... (162) (162)
------- -------- ------
Total stockholders' equity (deficiency).................. (6,066) 89,746
------- -------- ------
Total capitalization............................. $(6,066) $ 89,746 $
======= ======== ======
</TABLE>
The table excludes the following shares:
- 1,495,206 shares subject to outstanding stock options as of December 31,
1999, of which 511,825 stock options were exercisable as of December 31,
1999 and
- 99,938 shares issuable upon exercise of unissued stock options under our
1999 employee stock option plan as of December 31, 1999.
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<PAGE> 22
DILUTION
Assuming that the business combination of Real Media, Inc. and Real Media
Europe had been completed as of December 31, 1999, Real Media's pro forma net
tangible book value at December 31, 1999 would have been approximately $5.3
million, or $0.20 per share. Pro forma net tangible book value per share is
equal to our total tangible assets less our total liabilities, divided by the
total number of shares of our common stock outstanding. Assuming we had also
sold the shares of our common stock offered hereby at an assumed initial public
offering price of $ per share (the midpoint of the range of estimated
initial public offering prices set forth on the cover page of this prospectus)
and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us, our as adjusted pro forma net
tangible book value at December 31, 1999 would have been approximately $ ,
or $ per share. This represents an immediate increase in pro forma net
tangible book value of $
per share to existing stockholders and an immediate dilution of $ per share
to new investors purchasing shares of our common stock in this offering.
Dilution in pro forma net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of our
common stock in this offering and the as adjusted pro forma net tangible book
value per share of our common stock immediately following this offering. The
following table illustrates the immediate per share dilution to new investors.
<TABLE>
<CAPTION>
PER SHARE
---------
<S> <C> <C>
Assumed initial public offering price....................... $
Pro forma net tangible book value at December 31, 1999.... $ 0.20
Increase attributable to this offering....................
As adjusted pro forma net tangible book value after this
offering..................................................
------
Dilution to new investors in this offering.................. $
======
</TABLE>
The following table sets forth, on an as adjusted pro forma basis, as of
December 31, the total number of shares of common stock purchased from Real
Media, Inc., the total cash consideration paid and the average price per share
paid by the existing stockholders and by the new investors in this offering at
an assumed initial public offering price of $ per share (the midpoint of the
range of estimated initial public offering prices set forth on the cover page of
this prospectus):
<TABLE>
<CAPTION>
AVERAGE PRICE
SHARES PURCHASED TOTAL CONSIDERATION PER SHARE
--------------------- ----------------------- -------------
NUMBER PERCENT AMOUNT PERCENT
---------- ------- ------------ -------
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 26,412,675 % $104,100,766 % $3.94
New investors.....................
---------- --- ------------ ---
Total................... % $ % $
========== === ============ ===
</TABLE>
The foregoing discussion and tables are based on the number of shares
issued and outstanding on December 31, 1999, assuming the completion of the
business combination and this offering, no exercise of the underwriters'
over-allotment option to purchase additional shares and no exercise of
any stock options outstanding and exercisable as of December 31, 1999. As of
December 31, 1999, there were 1,495,206 shares issuable upon the exercise of
outstanding stock options, of which 511,825 stock options were exercisable at a
weighted average exercise price of $1.66 per share and 99,938 shares were
issuable upon exercise of unissued stock options under our 1999 employee stock
option plan. Options for 983,381 shares were outstanding but not exercisable as
of December 31, 1999.
Assuming the completion of the business combination, this offering and the
exercise in full of all of the options outstanding and exercisable as of
December 31, 1999, including the underwriters' over-allotment option, our as
adjusted pro forma net tangible book value as of December 31, 1999 would have
been approximately $ , or $ per share. This represents an immediate
increase in pro forma net tangible book value of $ per share to existing
stockholders and an immediate dilution in the pro forma net tangible book value
of $ per share to new investors purchasing shares of our common stock in
this offering.
18
<PAGE> 23
SELECTED FINANCIAL INFORMATION OF REAL MEDIA, INC.
The following selected financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Real Media, Inc.'s financial statements and the notes thereto
included elsewhere in this prospectus. The selected statement of operations
information for the three-year period ended December 31, 1999 and the balance
sheet information as of December 31, 1998 and 1999 are derived from the
financial statements of Real Media, Inc., which have been audited by Ernst &
Young LLP, independent auditors, and are included elsewhere in this prospectus.
The selected statement of operations information for the year ended December 31,
1996 and the balance sheet information as of December 31, 1996 and 1997 are
derived from the financial statements of Real Media, Inc., which have been
audited by Ernst & Young LLP, independent auditors, and are not included in this
prospectus. The historical results are not necessarily indicative of the
operating results to be expected in the future.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1997 1998 1999
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS INFORMATION:
Revenue....................................... $ 93 $ 553 $ 2,103 $ 8,115
Cost of revenue............................... 72 335 868 3,522
--------- --------- --------- ---------
Gross profit.................................. 21 218 1,235 4,593
--------- --------- --------- ---------
Operating expenses:
Sales and marketing......................... 140 973 1,720 8,734
Product and technology development.......... 61 428 543 897
General and administrative.................. 290 596 1,126 4,692
--------- --------- --------- ---------
Total operating expenses...................... 491 1,997 3,389 14,323
--------- --------- --------- ---------
Loss from operations.......................... (470) (1,779) (2,154) (9,730)
Interest income (expense), net................ (6) (18) 38 (73)
--------- --------- --------- ---------
Net loss...................................... $ (476) $ (1,797) $ (2,116) (9,803)
========= ========= ========= =========
Net loss per share:
Basic and diluted........................... $ (0.35) $ (0.30) $ (0.27) $ (1.05)
========= ========= ========= =========
Weighted average shares outstanding:
Basic and diluted........................... 1,356,493 5,968,767 7,849,253 9,358,972
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1996 1997 1998 1999
---- ----- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Cash and cash equivalents................................ $594 $ 49 $ 639 $ 1,389
Total assets............................................. 662 361 1,670 6,513
Total long-term debt..................................... -- -- -- --
Total stockholders' equity (deficiency).................. 530 (923) 28 (6,066)
</TABLE>
19
<PAGE> 24
SELECTED COMBINED FINANCIAL INFORMATION OF REAL MEDIA EUROPE
The following selected combined financial information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Real Media Europe's combined financial statements
and the notes thereto included elsewhere in this prospectus. The selected
combined statement of operations information for the three-year period ended
December 31, 1999 and the combined balance sheet information as of December 31,
1998 and 1999 are derived from the combined financial statements of Real Media
Europe, which have been audited by ATAG Ernst & Young AG, independent auditors,
and are included elsewhere in this prospectus. The selected combined statement
of operations information for the year ended December 31, 1996 and the combined
balance sheet information as of December 31, 1996 and 1997 are derived from the
combined financial statements of Real Media Europe, which have been audited by
ATAG Ernst & Young AG, independent auditors, and are not included in this
prospectus. The historical results are not necessarily indicative of the
operating results to be expected in the future.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998 1999
----- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS INFORMATION:
Revenue............................................. $ 289 $ 925 $ 5,436 $ 17,021
Cost of revenue..................................... 335 751 3,684 12,151
----- ------- ------- --------
Gross profit (loss)................................. (46) 174 1,752 4,870
----- ------- ------- --------
Operating expenses:
Sales and marketing............................... 294 730 2,000 4,626
Product and technology development................ -- 73 312 575
General and administrative........................ 360 612 1,405 2,946
----- ------- ------- --------
Total operating expenses............................ 654 1,415 3,717 8,147
----- ------- ------- --------
Loss from operations................................ (700) (1,241) (1,965) (3,277)
Interest expense, net............................... (5) (15) (55) (214)
----- ------- ------- --------
Net loss............................................ $(705) $(1,256) $(2,020) $ (3,491)
===== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1996 1997 1998 1999
----- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
COMBINED BALANCE SHEET INFORMATION:
Cash and cash equivalents............................ $ -- $ 103 $ 191 $ 588
Total assets......................................... 139 1,087 3,410 7,509
Total long-term debt................................. 635 1,746 3,837 5,878
Total shareholder's equity (deficiency).............. (711) (1,389) (3,349) (6,397)
</TABLE>
20
<PAGE> 25
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial information
illustrates the effect of the business combination of Real Media, Inc. and Real
Media Europe under the terms of the stock purchase agreement dated February 8,
2000. See "Related Party Transactions -- Business Combination with Real Media
Europe." The unaudited pro forma combined condensed financial information is
based on the historical financial statements of Real Media, Inc. and Real Media
Europe. The unaudited pro forma combined condensed statements of operations for
the year ended December 31, 1999 give effect to the business combination as if
it had been completed on January 1, 1999.
ACCOUNTING TREATMENT
Real Media, Inc. plans to record the business combination with Real Media
Europe using the purchase method of accounting. Accordingly, the assets acquired
and liabilities assumed will be recorded at their estimated fair values, which
are subject to further adjustment based upon appraisals and other analyses. The
pro forma adjustments are based upon available information and assumptions that
Real Media, Inc. believes are reasonable at the time made. The unaudited pro
forma combined condensed financial information does not purport to present our
financial position or results of operations had the business combination
occurred on the date specified, nor are they necessarily indicative of the
financial position or results of operations that may be achieved in the future.
The unaudited pro forma combined condensed financial information should be read
in conjunction with the audited financial statements of Real Media, Inc. and the
notes thereto and the audited combined financial statements of Real Media Europe
and the notes thereto included elsewhere in this prospectus.
21
<PAGE> 26
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
As of December 31, 1999
<TABLE>
<CAPTION>
HISTORICAL
-------------------------
REAL MEDIA, REAL MEDIA PRO FORMA PRO FORMA
INC. EUROPE ADJUSTMENTS REAL MEDIA, INC.
----------- ---------- ----------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............. $ 1,389 $ 588 $ 5,177(1) $ 7,154
Accounts receivable, net............... 3,946 5,279 -- 9,225
Due from affiliates.................... 214 708 (595)(2) 327
Due from stockholder................... 46 -- -- 46
Prepaid and other current assets....... 70 120 -- 190
-------- ------- -------- --------
Total current assets..................... 5,665 6,695 4,582 16,942
Property and equipment, net.............. 610 714 1,324
Goodwill and intangibles, net............ -- -- 84,408(1) 84,408
Other.................................... 238 100 -- 338
-------- ------- -------- --------
Total assets............................. $ 6,513 $ 7,509 $ 88,990 $103,012
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Bank overdraft......................... $ -- $ 118 $ -- $ 118
Accounts payable....................... 3,761 3,451 -- 7,212
Accrued expenses....................... 1,307 2,822 -- 4,129
Due to affiliates...................... 328 1,074 (983)(1)(2) 419
Notes payable -- stockholders.......... 6,000 -- (6,000)(1) --
Capital lease obligations.............. -- 59 -- 59
Deferred revenue....................... 825 504 -- 1,329
Deferred revenue -- stockholder........ 358 -- (358)(2) --
-------- ------- -------- --------
Total current liabilities................ 12,579 8,028 (7,341) 13,266
Note payable............................. -- 5,878 (5,878)(1) --
Stockholders' equity (deficiency):
Preferred stock........................ -- -- 1(1) 1
Common stock........................... 10 711 (695)(1) 26
Additional paid-in capital............. 8,278 -- 95,795(1) 104,073
Deferred compensation.................. (162) -- -- (162)
Accumulated deficit.................... (14,192) (7,531) 7,531(1) (14,192)
Accumulated other comprehensive income
(loss).............................. -- 423 (423)(1) --
-------- ------- -------- --------
Total stockholders' equity
(deficiency)........................... (6,066) (6,397) 102,209 89,746
-------- ------- -------- --------
Total liabilities and stockholders'
equity (deficiency).................... $ 6,513 $ 7,509 $ 88,990 $103,012
======== ======= ======== ========
</TABLE>
The accompanying notes and management's assumptions to the unaudited pro forma
combined
condensed financial information are integral parts of this statement.
22
<PAGE> 27
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
Year ended December 31, 1999
<TABLE>
<CAPTION>
HISTORICAL
-------------------------
REAL MEDIA, REAL MEDIA PRO FORMA PRO FORMA
INC. EUROPE ADJUSTMENTS REAL MEDIA, INC.
----------- ---------- ----------- ----------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue.................................. $ 8,115 $17,021 $ (293)(3) $ 24,843
Cost of revenue.......................... 3,522 12,151 (293)(3) 15,380
------- ------- -------- -----------
Gross profit............................. 4,593 4,870 -- 9,463
Operating expenses:
Sales and marketing.................... 8,734 4,626 -- 13,360
Product and technology development..... 897 575 -- 1,472
General and administrative............. 4,692 2,946 -- 7,638
Amortization of goodwill and
intangibles......................... -- -- 28,136(4) 28,136
------- ------- -------- -----------
Total operating expenses................. 14,323... 8,147 28,136 50,606
------- ------- -------- -----------
Loss from operations..................... (9,730) (3,277) (28,136) (41,143)
Other income (expense):
Interest income........................ 22 11 -- 33
Interest expense....................... (95) (225) -- (320)
------- ------- -------- -----------
Net loss................................. $(9,803) $(3,491) $(28,136) $ (41,430)
======= ======= ======== ===========
Basic and diluted loss per common
share ................................. $ (1.60)
===========
Number of shares used in computing basic
and diluted loss per share (5)......... 25,935,497
===========
</TABLE>
The accompanying notes and management's assumptions to the unaudited pro forma
combined
condensed financial information are integral parts of this statement.
23
<PAGE> 28
REAL MEDIA, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL INFORMATION
1. Reflects the issuance of 16,126,525 shares of Real Media's common stock and
450,000 shares of Real Media's Series A Convertible Preferred Stock in
exchange for (i) all of the outstanding shares of Real Media Europe Holding's
common stock, (ii) the conversion of a $6.0 million note payable and (iii)
the contribution to capital of $4.0 million.
<TABLE>
<S> <C> <C>
Value of shares issued...................................... $95,812,000
Cash received............................................... (4,000,000)
Conversion of notes......................................... (6,000,000)
Transaction costs........................................... 100,000
-----------
Total acquisition costs..................................... 85,912,000
Less net tangible assets acquired:
Real Media Europe's net tangible assets as of December 31,
1999................................................... $(6,397,000)
Notes payable to PubliGroupe contributed to capital....... 5,878,000
Inter-company balances due to PubliGroupe contributed to
capital................................................ 746,000
Capital contribution commitment........................... 1,277,000
-----------
Real Media Europe's net tangible assets acquired............ 1,504,000
-----------
Excess of cost over net tangible assets acquired............ $84,408,000
===========
Cash received............................................... $ 4,000,000
Capital contribution commitment............................. 1,277,000
Transaction costs........................................... (100,000)
-----------
Pro forma adjustment to cash................................ $ 5,177,000
===========
Intercompany balances due to PubliGroupe contributed to
capital................................................... $ 746,000
Intercompany balances between Real Media, Inc. and Real
Media Europe (see note 2 below)........................... 237,000
-----------
Pro forma adjustment to due to affiliates................... $ 983,000
===========
</TABLE>
We have made a preliminary allocation to intangible assets of costs in excess
of the net tangible assets acquired. Real Media Europe's historical tangible
assets and liabilities are estimated to approximate fair value. However, there
can be no assurance that the actual allocation will not differ significantly
from the pro forma allocation.
2. Reflects the elimination of inter-company balances.
3. Reflects the elimination of inter-company revenue and expenses.
4. Reflects amortization of costs in excess of the net tangible assets acquired
in the business combination by use of the straight-line method over three
years.
5. The weighted average common shares outstanding used to calculate pro forma
net loss per common share assumes the issuance of 16,126,525 shares of Real
Media's common stock and 450,000 shares of Real Media's common stock issuable
upon the conversion of Real Media's Series A Convertible Preferred Stock,
which will be issued in connection with the business combination, as if such
shares were outstanding from the beginning of the period presented.
24
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The historical information discussed below is derived from the audited
financial statements of the separate operations of Real Media, Inc. and Real
Media Europe for each of the periods presented. You should refer to the
unaudited pro forma combined condensed financial statements and related notes
for information regarding our operations on a consolidated basis.
OVERVIEW
Real Media is a global provider of comprehensive Internet advertising
solutions for web sites and advertisers. We provide brand-focused ad sales
representation, technology for planning and delivery of Internet advertising,
and media and marketing services to web sites and advertisers.
Real Media, Inc. was incorporated in May 1995 in Delaware. Following its
founding, Real Media, Inc. began developing its ad management software
technology, OAS, and creating its web site portfolio strategy. In 1995, Real
Media, Inc. had no revenue, and the costs of its initial activities were paid
directly by its founding stockholders. In 1996, Real Media, Inc. began to market
its products and services in the United States.
Real Media Europe comprises businesses that commenced operations in
February 1996, when PubliGroupe established an online advertising business in
Switzerland. In December 1996, PubliGroupe entered into technology licensing and
joint marketing agreements with Real Media, Inc. to develop an Internet ad sales
representation business in Europe and began offering OAS to its customers in
Europe. Throughout 1997 and 1998, the European operations expanded with the
establishment of offices located in Germany, the United Kingdom and France.
In December 1996, PubliGroupe made its initial equity investment in Real
Media, Inc., concurrent with entering into the technology licensing and joint
marketing agreements noted above. PubliGroupe made subsequent equity investments
in Real Media, Inc. in June 1997 and March 1999. Advance Internet made its
initial equity investment in Real Media, Inc. in April 1998 and made subsequent
investments in March and August 1999.
In August 1999, in connection with discussions regarding a potential
business combination and to provide working capital to Real Media, Inc.,
PubliGroupe entered into a commitment to lend Real Media, Inc. $10.0 million to
be evidenced by promissory notes convertible into common stock of Real Media,
Inc. upon the completion of the business combination. Real Media, Inc. has
borrowed all $10.0 million available under this commitment as of February 9,
2000. On February 8, 2000, Real Media, Inc. and PubliGroupe finalized their
agreement regarding the business combination. Under this agreement, PubliGroupe
will transfer to Real Media, Inc.:
- All of the stock of Real Media Europe's holding company. The holding
company owns 100% of Real Media SARL, Real Media Deutschland GmbH, Real
Media Holding (UK) Ltd. and Real Media (UK) Ltd, which conduct our
business in France, Germany and the United Kingdom, respectively. The
holding company also owns 100% of Real Media Technology S.A., which
provides technical support to our European operations, and 49% of Real
Media S.A., which conducts our business in Switzerland.
- Real Media Limited, which conducts our business in Hong Kong.
- Real Media Pte Ltd., which conducts our business in Singapore.
In exchange for the transfer of the stock of Real Media Europe's holding company
and the $10.0 million borrowed by Real Media, Inc. from PubliGroupe, Real Media,
Inc. will issue to PubliGroupe 16,126,525 shares of common stock and 450,000
shares of Series A Convertible Preferred Stock. The preferred stock will convert
into 450,000 shares of our common stock immediately upon the completion of this
offering. Real Media, Inc. will pay PubliGroupe $10.00 in exchange for the stock
of Real Media Limited and Real Media Pte Ltd. Immediately after this offering,
PubliGroupe will own approximately % of the issued and
25
<PAGE> 30
outstanding common stock of Real Media, Inc. See "Related Party Transactions --
Business Combination with Real Media Europe."
Following the business combination, we will initially own a 49% interest in
Real Media S.A. We have an option to acquire the remaining interest of that
company from PubliGroupe, which we intend to exercise in 2000. In addition,
PubliGroupe will have the option to sell to us the remaining interest in Real
Media S.A. We will consolidate the results of operations of Real Media S.A.,
recognizing 100% of the revenue and the losses but only 49% of the profits, if
any, of that company until we acquire PubliGroupe's 51% interest. See "Related
Party Transactions -- Business Combination with Real Media Europe."
The business combination will be accounted for as a purchase of Real Media
Europe's holding company by Real Media, Inc. and will create approximately $84.4
million of goodwill and intangibles to be amortized on the straight-line basis
over three years.
We currently generate revenue from ad sales, the sale or license of OAS and
related products, and media and marketing services. To date, we have generated
an insignificant amount of revenue directly attributable to media and marketing
services, but we expect the related revenue to increase as a percentage of our
total revenue. For the year ended December 31, 1999, virtually all of our
revenue was generated by sales in the United States, France, Germany,
Switzerland and the United Kingdom. We sell the advertising space of Excite in
France and Germany, which accounted for approximately 12% of our pro forma
combined revenue for 1999.
Advertising revenue is derived from advertisers who place ads on the web
sites in the Real Media Network on a purchase order basis, net of any
commissions paid to ad agencies representing the advertisers. The cost to
advertisers of placing ads is generally determined on a cost per thousand ads
delivered basis. Ad sales revenue is recognized in the period in which the
advertisement is delivered to the web sites, provided that no significant
obligations remain to be performed. We bill and collect the amounts from the
advertisers or ad agencies. We bear the risk of loss from the non-collection of
fees payable from advertisers for ads sold. We purchase ad space from web sites
and include the cost of this space in "cost of revenue."
Technology revenue is composed of revenue from software licensing and
maintenance and support revenue. Revenue from software licensing agreements is
recognized upon delivery of the software when collection is probable, all
license payments are due within one year, and the license fee is fixed and
determinable. Revenue from maintenance and support services is recognized
ratably over the lives of the maintenance agreements, which typically do not
exceed one year. Maintenance and support revenue received in advance of the
related services is recorded as deferred revenue. Expenses related to
maintenance and support revenue are primarily payroll costs incurred to deliver,
modify and support the software. These expenses are included in cost of revenue.
Pricing for our Internet advertising and technology solution is based on a
standard price list and is also influenced by whether the customer purchases
more than one of the products and services that compose our solution.
Sales and marketing expenses are composed primarily of salaries and
benefits expenses, including commissions, for sales and marketing staff and also
include sales support, travel, advertising, trade show costs and marketing
materials costs.
Product and technology expenses consist primarily of salaries and benefits
for all technical and engineering staff, and consulting fees. Salaries and
benefits for maintenance and support staff are included in cost of revenue.
General and administrative expenses consist primarily of salaries and
benefits for all other staff, professional fees, facilities and general office
expenses.
26
<PAGE> 31
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
Revenue
Real Media, Inc.'s revenue was $8.1 million for the year ended December 31,
1999, a 286% increase from $2.1 million in the prior year. This increase in
revenue was primarily attributable to growth in technology revenue, resulting
from a greater number of OAS licenses sold, at higher average prices, and higher
maintenance and support revenue, due to a larger installed base of web site
licensees contracting for such services, and increased advertising revenue,
resulting from an increase in the number of advertisers and ads delivered. It is
expected that growth in advertising revenue will outpace growth in technology
revenue in 2000.
Real Media Europe's revenue was $17.0 million for the year ended December
31, 1999, a 213% increase from $5.4 million in the prior year. This increase in
revenue was primarily attributable to higher advertising sales, resulting from
an increase in the number of advertisers and ads delivered. Technology revenue
also increased during the period, but at a slower rate, and had a lesser impact
in absolute terms.
Gross Profit
Real Media, Inc.'s gross profit was $4.6 million and $1.2 million, or 57%
and 59% of revenue, for the years ended December 31, 1999 and 1998,
respectively. The gross profit margin percentage decreased due to higher
technology support costs, and the implementation of certain lower margin
promotional campaigns. It is anticipated that gross profit margin percentages
will continue to decline in 2000 as advertising sales growth begins to exceed
technology sales growth.
Real Media Europe's gross profit was $4.9 million and $1.8 million, or 29%
and 32% of revenue, for the years ended December 31, 1999 and 1998,
respectively. This decrease in the gross profit margin percentage was primarily
due to the rapid growth of lower margin advertising sales relative to technology
sales growth.
Operating Expenses
Sales and Marketing. Real Media, Inc.'s sales and marketing expenses were
$8.7 million for the year ended December 31, 1999, a 408% increase from $1.7
million in the prior year. This increase in sales and marketing expenses
reflects the additional salary, benefits and commission expenses incurred with
the expansion of the sales force, the hiring of additional marketing and sales
support personnel and greater advertising expenditures incurred in connection
with a major brand awareness campaign that began in September 1999. Additional
increases in staffing and advertising expenditures will continue in 2000.
Real Media Europe's sales and marketing expenses were $4.6 million for the
year ended December 31, 1999, a 131% increase from $2.0 million in the prior
year. This increase in sales and marketing expenses reflects the additional
salary, benefits and commission expenses incurred with the expansion of the
sales force, the hiring of additional marketing personnel and greater
advertising expenditures. It is anticipated that advertising expenses, which
have been lower in Europe than in the United States due to better brand
recognition and less competition, will grow substantially in 2000 as Real Media
Europe enters new markets.
Product and Technology Development. Real Media, Inc.'s product and
technology development expenses were $897,000 for the year ended December 31,
1999, a 65% increase from $543,000 in the prior year. This increase in product
and technology development expenses was principally due to the hiring of
software engineering personnel to develop enhanced features incorporated into
new releases of OAS. Compensation expense for additional research and
development, product enhancement and quality assurance personnel is expected to
increase significantly in 2000.
Real Media Europe relied on the product development efforts of Real Media,
Inc., licensing its technology from Real Media, Inc. for sale or licensing to
web sites in Europe. Real Media Europe
27
<PAGE> 32
maintained a technology team to provide customized solutions of OAS. The related
costs of the team were $575,000 in the year ended December 31, 1999, an 84%
increase from $312,000 in the prior year. This increase in product and
technology development expenses was principally due to the hiring of additional
personnel to serve a growing installed customer base.
General and Administrative. Real Media, Inc.'s general and administrative
expenses were $4.7 million for the year ended December 31, 1999, a 317% increase
from $1.1 million in the prior year. This increase in general and administrative
expenses was primarily related to increased personnel, professional fees and
facilities expenses necessary to support growth, including the opening of a
Miami office to service Latin America. General and administrative expenses are
expected to continue to increase as a result of hiring additional senior
management, accounting and MIS personnel and from additional facilities and
infrastructure costs to support the growth of Real Media, Inc.'s business and
operations as a public company.
Real Media Europe's general and administrative expenses were $2.9 million
for the year ended December 31, 1999, a 110% increase from $1.4 million in the
prior year. This increase in general and administrative expenses was primarily
related to increased personnel and other expenses associated with increased
activity levels. These costs are expected to continue to increase to support the
growth of the European businesses and expansion into new markets in Austria,
Italy, the Netherlands, Spain and Sweden, and as Real Media Europe begins to
perform in-house administrative functions that were previously performed by
PubliGroupe.
Income taxes
No income tax benefits were recorded for either of the periods presented.
YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Revenue
Real Media, Inc.'s revenue was $2.1 million for the year ended December 31,
1998, a 280% increase from $553,000 in the prior year. This increase in revenue
was due to growth in both advertising and technology revenue. Increases in the
number of advertisers and ads delivered drove growth in advertising revenue.
Technology revenue growth was driven by an increase in the number of OAS
licenses sold, at higher average prices, and higher maintenance and support
revenue, due to a larger installed base of web site licensees contracting for
such services.
Real Media Europe's revenue was $5.4 million for the year ended December
31, 1998, a 488% increase from $925,000 in the prior year. This increase in
revenue was primarily attributable to higher advertising sales, stemming from
the launching of Real Media France in January 1998, and more significant
contributions from operations in the United Kingdom and Germany, which did not
begin to generate revenue until the fourth quarter of 1997. Technology revenue
increased at a faster rate but was smaller on an absolute basis.
Gross Profit
Real Media Inc.'s gross profit was $1.2 million and $218,000, or 59% and
39% of revenue, for the years ended December 31, 1998 and 1997, respectively.
Gross profit margin increased because higher margin technology sales accounted
for a greater proportion of revenue generated in the year ended December 31,
1998.
Real Media Europe's gross profit was $1.8 million and $174,000, or 32% and
19% of revenue, for the years ended December 31, 1998 and 1997, respectively.
Gross profit margin increased because higher margin technology sales accounted
for a greater proportion of revenue generated in the year ended December 31,
1998.
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<PAGE> 33
Operating Expenses
Sales and Marketing. Real Media, Inc.'s sales and marketing expenses were
$1.7 million for the year ended December 31, 1998, a 77% increase from $973,000
in the prior year. This increase in sales and marketing expenses primarily
reflects an increase in advertising expenditures, as well as the hiring of new
sales and marketing personnel and related costs such as travel and
entertainment.
Real Media Europe's sales and marketing expenses were $2.0 million for the
year ended December 31, 1998, a 174% increase from $730,000 in the prior year.
This increase in sales and marketing expenses was primarily a result of
increased sales and marketing personnel costs as Real Media Europe opened a new
office in Paris, and to a lesser extent, increased advertising expenditures, as
Real Media Europe entered new markets.
Product and Technology Development. Real Media, Inc.'s product and
technology development expenses were $543,000 for the year ended December 31,
1998, a 27% increase from $428,000 in the prior year. This increase in product
and technology development expenses was principally due to the hiring of
additional personnel and related costs.
Real Media Europe's product and technology development expenses were
$312,000 for the year ended December 31, 1998, a 327% increase from $73,000 in
the prior year. The increase in product and technology development expenses was
attributable to higher salary, benefits and related expenses incurred in the
expansion of the European technology team.
General and Administrative. Real Media, Inc.'s general and administrative
expenses were $1.1 million for the year ended December 31, 1998, an 89% increase
from $596,000 in the prior year. This increase in general and administrative
expenses was primarily related to increases in personnel, facilities and general
office expenses relating to Real Media, Inc.'s growth, including a full year of
operation for the San Francisco office, which was opened in the fourth quarter
of 1997.
Real Media Europe's general and administrative expenses were $1.4 million
for the year ended December 31, 1998, a 130% increase from $612,000 in the prior
year. This increase in general and administrative expenses was primarily related
to the first full year of Real Media Europe's operations in France, Germany and
the United Kingdom.
Income taxes
No income tax benefits were recorded for either of the periods presented.
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<PAGE> 34
PRO FORMA COMBINED CONDENSED QUARTERLY RESULTS OF OPERATIONS
The following tables set forth unaudited pro forma combined condensed
quarterly results of operations for the periods indicated in dollars and as a
percentage of revenue. The pro forma information reflects the business
combination of Real Media, Inc. and Real Media Europe as if it were completed on
January 1, 1998. Goodwill and other intangibles are being amortized over three
years. In the opinion of management, this information has been prepared on the
same basis as the audited financial statements appearing elsewhere in this
prospectus, and all necessary adjustments, consisting only of normal recurring
adjustments, have been included in the amounts stated below to present fairly
the unaudited pro forma consolidated quarterly results of operations. The
quarterly data should be read in conjunction with the audited financial
statements of Real Media, Inc., the audited combined financial statements of
Real Media Europe and the notes to the financial statements appearing elsewhere
in this prospectus.
<TABLE>
<CAPTION>
PRO FORMA THREE MONTHS ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS, EXCEPT AS A PERCENTAGE OF REVENUE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue.................. $ 1,143 $ 1,745 $ 1,729 $ 2,845 $ 3,368 $ 4,737 $ 5,800 $ 10,938
Cost of revenue.......... 811 1,079 1,061 1,524 1,893 3,044 3,598 6,845
------- ------- ------- ------- ------- ------- -------- --------
Gross profit............. 332 666 668 1,321 1,475 1,693 2,202 4,093
Operating expenses:
Sales and marketing.... 540 846 847 1,487 1,383 1,653 3,228 7,096
Product and technology
development.......... 178 232 236 209 276 357 413 426
General and
administrative....... 449 669 624 789 1,331 1,341 1,717 3,249
Amortization of
goodwill and
intangibles.......... 7,034 7,034 7,034 7,034 7,034 7,034 7,034 7,034
------- ------- ------- ------- ------- ------- -------- --------
Total operating
expenses............... 8,201 8,781 8,741 9,519 10,024 10,385 12,392 17,805
------- ------- ------- ------- ------- ------- -------- --------
Loss from operations..... (7,869) (8,115) (8,073) (8,198) (8,549) (8,692) (10,190) (13,712)
Interest income
(expense), net......... (27) 23 25 (38) (33) (34) (47) (173)
------- ------- ------- ------- ------- ------- -------- --------
Net loss................. $(7,896) $(8,092) $(8,048) $(8,236) $(8,582) $(8,726) $(10,237) $(13,885)
======= ======= ======= ======= ======= ======= ======== ========
Revenue.................. 100% 100% 100% 100% 100% 100% 100% 100%
Cost of revenue.......... 71 62 61 54 56 64 62 63
------- ------- ------- ------- ------- ------- -------- --------
Gross profit............. 29 38 39 46 44 36 38 37
Operating expenses:
Sales and marketing.... 47 48 49 52 41 35 56 65
Product and technology
development.......... 16 13 14 7 8 8 7 4
General and
administrative....... 39 38 36 28 40 28 30 29
Amortization of
goodwill and
intangibles.......... 616 404 406 247 209 148 121 64
------- ------- ------- ------- ------- ------- -------- --------
Total operating
expenses............... 718 503 505 334 298 219 214 162
------- ------- ------- ------- ------- ------- -------- --------
Loss from operations..... (689) (465) (466) (288) (254) (183) (176) (125)
Interest income
(expense), net......... (2) 1 1 (1) (1) (1) (1) (2)
------- ------- ------- ------- ------- ------- -------- --------
Net loss................. (691)% (464)% (465)% (289)% (255)% (184)% (177)% (127)%
======= ======= ======= ======= ======= ======= ======== ========
</TABLE>
Our revenue increased during each quarter of 1999, rising by 41% from the
first quarter to the second quarter, by 22% from the second quarter to the third
quarter, and by 89% from the third quarter to the fourth quarter. During 1998,
revenue did not increase between the second quarter and the third quarter
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<PAGE> 35
due to a seasonal slowdown in European sales. Between the second quarter and the
third quarter of 1999, the revenue growth rate was adversely impacted by the
seasonal slowdown in Europe.
Gross profit increased sequentially in all quarters in 1998 and 1999. Over
this period, gross profit as a percentage of revenue fluctuated due to changes
in the mix of revenues between advertising and technology sales.
Increases in total operating expenses were due primarily to an increase in
salaries and benefits resulting from increased hiring of sales and marketing,
technical and administrative personnel required to sustain our growth and
develop our infrastructure for future growth.
SEASONALITY
Our advertising revenue has historically been, and we expect it to continue
to be, subject to seasonal fluctuations because advertisers generally place
fewer advertisements during the first and third quarters of each year.
Seasonality is more pronounced in Europe than in the United States. In Europe,
the third quarter is typically substantially weaker than the fourth quarter, and
often equal to or slightly lower than the second quarter. If as expected,
advertising revenue increases at a faster pace than our technology revenue,
these seasonal fluctuations may become more significant. Additionally,
expenditures by advertisers tend to be cyclical, reflecting overall economic
conditions, as well as budgeting and buying patterns.
LIQUIDITY AND CAPITAL RESOURCES
Real Media, Inc.
From 1996 through December 31, 1999, Real Media, Inc. has financed its
operations through a combination of private placements of equity, debt and
convertible debt to its two major stockholders, PubliGroupe and Advance
Internet. Real Media, Inc. has used the net proceeds from these financings,
totaling approximately $14.5 million, to develop and market its Internet
advertising solutions, to hire additional personnel, and for general corporate
purposes related to the expansion of the business.
Net cash used by Real Media, Inc.'s operating activities for the year ended
December 31, 1999 was $8.2 million. Net cash used by operating activities was
$2.1 million and $1.6 million for the years ended December 31, 1998 and 1997,
respectively. Cash used for the year ended December 31, 1999 resulted primarily
from net losses and increases in accounts receivable partially offset by
increases in accounts payable and other current liabilities. Cash used from
operating activities for the two prior years resulted primarily from net losses.
Net cash used by Real Media, Inc.'s investing activities in the year ended
December 31, 1999 was $650,000, consisting of purchases of property and
equipment. Similar purchases account for the cash used in investing activities
of $73,000 and $80,000 in the years ended December 31, 1998 and 1997,
respectively.
Net cash provided by Real Media, Inc.'s financing activities during the
year ended December 31, 1999 totaled $9.6 million, and consisted of two private
equity placements aggregating $3.6 million and convertible debt issuances of
$6.0 million. See "-- Overview." Net cash provided by financing activities in
1998 was $2.7 million, consisting of a $3.0 million private equity placement and
the issuance of stockholder notes in the amount of $225,000, offset by the
repayment of stockholder notes of $508,000. In 1997, Real Media, Inc. raised a
total of $1.2 million through the issuance of common stock ($330,000) and
stockholder notes ($834,000). From 1997 through 1999, Real Media, Inc. incurred
interest expense of approximately $150,000 on amounts due to PubliGroupe.
Real Media Europe
Real Media Europe has been funded solely by loans and equity contributions
by PubliGroupe. From 1996 through December 31, 1999, Real Media Europe has
received net proceeds of approximately
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<PAGE> 36
$6.7 million to launch, develop and operate offices in Switzerland, Germany, the
United Kingdom and France.
Net cash used by Real Media Europe's operating activities for the year
ended December 31, 1999 was $1.4 million. Net cash used by operating activities
was $1.5 million and $1.4 million for the years ended December 31, 1998 and
1997, respectively. Cash used for all periods resulted primarily from net losses
and increases in accounts receivable partially offset by increases in accounts
payable and other current liabilities.
Net cash used in investing activities in the year ended December 31, 1999
was $494,000, consisting of purchases of $725,000 of property and equipment, net
of proceeds from the sale of marketable securities of $231,000. Net cash used in
investing activities for the year ended December 31, 1998 was $509,000,
consisting of purchases of property and equipment and marketable securities of
$283,000 and $226,000, respectively. Purchases of property and equipment account
for the cash used in investing activities of $156,000 in the year ended December
31, 1997.
Net cash provided by financing activities during the year ended December
31, 1999 totaled $2.3 million and consisted of advances from PubliGroupe. Net
cash provided by financing activities in 1998 was $2.1 million, consisting of a
capital contribution from PubliGroupe of $170,000 and loans from PubliGroupe of
$1.9 million. In 1997, Real Media Europe received $1.6 million in financing from
PubliGroupe, consisting of $531,000 in capital contributions and $1.1 million in
borrowings. From 1997 through 1999, Real Media Europe incurred interest expense
of approximately $290,000 on amounts due to PubliGroupe.
Consolidated Real Media
We currently anticipate that we will experience significant growth in
operating expenses worldwide for the foreseeable future and that these operating
expenses will be a material use of our cash resources. We currently have working
capital commitments relating to recent acquisitions that total approximately
$1.5 million through December 31, 2000, and we expect to incur an increase in
capital expenditures consistent with our anticipated growth in operations,
infrastructure and personnel. Prior to the completion of this offering, we
expect funding for our continued expansion to come from an aggregate of up to
$15.0 million to be loaned to us by PubliGroupe and Advance Internet, which will
be repaid from the proceeds of this offering. See "Related Party
Transactions -- Stockholders Voting Agreements." After the completion of this
offering, we expect funding for our continued expansion to come from the
proceeds from this offering, which we believe, together with our existing cash,
will be sufficient to meet our anticipated cash needs for working capital,
repayment of debt and capital expenditures for at least the next twelve months.
RECENT ACCOUNTING PRONOUNCEMENTS
We do not expect the adoption of any recently issued accounting
pronouncements to have a significant impact on our net results of operations,
financial position or cash flows.
CURRENCY HEDGING INSTRUMENTS
We transact business in various currencies. Accordingly, we are subject to
exposure from adverse movements in currency exchange rates. This exposure is
primarily related to revenues and operating expenses in several European
countries denominated in the respective local currency. However, we currently
have no hedging contracts outstanding.
We currently do not use financial instruments to hedge operating expenses
in any of the countries in which we operate. Instead, we believe that a natural
partial hedge exists, because local currency revenues will substantially offset
the operating expenses denominated in the respective local currency. We assess
the need to utilize financial instruments to hedge currency exposures on an
ongoing basis.
We do not use derivative financial instruments for speculative trading
purposes, nor do we hedge our foreign currency exposure in a manner that offsets
the effects of changes in exchange rates. See "Risk
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<PAGE> 37
Factors -- Risks Relating to Real Media -- We face risks associated with our
international operations and plans for expansion."
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products only accept
two digits to identify the year in any date. Therefore, the year 2000 will
appear as "00," which the system or software may consider to be the year 1900
rather than the year 2000. The failure of any computer systems or software to be
Year 2000 compliant could result in system failures, delays or miscalculations.
In the ordinary course of our business, we have evaluated the internally
developed software included in our ad management technology, and believe that
this software is generally Year 2000 compliant, meaning that the use or
occurrence of dates on or after January 1, 2000 will not materially affect the
performance of this software or the ability of this software to correctly
create, store, process and output data involving dates. To date, we have not
received any Year 2000 related claims regarding our services.
We do not believe we have significant Year 2000 issues within our systems
or services. Because we believe we are Year 2000 compliant, we have not engaged
any third parties to independently verify our Year 2000 readiness, nor have we
assessed potential costs associated with Year 2000 risks or made any contingency
plans to address these risks. Although we have not discovered any material Year
2000 problems with our internal information technology to date, we may in the
future.
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<PAGE> 38
BUSINESS
Real Media provides comprehensive Internet advertising solutions for web
sites and advertisers throughout the world. Our solutions, which emphasize the
value of web site brands and user information, enable sites to maximize revenue
from Internet advertising. We focus on developing relationships with leading web
sites worldwide that have strong brands in their national or local markets.
These relationships allow us to offer advertisers opportunities to reach large,
targeted audiences in environments that stimulate user trust and loyalty.
Our comprehensive solutions consist of three complementary components:
The Real Media Network. We provide brand-focused ad sales representation
to a global network of over 1,000 web sites. We organize our network into
national and regional portfolios of selected sites in several categories,
including portals, general interest sites and vertical content sites.
Advertisers purchase ad space through standard network campaigns that use web
sites grouped into specific interest or geographic categories, and through
customized campaigns that use individually selected sites. Customized campaigns
may be event-related, involve sponsorships or combine the use of online and
offline advertising.
Open AdStream(TM) (OAS). Our proprietary ad management software provides
web sites with the technology infrastructure to manage all aspects of targeted
ad campaigns, including campaign planning, delivery, measurement and reporting,
and allows them to manage sales relationships with advertisers and ad agencies.
OAS enables web sites to collect information resulting from user interaction
with site content and advertisements and retain exclusive ownership over this
data. Currently, over 700 web sites worldwide use OAS. Our top 25 web sites use
OAS to serve over six billion advertisements per month.
Media and Marketing Services. We offer a suite of media and marketing
services to web sites that include user base analysis and profiling tools, as
well as consulting and other services.
We currently provide our products and services to over 1,400 web sites in
40 countries, including key operations in the United States (founded May 1995),
Switzerland (February 1996), Germany (October 1997), the United Kingdom (October
1997) and France (January 1998). Our clients include web sites of:
<TABLE>
<CAPTION>
EUROPE NORTH AMERICA LATIN AMERICA ASIA/PACIFIC AFRICA
------ ------------- ------------- ------------ ------
<S> <C> <C> <C> <C>
Excite@Home The New York Times Universo Online (UOL) Lycos Times Media
The Times Qualcomm Eudora Infosel South China Morning Post iAfrica
Suddeutsche Zeitung The Weather Channel El Tiempo Apple Daily Independent Online
Blue Window Bloomberg O Globo Pacific Internet SABC
Bonjour Playboy El Mercurio Netvigator Mweb
</TABLE>
In the online world, as in the offline world, strong brands attract loyal
audiences. We believe that this loyalty allows branded web sites to charge
higher rates for their advertising space, as audiences are more likely to act
upon ad messages on these sites. As the number of web sites worldwide continues
to grow, we believe that branded sites will become increasingly attractive to
advertisers. Over 900 advertisers throughout the world have used our network,
including British Telecom, Ford Motor Company, IBM, Intel, Microsoft, Swisscom
and UBS.
OUR RELATIONSHIP WITH PUBLIGROUPE
We maintain a strong strategic relationship with our principal stockholder,
PubliGroupe, a leading seller of print advertising throughout the world, with
approximately $1.5 billion in revenue in 1998 and a 100-year history of media
representation. As we expand globally, we intend to continue to take advantage
of PubliGroupe's relationships with publishers, media buyers and advertisers,
and its extensive infrastructure in and operating knowledge of local markets
worldwide. Our relationship with PubliGroupe also provides cross-promotional
marketing opportunities, such as jointly planned and executed ad campaigns that
use both print and online media.
PubliGroupe currently owns the businesses that compose Real Media Europe.
On February 8, 2000, we finalized a stock purchase agreement with PubliGroupe,
under which PubliGroupe will transfer to Real Media, Inc. all of PubliGroupe's
Internet advertising operations in Europe and Asia, except for a part of
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<PAGE> 39
its Internet advertising operation in Switzerland. Immediately after this
offering, PubliGroupe will own approximately % of the issued and outstanding
common stock of Real Media, Inc. See "Related Party Transactions -- Business
Combination with Real Media Europe."
Simultaneously with the business combination, PubliGroupe, Advance Internet
and our five founders will enter into a stockholders voting agreement. The
stockholders voting agreement will establish the composition of our board of
directors, prescribe voting requirements for PubliGroupe with respect to
important corporate decisions and place limits on transfers of shares of our
stock held by the parties. Under this agreement, PubliGroupe will agree to vote
all of the shares that it holds in excess of one-third of our outstanding common
stock in accordance with the recommendation of the majority of our board of
directors on any matter submitted to the stockholders of Real Media for their
vote. This limitation on voting rights will not apply to votes on many change of
control events involving Real Media, such as mergers and other forms of business
combinations. See "Related Party Transactions -- Stockholders Voting Agreement."
When we consummate the business combination, we will also enter into several
other agreements with PubliGroupe described under "Related Party Transactions."
INDUSTRY BACKGROUND
THE EMERGENCE OF GLOBAL INTERNET ADVERTISING
The Internet has rapidly emerged as an important medium for facilitating
communication, disseminating information and conducting commerce. Growth in the
number of Internet users is expected to continue as new technologies are
developed and adopted, as web access and bandwidth increase, and as Internet
content improves and becomes more dynamic. International Data Corporation
estimates that the number of worldwide Internet users will grow from about 142
million in 1998 to approximately 502 million in 2003. The percentage of these
users residing outside the United States is also expected to increase, growing
from approximately 56% in 1998 to approximately 65% in 2003.
As the number of people using the Internet worldwide grows, advertisers are
predicted to increase spending on online advertising. Forrester Research
projects that total worldwide online advertising expenditures will grow from an
estimated $3.3 billion in 1999 to $33.1 billion in 2004 and that a portion of
this increase will come from offline budgets. Moreover, Forrester Research
predicts that the largest area of growth for online advertising will occur
outside the United States; non-U.S. online advertising expenditures are expected
to grow from 16% of the total in 1999 to 33% in 2004. The Direct Marketing
Association expects that worldwide expenditures for online direct marketing will
grow from approximately $603 million in 1998 to approximately $5.3 billion in
2003.
We believe that increasing acceptance of the Internet as an advertising
medium, combined with further advances in technology, will lead to new forms of
interactive advertising delivered across emerging platforms such as digital
television and wireless communication devices. In particular, Forrester Research
estimates that advertising revenue via interactive television, which brings
together traditional broadcast content with interactive content and
advertisements, will reach $9.4 billion by 2004.
ADVANTAGES OF INTERNET ADVERTISING OVER TRADITIONAL MEDIA
The interactive nature of the Internet offers advertisers several distinct
advantages over traditional media such as television, radio and print. Internet
users communicate with web sites in multiple ways, such as registering for the
sites, requesting information and purchasing goods or services. Internet
technologies enable sites to capture the data generated by this interaction,
which may include user demographics and preferences as well as transactional
data. Analyzing this data permits web sites to better understand the
characteristics of their user base and communicate this detailed information to
advertisers, providing several advantages:
Ability to Target Specific/Individual Audiences. Internet technologies
enable the separate delivery of content and advertisements to each individual
web browser, allowing different users to view the same web page at the same time
while receiving different ads. As a result, sites that can identify individuals
and gather information through user interaction with the site can offer
advertisers the ability to target or personalize their messages to specific
audiences or individuals.
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<PAGE> 40
Ability to Track and Measure Advertising Effectiveness. Increasingly
sophisticated ad management technology enables sites to track and measure the
effectiveness of ad campaigns as they are running; in traditional media,
advertisers receive general reports at the conclusion of a campaign. The ability
to receive continuous campaign feedback enables advertisers and direct marketers
to refine campaigns in "real time" according to actual customer behavior or
product availability.
Greater Cost-Effectiveness. Internet advertising campaigns tend to be more
cost-effective than similar types of traditional media campaigns because
advertisers can better target their messages to individuals, modify campaigns as
they are delivered and pay less, in general, to reach a similar audience size.
Additionally, the Internet allows advertisers to more efficiently deliver
campaigns in local markets worldwide by allowing ads to be delivered
simultaneously to multiple local sites without having to purchase inventory from
each site separately. According to data from the Direct Marketing Association,
each dollar spent during 1998 on Internet advertising generated over $7.50 in
sales, versus $5.00 and $6.25 for television and radio advertising,
respectively.
CHALLENGES OF GLOBAL INTERNET ADVERTISING
While advertising online offers many advantages over traditional
advertising, branded web sites and advertisers face significant challenges in
maximizing the full value of global Internet advertising opportunities.
Challenges for Branded Web Sites
Increasing Ad Sales. Web sites face numerous hurdles in increasing the
sale of their ad inventory, including the time and expense of building an
experienced sales force with national or global coverage, the lack of access to
media buyers at large ad agencies, and the difficulty of implementing the
necessary billing and collections procedures. These challenges can require
significant management attention and resources that could otherwise be devoted
to other aspects of a site's business. As a result, many web sites choose to
outsource their ad sales function to experienced parties that have extensive and
established Internet ad sales organizations and who typically represent a
portfolio or network of many web sites.
Maintaining and Enhancing Brand Value. Several Internet advertising
techniques undermine the ability of web sites to maintain the value of their
brand, which ultimately can negatively impact the rates sites can charge to
advertisers. These techniques include:
- Centralized, Profile-Based Advertising. This technique involves a
third-party ad sales representative selling the ad inventory of
multiple web sites based solely on aggregated user characteristics.
This method places little or no emphasis on the brands of the sites
whose ad inventory is sold. Web sites that permit their ad inventory
to be sold in this manner risk losing pricing power as advertisers
discount the significant value of individual site brands, as well as
user base trust and loyalty.
- Remnant Inventory Sales. Most web sites have significant amounts of
unsold, or remnant, ad inventory. Many web sites put themselves at
risk of diluting their brand value by selling remnant ad inventory to
advertisers at rates that are much lower than the site's published
rates. While providing incremental revenue in the short-term, such
selling may reduce the site's ability to maintain premium pricing over
the long term.
Selecting Appropriate Ad Management Technology. In choosing ad management
technology, web sites must consider the following factors:
- Business Issues: Web sites must determine how important it is for
them to be able to:
-- control the collection and use of user data generated by user
interaction with the web sites' content and advertisements;
-- customize ad targeting, delivery and reporting features to meet
their specific needs; and
-- integrate ad management technology with existing internal systems or
other technologies.
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<PAGE> 41
Local ad management software solutions, which are installed and
operated at web sites, typically offer greater flexibility in
addressing these issues than central serving solutions, which
manage ad delivery and data collection from a remote location.
- Technical Issues: Ad management technologies vary widely in terms
of technical performance. Compared to central serving, local
software solutions generally deliver ads to users at a faster rate,
which can improve user viewing experience and increase the number of
ads delivered. Faster delivery rates typically occur for the
following reasons:
-- ad delivery decisions are made at the site, instead of from a remote
location, reducing communication delays;
-- the number of steps required to deliver an ad is typically lower;
and
-- central serving solutions may suffer from processing bottlenecks
that arise because ad delivery decisions are made simultaneously for
a large number of sites, especially during times of peak user
traffic.
- Total Cost of Ownership: Sites using local software solutions incur
fixed installation and maintenance costs while those that use central
serving solutions typically pay on a per-ad-delivered basis. Local
software solutions allow sites to leverage an infrastructure
investment instead of paying fees each time an ad is delivered. As a
result, purchasing ad management software may cost less over time than
a central serving alternative for sites with high levels of user
traffic.
Realizing Value from Proprietary User Information. User interaction with
web sites generates data that can be gathered and analyzed to better understand
user base characteristics and enable targeted advertising. Sites that collect
user information on their own servers retain access to and control over this
proprietary asset and can capture all of the resulting value generated by using
such data to target advertising on their sites. Web sites may also choose to
rely on central serving or profiling companies to collect user information,
which is then co-owned between the third party and the site and typically
combined by the third party with data from other sites. Once collected, such
information could be used in ways that are competitive to the sites' interests,
such as to enhance targeted direct marketing campaigns on rival sites.
Responding to User Privacy Concerns. Web sites have come under increased
scrutiny with respect to their privacy policies and their handling of user
information. While users typically provide information to web sites through
registration and interaction with content, users may not understand that this
information may be shared with third parties. Legislatures worldwide have
enacted or are considering enacting restrictions on the use of personal
information collected on the Internet. Web sites must be prepared to adapt their
practices to respond to user privacy concerns.
Challenges for Advertisers
Overcoming Internet Audience Fragmentation. Low barriers to entry and
easy-to-use web site authoring software have resulted in a proliferation of web
sites worldwide. eMarketer estimates that there were 3.6 million web sites
worldwide in June 1999. As a result of web site and web user growth, advertisers
are faced with an increasingly complex and fragmented environment in which to
develop and execute their advertising campaigns.
Reaching Consumers in a Trusted, Relevant Environment. As Internet
advertising continues to evolve, advertisers must find ways to reach audiences
in environments that are relevant to individuals' purchasing decisions and
through sites that users are likely to trust.
Obtaining Accurate Information on Ad Campaign Performance. Unlike
traditional broadcast and print media which are delivered to mass audiences,
Internet ads are delivered to individual users. Internet ad campaigns are
usually measured and billed by the number of ad impressions that are delivered
and sometimes by the number of actions that users take, such as clicking on a
banner ad. Accurate and timely measurement of the delivery and performance of ad
campaigns is important to Internet advertisers in determining the
cost-effectiveness of their campaigns.
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<PAGE> 42
THE REAL MEDIA SOLUTION
Real Media provides comprehensive Internet advertising solutions that
emphasize the value of web site brands and user information. Our solutions
consist of three complementary components: the Real Media Network, Open
AdStream(TM) and a suite of media and marketing services. These solutions
benefit web sites and advertisers in the following ways:
THE REAL MEDIA NETWORK
Global Sales Presence. Web sites in the Real Media Network benefit from
our global sales infrastructure consisting of over 70 account executives in 22
offices in 16 countries, as of January 21, 2000. This sales presence and our
knowledge of local and national markets, which is enhanced by the worldwide
relationships of our strategic partner PubliGroupe, permit sites to avoid the
potentially significant cost of building their own national or global sales
forces.
Brand-Focused Sales Approach. Through general ad sales representation or
individual site opportunities such as sponsorships, we sell the value of each
web site's brand and unique audience. Using this approach, we design ad
campaigns that typically run across selected sites that meet an advertiser's
objectives. By emphasizing our sites' brands, we help ensure that advertisers
recognize, and pay for, the full value they receive when placing ads on these
sites.
Overcoming a Fragmented Marketplace through National and Regional
Portfolios. By creating a network of national and regional portfolios of
complementary sites and aggregating their ad inventory, we provide the necessary
scale for these sites to attract the interest of major national and
transnational advertisers. For advertisers and their agencies, our portfolio
approach significantly simplifies the process of planning and executing
advertising campaigns across numerous web sites and multiple geographic markets.
Reaching Large Audiences in Desirable Environments. We design our
portfolios to include several categories of web sites, such as portals and other
general interest content sites, specialized content sites and transnational
sites. This enables advertisers worldwide to reach large,
demographically-desirable audiences in environments that stimulate user trust
and loyalty.
OPEN ADSTREAM(TM)
Comprehensive and Flexible Ad Management Software. OAS provides web sites
with the technology infrastructure to manage all aspects of targeted ad
campaigns, including campaign planning, delivery, measurement and reporting.
Advanced modules in one of our OAS product lines allow web sites to better
manage relationships with advertisers and ad agencies through workplace
automation features that improve the sales, billing and financial management
processes of sites. Many OAS features are customizable, which gives sites
increased flexibility in managing their business and provides competitive
advantages over sites that use a central serving solution.
Exclusive Ownership and Use of User Data. In contrast to most central
serving solutions, OAS enables sites to collect and warehouse user data without
sharing ownership of the information with a third party. Consequently, all value
that is created by analyzing the resulting proprietary user information is
retained exclusively by the site, which helps to preserve the site's brand
value. Moreover, this data may be used to generate user profiles, through
systems such as our audience management solution, to conduct profile-based
marketing on the site.
Superior Performance and Scalability. Because OAS is installed directly on
the web server that delivers content to a user's browser, the time needed to
make and deliver ad decisions is significantly less than with a central serving
solution, which makes the same decisions from a remote location and is therefore
subject to network communication delays. As a result, OAS is capable of serving
more ads per page without significantly increasing the page delivery time. In
addition, OAS's design allows it to maintain its performance levels in
situations where sites experience dramatic increases in user traffic, allowing
sites to maximize potential advertising revenues.
Lower Total Cost of Ownership. While the installation of OAS may require
greater up-front expenditures than using a central serving solution, these costs
and the ongoing maintenance costs are fixed.
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This is in contrast to most central serving solutions, which charge on the basis
of each ad delivered. For web sites whose traffic and advertising revenues are
growing rapidly, a fixed cost solution such as OAS can provide greater operating
leverage and a lower total cost of ownership than a central serving solution.
Adaptable in Response to Privacy Issues. OAS allows web sites to have
flexibility to collect information from users in a manner consistent with the
site's privacy policy. By using a software add-on to OAS called the Privacy
Proxy(TM), sites can also prevent third party ad serving companies from
obtaining data on the site's users.
MEDIA AND MARKETING SERVICES
User Base Analysis and Profiling. Our audience management solution allows
sites to collect registration and other data provided by users and combine it
with information about user browsing activity within their site, which is called
clickstream data, to form the basis of a data warehouse. This information can be
analyzed to develop insights into the characteristics of a site's user base for
purposes of selling more effectively to advertisers. Users may also be
identified and profiled during this interaction with the web site for
simultaneous targeting of advertising and direct marketing campaigns.
Strategic Positioning. Through our consulting services, we advise web
sites on how to increase awareness of their site, increase site traffic, and
enhance the aesthetic appeal and navigability of the site. We also offer a range
of additional consulting, training and other services, which increases our
ability to maintain strong web site relationships.
STRATEGY
Our objective is to be the leading global provider of comprehensive
Internet advertising solutions. We will continue to focus on providing branded
web sites with products and services that help them maximize revenue from
Internet advertising by emphasizing the value of their brands and user
information. In executing our strategy, we intend to actively promote our
brand-focused approach to both web sites and advertisers.
The key elements of our strategy are to:
Expand Operations in Existing Global Markets and Extend into New
Markets. Our global expansion strategy is to develop long-term relationships
with web sites that have strong brand identities in their national and local
markets by (1) establishing an early presence in targeted national markets; (2)
employing experienced local management; and (3) leveraging PubliGroupe's local
knowledge and contacts. We have built what we believe is a market-leading
position in Europe by executing this strategy in Switzerland, Germany, France
and the United Kingdom. We have also built an active local and national presence
in 12 other markets throughout Europe, North America, Latin America,
Asia/Pacific and Africa.
Add Selected Sites to our Portfolios. Our portfolio strategy is to
represent the best possible collection of web site brands in national or
regional markets with significant or rapidly growing online audiences. To build
our portfolios, we assess the value of potential sites to advertisers, determine
whether they complement other portfolio sites, and seek exclusive, long-term
representation relationships with those that meet these criteria. In particular,
we seek to build portfolios comprising a broad mixture of national and regional
sites. As we continue to build our national and regional portfolios throughout
the world, we will remain selective in adding web site brands.
Enhance and Extend OAS Capabilities. We will continue to position OAS as a
leading Internet advertising technology by improving its existing capabilities
and adding new features. In addition, we will continue to integrate OAS with
complementary Internet technology, expanding upon our existing relationships
with NetPerceptions and the iPlanet Sun/Netscape alliance. As we develop more
advanced features or add-ons for OAS, we plan to take greater advantage of
opportunities to sell these product enhancements to existing clients, in
addition to marketing them to new clients.
Further Develop Media and Marketing Services. We intend to expand our
suite of media and marketing services through strategic relationships, internal
development and acquisitions. Our media and marketing services enable our
clients to better compete for Internet advertising dollars and strengthen our
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relationships with those clients. We will increasingly seek to sell media and
marketing services to existing ad sales representation and technology clients.
Continue to Develop Cross-Media Platforms for our Products and
Services. We will continue to position our products and services to take full
advantage of cross-media opportunities, including the convergence of Internet
content and other broadband distribution platforms such as interactive
television and wireless communication devices. Additionally, we offer
advertisers the opportunity to package the purchase of online and offline media
through our Print Plus program, which we jointly market with PubliGroupe.
Pursue Selected Acquisitions and Joint Ventures. Real Media may acquire
companies or form joint ventures to enhance or establish its presence in
targeted global markets. In January 2000, we acquired a South African company to
which we previously licensed our technology and which sells our products and
services in South Africa. We also acquired in January 2000 a 25% interest in an
Australian Internet advertising company, and we have an option to increase our
ownership to 51%. In December 1998, we acquired Cubicmedia GmbH, which helped us
build a strong market position in Germany. Also, we may seek to acquire
companies with products or services that complement our existing Internet
advertising solutions.
PRODUCTS AND SERVICES
THE REAL MEDIA NETWORK: A GLOBAL NETWORK OF NATIONAL AND REGIONAL PORTFOLIOS
Through the Real Media Network, we provide outsourced ad sales
representation to over 1,000 web sites in 33 countries that we organize into 17
national and regional portfolios around the world. We build our portfolios by
working with several categories of branded web sites, including:
- portals and other general interest content sites, which include portals
and other national and regional coverage sites, such as online
newspapers;
- vertical content sites, which focus on specific interest areas, such as
business, technology, entertainment and sports; and
- transnational sites, which operate in multiple national markets.
In our portfolios, we typically seek to include one large portal site with
national coverage and high user traffic; several high traffic national or
regional content sites, frequently including leading online newspapers; vertical
content sites covering specific interest areas; and several transnational sites.
We build our national and regional portfolios by selecting sites in each
category that also meet other criteria, such as strong national or local brand,
loyal user base, minimum number of monthly page views, and attractive user
demographics. This enables advertisers to reach targeted audiences in specific
markets. Clients with web sites in our portfolios include:
<TABLE>
<CAPTION>
FRANCE GERMANY SWITZERLAND UNITED KINGDOM
- ------ ------- ----------- --------------
<S> <C> <C> <C>
Excite@Home Excite@Home Blue Window The Sun
Bonjour Suddeutsche Zeitung Swiss Online The Times
Web66 Planet-Interkom Tages-Anzeiger ADHunter
Le Revenu Game Channel Search E*Trade
Cadresonline Aktiencheck Edicom Arsenal FC
</TABLE>
<TABLE>
<CAPTION>
UNITED STATES BRAZIL MEXICO HONG KONG/CHINA
------------- ------ ------ ---------------
<S> <C> <C> <C>
Qualcomm Eudora Universo Online (UOL) Infosel South China Morning Post
Money.net Zero Hora Digital La Reforma Apple Daily
Boston Globe O Globo Mexico.com Yahoo!
Golf Online Lancenet! El Economista Netvigator
Washington Post Placar Novedades Boom.com
</TABLE>
We sell the ad inventory in our portfolios to advertisers through several
methods, including:
Targeting Vertical Audiences. Through our Real Media Content Networks, we
group our sites by content categories and aggregate ad inventory across
participating sites. We sell ad inventory as a
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collection of individual brands to advertisers trying to reach an audience with
particular lifestyle, demographic or other characteristics. These branded web
sites feature content in the following areas:
<TABLE>
<S> <C> <C>
Automotive Entertainment Personal Finance
Business Health & Fitness Small Business
College Home and Living Sports
E-Commerce Local News Technology
Elite Professional Multicultural Travel
News and Information
</TABLE>
Reaching Local Audiences. We have very strong relationships with most of
the world's leading online newspapers, which offer our advertisers the ability
to target audiences in local or regional markets. We group these online
newspapers into:
World's Interactive Newspapers (WIN) -- WIN comprises selected online
newspapers around the world, including Suddeutsche Zeitung, The Times,
De Telegraaf, O Globo, South China Morning Post, and many others;
America's Interactive Newspapers (AIN) -- AIN consists of U.S. online
newspapers, including Los Angeles Times, The Boston Globe, The New York
Post, Chicago Sun-Times and The Washington Post.
For most WIN or AIN campaigns, advertisers buy ad inventory in groups of five to
eight web sites. Ad inventory on WIN and AIN sites is also sold through the
Content Networks. For example, we sell ad inventory on The Times through the
Business Content Network as well as part of The Times in WIN.
Creating Individual Site Opportunities. Real Media works with selected
branded sites on an individual basis to create site-specific ad sales
opportunities that emphasize the value of a site's brand and user base. Examples
include sponsorships of an entire web site or sections of the site, event-driven
campaigns and exclusive representation in specific international markets. Real
Media matches these opportunities with advertisers seeking to work with
individual sites to target specific audiences.
Maximizing Inventory Sold. Real Media offers sites the opportunity to
maximize the amount of ad inventory sold by allowing sites to make available
previously unsold ad inventory on an anonymous basis at rates below the site's
published rates. Sites are therefore able to generate incremental revenue from
ad inventory while protecting their published rates. Advertisers purchasing this
ad inventory gain access to discounted ad space on participating top branded
sites without knowing on which sites their ads run. To determine the success of
the campaign, advertisers receive detailed reports that measure the particular
parameters relevant to the campaign, such as the number of users clicking on the
ad.
Content Syndication. We offer our portfolio web sites the opportunity to
increase their available ad inventory by receiving free content, such as travel,
financial and other specialized information, from third party providers. This
syndicated content can augment existing content or create new sections on the
site, often in a way that emphasizes the brands of both parties. This additional
content increases the opportunities of our portfolio web sites to create and
sell incremental ad inventory.
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Over 900 advertisers have purchased the ad inventory of our portfolios,
including:
<TABLE>
<CAPTION>
FRANCE GERMANY SWITZERLAND UNITED KINGDOM
- ------ ------- ----------- --------------
<S> <C> <C> <C>
IBM Weltbild/Booxtra UBS Egg
Intel IBM Credit Suisse Virgin
France Telecom Comdirect Bank IBM British Telecom
QXL Primus -- Online Swisscom QXL
Peugeot Deutsche Telekom Teledata British Gas
UNITED STATES MEXICO HONG KONG/CHINA SOUTH AFRICA
- ---------------------- ---------------------- ---------------------- ----------------------
Lexus Consejero Star Alliance Mobile Telegraph
Cnet 3Com E-Finance Networks
Bell Atlantic Dell Boom.com Investec Bank
Amazon.com Querico Hong Kong Tourist South Africa Airways
Marriott Hotels Florida Atlantic Authority BMW
University Quokka Sports Symantec
</TABLE>
We also work with numerous ad agencies, including DDB Digital, Lot21, McCann
Erickson, OgilvyOne and Saatchi & Saatchi Advertising.
OPEN ADSTREAM(TM): TECHNOLOGY INFRASTRUCTURE FOR INTERACTIVE ADVERTISING
Real Media develops, markets and supports the Open AdStream(TM) family of
ad management technology solutions and offers related support services. OAS 5.0
provides sites with the technology infrastructure to plan, deliver, measure and
report on targeted ad campaigns. OAS Enterprise 2000 combines the capabilities
of OAS 5.0 with advanced modules that provide workplace automation features that
allow web sites to consolidate the entire ad sales, billing and financial
management processes into one application. In addition, OAS functions across
existing web-based platforms, including UNIX, Linux and Windows NT. Within these
environments, OAS integrates with other Internet technologies, such as
NetPerceptions' AdTargeting product and the Sun/Netscape alliance's iPlanet
suite of e-commerce products. OAS fully supports "rich media" advertisements and
allows sites to deliver personalized content and promotional offers directly to
users. Rich media refers to the integration of animation, sound, interactivity
and commerce in Internet advertising. OAS also provides the technology backbone
for our audience management system by collecting user information and targeting
ads to individuals in real-time, based on user profiles. Privacy Proxy(TM), an
OAS add-on, prevents third parties from obtaining a site's user information.
We believe that OAS is one of the most deployed ad management technologies,
used by over 700 web sites worldwide. Our top 25 web sites use OAS to serve over
six billion advertisements per month. Some of our clients whose web sites use
OAS include:
<TABLE>
<CAPTION>
FRANCE GERMANY SWITZERLAND UNITED KINGDOM
- ------ ------- ----------- --------------
<S> <C> <C> <C>
Le Monde Axel Springer Tages-Anzeiger The Sun
Les Echos Spiegel Online Swiss Online Shopsmart
Bonjour OMS Swissclick E*Trade
Canal Plus Bertelsmann SF-DRS Cable & Wireless
TF1 Infoseek Edicom Conde Nast
UNITED STATES MEXICO HONG KONG/CHINA SOUTH AFRICA
- ---------------------- ---------------------- ---------------------- ----------------------
The New York Times Infosel Lycos SABC
The Weather Channel Mexico.com South China Morning Independent Online
Bloomberg La Reforma Post iAfrica
MP3 El Norte Apple Daily Times Media
USA Today El Universal Recruit Global Internet Access
Hutch City
</TABLE>
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The OAS Architecture
A significant challenge for Internet ad management technology is to
minimize delays in delivering ads to the web site user, which directly affects
the user's viewing experience. One potential ad delivery bottleneck involves the
location of where decisions are made regarding which ad to deliver. OAS is
designed to make ad delivery decisions directly on the site's web server, which
allows for the nearly simultaneous delivery of content and ads to the user. By
contrast, most central serving solutions make ad delivery decisions at a remote
location, which requires additional communication steps over the Internet. By
eliminating these extra steps to deliver an ad, OAS maximizes ad delivery speed,
which improves the viewing experience for users on the web site and allows sites
to add incremental advertisements to web pages without decreasing ad delivery
performance.
OAS 5.0
OAS 5.0 is a complete Internet advertising management solution enabling web
sites to manage the planning, delivering and reporting of advertising campaigns.
OAS comprises three main subsystems: AdPlanning, AdDelivery and AdReporting.
AdPlanning -- allows OAS users to manage all aspects of an advertising
campaign, including scheduling, targeting and storing advertisements.
Campaign Scheduling -- determines the placement of ads on the site, the
dates and times ads will run, and the frequency with which ads are
served. For example, an ad can be served based on the availability of
inventory, serving the ad as many times as it is requested until the
commitment has been fulfilled, or in even intervals over the duration of
a selected time period.
Campaign Targeting -- designates specific ad delivery to users based on
one or more criteria pre-selected by the advertiser, such as context
(e.g., sports, news or entertainment), environmental factors (e.g.,
operating system or browser type), or visitor profile information, to
ensure that campaigns are targeted at users most likely to respond to
the ads.
Storing Advertisements -- OAS supports many types of ads, including
images, streaming media, e-commerce banners, Java ads and rich media
ads.
AdDelivery -- automates the ad decision-making process, placement of ads on
a page and distribution of ads to a specific user's browser in real-time as web
pages are requested.
AdDelivery Engine -- automates the ad delivery decision process to
ensure that the correct number, type and specific location of ads are
served on a visitor's browser. This process occurs through the
integration of OAS with the web site's user information databases, or
Real Media's audience management solution, which enables targeted
advertising to specific visitors based on the criteria specified in the
ad planning process.
AdDelivery Logging -- each ad delivery is recorded in a log file, with
details of the ad delivery, for later analysis by the reporting
subsystem.
AdReporting -- analyzes campaign delivery details and presents them in an
easy-to-understand format, allowing the web site and advertisers to evaluate the
performance of an ad campaign and adjust it for optimal campaign performance.
OAS provides detailed ad campaign performance reports of the number of
impressions and click-throughs by category of visitor, by sections and position
on the web sites, by demographic groups and by customized targeting profiles.
Dynamic Reports -- using a standard web browser, web site personnel and
advertisers are able to access detailed campaign reports.
Inventory Management -- allows sites to forecast traffic volume and to
determine available ad space, enabling sites to more effectively plan,
price and sell their ad inventory.
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OAS Enterprise 2000
OAS Enterprise 2000 is a new end-to-end Internet ad business management
solution that combines the planning, delivering and reporting capabilities of
OAS 5.0 with advanced modules for ad sales, billing and finance into one
application. OAS Enterprise 2000 contains the following modules:
AdSales. The AdSales module is a contact management solution that enables
sales personnel to manage relationships with agencies and advertisers throughout
the ad sales process, from tracking prospects to signing contracts. AdSales
tracks all salesperson information, such as number of prospects and active
campaigns, and provides advanced search tools to allow the sharing of
information across the organization.
AdBilling. The AdBilling module synthesizes campaign information from OAS
and delivers it in a usable format to the web site's existing billing system.
This module also calculates agency commissions and generates invoicing
information.
AdFinance. The AdFinance module provides tools for sales managers and
financial personnel to analyze data generated through AdSales and other OAS
features. Sales managers can oversee the efforts of individual sales people or
the collective sales force to measure performance and generate forecasts.
Financial personnel can analyze revenue by advertiser, campaign or contract, as
well as measure the potential impact of changing advertising rates.
Privacy Proxy(TM)
Privacy Proxy(TM) is an add-on software module for OAS that prevents third
parties from capturing a web site's user information. When a third party serves
an ad, the third party typically gains access to the web site user's profile
information and, potentially, other information as well. Privacy Proxy(TM) acts
as an intermediary between the web site user and a third-party ad server,
preventing the flow of specific user information between the two. Therefore, the
user's profile information is kept private and the web site maintains control
over its user information.
Technical Support Services
We offer web sites that use our OAS solution three different options for
technical support services. Basic technical support includes remote installation
support and telephone training/support during normal business hours. Premium
technical support adds 24-hour availability for telephone support, quarterly
training seminars and ad server monitoring. Partner level technical support,
which is mandatory for clients that buy one of our customization packages,
includes all premium support features plus on-site installation, support for all
customizations and access to a private web site from which they can download
fixes or enhancements.
MEDIA AND MARKETING SERVICES
We offer a suite of media and marketing services to web sites that includes
user base analysis and profiling tools, as well as consulting and other
services. These services enable web sites to better compete for Internet
advertising dollars.
Audience Management
We offer an audience management system to web sites in partnership with
Cyber Dialogue, an Internet database marketing company, that enables sites to
collect registration and other data from users and then combine it with
information regarding the user's browsing to form a data warehouse. After
information is collected through OAS and other tools, it is analyzed to identify
users and develop insights into their characteristics and preferences. This
information may also be used to profile individual users to allow OAS to target
advertisements to users as they interact with the web sites. By better
understanding their user base and offering profile-based marketing, we believe
web sites that use our audience management system will increase their value to
advertisers and potentially raise their rates.
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Consulting and Other Services
We offer consulting services to sites, including site promotion, public
relations strategies, developing banner advertisements, sponsorship strategies
and advice on the integration of direct marketing and e-commerce technologies.
We also offer training services designed to help educate web sites on certain
aspects of running an Internet advertising-based business and outsourced
campaign management services to web sites that need temporary assistance in
managing the process of ad campaign execution.
SELECTED CASE STUDIES
Some examples of solutions that Real Media has provided to branded web
sites and advertisers are described below.
NYTIMES.COM
Challenge
NYTimes.com, the online offering of The New York Times, currently has over
10 million users who provide personal information when registering to use the
site. NYTimes.com required an ad management solution that would support the
collection of this user information and target advertising to its users based on
this information. NYTimes.com also wanted to prevent third parties that
centrally served ads to the NYTimes.com site from capturing this proprietary
information.
Solution
NYTimes.com converted from an internally developed ad management system to
OAS to improve the collection of user profiles and perform basic ad targeting to
these users. We also integrated OAS with the subsequently deployed NYTimes.com
decision support system, facilitating advanced ad targeting. NYTimes.com also
uses our Privacy Proxy(TM) add-on module, preventing third parties from tracking
NYTimes.com users after they leave the web site. Consequently, the site is able
to maintain control over the data regarding its demographically attractive user
base and to realize the value of this information by charging premium
advertising rates.
SAMSUNG
Challenge
Samsung wanted to market its portable MP3 player, called Yepp, to teens and
young adults in France.
Solution
Working with two of Samsung's advertising agencies, OMD Interactive Paris
and Agency Paris, we created a customized campaign with two web sites in our
French portfolio, Nirvanet and Infodeclics, that have a high percentage of users
between the ages of 15 and 25. Recognizing that information on the Yepp product
and MP3 files in general might be interesting to these sites' primary users, we
worked with Nirvanet and Infodeclics to integrate this content into their sites,
with links to other information about Samsung's portable MP3 player. During and
after the campaign, Real Media also placed rich media banners on both sites,
using OAS to manage this portion of the campaign.
The Nirvanet homepage is made up of four asteroid-shaped rocks on the
screen, with each rock leading to a different section of the site. We added an
additional rock, which led to a section with information on the Yepp product and
MP3 files. From those pages, over 4% of users clicked through to a Samsung web
site that contained further product information. In the music section of
Nirvanet, a small rich media ad, run by OAS, was used to remind people about the
Yepp product. The digital image of a man surfing would move back and forth
across the screen, and when a user moved his mouse over the image, a special
message with a link to the Samsung Yepp web site would replace the surfer.
Approximately 13% of visitors to the site clicked on the ad.
On the Infodeclics web site, multiple sections of the site also reinforced
the Yepp product. For example, in the music section, a complete article
presented the product, with links to the Samsung site.
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Approximately 3% of all visitors to the Infodeclics site clicked through to the
Samsung site, which exceeded Samsung's expectations.
WEATHER.COM
Challenge
At times of peak audience traffic, such as during severe weather,
Weather.com, the web site of the Weather Channel, lost significant potential
advertising revenue because the site's existing ad management technology could
not scale effectively.
Solution
After examining alternative ad management technologies, Weather.com
selected OAS 5.0 to replace a competitor's technology because of OAS' scalable
architecture, which enables the delivery of ads even during spikes of high user
traffic. Within weeks of the OAS installation, Hurricane Floyd hit the United
States mainland. OAS successfully delivered ads throughout the storm period,
during which the site recorded over 20 million page views each day. OAS's
scalability enabled Weather.com to maximize ad delivery opportunities during
this period of peak audience traffic in contrast to Weather.com's previous ad
management technology. Moreover, with OAS installed directly onto the site's
primary web servers, Weather.com was immediately able to redeploy over 20
secondary servers previously dedicated to ad delivery. This reallocation of
computer resources also resulted in a significant reduction in maintenance and
operation costs related to ad management. More recently, OAS has enabled
Weather.com to hit new daily highs in excess of 100 million ad deliveries.
SALES AND MARKETING
Our sales and marketing efforts emphasize the value of Real Media's
comprehensive solution for web sites and advertisers. Throughout the sales
generation process, we highlight an approach to ad sales representation and ad
management technology that focuses on web site brand value, site ownership of
user information and accurate measurement of ad campaign effectiveness.
We seek to develop long-term relationships with leading web sites worldwide
by providing a full range of products and services to help them build
advertising-based Internet businesses. Once we establish a relationship with a
client, web site account managers coordinate cross-selling efforts and provide
general customer service, while product specialists for the Real Media Network,
OAS and media and marketing services promote specific sales ideas. In Europe,
Latin America and the United States, our OAS sales effort is augmented by
resellers that either offer OAS directly to customers with whom we had no prior
relationship, or sell OAS as part of a bundled suite of technology. Our web site
clients may use products or services from more than one of our core offerings.
To sell ad inventory for sites in the Real Media Network, we employ account
executives that work closely with advertisers and their agencies to offer
solutions that meet their specific needs. To simplify the sales process, we have
developed several types of ad inventory packages that are designed to reach
specific audiences on our network. Account executives are typically either
category specialists, focusing on selling campaigns to advertisers in particular
industries, such as automotive or travel, or web site specialists, who focus on
selling specific web site inventory.
We support our global sales operations with marketing efforts directed at
ad agency professionals, major advertisers, and potential web site clients in
each of our markets. The objective of these efforts is to elevate awareness of
Real Media's brand and differentiated market position, and also generate
business leads, through print and online advertising campaigns, direct
marketing, public relations, the Real Media web site, participation in trade
shows and event sponsorships. To emphasize the value of, and our commitment to,
our web site client base, we are beginning to feature selected sites in our
advertising campaigns to showcase their unique characteristics. Another way in
which we market Real Media throughout the world is by actively cross promoting
our solutions with our strategic partner PubliGroupe, which has operated
internationally for over 100 years. In addition to referring qualified leads to
each other,
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we jointly develop and execute cross media campaigns that have online and
offline components for selected clients.
Our global sales force consists of over 100 individuals as of January 21,
2000, and operates through 23 offices around the world. United States and Latin
America sales are headquartered in New York, with local operations in Chicago,
Dallas, Fort Washington (Pennsylvania), Mexico City, Miami, San Francisco and
Sao Paulo. European sales are headquartered in Lausanne, with offices in
Amsterdam, Hamburg, London, Madrid, Munich, Paris, Stockholm, Vienna and Zurich.
In Asia/Pacific, we have sales offices in Hong Kong, Seoul, Singapore and
Sydney. In Africa, we operate in Johannesburg. We intend to continue expanding
our sales force for web sites and advertisers by hiring employees with extensive
experience in and knowledge of local advertising markets and by opening new
offices in selected countries.
PRIVACY STATEMENT
Real Media is committed to providing branded web sites with Internet
advertising solutions that benefit the sites while protecting the privacy of
consumers. Real Media believes that information collected by web sites using OAS
software and/or our audience management system is owned exclusively by the
sites. We do not sell or license this information to any third parties.
Moreover, an add-on module to OAS is the Privacy Proxy(TM), which prevents
third-party ad serving or profiling companies from collecting information on
site users without their consent. Sites may therefore ensure that user
information is handled in a manner consistent with the site's privacy policy.
For ad campaigns that are centrally delivered by Real Media, we do collect
certain non-personally identifiable information about users, such as the type of
browser, IP address, operating system, domain name, day and time of visit, pages
visited and search term, if any, and other data that is not used to identify,
contact or locate a person. Such information is used exclusively for the purpose
of targeting ads and measuring ad effectiveness on behalf of Real Media's
advertisers, and is not used to create user profiles.
Real Media is an industry leader in privacy initiatives. We actively
promote site ownership of the data that they collect from third parties. Real
Media is a founding member of the Network Advertising Initiative working on
self-regulation by Internet advertising networks. We strive to educate our
business customers about data collection and privacy concerns and consumers on
their privacy rights.
COMPETITION
The market for global Internet advertising solutions is highly competitive
and we expect this competition to increase in each of our targeted national
markets worldwide from both existing participants and new entrants, due to the
lack of barriers to entry in the marketplace. See "Risk Factors -- Risks
Relating to the Internet Advertising Industry -- The Internet advertising
industry is highly competitive."
We compete against a fragmented landscape of participants in the Internet
advertising solutions market, many of whom possess greater financial resources
and brand recognition than we do. The competition for each element of our
solution includes:
THE REAL MEDIA NETWORK
The Real Media Network competes directly with a number of different types
of companies. Our competition differs considerably across the markets in which
we operate. Competitors include: (1) other third-party Internet advertising
networks, (2) large Internet media companies, (3) other Internet ad sales
representation firms and (4) to a lesser extent, Internet direct marketing
firms. In addition, the Real Media Network also indirectly competes with
traditional media companies in the television, radio and print industries to
capture a greater portion of total advertising expenditures.
We compete with other third-party ad networks, such as CMGI, Inc.,
DoubleClick and 24/7 Media or their affiliates, in the markets in which we
operate, especially in the United States, France and the United Kingdom, and
across many of the other European, Latin American and Asian markets.
We also face competition in various markets from several large online media
companies that are not part of our network and which use in-house sales forces
to sell advertising on their sites. These include
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America Online in the United States and Brazil, Yahoo! in the United States,
France and Germany, and Rignier in Switzerland.
Other online ad sales representation firms that may be independent or part
of larger media companies compete with us in a variety of markets. These include
independent sales representation firms such as Adlink in France, TSMSI in the
United Kingdom, AdPepper in Switzerland, BMC Media in Australia and several
smaller independents in these and other markets in which we operate. In Germany,
two of our principal competitors are the third-party ad representation units of
Axel Springer Verlag and Bertelsmann.
OPEN ADSTREAM(TM)
We face competition for our Open AdStream(TM) technology principally from
other third-party ad management technology companies, including DoubleClick,
Engage Technologies' Accipiter unit, CMGI's AdForce unit and Excite@Home's
MatchLogic division, as well as internally-developed web serving technology.
Because we focus primarily on providing local ad management software solutions,
we may not be able to compete effectively if centrally-served solutions gain
popularity with branded web sites.
We also expect to face indirect competition from software companies that
offer products to help web sites personalize their interaction with users. Such
companies include Allaire, BroadVision and Vignette. Additionally many larger
software firms with significantly greater financial and technical resources than
us, such as Microsoft and Oracle, may develop products that compete with OAS or
that bundle the technology of our competitors with their own.
MEDIA AND MARKETING SERVICES
We currently face competition for our media and marketing services from
Internet user profiling companies, including Engage Technologies, MatchLogic
division, and DoubleClick, which offer alternatives to our audience management
solution. We may also encounter competition in the future from database
marketing firms, data mining and analysis firms, and Internet consulting, public
relations and related firms.
CONSOLIDATION IN THE INDUSTRY
Our industry is consolidating rapidly with several of our principal
competitors, including CMGI, DoubleClick, Engage Technologies and 24/7 Media
having announced or completed numerous acquisitions in recent months. While we
currently face fragmented competition in many markets, this consolidation may
lead to changes in our competitors and the size and resources of our competitors
in the near term. See "Risk Factors -- Risks Relating to the Internet
Advertising Industry -- Industry consolidation may increase our competitors'
resources."
INTELLECTUAL PROPERTY
The computer software market is characterized by frequent and substantial
intellectual property litigation, which is often complex and expensive, and
involves a significant diversion of corporate resources. We are not currently
involved in any litigation involving intellectual property rights, nor have we
been put on notice of any potential claims, but some may arise in the ordinary
course of business. However, there can be no assurances that our business
activities will not infringe upon the proprietary rights of others, or that
other parties will not assert infringement claims against us whether meritorious
or not. Should such claims arise, it could have a material adverse effect on our
business. See "Risk Factors -- Any Failure by us to protect our intellectual
property could harm our business and competitive position."
Our success and ability to compete are substantially dependent on our
proprietary technologies, including Open AdStream(TM), OAS Enterprise(TM) 2000
and Privacy Proxy(TM), that we protect through a combination of intellectual
property laws. We are actively evaluating the extent to which we may be able to
claim patent protection for our proprietary technologies. To date, however, we
have not sought patent protection or copyright registration for our proprietary
software and other technologies. As a result, we may not be able to prevent
others from using any inventions in our software and other technologies, and we
may not have adequate remedies to compensate us fully for any infringement of
our copyrights by others. Although we have applied to register trademarks in the
United States and internationally, we have not secured registrations for our
marks. We cannot guarantee that any of our trademark registrations will be
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approved. Even if they are approved, these trademarks may be successfully
challenged by others or invalidated since the validity, enforceability and scope
of protection on intellectual property rights in Internet-related industries are
uncertain and still evolving. Furthermore, if our trademark registrations are
not approved because third parties own these trademarks, our use of these
trademarks will be restricted unless we enter into arrangements with these third
parties. We cannot assure you that we can enter into arrangements with these
third parties on commercially reasonable terms, if at all. We are aware that
other companies claim rights to the mark REAL MEDIA and we may not be able to
prevent all third-party use of our marks. Further, the laws of some foreign
countries do not protect our proprietary rights to the same extent as do the
laws of the U.S. and effective copyright, trademark and trade secret protection
may not be available in all jurisdictions.
We generally enter into confidentiality or license agreements with our
employees, consultants and corporate partners and generally control access to
and distribution of our technologies, documentation and other proprietary
information. Despite these efforts, unauthorized parties may attempt to
disclose, obtain use of our advertising solutions or technologies. Our
precautions may not prevent misappropriation of our advertising solutions or
technologies, particularly in foreign countries where laws or law enforcement
practices may not protect our rights as fully as in the United States. Further,
we cannot assure you that others will not develop technologies that are similar
or superior to our technology.
EMPLOYEES
As of January 21, 2000, we had 301 employees worldwide. None of our
employees is represented by a collective bargaining agreement. We believe that
we maintain good relationships with our employees.
FACILITIES
Our global headquarters are in New York, New York, where we lease
approximately 8,500 square feet pursuant to a lease that expires in February
2002. Our principal technology development center is located in a 16,820 square
foot office in Fort Washington, Pennsylvania, under a lease that expires in
2005.
Our European operations are headquartered in Lausanne, Switzerland, where
we lease approximately 1,700 square feet pursuant to a lease that expires in
2005.
We continually evaluate our facilities requirements and believe that
suitable additional space will be available in the future on commercially
reasonable terms.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers and directors, their ages and positions, and
director classes, are set forth below. Three current directors who will resign
from the board prior to this offering are not listed.
<TABLE>
<CAPTION>
NAME AGE POSITION CLASS
- ---- --- -------- -----
<S> <C> <C> <C>
David Morgan............. 36 Chairman and Director
Christopher Neimeth...... 30 President, Chief Executive Officer and Director
Gil Beyda................ 36 Chief Technology Officer and Director
Norman Blashka........... 45 Chief Financial Officer, Senior Vice President and Secretary
Pascal Zahner............ 39 Chief Executive Officer, Europe
Silvana Imperiali........ 32 Chief Operating Officer
Philippe Paget........... 38 Chief Operating Officer, Europe
Walter Annasohn.......... 54 Director
Hans Steiner............. 51 Director
Heinz Wagli.............. 57 Director
</TABLE>
- ---------------
(1) Member of the audit committee
(2) Member of the compensation committee
David Morgan is a co-founder of Real Media and has served as Chairman and
Director since its inception in May 1995. From May 1995 to December 1999, Mr.
Morgan was also our President and Chief Executive Officer. Before co-founding
Real Media, from 1992 to May 1995, Mr. Morgan was General Counsel and a Director
of New Media Ventures for the Pennsylvania Newspaper Publisher's Association.
Mr. Morgan obtained a J.D. from the Dickinson School of Law and a B.A. in
political science from The Pennsylvania State University.
Christopher Neimeth has served as Real Media's President and Chief
Executive Officer since December 1999 and will serve as a Director upon the
completion of the business combination of Real Media, Inc. and Real Media
Europe. Before joining Real Media, from August 1999 to December 1999, Mr.
Neimeth was Senior Vice President, Business Development and Strategic Planning
of Times Company Digital, the Internet unit of The New York Times Company. From
September 1995 to August 1999, Mr. Neimeth was Director of Marketing, then Vice
President, Director of Sales and Marketing and later Group Vice President of the
predecessor of Times Company Digital. From April 1994 to September 1995, Mr.
Neimeth worked at Grey Interactive, where he was a co-founder and associate
director. Mr. Neimeth is a founding member of the Advertising Research
Foundation Video/Interactive Media Council and The New York New Media
Association, and a member of the advisory board of the AdCouncil's Internet
Committee. He is also a founding member and director of the Internet Advertising
Bureau. Mr. Neimeth obtained a B.A. in anthropology and economics from Hamilton
College.
Gil Beyda is a co-founder of Real Media and has served as a Director and
Chief Technology Officer since its inception in May 1995. Before co-founding
Real Media, Mr. Beyda was President and Technology Consultant of Beyda
Consulting Group, a computer consulting firm he founded in 1979, specializing in
designing, developing and deploying complex software systems for Fortune 500
companies. Mr. Beyda obtained an M.B.A. and a B.S. in computer science from
California State University at Northridge and is fluent in 15 computer
programming languages, 14 computer operating systems and over 20 computer
systems.
Norman Blashka has served as Real Media's Chief Financial Officer and
Senior Vice President since September 1999 and Secretary since October 1999.
Before joining Real Media, from January 1997 to September 1999, Mr. Blashka was
Senior Vice President and Chief Financial Officer of Mickelberry
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Communications, Inc., an integrated marketing services company, and Executive
Vice President of Union Capital Corporation, a merchant bank and holding company
affiliated with Mickelberry. From January 1999 to September 1999, Mr. Blashka
was also the Chief Investment Officer at Union Capital. From October 1993 to
September 1996, Mr. Blashka was the Vice President and Chief Financial Officer
of Lang Communications, L.P., a privately-held magazine publisher. Mr. Blashka,
a certified public accountant, obtained an M.B.A. from Columbia University's
Graduate School of Business and a B.A., summa cum laude, in economics from the
State University of New York, College at New Paltz.
Pascal Zahner is the founder of Real Media Europe and has served as Chief
Executive Officer, Europe since February 2000. From November 1997 to February
2000, Mr. Zahner served as a Director of Real Media, Inc. From January 1997 to
January 2000, Mr. Zahner served as Real Media Europe's Managing Director and
Chief Executive Officer Europe & Asia. From May 1995 to December 1996, Mr.
Zahner participated in the launch of MMD Multimedia Development S.A. as a member
of the management team. MMD is a subsidiary of PubliGroupe dedicated to
interactive advertising and web development, mainly active in Switzerland. From
April 1994 to April 1995, Mr. Zahner was part of PubliGroupe's R&D team,
focusing on defining a development strategy in interactive media for the group.
Mr. Zahner obtained a degree in political science from the University of
Lausanne (Switzerland) and an M.S. in journalism from Columbia University's
Graduate School of Journalism.
Silvana Imperiali has served as Real Media's Chief Operating Officer since
September 1999. Before joining Real Media, from April 1998 to September 1999,
Ms. Imperiali was a Marketing Director at Publicitas/Globe Media, an affiliate
of PubliGroupe. From October 1994 to March 1998, Ms. Imperiali was a Managing
Director of Publicitas Swiss Press, an affiliate of PubliGroupe in Zurich,
Switzerland, where she directed advertising and marketing for Swiss publishing
groups. Ms. Imperiali obtained a masters degree in management of publishing
houses at SZV/SAWI and a degree in politics with special certificates in
economics and law from the University of Lausanne (Switzerland).
Philippe Paget has served as Chief Operating Officer of Real Media Europe
since January 2000. From June 1997 to January 2000, Mr. Paget served as Managing
Director of Real Media France. From September 1994 to June 1997, Mr. Paget was
an Associated Manager of Presence D'Esprits, a French communication agency. Mr.
Paget obtained a degree in marketing from the European Business School (France).
Walter Annasohn has served as a Director of Real Media, Inc. since April
1999. Dr. Annasohn has served as the CEO of operations in North America, Russia
and Ukraine of Publicitas Promotion Network as a Senior Vice President of
PubliGroupe since May 1994. From July 1990 to April 1994, Dr. Annasohn was the
CEO of the International Division of Ascom, a Swiss telecommunications company.
Dr. Annasohn is also a high ranking officer (colonel) and member of the general
staff of the Swiss Army. Dr. Annasohn obtained a degree, magna cum laude, in
economics, and a Ph.D., magna cum laude, in economics, from the University of
Bern (Switzerland).
Hans Steiner will serve as a Director upon the completion of the business
combination of Real Media, Inc. and Real Media Europe. Mr. Steiner has served as
a Director and a Senior Vice President of the PubliOnline Division of
PubliGroupe since October 1999. From February 1986 to September 1999, Mr.
Steiner was a Senior Vice President with managerial responsibilities in Europe,
Asia, Latin America and the United States of Societe Generale de Surveillance, a
Swiss-based service company. Mr. Steiner obtained a B.S. in business through
studies at the Ecole de Commerce in Neuchatel (Switzerland) with additional
coursework at The University of Hartford and Babson College. Mr. Steiner
obtained an M.B.A. in marketing and finance from Babson College.
Heinz Wagli will serve as a Director upon the completion of the business
combination of Real Media, Inc. and Real Media Europe. Dr. Wagli has served as
Chief Financial Officer of PubliGroupe since October 1993. From 1987 to
September 1993, Dr. Wagli was the Chief Financial Officer of the personal and
business communications division of Ascom, a Swiss telecommunications company.
Dr. Wagli obtained a degree, magna cum laude, in economics and a Ph.D., magna
cum laude, in economics from the University of Bern (Switzerland).
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BOARD COMPOSITION
We currently have seven members on our board of directors. When we complete
the business combination of Real Media, Inc. and Real Media Europe, we will have
nine members on our board of directors pursuant to the terms of the Second
Amended and Restated Voting and Stockholders Agreement. Upon the completion of
this offering, the composition of our board of directors will be determined by a
stockholders voting agreement. See "Related Party Transactions -- Stockholders
Voting Agreement."
Our certificate of incorporation provides for a board of directors of at
least three but not more than nine directors, to be divided into three classes
of directors. These classes are as nearly equal in number as possible and serve
staggered three-year terms. As a result, approximately one-third of our board of
directors will be elected each year. See "Description of Capital
Stock -- Section 203 of the Delaware General Corporation Law, Certain
Anti-Takeover, Limited Liability and Indemnification Provisions -- Classified
Board of Directors."
BOARD COMMITTEES
The compensation committee reviews and makes recommendations to the board
of directors regarding the compensation to be paid to our executive officers and
directors. Beginning , 2000, the compensation committee will
administer our 1999 employee stock option plan. The compensation committee
consists of Messrs. , and .
The audit committee reviews and monitors our corporate financial reporting,
external audits, internal control functions and compliance with laws and
regulations that could have a significant effect on our financial condition or
results of operations. In addition, the audit committee has the responsibility
to consider and recommend the appointment of, and to review fee arrangements
with, our independent auditors. The current members of the audit committee are
Messrs. , and .
BOARD COMPENSATION
We do not pay cash compensation to our directors, other than our
independent directors. We intend to pay our independent directors annually
for their services as directors. All of our directors are reimbursed for the
expenses they incur in attending meetings of the board or board committees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers, directors or compensation committee members
currently serves, or has in the past served, on the compensation committee of
any other company whose directors or executive officers have served on our
compensation committee.
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EXECUTIVE COMPENSATION
The following table provides certain summary information concerning the
compensation earned by our chief executive officer and our other executive
officers who earned more than $100,000 in total cash compensation during the
year ended December 31, 1999. The value of certain perquisites and other
personal benefits is not included in the amounts disclosed because it did not
exceed for any officer listed in the table below the lesser of either $50,000 or
10% of the total annual salary and bonus reported for such officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- ------------
SHARES
OTHER UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
- --------------------------- ---- -------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Christopher Neimeth................... 1999 $ 10,416(1) -- -- 630,176
President and Chief Executive
Officer
David Morgan.......................... 1999 77,500 -- -- --
Former President and Chief Executive
Officer (through December 14, 1999)
Gil Beyda............................. 1999 160,000 -- -- --
Chief Technology Officer
</TABLE>
- ---------------
(1) Compensation commenced on December 15, 1999. See "-- Employment Agreement."
In 2000, we expect that executive officers in addition to those listed
above will earn more than $100,000 in total cash compensation.
The following tables set forth certain information concerning grants to
purchase shares of our common stock made to each of the officers named in the
summary compensation table above during the year ended December 31, 1999. The
exercise price per share of each option was greater than or equal to the fair
market value of our common stock on the date of grant as determined by our board
of directors. We calculate the potential realizable value of options by assuming
that the fair market value of our common stock appreciates from the date of
grant at the indicated annual rate compounded annually for the entire term of
the option, and that the option is exercised and sold on the last day of its
term for the appreciated stock price. These numbers are calculated based on the
requirements of the Securities and Exchange Commission and do not reflect our
estimate of future stock price growth.
OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENTAGE OF AT ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------------------
NAME GRANTED 1999 SHARE DATE 5% 10%
- ---- ---------- ------------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Christopher Neimeth..... 630,176 53.4% $6.00 12/14/09
David Morgan............ -- -- -- -- -- --
Gil Beyda............... -- -- -- -- -- --
</TABLE>
Of Mr. Neimeth's 630,176 options, 157,544 are vested, and 39,386 will vest
at the end of each calendar quarter from the first quarter of 2000 to the fourth
quarter of 2002.
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The following table sets forth certain information concerning option
exercises by the officers named in the above summary compensation table. The
value of unexercised in-the-money options at fiscal year-end is based on an
assumed initial public offering price of $ per share (the midpoint of the
range of initial public offering prices set forth on the cover page of this
prospectus), less the exercise price, multiplied by the number of shares
underlying the option.
YEAR-END DECEMBER 31, 1999 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Christopher Neimeth......... 0 0 157,544 472,632
David Morgan................ -- -- -- -- -- --
Gil Beyda................... 0 0 10,000 0
</TABLE>
EMPLOYMENT AGREEMENT
We have entered into an employment agreement with Mr. Neimeth, dated as of
December 15, 1999, under which we have agreed to employ Mr. Neimeth as our chief
executive officer and a director for an initial term ending on December 31, 2002
and automatically renewing for successive one-year periods thereafter. Mr.
Neimeth's annual base salary under the agreement will be $250,000, $300,000 and
$350,000 for 2000, 2001 and 2002, respectively. Mr. Neimeth is eligible for an
annual incentive bonus based on performance targets, subject to modification by
our board of directors. The agreement provides that Mr. Neimeth will receive
three weeks of vacation per year and other benefits that we generally provide to
our senior executives. Under the agreement, we granted Mr. Neimeth options to
acquire 630,176 shares of our common stock. All shares of common stock Mr.
Neimeth acquires from exercising these options will be subject to the
stockholders voting agreement among Real Media, PubliGroupe, Advance Internet
and our five founders. See "Related Party Transactions -- Stockholders Voting
Agreement." The employment agreement prohibits Mr. Neimeth from competing with
us or soliciting our employees for employment for two years following the
termination of his employment. We can terminate Mr. Neimeth's employment with or
without cause, and Mr. Neimeth can terminate his employment with good reason,
such as a reduction in salary or responsibilities. If we terminate Mr. Neimeth's
employment without cause, or if he terminates it with good reason, we are
required to pay him six months' severance pay, and all stock options previously
granted to Mr. Neimeth that are vested on the termination date or would have
vested within 12 months following the termination date will immediately vest. In
addition, the covenant not to compete will no longer apply.
1999 EMPLOYEE STOCK OPTION PLAN
The board of directors adopted the Real Media, Inc. 1999 Employee Stock
Option Plan on July 15, 1999. The purpose of the plan is to provide incentives
to our directors, key employees, independent contractors, agents and consultants
and to aid in attracting and retaining valued directors, employees, independent
contractors, agents and consultants by offering them a greater stake in our
success and a closer identity with us and our stockholders. The plan is designed
to accomplish these goals by allowing for the grant of stock options and stock
appreciation rights. The total number of shares of common stock authorized under
the plan is 1,093,364 (subject to adjustments for stock splits, stock dividends
and other similar changes in our capitalization). If any awards expire or
terminate prior to exercise or if any award is paid in cash in lieu of stock,
the shares of common stock subject to such award will again be available for
grant under the plan. Once our common stock becomes publicly traded, no
individual employee may receive awards covering more than 50,000 shares under
the plan during any calendar year.
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Eligibility. Any officer, director, employee, independent contractor,
agent or consultant of Real Media or any of its subsidiaries is eligible to
participate in the plan.
Administration and Implementation. Currently, our board of directors
administers the plan. Once our common stock becomes publicly traded, the
compensation committee composed of at least two non-employee, outside directors
selected by the board of directors will administer the plan. The committee may:
- interpret and administer the plan;
- prescribe, amend and rescind rules and regulations to aid in the
interpretation and administration of the plan;
- select who among the eligible individuals will participate in the plan;
- determine the terms and conditions of awards under the plan; and
- make all determinations with respect to any controversies and claims
arising under the plan.
All determinations made by the compensation committee will be conclusive and
binding on all persons.
Options. An option is a grant by us of the right to purchase a specified
number of shares of our common stock for a specified time period at a fixed
price. Options may be either incentive stock options or non-qualified stock
options. Grants of options will be evidenced by option agreements which will
specify when an option may be exercisable and the terms and conditions
applicable to the option. The exercise price of an option will be determined by
the compensation committee, but, in the case of incentive stock options, the
exercise price will not be less than the fair market value of a share of common
stock on the date of grant (or 110% of such fair market value if such option is
granted to a person who owns more than 10% of the voting power of the company).
The term of an option will in no event be greater than ten years (or five years
in the case of an incentive stock option granted to a person who owns more than
10% of the voting power of the company). The compensation committee may provide
that non-qualified stock options may be transferred in accordance with such
limitations and conditions determined by the compensation committee.
The compensation committee may also provide in an option recipient's option
agreement that an additional option may be granted upon the exercise of the
initial option if the exercise price is paid in shares of our common. Such
additional option would be for the same number of shares so paid, would have an
exercise price equal to the fair market value of the common stock on the date of
grant and would not be exercisable until six months after the date of grant.
Options may be exercised by payment of the exercise price in cash, by
check, by delivery of shares of our common stock, or any combination of such
methods, or, if permitted by the compensation committee, with the proceeds of a
loan from us. Any such loan would be secured by the stock acquired pursuant to
the exercise of the option or by any other security as determined by the
compensation committee.
Options may be terminated upon the occurrence of one of the following:
three months after a recipient's voluntary or involuntary termination without
cause, termination of a recipient's employment for cause, or one year after a
recipient's employment is terminated for retirement, disability or death.
Stock Appreciation Rights. A stock appreciation right allows a recipient
to receive, upon exercise of the right, the increase in the fair market value of
a specified number of shares of common stock from the date of grant to the date
of exercise. Stock appreciation rights may be granted only in conjunction with
the grant of a stock option and will be exercisable at such times and to the
same extent as the related stock option is exercisable. Upon exercise of a stock
appreciation right, the related stock option will be forfeited and surrendered.
Payment upon exercise of a stock appreciation right may be made in cash or
common stock. Once our common stock is publicly traded, a stock appreciation
right generally may only be exercised in limited
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periods following the release of certain financial reports. The terms of a stock
appreciation right will be evidenced by a stock appreciation right agreement.
Amendment and Termination. The plan will terminate on July 15, 2009,
unless terminated earlier by the board of directors. The board of directors has
authority to amend or terminate the plan at any time. However, no termination or
amendment of the plan may adversely affect the rights of a holder of an
outstanding award granted under the plan without the consent of the holder. In
addition, certain amendments require the approval of the stockholders. The
following amendments require stockholder approval:
- any amendment that would, if it were not approved by the stockholders,
cause the plan to fail to comply with any requirement of applicable law
or regulation; and
- any amendment materially modifying the classes of individuals eligible to
participate in the plan.
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RELATED PARTY TRANSACTIONS
David Morgan, our chairman, Mark Pinney, a director until completion of the
business combination, and Gil Beyda, our chief technology officer and a
director, were involved in our founding and organization and may be considered
our promoters.
In 1995, our promoters paid for our operating expenses incurred in 1995.
In August 1996, Messrs. Morgan, Pinney and Beyda purchased 1,088,000,
1,044,000 and 1,004,000 shares of our common stock, respectively, at par value
$0.001 per share, or total cash consideration of $1,088, $1,044 and $1,004,
respectively.
In October 1996, Messrs. Morgan, Pinney and Beyda received stock options to
purchase 20,000, 50,000 and 10,000 shares of our common stock, respectively, at
an exercise price of $.05 per share.
In December 1996, we sold 2,250,000 shares of our common stock to
PubliGroupe for approximately $1.0 million in cash.
On May 13, 1997, we issued a $100,000 note payable to PubliGroupe, which
was repaid in June 1997.
In June 1997, PubliGroupe purchased 550,000 shares of our common stock for
$330,000 in cash and loaned Real Media, Inc. $770,000, which was evidenced by a
promissory note dated June 19, 1997.
In December 1997, Real Media, Inc. issued a $64,000 note payable to Mr.
Pinney, which was repaid in April 1998.
In January and February 1998, Real Media, Inc. issued notes payable to
PubliGroupe in the aggregate principal amount of $225,000.
In January 1998, Mr. Pinney received stock options to purchase 71,720
shares of our common stock at an exercise price of $.60 per share.
In April 1998, we sold 2,195,000 shares of our common stock to Advance
Internet for $3.0 million in cash. We also repaid to PubliGroupe principal and
interest of $500,000 in connection with the $770,000 and $225,000 notes payable.
The balance (aggregating approximately $551,000) was canceled and set up as
deferred revenue in accordance with the Amended and Restated Technology Transfer
Agreement, dated April 8, 1998, between Real Media, Inc. and PubliGroupe.
Under an agreement between Advance Internet and Real Media, Inc. in April
1998, Real Media, Inc. became a non-exclusive Internet ad sales representative
for Advance Internet affiliated web sites. As a result of this agreement, Real
Media, Inc. sold ad inventory of Advance Internet's web sites totaling
approximately $42,000 in 1998 and $171,000 in 1999.
In March 1999, we sold 277,778 shares of our common stock to PubliGroupe
for $750,000 in cash, and we sold 833,333 shares to Advance Internet for $2.25
million in cash.
In July 1999, to make additional shares of our common stock available for
the grant of options by us to our employees, consultants and non-employee
directors, Mr. Morgan terminated 20,000 options to purchase our common stock,
and we repurchased 40,000 shares of our common stock from him at par value $.001
per share.
In June and November 1999, Mr. Pinney exercised stock options for 121,720
shares of our common stock for an aggregate consideration of $45,532. In
addition, we paid Mr. Pinney a $50,000 retainer fee in 1999 for consulting and
advisory services provided to us.
In August 1999, we sold 95,007 shares of our common stock to Advance
Internet for $500,000 in cash.
Also in August 1999, in connection with discussions regarding a potential
business combination and to provide working capital to Real Media, Inc. prior to
the completion of the business combination, PubliGroupe entered into a
commitment to lend Real Media, Inc. $10.0 million. Loans made pursuant to
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this commitment were to be evidenced by promissory notes convertible into common
stock of Real Media, Inc. upon the completion of the business combination.
PubliGroupe has loaned Real Media, Inc. all $10.0 million under this commitment
through loans made in September ($1.0 million), October ($2.5 million), November
($1.5 million), and December 1999 ($1.0 million), and January ($2.4 million) and
February 2000 ($1.6 million). These notes are generally due one year from the
date of issuance, unless earlier terminated, and they accrue interest at the
prime rate, compounded annually.
BUSINESS COMBINATION WITH REAL MEDIA EUROPE
Real Media Europe consists of a group of affiliated companies, all of which
are subsidiaries of PubliGroupe. These companies are:
- Real Media SARL, which conducts our business in France;
- Real Media Holding (UK) Ltd. and Real Media (UK) Ltd, which conduct our
business in the United Kingdom;
- Real Media Deutschland GmbH, which conducts our business in Germany;
- Real Media S.A., which conducts our business in Switzerland; and
- Real Media Technology S.A., which provides technical support to our
European operations.
PubliGroupe has created a holding company, called Real Media Europe Holding
S.A., organized under the laws of Switzerland. PubliGroupe will transfer all of
the capital stock of the Real Media Europe companies to Real Media Europe
Holding, except that PubliGroupe will transfer only a 49% interest in Real Media
S.A. Pursuant to a stock purchase agreement between Real Media, Inc.,
PubliGroupe and Real Media Europe Holding, dated February 8, 2000, PubliGroupe
will transfer all of the stock of Real Media Europe Holding to Real Media, Inc.
in exchange for 16,126,525 shares of common stock of Real Media, Inc. and
450,000 shares of Series A Convertible Preferred Stock of Real Media, Inc. The
preferred stock will convert into 450,000 shares of our common stock immediately
upon the completion of this offering. In addition, PubliGroupe will transfer to
Real Media, Inc. for $10.00 all of the capital stock of Real Media Pte Ltd.,
which conducts our business in Singapore, and Real Media Limited, which conducts
our business in Hong Kong. Simultaneously with this transaction, the promissory
notes issued to PubliGroupe for its $10.0 million loan commitment will be
converted into approximately 1,901,141 shares of our common stock. The 1,901,141
shares of our common stock to be issued to PubliGroupe are included in the
16,126,525 shares of our common stock that PubliGroupe will receive in the
business combination.
The companies of Real Media Europe have various loan facilities with
PubliGroupe. Interest accrues on these loans at rates ranging between 4.0% and
6.75% per year. PubliGroupe has agreed to forgive intercompany loans and
eliminate all accumulated losses of Real Media Europe through December 31, 1999
through capital contributions. We must repay any intercompany loans made by
PubliGroupe to Real Media Europe between January 1, 2000 and the completion of
the business combination within 60 days following the business combination.
Following the business combination, we will own 49% of Real Media S.A.
through Real Media Europe Holding, and PubliGroupe will continue to own 51%.
Under the terms of our stock purchase agreement with PubliGroupe, we have the
right, exercisable until January 1, 2002, to purchase all, but not less than
all, of PubliGroupe's interest in Real Media S.A. Until that date, PubliGroupe
has the right to elect to sell to us all, but not less than all, of its interest
in Real Media S.A. The purchase price of a sale of Real Media S.A. will be
determined by negotiations between us and PubliGroupe and shall be payable in
cash, or, at our election, in shares of our common stock. If we are unable to
agree on a purchase price, we will agree to be bound by a value determined by
investments banks retained by PubliGroupe and us.
PubliGroupe and Real Media have given each other customary representations
and warranties in the stock purchase agreement as to the organization and
capitalization of the companies, their financial condition, title to their
assets, the absence of adverse changes to their businesses, the absence of
certain
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liabilities, and other matters typically covered in acquisition agreements. We
have agreed to indemnify each other for any losses caused by a breach of those
representations and warranties. PubliGroupe has also agreed to indemnify us for
certain potential tax liabilities. In addition to the stock purchase agreement,
we have entered into several ancillary agreements regarding our relationship
with PubliGroupe and other stockholders. The principal terms of these agreements
are described below.
Stockholders Voting Agreement
Real Media, PubliGroupe USA Holding, Inc. (a wholly-owned subsidiary of
PubliGroupe), PubliGroupe, Advance Internet and our five founders, David Morgan,
Gil Beyda, Mark Pinney, Charles Smith and Joshua Rosen, will enter into a Second
Amended and Restated Voting and Stockholders Agreement upon the closing of the
business combination. Among other things, under this agreement, PubliGroupe and
Advance Internet will agree to make available to us from time to time prior to
the completion of this offering up to $13.0 million and $2.0 million,
respectively, at an interest rate equal to the prime rate. These loans are all
due on the earlier of one year from the date of the first loan or the completion
of this offering, and we will repay them in full from the proceeds of this
offering.
The Second Amended and Restated Voting and Stockholder Agreement will be
terminated, and the parties will enter into a new stockholders voting agreement,
on the closing date of this offering. This stockholders voting agreement will
provide for a board of directors of nine members, three to be nominated by
PubliGroupe, two to be nominated by the founders, one to be the chief executive
officer of Real Media, and three to be independent directors. Initially, one of
the independent directors shall be nominated by Advance Internet, and two shall
be nominated by a vote of at least five of the other seven directors.
The parties to the stockholders voting agreement will agree not to sell or
transfer their shares of our common stock except:
- to Real Media, another party to the stockholders voting agreement or an
affiliate of that party, or any other person or entity who agrees to be
bound by the stockholders voting agreement;
- to the public in a sale registered under the Securities Act, or open
market sales made in accordance with Rule 144 under the Securities Act on
the Nasdaq National Market or the SWX New Market of the SWX Swiss
Exchange;
- pursuant to a tender offer, merger, recapitalization or other business
combination that is recommended by our board of directors; or
- in a transaction after the stockholder has offered to sell the stock to
the other parties to the stockholders voting agreement on the same terms
as a proposed sale.
PubliGroupe will agree to vote all of the shares that it holds in excess of
one-third of our outstanding common stock in accordance with the recommendation
of the majority of our board of directors on any matter submitted to our
stockholders for their vote. This limitation on PubliGroupe's voting rights does
not apply, however, to a vote on any merger or other business combination that
would result in the conversion of our common stock into cash or other securities
or would result in the stockholders of the other entity acquiring control of a
majority of the voting power of the combined entity. This requirement also does
not apply to any sale of all or substantially all of our assets.
During the term of the stockholders voting agreement, we will agree to give
PubliGroupe a right of first refusal on any proposed sale by us of our interest
in Real Media S.A. If PubliGroupe exercises this right, it will have the right
to buy our interest on the same terms as the proposed sale. If PubliGroupe does
not exercise its right of first refusal, we may sell our interest in Real Media
S.A., subject to our being able to complete the sale within a specified time
period.
The stockholders voting agreement will terminate on the earliest date on
which:
- PubliGroupe ceases to own at least 36% of our outstanding common stock;
- the parties to the agreement cease to own in the aggregate at least 51%
of our outstanding common stock, and Advance Internet owns less than
2,811,006 shares of our common stock; or
- Advance Internet and the founders cease to own at least 5% of our
outstanding common stock, and Advance Internet owns less than 2,811,006
shares of our common stock.
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Cooperation Agreement
We will enter into a cooperation agreement with PubliGroupe. PubliGroupe
will agree to promote us as an Internet advertising organization, and we will
pay PubliGroupe a percentage of our advertising revenue for advertising sales
leads that they deliver. We will agree to promote PubliGroupe as a transnational
print media representation and sales organization, and PubliGroupe will pay us a
share of its sales commissions for any sale leads we generate. PubliGroupe will
agree to promote OAS, and we will pay PubliGroupe a commission of 8% of the
first year license fee on all OAS sales it generates. In the cooperation
agreement, we and PubliGroupe will agree that we will not actively seek
relationships with companies that compete with the other's core business and
that we will not develop activities that compete with each other's core
businesses. This agreement, including the non-competition provisions, pertains
to all of the countries of the world except Switzerland. This agreement will
have an initial term of three years and will renew automatically for one-year
periods unless terminated.
Interim Administrative Services Agreement
PubliGroupe has provided administrative services to Real Media Europe since
its formation. Real Media Europe Holding will enter into an interim
administrative services agreement with PubliGroupe at the closing of the
business combination, pursuant to which PubliGroupe agrees to provide to Real
Media Europe Holding substantially the same financial management, information
technology and network services, legal, contract and corporate planning services
as PubliGroupe provided to Real Media Europe prior to the business combination.
Real Media Europe Holding will pay PubliGroupe a quarterly fee for these
services equal to the cost to PubliGroupe to provide the services, plus 5% of
that cost. This agreement will terminate on January 31, 2001 unless extended,
except that PubliGroupe may terminate the agreement upon notice or if
PubliGroupe owns, directly or indirectly, less than a majority of Real Media's
then outstanding common stock.
Real Media S.A. Stockholders Agreement
Real Media Europe Holding will enter into a stockholders agreement with
PubliGroupe and Real Media, Inc. with respect to Real Media S.A. Real Media
S.A.'s board of directors will be composed of three members designated by
PubliGroupe and two members designated by us. However, many important corporate
decisions must be approved by both Real Media Europe and PubliGroupe. The
agreement also restricts transfers of shares of Real Media S.A. PubliGroupe will
also agree to fund the operations of Real Media S.A. through loans as needed for
working capital and other general corporate purposes. Loans by PubliGroupe to
Real Media S.A. will bear interest at the prime rate as determined from time to
time by banks of Switzerland and will be repaid in full with interest when we
acquire PubliGroupe's 51% interest in Real Media S.A. The Real Media S.A.
stockholders agreement will terminate when we acquire PubliGroupe's 51% interest
in Real Media S.A.
Real Media S.A. Technology Transfer Agreement
Real Media and Real Media S.A. will enter into a technology transfer
agreement in which we will grant to Real Media S.A. an exclusive license to use
and modify the Open AdStream(TM) system technology in connection with planning
and delivery of Internet advertising in Switzerland. Until December 31, 2005,
Real Media S.A. will have the exclusive right to relicense Open AdStream(TM) and
provide related services in Switzerland and will agree to pay us a fee, ranging
from 5% to 30%, of the gross receipts it receives from those sales. The Open
AdStream(TM) technology may not be transferred by Real Media S.A. without our
consent, except that Real Media S.A. may grant non-exclusive licenses of the
technology to third parties to the extent necessary to comply with compulsory
license requirements and to keep any patents in full force. During the term of
the agreement, we will grant a license to Real Media S.A. for any improvements
to the technology that we develop, acquire or discover, and Real Media S.A. will
grant us a fully paid-up license during the term of the agreement for any
improvements that they develop, acquire or discover. The technology transfer
agreement requires us and Real Media S.A. to notify each other if either of us
becomes aware of any unauthorized use or infringement of the technology. Real
Media S.A. has the exclusive right in its discretion to defend any actions
against it in Switzerland resulting from any claim of unauthorized use or
infringement of the technology.
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Real Media S.A. Trademark and Tradename Agreement
We will enter into a trademark and tradename agreement with Real Media S.A.
under which we will grant Real Media S.A. the exclusive right to use in
Switzerland the tradename REAL MEDIA S.A., the trademark REAL MEDIA, and any
other trademarks or trade names used by us in connection with the operation of
our business outside Switzerland. Real Media S.A. will agree not to use the
marks outside of Switzerland and will not grant anyone else the right to use the
trademarks or its tradename. We and Real Media S.A. will cooperate in seeking
registrations and approvals of the tradename and trademarks. The trademark and
tradename agreement remains in effect until terminated by mutual agreement of
the parties or terminated due to a breach by either party or the insolvency of
Real Media S.A.
IMAS License Agreement
We have entered into two agreements with Consultas, a PubliGroupe company,
regarding the development and support of an advertising management information
system, known as IMAS. We expect IMAS to be operational in the first quarter
2000. Under a development agreement relating to IMAS, Consultas will own all
intellectual property rights to the first version of IMAS, IMAS 1.0, and we will
have a perpetual, fully paid-up license to use IMAS 1.0. Consultas has
contributed the salaries and benefits of personnel and other developmental costs
to the development of IMAS 1.0, and we will pay Consultas a fee of $250,000 over
nine months for the license to use IMAS 1.0. We will have the right to license
IMAS to third parties under a revenue-sharing arrangement with Consultas. We and
Consultas will also jointly develop IMAS 2.0, which Consultas will have the
right to use internally for PubliGroupe companies. Under a related application
service provider agreement, Consultas will provide us with computer hosting and
technical support for IMAS in exchange for a monthly fee of $5,000 while IMAS is
deployed only in Europe and $10,000 when IMAS is both deployed in Europe and
also outside of Europe.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of December 31, 1999, and as adjusted to
reflect the sale of shares of our common stock offered by this prospectus, by:
- each person (or group of affiliated persons) who is known by us to own
more than 5% of the outstanding shares of our common stock;
- each of our directors and our executive officers named in the summary
compensation table; and
- all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to securities.
Unless otherwise noted, we believe that all persons named in the table have sole
voting and sole investment power with respect to all shares beneficially owned
by them. All figures include shares of common stock issuable upon the exercise
of options or warrants exercisable within 60 days of the date of this
prospectus. Options or warrants that are exercisable for common stock and other
ownership rights in common stock that vest within 60 days of the date of this
prospectus are deemed to be outstanding and to be beneficially owned by the
person holding such options or warrants for the purpose of computing the
percentage ownership of such person but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
<TABLE>
<CAPTION>
PERCENT OF SHARES OUTSTANDING(1)
5% BENEFICIAL OWNERS, DIRECTORS, NUMBER OF SHARES -----------------------------------------
NOMINEES FOR DIRECTOR, NAMED OFFICERS BENEFICIALLY OWNED(1) BEFORE THE OFFERING AFTER THE OFFERING
- ------------------------------------- --------------------- ------------------- ------------------
<S> <C> <C> <C>
PubliGroupe S.A.(2)(3)(4)................ 18,612,030 70.5%
Advance Internet Inc.(5)................. 3,123,340 11.8%
David Morgan............................. 1,048,000 4.0%
Christopher Neimeth(6)................... 196,930 *
Gil Beyda(7)(8).......................... 1,014,000 3.8%
Walter Annasohn(4)(9).................... 18,612,030 70.5%
Hans Steiner(4)(9)....................... 18,612,030 70.5%
Heinz Wagli(4)(9)........................ 18,612,030 70.5%
All executive officers and directors as a
group
(thirteen persons)(10)................. 21,422,942 80.5%
</TABLE>
- ---------------
* Less than 1%
(1) Gives effect to the 16,126,525 shares of our common stock and 450,000
shares of Series A Convertible Preferred Stock issued to PubliGroupe in the
business combination of Real Media, Inc. and Real Media Europe. Upon the
completion of this offering, each share of Series A Convertible Preferred
Stock will convert into one share of our common stock immediately upon the
completion of this offering. Excludes 1,042,273 shares of our common stock
that PubliGroupe will receive in the business combination, which it will
sell to eleven employees of Real Media Europe.
(2) Includes 3,077,778 shares owned by PubliGroupe USA Holding, Inc., a wholly
owned subsidiary of PubliGroupe.
(3) PubliGroupe's address is Avenue des Toises 12, CH-1202, Lausanne,
Switzerland.
(4) Voting of these shares is subject to a stockholders voting agreement. See
"Related Party Transactions -- Stockholders Voting Agreement."
(5) Advance Internet's address is 30 Journal Square, Suite 400, Jersey City, NJ
07306.
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(6) Includes 196,930 options that are or will become exercisable within 60 days
of the date of this prospectus.
(7) Includes 100,000 shares owned by AS-IS Holdings, LLC, a limited liability
company of which Mr. Beyda, his spouse and the Gil Beyda 1999 Family Trust
Indenture are the only members.
(8) Includes 10,000 options that are or will become exercisable within 60 days
of the date of this prospectus.
(9) Drs. Annasohn and Wagli and Mr. Steiner are members of the executive
committee of PubliGroupe and may be deemed to beneficially own the shares
of our common stock owned by PubliGroupe. Their business address is the
same as PubliGroupe's.
(10) Includes 216,930 options that are or will become exercisable within 60 days
of the date of this prospectus.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of 120,000,000 shares of common
stock, par value $.001 per share, and 9,000,000 shares of preferred stock, par
value $.001 per share. Upon completion of this offering, we will have
approximately shares ( shares if the underwriters'
over-allotment option is exercised in full) of common stock issued and
outstanding, and no shares of preferred stock issued and outstanding.
The following is a summary only of our certificate of incorporation and
bylaws and of the Delaware General Corporation Law. We have filed copies of our
certificate of incorporation and bylaws as exhibits to the registration
statement of which this prospectus forms a part.
COMMON STOCK
The holders of our common stock are entitled to dividends that our board of
directors may declare from funds legally available therefor, subject to the
preferential rights of the holders of our preferred stock, if any. The holders
of our common stock are entitled to one vote per share on any matter to be voted
upon by stockholders. Our certificate of incorporation does not provide for
cumulative voting in connection with the election of directors, and accordingly,
holders of more than 50% of the shares voting will be able to elect all of the
directors.
Upon any voluntary or involuntary liquidation, dissolution, or winding up
of our affairs, the holders of our common stock are entitled to share ratably in
all assets remaining after payment of creditors and subject to prior
distribution rights of holders of our preferred stock, if any. All of the
outstanding shares of common stock are, and the shares offered by us will be,
fully paid and non-assessable.
PREFERRED STOCK
Our certificate of incorporation provides that our board of directors may
by resolution establish one or more classes or series of preferred stock having
such number of shares and relative voting rights, designation, dividend rates,
liquidation, and other rights, preferences and limitations as may be fixed by
them without further stockholder approval. The holders of our preferred stock
may be entitled to preferences over common stockholders with respect to
dividends, liquidation, dissolution or our winding up in such amounts as are
established by our board of directors' resolutions issuing such shares.
The issuance of our preferred stock may have the effect of delaying,
deferring or preventing a change in control of Real Media without further action
by the stockholders and may adversely affect voting and other rights of holders
of our common stock. In addition, the issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could make it more difficult for a third party to
acquire a majority of the outstanding shares of voting stock. At present, we
have no plans to issue any shares of preferred stock.
Prior to the completion of this offering, 450,000 shares of our Series A
Convertible Preferred Stock will be outstanding. The holders of Series A
Convertible Preferred Stock are not entitled to vote on matters submitted to our
stockholders. Shares of Series A Convertible Preferred Stock convert into an
equal number of shares of our common stock immediately upon the completion of
this offering.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW; CERTAIN ANTI-TAKEOVER,
LIMITED LIABILITY AND
INDEMNIFICATION PROVISIONS
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the
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person became an "interested stockholder," unless the business combination is
approved in a prescribed manner. A "business combination" includes certain
mergers, asset sales, and other transactions resulting in a financial benefit to
the "interested stockholder." Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within the past three years did own, 15% of the corporation's voting stock.
Certain provisions of our certificate of incorporation and bylaws could
have anti-takeover effects. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the corporate
policies formulated by our board of directors. In addition, these provisions
also are intended to ensure that our board of directors will have sufficient
time to act in what the board of directors believes to be in the best interests
of us and our stockholders. These provisions also are designed to reduce our
vulnerability to an unsolicited proposal for our takeover that does not
contemplate the acquisition of all of our outstanding shares or an unsolicited
proposal for the restructuring or sale of all or part of Real Media. The
provisions are also intended to discourage certain tactics that may be used in
proxy fights. However, these provisions could delay or frustrate the removal of
incumbent directors or the assumption of control of us by the holder of a large
block of common stock, and also could discourage or make more difficult a
merger, tender offer or proxy contest, even if such event would be favorable to
the interests of our stockholders.
CLASSIFIED BOARD OF DIRECTORS
Our certificate of incorporation provides for our board of directors to be
divided into three classes of directors, with each class as nearly equal in
number as possible, serving staggered three-year terms (other than directors who
may be elected by holders of preferred stock). As a result, approximately
one-third of our board of directors will be elected each year. The classified
board provision will help assure the continuity and stability of our board of
directors and our business strategies and policies as determined by our board of
directors. The classified board provision could have the effect of discouraging
a third party from making an unsolicited tender offer or otherwise attempting to
obtain control of us without the approval of our board of directors. In
addition, the classified board provision could delay stockholders who do not
like the policies of our board of directors from electing a majority of our
board of directors for two years.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
Our certificate of incorporation provides that stockholder action can only
be taken at an annual or special meeting of stockholders and prohibits
stockholder action by written consent in lieu of a meeting. Our bylaws provide
that special meetings of stockholders may be called only by our board of
directors or our chief executive officer. Our stockholders are not permitted to
call a special meeting of stockholders or to require that our board of directors
call a special meeting.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINEES
Our bylaws establish an advance notice procedure for our stockholders to
make nominations of candidates for election as directors or to bring other
business before an annual meeting of our stockholders. The advance notice
procedure provides that only persons who are nominated by, or at the direction
of, our board of directors or its chairman, or by a stockholder who has given
timely written notice to our secretary or any assistant secretary prior to the
meeting at which directors are to be elected, will be eligible for election as
our directors. The advance notice procedure also provides that at an annual
meeting only such business may be conducted as has been brought before the
meeting by, or at the direction of, our board of directors or its chairman or by
a stockholder who has given timely written notice to our secretary or any
assistant secretary of such stockholder's intention to bring such business
before such meeting. Under the advance notice procedure, if a stockholder
desires to submit a proposal or nominate persons for election as directors at an
annual meeting, the stockholder must submit written notice to Real Media not
less than 90 days nor more than 120 days prior to the first anniversary of the
previous year's annual meeting. In addition, under the advance notice procedure,
a stockholder's notice to Real Media proposing to nominate
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a person for election as a director or relating to the conduct of business other
than the nomination of directors must contain certain specified information. If
the chairman of a meeting determines that business was not properly brought
before the meeting, in accordance with the advance notice procedure, such
business shall not be discussed or transacted.
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
Our certificate of incorporation and bylaws provide that our board of
directors will consist of not less than three nor more than nine directors
(other than directors elected by holders of our preferred stock), the exact
number to be fixed from time to time by resolution adopted by our directors.
Further, subject to the rights of the holders of any series of our preferred
stock, if any, our certificate of incorporation and bylaws authorize our board
of directors to elect additional directors under specified circumstances and
fill any vacancies that occur in our board of directors by reason of death,
resignation, removal or otherwise. A director so elected by our board of
directors to fill a vacancy or a newly created directorship holds office until
the next election of the class for which such director has been chosen and until
his successor is elected and qualified. Subject to the rights of the holders of
any series of our preferred stock, if any, our certificate of incorporation and
bylaws also provide that directors may be removed only for cause and only by the
affirmative vote of holders of a majority of the combined voting power of the
then outstanding stock of Real Media. The effect of these provisions is to
preclude a stockholder from removing incumbent directors without cause and
simultaneously gaining control of our Board of Directors by filling the
vacancies created by such removal with its own nominees.
INDEMNIFICATION
We have included in our certificate of incorporation and bylaws provisions
to eliminate the personal liability of our directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by the
Delaware General Corporation Law, and to indemnify our directors and officers to
the fullest extent permitted by Section 145 of the Delaware General Corporation
Law, including circumstances in which indemnification is otherwise
discretionary. We believe that these provisions are necessary to attract and
retain qualified persons as directors and officers.
CERTIFICATE OF INCORPORATION
The provisions of our certificate of incorporation that could have
anti-takeover effects as described above are subject to amendment, alteration,
repeal or rescission by the affirmative vote of the holders of not less than
two-thirds (66 2/3%) of the outstanding shares of voting securities. This
requirement makes it more difficult for stockholders to make changes to the
provisions in our certificate of incorporation, which could have anti-takeover
effects by allowing the holders of a minority of the voting securities to
prevent the holders of a majority of voting securities from amending these
provisions of our certificate of incorporation.
BYLAWS
Our certificate of incorporation provides that our bylaws are subject to
adoption, amendment, alteration, repeal or rescission either by our board of
directors without the assent or vote of our stockholders, or by the affirmative
vote of the holders of not less than two-thirds (66 2/3%) of the outstanding
shares of voting securities. This provision makes it more difficult for
stockholders to make changes in our bylaws.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company. The transfer agent and registrar's address is 40 Wall
Street, New York, New York 10005, and its telephone number is (212) 936-5100.
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SHARES ELIGIBLE FOR FUTURE SALE
Immediately upon completion of this offering, shares of our
common stock will be outstanding, or shares if the underwriters
exercise their over-allotment option in full. Of these shares, the
shares of our common stock sold in this offering, assuming the underwriters
exercise their over-allotment option in full, assuming no exercise of
outstanding options, will be freely transferable without restriction or further
registration under the Securities Act of 1933, unless held by one of our
"affiliates," as that term is defined under Rule 144 under the Securities Act.
The remaining 26,412,675 shares of our common stock were issued prior to this
offering and are "restricted securities," as that term is defined under Rule
144. These shares are restricted securities because they were issued in private
transactions not involving a public offering and may not be sold in the absence
of registration other than in accordance with Rule 144 or another exemption from
registration. In addition, there are outstanding options to purchase 1,495,206
shares of our common stock which will be eligible for sale in the public market
from time to time, subject to vesting and applicable laws and, in some cases, to
the expiration of lock-up agreements.
Beginning on the 91st day after the date of this prospectus,
- 417,312 restricted shares will be eligible for sale.
Beginning on the 181st day after the date of this prospectus,
- 1,165,720 restricted shares will be eligible for sale, subject to a
stockholders voting agreement. See "Related Party
Transaction -- Stockholders Voting Agreement."
- 24,829,643 restricted shares will be eligible for sale, subject to
compliance with Rule 144 and in some cases, subject to a stockholders
voting agreement.
We are applying to list our common stock on both the Nasdaq National Market
and the SWX New Market of the SWX Swiss Exchange. Sales on the SWX New Market
will still be subject to United States securities laws including Rule 144 and
Regulation S under the Securities Act, which may restrict sales.
Prior to this offering, there has been no public market for our common
stock. No information is currently available and we cannot predict the timing or
amount of future sales of shares, or the effect, if any, that future sales of
the shares, or the availability of shares for future sale, will have on the
market price of our common stock prevailing from time to time. Sales of
substantial amounts of our common stock (including shares issuable upon the
exercise of stock options) in the public market after the lapse of the
restrictions described below, or the perception that such sales may occur, could
materially adversely effect the prevailing market prices for our common stock
and our ability to raise equity in the future. See "Risk Factors -- Risks
Relating to the Offering -- We expect to experience volatility in our stock
price that could affect your investment" and "Risk Factors -- Risks Relating to
the Offering -- Sales of our shares after this offering could result in a
decline in our stock price."
RULE 144
In general, under Rule 144, beginning on the 91st day after the date of
this prospectus, a person who owns shares that were purchased from us or any of
our affiliates at least one year previously, including a person who may be
deemed our affiliate, is entitled to sell within any three-month period a number
of shares that does not exceed the greater of:
- 1% of the then outstanding shares of our common stock, which we expect
will equal approximately 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 preceding the date on
which notice of the sale is filed with the SEC.
Sales under Rule 144 are also subject to certain restrictions as to the
manner of sale, notice requirements and the availability of current public
information about us.
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In addition, under Rule 144(k), if a period of at least two years has
elapsed since the later of the date restricted securities were acquired from us
or one our affiliates, a stockholder who is not one of our affiliates at the
time of sale and who has not been one of our affiliates for at least three
months prior to the sale would be entitled to sell shares of our common stock on
the public market immediately without complying with the volume limitations,
manner of sale, public information or notice provisions of requirements under
Rule 144. Rule 144 does not require the same person to have held the securities
for the applicable periods.
RULE 701
Any employee, director or officer of, or some consultants to, Real Media
who acquired shares pursuant to a written compensatory plan or contract may be
entitled to rely on the resale provisions of Rule 701 of the Securities Act,
which permits non-affiliates to sell their Rule 701 shares without having to
comply with the public information, holding period, volume limitation or notice
provisions of Rule 144, and permits Real Media affiliates to sell their Rule 701
shares without having to comply with the holding period restrictions of Rule
144, in each case, beginning on the 91st day after the date of this prospectus.
417,312 shares issued will be eligible for sale in reliance upon Rule 701.
LOCK-UP AGREEMENTS
In addition to the restrictions on resale described above, Real Media,
PubliGroupe, Advance Internet, our directors, our executive officers and certain
other stockholders have entered into lock-up agreements under which they have
agreed not to offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, or, in the case of Real Media, file with the SEC a
registration statement under the Securities Act 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 and Banc of America Securities
LLC, for a period of 180 days after the date of this prospectus, except in our
use for the filing of a registration statement on Form S-8 or grants of employee
stock options in connection with or pursuant to the terms of a plan in effect on
the date hereof, issuances of securities pursuant to the exercise of employee
stock options outstanding on the date hereof or the exercise of any other stock
options outstanding on the date hereof. Consequently, although some of the
shares owned by these persons and entities may be eligible for earlier sale
under the provisions of Rule 144, these persons may not sell these shares until
181 days after the date of this prospectus.
SWX SWISS EXCHANGE
Under the listing rules of the SWX New Market of the SWX Swiss Exchange,
Real Media and any stockholder who owns more than two percent of our common
stock prior to this offering must jointly and severally agree not to sell or
announce any intention to sell any of their equity securities of Real Media
during the six-month period beginning on the first trading day of our common
stock. After this six-month period, there are no restrictions under the rules of
the SWX New Market of the SWX Swiss Exchange on such stockholders' ability to
sell our common stock on the SWX New Market of the SWX Swiss Exchange.
REGISTRATION ON FORM S-8
Prior to the completion of this offering, we intend to file a registration
statement on Form S-8 to register shares of our common stock issuable
under our 1999 employee stock option plan. All of these shares generally will be
available for sale in the open market from time to time, subject to vesting
provisions, Rule 144 volume limitations applicable to our affiliates and, in the
case of some of the options, the expiration of lock-up agreements.
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PRINCIPAL TAX CONSEQUENCES TO NON-U.S. HOLDERS
CERTAIN UNITED STATES TAX CONSEQUENCES
The following discussion summarizes principal U.S. federal income and
estate tax consequences of the ownership and disposition of common stock by
"Non-U.S. Holders". You are a "non-U.S. holder" for U.S. federal income tax
purposes if you are:
- a non-resident alien individual;
- a foreign corporation;
- a foreign partnership; or
- an estate or trust that in either case is not subject to U.S. federal
income tax on a net income basis on income or gain from common stock.
This discussion does not consider the specific facts and circumstances that
may be relevant to particular holders and does not address the treatment of
holders of common stock under the laws of any state, local or foreign taxing
jurisdiction. This discussion is based on the tax laws of the U.S., including
the Internal Revenue Code, as amended to the date hereof, existing and proposed
regulations thereunder, and administrative and judicial interpretation thereof,
as currently in effect. These laws are subject to change, possibly on a
retroactive basis.
YOU SHOULD CONSULT YOUR OWN TAX ADVISORS WITH REGARD TO THE APPLICATION OF
THE FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS WELL AS TO THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS TO WHICH YOU
MAY BE SUBJECT.
DIVIDENDS
If you are a non-U.S. holder of our common stock, dividends paid to you are
subject to withholding of U.S. federal income tax at a 30% rate or at a lower
rate if so specified in an applicable income tax treaty. If, however, the
dividends are effectively connected with your conduct of a trade or business
within the U.S., and they are attributable to a permanent establishment that you
maintain in the U.S., if that is required by an applicable income tax treaty as
a condition for subjecting you to U.S. income tax on a net income basis on such
dividends, then such "effectively connected" dividends generally are not subject
to withholding tax. Instead, such effectively connected dividends are taxed at
rates applicable to U.S. citizens, resident aliens and domestic U.S.
corporations.
Effectively connected dividends received by a non-U.S. corporation may,
under certain circumstances, be subject to an additional "branch profits tax" at
a 30% rate or at a lower rate if so specified in an applicable income tax
treaty.
Under currently effective U.S. Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country, unless the payor has knowledge to the contrary, for purposes of the 30%
withholding tax discussed above. Under current interpretations of U.S. Treasury
regulations, this presumption that dividends paid to an address in a foreign
country are paid to a resident of that country, unless the payor has knowledge
to the contrary, also applies for the purposes of determining whether a lower
tax treaty rate applies.
Under U.S. Treasury regulations that will generally apply to dividends paid
after December 31, 2000, the "New Regulations," if you claim the benefit of a
lower treaty rate, you must satisfy certain certification requirements. In
addition, in the case of common stock held by a foreign partnership, the
certification requirements generally will apply to the partners of the
partnership and the partnership must provide certain information, including a
U.S. taxpayer identification number. The final withholding regulations also
provide look-through rules for tiered partnerships.
If you are eligible for a reduced rate of U.S. withholding tax under a tax
treaty, you may obtain a refund of any excess amounts withheld by filing a
refund claim with the IRS.
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GAIN ON DISPOSITION OF COMMON STOCK
If you are a non-U.S. holder you generally will not be subject to U.S. federal
income tax on gain recognized on a disposition of common stock unless:
- the gain is effectively connected with your conduct of a trade or
business in the U.S., and the gain is attributable to a permanent
establishment that you maintain in the U.S., if that is required by an
applicable income tax treaty as a condition for subjecting you to U.S.
taxation on a net income basis on gain from the sale or other disposition
of the common stock;
- you are an individual, you hold the common stock as a capital asset and
you are present in the U.S. for 183 or more days in the taxable year of
the sale and certain other conditions exist; or
- we are or have been a "United States real property holding corporation"
for federal income tax purposes and you held, directly or indirectly, at
any time during the five-year period ending on the date of disposition,
more than 5% of our common stock, and you are not eligible for any treaty
exemption.
Effectively connected gains recognized by a corporate non-U.S. holder may
also, under certain circumstances, be subject to an additional "branch profits
tax" at a 30% rate or at a lower rate if so specified in an applicable income
tax treaty.
We have not been, are not, and do not anticipate becoming a "United States
real property holding corporation" for federal income tax purposes.
FEDERAL ESTATE TAXES
Common stock held by an individual non-U.S. holder at the time of death
will be included in the holder's gross estate for U.S. federal estate tax
purposes and may be subject to U.S. federal estate taxes, unless an applicable
estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, U.S. information reporting requirements and backup withholding
tax will not apply to dividends paid to you if you are either:
- subject to the 30% withholding tax discussed above, or
- not subject to the 30% withholding tax because an applicable tax treaty
reduces or eliminates such withholding tax.
If you do not meet either of these requirements for exemption and you fail to
provide certain information, including your U.S. taxpayer identification number,
or otherwise establish your status as an "exempt recipient," you may be subject
to backup withholding of U.S. federal income tax at a rate of 31% on dividends
paid with respect to common stock.
Under current law, the payor may generally treat dividends paid to a payee
with a foreign address as exempt from backup withholding and information
reporting unless the payor has definite knowledge that the payee is a U.S.
person. However, under the New Regulations, dividend payments generally will be
subject to information reporting and backup withholding unless certain
certification requirements are met. See the discussion under "Dividends" in this
section for the rules applicable to foreign partnerships under the New
Regulations.
U.S. information reporting and backup withholding requirements generally
will not apply to a payment of the proceeds of a sale of common stock made
outside the U.S. through an office outside the U.S. of a non-U.S. broker.
However, U.S. information reporting, but not backup withholding, will apply to a
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payment made outside the U.S. of the proceeds of a sale of common stock through
an office outside the U.S. of a broker that:
- is a U.S. person;
- derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the U.S.;
- is a "controlled foreign corporation" as to the U.S.; or
- with respect to payments made after December 31, 2000, is a foreign
partnership with certain connections to the U.S.
in each case, unless the broker has documentary evidence in its records that the
holder or beneficial owner is a non-U.S. person and has no knowledge to the
contrary or the holder otherwise establishes an exemption.
Payment of the proceeds of a sale of common stock to or through a U.S.
office of a broker is subject to both U.S. backup withholding and information
reporting unless the holder certifies its non-U.S. status under penalty of
perjury or otherwise establishes an exemption.
Backup withholding is not an additional tax and you may apply any taxes
that are withheld against your tax liability and you generally may obtain a
refund of any excess amounts withheld under the backup withholding rules by
filing a refund claim with the Internal Revenue Service.
CERTAIN SWISS TAX CONSEQUENCES
The following is a summary of certain Swiss federal income tax
considerations relevant to the purchase, ownership and disposition of shares of
common stock and, unless otherwise indicated, is applicable only to stockholders
that are resident in Switzerland. This summary does not purport to be a
comprehensive description of all of the tax considerations that may be relevant
to an investment in shares of common stock, and is based on treaties, laws,
regulations, rulings and decisions currently in effect, all of which are subject
to change. Prospective investors should consult their own advisers as to the tax
consequences of the purchase, ownership and disposition of shares of common
stock in light of their particular circumstances.
The statements and discussion of certain Swiss taxes set forth below are of
a general nature only and do not address every potential tax consequence of an
investment in shares under Swiss law. Potential investors will therefore need to
consult their own tax advisers to determine the special tax consequences of the
receipt, ownership and sale or other dispositions of shares of common stock.
CREDIT FOR U.S. WITHHOLDING TAXES
Subject to certain requirements, shareholders resident in Switzerland may
claim the U.S. withholding tax withheld from any dividends that we may pay to
them as a credit against their Swiss income taxes on the respective dividend
income.
GAIN ON SALE OF COMMON STOCK
Under current Swiss tax rules, gain on the sale of shares of common stock
of individuals resident in Switzerland is generally not subject to income tax
provided the shares of common stock are part of their private property (as
defined under applicable tax regulation), and further provided that such persons
are not taxed as professional securities dealers. We currently have no intention
of repurchasing any of the shares we sell in this offering. However, if we were
to repurchase any such shares, any gains an individual resident in Switzerland
may realize may be deemed taxable dividend income rather than gain if certain
conditions are met.
Gains realized on shares of common stock as part of the business property
of a Swiss tax resident person or entity are included in the taxable income of
such person or entity.
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Under current Swiss tax law, a holder of our common stock who (i) is a
non-resident of Switzerland, (ii) during the taxable year has not engaged in a
trade or business through a permanent establishment within Switzerland and (iii)
is not subject to taxation in Switzerland for any other reason will be exempt
from Swiss Federal, Cantonal or Municipal Income Tax or other Swiss tax on gains
realized during the year on the sale of our common stock.
WITHHOLDING TAX ON DIVIDENDS AND DISTRIBUTIONS
Any dividends paid and similar cash or in kind distributions made by us to
a stockholder are not subject to Swiss Federal withholding tax.
INCOME TAX ON DIVIDENDS
Swiss residents receiving dividends or similar distributions (including
stock dividends and liquidation proceeds in excess of the par value of common
stock held) from us are required to include such amount in their personal income
tax returns. Swiss stockholders who are corporations may under certain
circumstances benefit from income tax relief with respect to qualifying dividend
income.
STAMP DUTY UPON TRANSFER OF COMMON STOCK
Each party to a transfer of ownership of our common stock (including
non-Swiss residents) may be subject to transfer stamp duty at a rate of 0.15% of
the consideration paid (i.e. up to a total of 0.3%) if a Swiss bank or any other
Swiss security dealer (as defined by the Swiss Federal Stamp Tax Act) is a
contractual party or acts as an intermediary to the transfer. Additionally,
sales of our common stock through the facilities of the SWX Swiss Exchange may
be subject to a stock exchange levy at a rate of up to 0.02% of the
consideration paid.
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation and Banc of America
Securities LLC, who are acting as joint book-running lead managers, and Lazard
Freres & Co. LLC is acting as a co-manager, the following respective numbers of
shares of common stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Banc of America Securities LLC..............................
Lazard Freres & Co. LLC.....................................
--------
Total.............................................
========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all of 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 on a pro
rata basis up to additional shares from us at the initial 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 initial 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
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............... $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We, PubliGroupe, Advance Internet, our directors, our executive officers
and certain other stockholders have agreed not to offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or, in our case, file
with the SEC a registration statement under the Securities Act 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 and Banc of
America Securities LLC, for a period of 180 days after the date of this
prospectus, except in our case for the filing of a registration statement on
Form S-8 or grants of employee stock options in connection with or pursuant to
the terms of a plan in effect on the date hereof, issuances of securities
pursuant to the exercise of employee stock options outstanding on the date
hereof or the exercise of any other stock options outstanding on the date
hereof.
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The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and
certain other persons associated with us who have expressed an interest in
purchasing common stock in the offering. The number of shares of our common
stock available for sale to the general public in the offering will be reduced
to the extent these persons purchase reserved shares. Any reserved shares not so
purchased will be offered by the underwriters to the general public on the same
terms as the other shares.
We 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. PubliGroupe has agreed to indemnify the underwriters
against the breach of certain representations relating to Real Media Europe, or
contribute to payments which the underwriters may be required to make in that
respect.
Each of the underwriters has represented and agreed that:
(1) it has not offered or sold and prior to the date six months after
the date of issue will not offer or sell any of our common stock to persons
in the United Kingdom except to persons whose ordinary activities involved
them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted or do not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of the
Securities Regulations 1995;
(2) it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by it in
relation to our common stock in, from or otherwise involving the United
Kingdom; and
(3) it has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with the issue
of our common stock to a person who is of a kind described in Article II(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom such document may otherwise lawfully be
issued or passed on.
We have applied to list the shares of our common stock on the Nasdaq
National Market, subject to official notice of issuance, and on the SWX New
Market of the SWX Swiss Exchange under the symbol "RLMD."
Prior to the offering, there has been no public market for our common
stock. The initial public offering price for our common stock will be determined
by negotiation between us and the underwriters, and may not reflect the market
price for our common stock following the offering. Among the principal factors
considered in determining the initial public offering price will be:
- the information set forth in this prospectus and otherwise available to
the underwriters;
- market conditions for initial public offerings;
- the history of and prospects for the industry in which we are competing;
- our past and present operations;
- our past and present earnings and current financial position;
- the ability of our management;
- our prospects for future earnings;
- the present state of our development and our current financial condition;
- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies;
- the general condition of the securities markets at the time of the
offering; and
- other relevant factors.
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We cannot assure you that the initial public offering price will correspond
to the price at which our common stock will trade in the public market
subsequent to the offering or that an active trading market for our common stock
will develop and continue after the offering.
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 such
syndicate member is purchased in a stabilizing transaction or a syndicate
covering transaction to cover syndicate short term positions.
- In "passive" market making, market makers in the common stock who are
underwriters or prospective underwriters may, subject to certain
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.
The underwriters and their affiliates have provided and will in the future
continue to provide investment banking and other financial services, including
the provision of credit facilities, for us and certain of our affiliates in the
ordinary course of business for which they have received and will receive
customary compensation.
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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 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 TO PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that: (1) 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; (2) where required
by law, that such purchaser is purchasing as principal and not as agent; and (3)
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 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 outside
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 filed 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.
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LEGAL MATTERS
Dechert Price & Rhoads, Philadelphia, Pennsylvania, will pass upon the
validity of our common stock offered by this prospectus for Real Media. Simpson
Thacher & Bartlett, New York, New York, will pass upon certain legal matters for
the underwriters.
EXPERTS
The financial statements of Real Media, Inc. and the combined financial
statements of Real Media Europe as of December 31, 1998 and 1999 and for each of
the years in the three-year period ended December 31, 1999 appearing in this
prospectus and the registration statement of which this prospectus constitutes a
part, and the related financial statement schedule included elsewhere in the
registration statement, have been audited by Ernst & Young LLP, independent
auditors, in the case of Real Media, Inc., and by ATAG Ernst & Young AG,
independent auditors, in the case of Real Media Europe, as set forth in their
reports thereon appearing elsewhere herein, and are included in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to our common stock offered by this prospectus. This
prospectus is a part of the registration statement and does not contain all of
the information set forth in the registration statement and the exhibits to the
registration statement. For further information with respect to Real Media and
our common stock, we refer you to the registration statement and the exhibits
filed as a part of the registration statement. Statements contained in this
prospectus concerning the contents of any contract, agreement or other document
are not necessarily complete; we refer you in each instance to the copy of the
contract or other document filed as an exhibit to the registration statement and
our statements are qualified by this reference. You may inspect the registration
statement, including its exhibits, without charge and obtain copies of all or
any part thereof at prescribed fees at the following SEC offices:
<TABLE>
<S> <C> <C>
Public Reference Room Citicorp Center Seven World Trade Center
450 Fifth Street, N.W. 500 West Madison Street 13th Floor
Washington, D.C. 20549 Suite 1400 New York, New York 10048
Chicago, Illinois 60661
</TABLE>
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site that
provides online access to reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC at the
address http://www.sec.gov.
Upon completion of this offering, we will be required to file annual,
quarterly and current reports, proxy statements and other information with the
SEC. You may read and copy any of these documents at the SEC's offices
identified above. Upon approval of our common stock for listing on the Nasdaq
National Market, you may also review these documents at 1735 K Street, N.W.,
Washington, D.C. 20006.
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TRANSFER OF SHARES ON THE SWX SWISS EXCHANGE
Our common stock is issued only in registered form, which means that the
holder of such shares is registered in our stock register maintained by our
United States transfer agent and registrar. The United States transfer agent and
registrar for the common stock is American Stock Transfer & Trust Company. In
general, the common stock will trade on the SWX Swiss Exchange only through
transfers of beneficial interests held through transfers of shares registered in
the name of the Swiss Nominee Company (SNOC). SNOC is a corporation incorporated
in Switzerland and owned by a number of Swiss banks and provides nominee
services for the benefit of beneficial holders of shares. Any investor who holds
a certificate representing shares of common stock directly, rather than such
beneficial interests registered in the name of SNOC, and who desires to sell
such shares of common stock on the SWX Swiss Exchange, will be required to
deposit the certificate with the United States transfer agent. The United States
transfer agent will register the shares in the name of SNOC in order to make the
share certificates eligible for the Swiss security clearing system SIS
SEGAINTERSETTLE AG (SIS) and tradable on the SWX Swiss Exchange and the investor
will receive a beneficial interest therein. Certificates representing shares of
common stock held through SNOC will not be issued unless such shares are
withdrawn from SNOC, in which case the shares will not be eligible to trade on
the SWX Swiss Exchange unless redeposited as described above. SNOC will be the
registered owner of all shares of Common Stock that are held by investors
through SNOC.
Generally, all transfers of common stock will be registered by brokers and
other financial institutions and SIS in SNOC's books. In this connection SIS is
acting as clearing house for transactions involving more than one broker or
other financial institutions. The United States transfer agent will not know the
beneficial owners of the common stock that is held through SNOC. The brokers and
other financial institutions will be responsible for keeping account of the
common stock holdings on behalf of their customers.
Communications by our stockholders regarding stockholders' meetings and
dividend payments will be transmitted through the U.S. transfer agent to SNOC.
SNOC will transmit these communications to SIS which will make available such
communications to brokers or other financial institutions for the benefit of the
investors. Such communications will also be made by publications in newspapers
in Zurich and Geneva and on at least one electronic media such as Reuters or
Bloomberg.
SNOC will consent or vote with respect to such shares on behalf of
beneficial owners thereof provided it receives appropriate instructions from
brokers or other financial institutions acting on behalf of beneficial owners in
accordance with SNOC's standard rules and procedures and any laws or other
regulations applicable to Real Media.
Any dividend or other payments on common stock held through SNOC will be
made by to the U.S. transfer agent who upon receipt of such
payments, will credit SNOC for the amount of such payments. Payments by SNOC to
the beneficial owners of common stock will be governed by SNOC's and SIS's
customary practices, and will be the sole responsibility of SNOC subject to any
statutory or regulatory requirements as may be in effect from time to time. Any
dividends will be converted into Swiss Francs and distributed by SIS.
78
<PAGE> 83
NOTICE TO HOLDERS OF SHARES TRADED ON THE
SWX NEW MARKET OF THE SWX SWISS EXCHANGE
CLEARING CODES
The SIS security number (Valorennummer) for the shares of Real Media common
stock is 1 035 929. The ISIN is CH 001 035 929 4. The ticker symbol will be
RLMD.
PAYING AGENT
Real Media has appointed Credit Suisse First Boston, Zurich, and Credit
Suisse, Zurich, as paying agents for the shares traded on the SWX New Market of
the SWX Swiss Exchange to make dividend or related payments.
MARKET MAKER
Credit Suisse First Boston, Zurich, will serve as a market marker for the
shares of Real Media common stock on the SWX New Market of the SWX Swiss
Exchange.
NOTICES
Notices required under the Listing Rules of the SWX Swiss Exchange will be
published in two Swiss newspapers in German and French. Real Media or the SWX
Swiss Exchange may also disseminate the relevant information about the online
exchange information systems.
RESPONSIBILITY
We have taken reasonable care to assure ourselves that the facts contained
in this prospectus are true and accurate in all material respects and that there
are no other material facts the omission of which would make misleading any
statement herein.
79
<PAGE> 84
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
REAL MEDIA, INC.
Report of Independent Auditors.............................. 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 Changes in Stockholders' Equity (Deficiency)
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
Notes to Financial Statements............................... F-7
REAL MEDIA EUROPE
Report of Independent Auditors.............................. F-15
Combined Balance Sheets as of December 31, 1998 and 1999.... F-16
Combined Statements of Operations for the years ended
December 31, 1997, 1998 and 1999.......................... F-17
Combined Statements of Changes in Shareholder's Equity
(Deficiency) for the years ended December 31, 1997, 1998
and 1999.................................................. F-18
Combined Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999.......................... F-19
Notes to Combined Financial Statements...................... F-20
</TABLE>
F-1
<PAGE> 85
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Real Media, Inc.
We have audited the accompanying balance sheets of Real Media, Inc. (the
"Company") as of December 31, 1998 and 1999, and the related statements of
operations, changes in stockholders' equity (deficiency) and cash flows for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Real Media, Inc. as of
December 31, 1998 and 1999, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States.
New York, New York
February 9, 2000
F-2
<PAGE> 86
REAL MEDIA, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 638,998 $ 1,388,510
Accounts receivable, less allowance of $40,000 in 1998 and
$334,000 in 1999....................................... 883,743 3,945,739
Due from affiliates....................................... 10,622 213,785
Due from stockholder...................................... -- 46,500
Prepaid and other current assets.......................... 14,422 70,553
---------- ------------
Total current assets........................................ 1,547,785 5,665,087
Property and equipment, net................................. 111,446 609,630
Other....................................................... 10,760 238,390
---------- ------------
Total assets................................................ $1,669,991 $ 6,513,107
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable.......................................... $ 861,452 $ 3,761,015
Accrued expenses.......................................... 32,947 1,306,841
Notes payable -- stockholders............................. -- 6,000,000
Due to affiliates......................................... -- 327,988
Deferred revenue.......................................... 273,783 824,951
Deferred revenue -- stockholder........................... 473,506 358,206
---------- ------------
Total current liabilities................................... 1,641,688 12,579,001
Commitments
Stockholders' equity (deficiency):
Preferred stock -- $.001 par value; 9,000,000 shares
authorized; no shares issued and outstanding........... -- --
Common stock -- $.001 par value; 18,000,000 shares
authorized; 8,440,062 and 9,836,150 shares issued and
outstanding at December 31, 1998 and 1999,
respectively........................................... 8,440 9,836
Additional paid-in capital................................ 4,409,502 8,278,615
Accumulated deficit....................................... (4,389,639) (14,192,235)
Deferred compensation..................................... -- (162,110)
---------- ------------
Total stockholders' equity (deficiency)..................... 28,303 (6,065,894)
---------- ------------
Total liabilities and stockholders' equity (deficiency)..... $1,669,991 $ 6,513,107
========== ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 87
REAL MEDIA, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenue............................................. $ 553,520 $ 2,103,288 $ 8,115,029
Cost of revenue..................................... 335,342 868,072 3,521,951
----------- ----------- -----------
Gross profit........................................ 218,178 1,235,216 4,593,078
Operating expenses:
Sales and marketing............................... 972,590 1,719,805 8,733,517
Product and technology development................ 427,632 543,132 896,621
General and administrative........................ 596,678 1,126,653 4,692,494
----------- ----------- -----------
Total operating expenses............................ 1,996,900 3,389,590 14,322,632
----------- ----------- -----------
Loss from operations................................ (1,778,722) (2,154,374) (9,729,554)
Other income (expense):
Interest income................................... 13,538 63,047 21,901
Interest expense.................................. (31,994) (24,928) (94,943)
----------- ----------- -----------
Net loss............................................ $(1,797,178) $(2,116,255) $(9,802,596)
=========== =========== ===========
Basic and diluted net loss per common share......... $ (0.30) $ (0.27) $ (1.05)
=========== =========== ===========
Number of shares used in computing basic and diluted
net loss per share................................ 5,968,767 7,849,253 9,358,972
=========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 88
REAL MEDIA, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
Years ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN ACCUMULATED DEFERRED
SHARES AMOUNT CAPITAL DEFICIT COMPENSATION TOTAL
--------- ------ ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996..................... 5,690,000 $5,690 $1,000,244 $ (476,206) $ -- $ 529,728
Issuance of common stock... 550,000 550 329,450 -- -- 330,000
Issuance of stock options
to consultants........... -- -- 14,714 -- -- 14,714
Net loss................... -- -- -- (1,797,178) -- (1,797,178)
--------- ------ ---------- ------------ --------- -----------
Balance at December 31,
1997..................... 6,240,000 6,240 1,344,408 (2,273,384) -- (922,736)
Issuance of common stock... 2,195,000 2,195 2,997,805 -- -- 3,000,000
Exercise of stock
options.................. 5,062 5 2,906 -- -- 2,911
Issuance of stock options
to consultants........... -- -- 64,383 -- -- 64,383
Net loss................... -- -- -- (2,116,255) -- (2,116,255)
--------- ------ ---------- ------------ --------- -----------
Balance at December 31,
1998..................... 8,440,062 8,440 4,409,502 (4,389,639) -- 28,303
Issuance of common stock... 1,206,118 1,206 3,498,794 -- -- 3,500,000
Return of common stock by a
founder.................. (40,000) (40) -- -- -- (40)
Exercise of stock
options.................. 229,970 230 88,128 -- -- 88,358
Issuance of stock options
to consultants........... -- -- 201,411 -- (201,411) --
Deferred compensation
related to employee stock
options.................. -- -- 80,780 -- (80,780) --
Amortization of deferred
compensation............. -- -- -- -- 120,081 120,081
Net loss................... -- -- -- (9,802,596) -- (9,802,596)
--------- ------ ---------- ------------ --------- -----------
Balance at December 31,
1999..................... 9,836,150 $9,836 $8,278,615 $(14,192,235) $(162,110) $(6,065,894)
========= ====== ========== ============ ========= ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 89
REAL MEDIA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(1,797,178) $(2,116,255) $(9,802,596)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 32,181 49,780 151,701
Bad debt expense.......................................... -- 102,302 403,848
Amortization of deferred compensation..................... -- -- 10,902
Amortization of deferred revenue -- stockholder........... -- (77,405) (115,300)
Nonemployee stock compensation expense.................... 14,714 64,383 109,179
Changes in operating assets and liabilities:
Accounts receivable.................................... (169,596) (798,037) (3,465,844)
Due from affiliates.................................... (24,210) 13,588 (203,163)
Due from stockholder................................... -- -- (46,500)
Prepaid and other current assets....................... 1,514 (10,715) (56,131)
Other assets........................................... (1,260) (2,000) (227,630)
Accounts payable....................................... 173,919 578,708 2,899,563
Accrued expenses....................................... 40,200 (34,358) 1,273,894
Due to affiliates...................................... -- -- 327,988
Deferred revenue....................................... 100,000 173,783 551,168
----------- ----------- -----------
Net cash used in operating activities....................... (1,629,716) (2,056,226) (8,188,921)
INVESTING ACTIVITIES
Purchases of property and equipment......................... (79,896) (73,248) (649,885)
----------- ----------- -----------
Net cash used in investing activities....................... (79,896) (73,248) (649,885)
FINANCING ACTIVITIES
Proceeds from issuance of common stock...................... 330,000 3,002,911 3,588,358
Proceeds from stockholders' notes........................... 834,000 225,000 6,000,000
Repayment of stockholders' notes............................ -- (508,089) --
Return of common stock by a founder......................... -- -- (40)
----------- ----------- -----------
Net cash provided by financing activities................... 1,164,000 2,719,822 9,588,318
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents............ (545,612) 590,348 749,512
Cash and cash equivalents, beginning of year................ 594,262 48,650 638,998
----------- ----------- -----------
Cash and cash equivalents, end of year...................... $ 48,650 $ 638,998 $ 1,388,510
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid............................................... $ 237 $ 56,000 $ --
=========== =========== ===========
Noncash investing and financing activity:
Stockholder's debt converted to deferred revenue.......... $ -- $ 550,911 $ --
=========== =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 90
REAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1997, 1998 and 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Real Media, Inc. (the "Company") was incorporated in the State of Delaware
on May 15, 1995 and commenced sales of its Internet advertising solutions in
1996. The Company provides Internet advertising solutions for its extensive
network of branded web sites. As part of its comprehensive Internet advertising
solution, the Company also markets and supports its proprietary ad management
software, Open AdStream(TM), which provides web sites with the technology
infrastructure to manage targeted ad campaigns.
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.
Revenue Recognition
The Company generates its revenue from the sale and delivery of advertising
impressions through third-party web sites, licensing of its software and
providing maintenance and support services with respect to its software.
Revenue from advertising sales is recorded gross in accordance with Staff
Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements, as the Company is a principal in separate, approximately concurrent,
transactions to purchase and sell advertising space and has the risks and
rewards of ownership, such as the risk of loss due to performance, delivery or
distribution failure, in addition to credit risk. The Company's obligation to
pay the seller of the ad space is independent of the purchaser's obligation to
pay the Company for the ad space.
Revenue from advertising is recognized in the period in which the
advertising impressions are delivered to the web sites, provided that no
significant obligations remain to be performed. The Company becomes obligated to
make payments to third-party web sites, which have contracted with the Company
in the period the advertising impressions are delivered. Such expenses are
classified as cost of revenue in the statements of operations.
Revenue from software licensing agreements is recognized in accordance with
Statement of Position ("SOP") 97-2, Software Revenue Recognition, upon delivery
of the software when collection is probable; all license payments are due within
one year, the license fee is otherwise fixed and determinable, vendor-specific
evidence exists to allocate the total fee to the elements of the arrangement and
persuasive evidence of an arrangement exists.
Revenue from maintenance and support services is recognized ratably over
the lives of the maintenance agreements, which typically do not exceed one year.
Maintenance revenue received in advance of the related services is recorded as
deferred revenue. Expenses from the Company's licensing maintenance and support
revenues are primarily payroll costs incurred to deliver, modify and support the
software. These expenses are classified as cost of revenues in the statements of
operations.
F-7
<PAGE> 91
REAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31, 1997, 1998 and 1999
Advertising Costs
Advertising costs are expensed as incurred. For the years ended December
31, 1997, 1998 and 1999, advertising expense amounted to approximately $43,000,
$614,000 and $4,123,000, respectively, and is included in sales and marketing
expenses.
Software Development Costs
Software development costs incurred in the process of developing product
improvements or new products are charged to expenses as incurred.
Statement of Financial Accounting Standards ("SFAS") No. 86, Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,
requires capitalization of certain software development costs subsequent to the
establishment of technological feasibility.
Based on the Company's product development process, technological
feasibility is established upon the completion of a working model. Costs
incurred by the Company between completion of the working model and the point at
which the product is ready for general release have been insignificant.
Therefore, all software development costs have been expensed.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and accounts receivable. The Company maintains the majority of its cash and cash
equivalents with one financial institution. The Company's sales are primarily to
companies located in the United States. The Company performs periodic credit
evaluations of its customers' financial condition and does not require
collateral and establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of customers, historical trends and other
information; to date, such losses have been within management's expectations.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheets for cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses and notes
payable approximate their fair values.
Property and Equipment
Property and equipment are stated at cost and depreciation for financial
reporting purposes is calculated using the straight-line method over the
estimated useful lives of the assets ranging from three to five years. Leasehold
improvements are amortized over the lesser of the useful life of the asset or
the remaining period of the lease.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash
F-8
<PAGE> 92
REAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31, 1997, 1998 and 1999
flows is less than the carrying amount of the asset, a loss is recognized for
the difference between the fair value and carrying value of that asset.
Stock-Based Compensation
The Company measures compensation expense related to the grant of stock
options and stock-based awards to employees in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, under which compensation
expense, if any, is generally based on the difference between the exercise price
of an option, or the amount paid for the award and the market price or fair
value of the underlying common stock at the date of the award. Stock-based
compensation arrangements involving nonemployees are accounted for under SFAS
No. 123, Accounting for Stock-Based Compensation, under which such arrangements
are accounted for based on the fair value of the option or award. As required by
SFAS No. 123, the Company discloses pro forma net loss per share information
reflecting the effect of applying SFAS No. 123 fair value measurement to
employee arrangements.
Earnings (Loss) Per Share
The Company calculates earnings per share in accordance with SFAS No. 128,
Computation of Earnings Per Share, and SEC Staff Accounting Bulletin No. 98.
Accordingly, basic earnings per share is computed using the weighted average
number of common and dilutive common equivalent shares outstanding during the
period. Common equivalent shares consist of shares issuable upon the exercise of
stock options (using the treasury stock method); common equivalent shares are
excluded from the calculation if their effect is anti-dilutive.
Segment Information
The Company discloses information regarding segments in accordance with
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 131 establishes standards for reporting of financial
information about operating segments in annual financial statements and requires
reporting selected information about operating segments in interim financial
reports. The disclosure of segment information was not required as the Company
operates in only one business segment.
As of and for the years ended December 31, 1997, 1998 and 1999,
substantially all of the Company's assets were located in the United States and
the Company derived substantially all of its revenue from businesses located in
the United States.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1999
-------- ---------
<S> <C> <C>
Computer equipment.......................................... $170,657 $ 498,452
Purchased software.......................................... 4,201 57,705
Office furniture, fixtures and equipment.................... 22,365 139,274
Leasehold improvements...................................... -- 151,677
-------- ---------
197,223 847,108
Less accumulated depreciation............................... (85,777) (237,478)
-------- ---------
$111,446 $ 609,630
======== =========
</TABLE>
F-9
<PAGE> 93
REAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31, 1997, 1998 and 1999
3. NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net
loss per share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Numerator:
Numerator for basic and diluted net loss per share...... $(1,797,178) $(2,116,255) $(9,802,596)
=========== =========== ===========
Denominator:
Denominator for basic and dilutive net loss per share --
weighted average shares............................... 5,968,767 7,849,253 9,358,972
=========== =========== ===========
Basic and diluted net loss per share...................... $ (0.30) $ (0.27) $ (1.05)
=========== =========== ===========
</TABLE>
The following securities are not included in the diluted net loss per share
computation as they are antidilutive:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Stock options........................................ 511,530 650,250 1,495,206
</TABLE>
4. RELATED PARTY TRANSACTIONS
From September 1999 through December 1999, the Company issued four
convertible promissory notes aggregating $6,000,000 to a wholly-owned subsidiary
of a stockholder. These notes bear interest at the prime rate and for the year
ended December 31, 1999, the Company incurred interest of approximately $95,000
in connection with these loans. The notes will be converted into the Company's
common stock upon completion of the business combination of the Company and Real
Media Europe (see Note 9).
During 1997 and 1998, the Company borrowed $770,000 and $225,000,
respectively, from a stockholder. In April 1998, the Company repaid principal
and interest of $500,000 in connection with this debt and the remaining balance
(aggregating approximately $551,000) was canceled and set up as deferred revenue
in accordance with a technology transfer agreement. Prior to their cancellation,
the notes bore interest at 8.5%.
Deferred revenue from this stockholder will be amortized as revenue is
earned by the Company pursuant to the technology transfer agreement whereby the
stockholder can (i) sell the Company's Open AdStream(TM) software to customers
located in Europe and (ii) receive technical support services from the Company.
For the years ended December 31, 1998 and 1999, the Company recognized revenue
of approximately $77,000 and $115,000, respectively, in connection with software
sales pursuant to this agreement.
During the year ended December 31, 1997, the Company issued a $64,000 note
payable to a founding stockholder which was repaid in April 1998.
Due from affiliates consists of compensation and advertising campaign
expenses incurred by the Company on behalf of certain companies located in
Europe that are wholly-owned subsidiaries of a major stockholder of the Company.
Due from stockholder consists of revenue from the sale of software to a
wholly-owned subsidiary of a major stockholder.
F-10
<PAGE> 94
REAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31, 1997, 1998 and 1999
Due to affiliates consists of advertising campaign expenses and sales
representation services provided by two of the Company's major stockholders,
respectively.
5. INCOME TAXES
The Company accounts for income taxes using the liability method required
by SFAS No. 109, Accounting for Income Taxes.
Significant components of the Company's net deferred tax assets and
liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Net deferred tax assets:
Net operating loss carryforward......................... $ 1,610,371 $ 6,307,962
Compensation charge from issuance of stock options...... 36,511 79,421
Cash to accrual......................................... 332,271 450,366
Depreciation............................................ (21,007) 4,317
----------- -----------
Net deferred tax assets................................. 1,958,146 6,842,066
Valuation allowance..................................... (1,958,146) (6,842,066)
----------- -----------
Total net deferred tax assets............................. $ -- $ --
=========== ===========
</TABLE>
The net deferred tax assets have been fully offset by a valuation allowance
due to the uncertainty of the realization of these assets.
At December 31, 1998 and 1999, the Company has net operating loss
carryforwards of approximately $3,599,000 and $10,354,000, respectively, for
Federal, state and local income tax purposes expiring from 2011 through 2019.
Rate Reconciliation
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Statutory rate.............................................. (34)% (34)% (34)%
Losses for which no benefit is provided..................... 34% 34% 34%
--- --- ---
Tax provision............................................... --% --% --%
=== === ===
</TABLE>
6. STOCKHOLDERS' EQUITY (DEFICIENCY)
Common Stock
In August 1999, the Company completed its fifth private placement offering
of shares of its common to an existing stockholder. The Company issued 95,007
shares of its common stock, at $5.26 per share, for proceeds of $500,000.
In March 1999, the Company completed its fourth private placement offering
of shares of its common stock to two existing stockholders. The Company issued
1,111,111 shares of its common stock, at $2.70 per share, for proceeds of
$3,000,000.
F-11
<PAGE> 95
REAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31, 1997, 1998 and 1999
In April 1998, the Company completed its third private placement offering
of shares of its common stock to a new investor. The Company issued 2,195,000
shares of its common stock, at $1.37 per share, for proceeds of $3,000,000.
During 1998, the Company increased its authorized number of shares of
common stock from 9,000,000 shares to 18,000,000 shares.
In June 1997, the Company completed its second private placement offering
of shares of its common stock to an existing stockholder. The Company issued
550,000 shares of its common stock, at $0.60 per share, for proceeds of
$330,000.
Stock Options
As of December 31, 1999, the Company has authorized the grant of options to
employees, officers and consultants for up to 1,830,176 shares of the Company's
common stock.
In 1999, the Company established the 1999 Employee Stock Option Plan (the
"Plan") and has authorized the grant of options to directors, key employees,
independent contractors, agents and consultants for up to 1,093,364 shares of
the Company's common stock as of December 31, 1999. For the year ended December
31, 1999, options to purchase 993,426 shares of the Company's common stock were
granted under the Plan.
During 1999, options to purchase 26,000 shares of the Company's common
stock were granted to employees at exercise prices below the estimated fair
value of the Company's common stock on the date of the grant. In accordance with
APB Opinion No. 25, the Company recorded deferred compensation of approximately
$81,000, in connection with these options which is being amortized over the
vesting period of the options.
Pro forma information regarding net loss, as required by SFAS No. 123, has
been determined as if the Company had accounted for its employee stock options
under the fair value method of that Statement. The fair value of the options was
estimated at the date of grant using a Minimum Value option pricing model with
the following assumptions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
ASSUMPTIONS 1997 1998 1999
- ----------- ----------- ----------- -----------
<S> <C> <C> <C>
Average risk-free interest rate.......... 6.04%-6.98% 4.80%-5.92% 4.98%-6.92%
Dividend yield........................... 0.0% 0.0% 0.0%
Average life............................. 10 years 10 years 10 years
</TABLE>
Option pricing models require the input of highly subjective assumptions.
Because the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Pro forma net loss......................... $(1,821,454) $(2,159,232) $(10,136,000)
Pro forma basic and diluted net loss per
share.................................... (0.31) (0.28) (1.08)
</TABLE>
F-12
<PAGE> 96
REAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31, 1997, 1998 and 1999
The weighted average fair value of options granted during the years ended
December 31, 1997, 1998 and 1999 was $0.20, $0.32 and $0.26, respectively.
The Company recorded compensation expense for nonemployee granted options
for the years ended December 31, 1997, 1998 and 1999 of $14,714, $64,383 and
$109,179, respectively.
The following transactions occurred with respect to stock options for the
years ended December 31, 1997 and 1998 and 1999:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
OPTIONS EXERCISE PRICE
--------- --------------
<S> <C> <C>
Options outstanding at December 31, 1996............ 198,000 $0.05
Granted........................................... 340,530 0.58
Exercised......................................... -- --
Canceled.......................................... (27,000) 0.50
---------
Options outstanding at December 31, 1997............ 511,530 0.38
Granted........................................... 263,470 0.98
Exercised......................................... (5,062) 0.58
Canceled.......................................... (119,688) 0.56
---------
Options outstanding at December 31, 1998............ 650,250 0.59
Granted........................................... 1,179,676 5.08
Exercised......................................... (229,970) 0.38
Canceled.......................................... (104,750) 1.33
---------
Options outstanding at December 31, 1999............ 1,495,206 4.11
=========
</TABLE>
The following table summarizes information concerning outstanding options
at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------- ---------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE NUMBER OF STOCK AVERAGE
NUMBER EXERCISE REMAINING OPTIONS EXERCISE
OUTSTANDING PRICE CONTRACTUAL LIFE EXERCISABLE PRICE
----------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
86,000 $0.05 6.8 years 76,000 $0.05
77,000 0.50 7.2 years 76,973 0.50
122,780 0.60 7.8 years 122,203 0.60
162,750 1.37 8.9 years 110,981 1.37
37,500 2.70 9.3 years 12,451 2.70
147,500 4.37 9.6 years 67,540 4.37
163,500 5.26 9.7 years 29,739 5.26
698,176 6.00 9.7 years 15,938 6.00
- ------------- ------------
1,495,206 4.11 10 years 511,825 1.66
- ------------- ------------
- ------------- ------------
</TABLE>
The options outstanding primarily vest in annual installments ranging from
one to three years commencing on the date of grant and expire the earlier of ten
years after the date of grant or 90 days following termination of employment
with the Company.
F-13
<PAGE> 97
REAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31, 1997, 1998 and 1999
7. COMMITMENTS
Operating Lease Commitments
The Company leases office space and equipment under various noncancellable
operating leases expiring through 2006. Minimum rental commitments under such
operating leases are as follows:
<TABLE>
<S> <C>
Year ending December 31:
2000...................................................... $ 680,000
2001...................................................... 681,000
2002...................................................... 581,000
2003...................................................... 378,000
2004...................................................... 377,000
2005...................................................... 385,000
2006...................................................... 73,000
----------
$3,155,000
==========
</TABLE>
Rent expense for the years ended December 31, 1997, 1998 and 1999 was
approximately $61,000, $75,000 and $236,000, respectively.
Letters of Credit
In December 1999, the Company issued a stand-by letter of credit for
approximately $307,000 as security required by various lease agreements.
8. BENEFIT PLAN
The Company has a defined contribution plan covering all eligible
employees, which qualifies under Section 401(k) of the Internal Revenue Code.
The Company's 401(k) plan provides that eligible employees may make
contributions of 1% to 15% of eligible compensation.
The Company may make discretionary matching contributions. Since the 401(k)
plan's inception in January 1998, no such discretionary contributions have been
made.
9. SUBSEQUENT EVENTS
In January and February 2000, the Company issued two convertible promissory
notes aggregating $4,000,000 to a wholly-owned subsidiary of a stockholder.
These notes bear interest at the prime rate and will be converted into shares of
the Company's common stock upon completion of the business combination of the
shares of Company and Real Media Europe.
On February 8, 2000, the Company entered into an agreement (the
"Agreement"), subject to customary closing requirements including the execution
of ancillary agreements, to acquire all of the outstanding shares of Real Media
Europe Holding S.A., a wholly-owned subsidiary of a stockholder of the Company.
In connection with the Agreement, the Company will receive $1,600,000 from this
stockholder. Additionally, notes payable aggregating $8,400,000 to this
stockholder will be converted into shares of the Company's common stock. Under
the Agreement, the Company will issue 16,126,525 shares of its common stock and
450,000 shares of its Series A Convertible Preferred Stock. Immediately
following this transaction, this stockholder will own approximately 74% of the
outstanding common stock of the Company (including common stock to be sold by
this stockholder to certain employees of Real Media Europe Holding S.A.
immediately following this transaction).
Real Media Europe Holding S.A. is a holding company for operations
throughout Europe and provides Internet advertising solutions and software sales
and support under exclusive licensing agreement with the Company. The
acquisition will be accounted for by the purchase method of accounting and,
accordingly, the purchase price will be allocated based on the estimated fair
values as of the date of acquisition pending final determination of certain
tangible and intangible assets.
F-14
<PAGE> 98
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholder of
Real Media Europe
We have audited the accompanying combined balance sheets of Real Media
Europe (the "Company") as of December 31, 1998 and 1999 and the related combined
statements of operations, changes in shareholder's equity (deficiency) and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Real Media
Europe as of December 31, 1998 and 1999, and the combined 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.
Zurich, Switzerland
February 21, 2000
F-15
<PAGE> 99
REAL MEDIA EUROPE
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 190,945 $ 588,079
Marketable securities..................................... 236,741 --
Accounts receivable, less allowance of $69,000 and
$184,000 at December 31, 1998 and 1999, respectively... 1,447,124 5,278,576
Due from affiliates....................................... 776,636 707,851
Prepaid and other current assets.......................... 374,682 120,128
----------- -----------
Total current assets........................................ 3,026,128 6,694,634
Property and equipment, net................................. 353,307 714,234
Other....................................................... 30,376 100,044
----------- -----------
Total assets................................................ $ 3,409,811 $ 7,508,912
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIENCY)
Current liabilities:
Bank overdraft............................................ $ -- $ 117,994
Accounts payable.......................................... 997,836 3,451,244
Accrued expenses.......................................... 1,017,247 2,821,826
Due to affiliates......................................... 516,266 1,074,360
Current portion of capital lease obligations.............. 11,063 59,194
Deferred revenue.......................................... 378,835 504,291
----------- -----------
Total current liabilities................................... 2,921,247 8,028,909
Notes payable to affiliate.................................. 3,780,479 5,877,572
Long-term portion of capital lease obligations.............. 56,765 --
Commitments
Shareholder's equity (deficiency):
Common stock.............................................. 710,677 710,677
Accumulated deficit....................................... (4,040,024) (7,531,076)
Accumulated comprehensive income (loss)................... (19,333) 422,830
----------- -----------
Total shareholder's equity (deficiency)..................... (3,348,680) (6,397,569)
----------- -----------
Total liabilities and shareholder's equity (deficiency)..... $ 3,409,811 $ 7,508,912
=========== ===========
</TABLE>
See accompanying notes.
F-16
<PAGE> 100
REAL MEDIA EUROPE
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenue............................................. $ 924,986 $ 5,436,631 $17,020,910
Cost of revenue..................................... 751,400 3,684,242 12,150,593
----------- ----------- -----------
Gross profit........................................ 173,586 1,752,389 4,870,317
Operating expenses:
Sales and marketing............................... 729,698 1,999,665 4,625,938
Product and technology development................ 73,000 312,000 574,838
General and administrative........................ 612,565 1,405,223 2,946,108
----------- ----------- -----------
Total operating expenses............................ 1,415,263 3,716,888 8,146,884
----------- ----------- -----------
Loss from operations................................ (1,241,677) (1,964,499) (3,276,567)
Other income (expense):
Interest income................................... 78 16,621 10,522
Interest expense.................................. (14,891) (71,894) (225,007)
----------- ----------- -----------
Net loss............................................ $(1,256,490) $(2,019,772) $(3,491,052)
=========== =========== ===========
</TABLE>
See accompanying notes.
F-17
<PAGE> 101
REAL MEDIA EUROPE
COMBINED STATEMENTS OF CHANGES IN
SHAREHOLDER'S EQUITY (DEFICIENCY)
FOR THE YEAR ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON ACCUMULATED COMPREHENSIVE
STOCK DEFICIT INCOME (LOSS) TOTAL
-------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1997.............. $ 3 $ (763,762) $ 52,939 $ (710,820)
-----------
Net loss................................ -- (1,256,490) -- (1,256,490)
Other comprehensive income -- foreign
currency translation.................. -- -- 36,886 36,886
-----------
Comprehensive loss...................... -- -- -- (1,219,604)
Capital contribution.................... 541,251 -- -- 541,251
-------- ----------- --------- -----------
Balance at December 31, 1997............ 541,254 (2,020,252) 89,825 (1,389,173)
-----------
Net loss................................ -- (2,019,772) -- (2,019,772)
Other comprehensive loss -- foreign
currency translation.................. -- -- (109,158) (109,158)
-----------
Comprehensive loss...................... -- -- -- (2,128,930)
Capital contribution.................... 169,423 -- -- 169,423
-------- ----------- --------- -----------
Balance at December 31, 1998............ 710,677 (4,040,024) (19,333) (3,348,680)
-----------
Net loss................................ -- (3,491,052) -- (3,491,052)
Other comprehensive income -- foreign
currency translation.................. -- -- 442,163 442,163
-----------
Comprehensive loss...................... -- -- -- (3,048,889)
-------- ----------- --------- -----------
Balance at December 31, 1999............ $710,677 $(7,531,076) $ 422,830 $(6,397,569)
======== =========== ========= ===========
</TABLE>
See accompanying notes.
F-18
<PAGE> 102
REAL MEDIA EUROPE
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................................ $(1,256,490) $(2,019,772) $(3,491,052)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation and amortization..................... 68,736 157,552 311,115
Bad debt expense.................................. 7,594 81,287 149,466
Amortization of prepaid license fees.............. -- 77,405 115,300
Changes in operating assets and liabilities:
Accounts receivable............................ (285,307) (1,105,018) (4,327,040)
Due from affiliates............................ (402,132) (358,378) (144,679)
Prepaid and other current assets............... (29,312) (336,377) 224,686
Other assets................................... -- (29,175) (91,991)
Bank overdraft................................. -- -- 125,292
Accounts payable and accrued expenses.......... 310,152 1,457,840 4,827,439
Due to affiliates.............................. 116,000 318,912 711,634
Deferred revenue............................... 83,511 283,764 175,727
----------- ----------- -----------
Net cash used in operating activities............... (1,387,248) (1,471,960) (1,414,103)
INVESTING ACTIVITIES
Purchase of marketable securities................... -- (226,324) --
Proceeds from sale of marketable securities......... -- -- 230,785
Purchases of property plant and equipment........... (155,553) (283,024) (724,839)
----------- ----------- -----------
Cash used in investing activities................... (155,553) (509,348) (494,054)
FINANCING ACTIVITIES
Capital contribution................................ 530,661 169,700 --
Net proceeds from borrowings from affiliate......... 1,123,294 1,907,542 2,328,467
Principal payments on capital lease obligations..... (6,861) (13,362) (6,929)
----------- ----------- -----------
Net cash provided by financing activities........... 1,647,094 2,063,880 2,321,538
Increase in cash and cash equivalents............... 104,293 82,572 413,381
Effect of exchange rate changes on cash............. (1,694) 5,774 (16,247)
Cash and cash equivalents, beginning of year........ -- 102,599 190,945
----------- ----------- -----------
Cash and cash equivalents, end of year.............. $ 102,599 $ 190,945 $ 588,079
=========== =========== ===========
</TABLE>
See accompanying notes.
F-19
<PAGE> 103
REAL MEDIA EUROPE
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31 1997, 1998 and 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Real Media Europe (the "Company") includes Real Media companies,
wholly-owned by PubliGroupe S.A., located in Germany, France, Switzerland and
the United Kingdom. Operations commenced as follows:
<TABLE>
<S> <C>
Switzerland................................................. February 1996
United Kingdom.............................................. October 1997
Germany..................................................... October 1997
France...................................................... January 1998
</TABLE>
The Company provides Internet advertising solutions for its extensive
network of branded web sites. As part of its comprehensive Internet advertising
solution, the Company also markets and supports an affiliated company's
proprietary ad management software, Open AdStream(TM), which provides web sites
with the technology infrastructure to manage targeted ad campaigns.
The Company's customers are primarily located throughout Europe.
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.
Combination
The combined financial statements reflect the accounts of Real Media
Europe. Significant intercompany transactions and balances have been eliminated.
Revenue Recognition
The Company generates its revenue from the delivery of advertising
impressions through third-party web sites, licensing of its software and
providing maintenance services.
Revenue from advertising sales is recorded gross in accordance with Staff
Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements, as the Company is a principal in separate, approximately concurrent,
transactions to purchase and sell advertising space and has the risks and
rewards of ownership, such as the risk of loss due to performance, delivery or
distribution failure, in addition to credit risk. The Company's obligation to
pay the seller of the ad space is independent of the purchaser's obligation to
pay the Company for the ad space.
Revenue from advertising is recognized in the period in which the
advertising impressions are delivered to the web sites, provided that no
significant obligations remain to be performed. The Company becomes obligated to
make payments to third-party web sites, which have contracted with the Company,
in the period the advertising impressions are delivered. Such expenses are
classified as cost of revenue in the statements of operations.
Revenue from software licensing agreements is recognized in accordance with
Statement of Position ("SOP") 97-2, Software Revenue Recognition, upon delivery
of the software when collection is probable; all license payments are due within
one year, the license fee is otherwise fixed and determinable, vendor-
F-20
<PAGE> 104
REAL MEDIA EUROPE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31 1997, 1998 and 1999
specific evidence exists to allocate the total fee to the elements of the
arrangement and persuasive evidence of an arrangement exists.
Revenue from maintenance and support services is recognized ratably over
the lives of the maintenance agreements, which typically do not exceed one year.
Maintenance revenue received in advance of the related services is recorded as
deferred revenue. Expenses from the Company's licensing maintenance and support
revenues are primarily payroll costs to deliver, modify and support the
software. These expenses are classified as cost of revenue in the statements of
operations and were not material.
Advertising Costs
Advertising costs are expensed as incurred. For the years ended December
31, 1997, 1998 and 1999, advertising expense amounted to approximately $24,000,
$145,000 and $371,000, respectively, and is included in sales and marketing
expenses.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist of cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities. At December 31, 1998 and
1999, the fair value of these instruments approximate their financial statement
carrying amount because of the short term maturity of these instruments.
The notes payable to affiliates bear interest at market rates and,
therefore, their carrying values approximate their fair values.
The Company performs periodic credit evaluations of its customers'
financial condition and does not require collateral and establishes an allowance
for doubtful accounts based upon factors surrounding the credit risk of
customers, historical trends and other information; to date, such losses have
been within management's expectations.
Property and Equipment
Property and equipment are stated at cost and depreciation for financial
reporting purposes is calculated using the straight-line method over the
estimated useful lives of the assets ranging from three to five years.
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.
F-21
<PAGE> 105
REAL MEDIA EUROPE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31 1997, 1998 and 1999
Income Taxes
Deferred income taxes are provided for temporary differences between the
carrying amount of assets and liabilities for financial reporting and income tax
purposes.
Segment Information
The Company discloses information regarding segments in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosures about
Segments of an Enterprise and Related Information. SFAS No. 131 establishes
standards for reporting of financial information about operating segments in
annual financial statements and requires reporting selected information about
operating segments in interim financial reports. The disclosure of segment
information was not required as the Company operates in only one business
segment. Geographical segment information is disclosed in Note 9.
Translation of Foreign Currencies
Balance sheets of the individual subsidiaries of the Company are translated
into United States dollars at the year end exchange rates. Statements of
operations are translated at the average exchange rate for the year. The
difference resulting from the use of these two annual rates is recorded as a
separate component of shareholder's equity (deficiency).
Comprehensive Income
SFAS No. 130, Reporting Comprehensive Income, establishes standards for the
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. This statement requires that all items
that are required to be recognized as components of comprehensive income (loss)
be reported in a financial statement with the same prominence as other financial
statements. The Company has determined that their only item of comprehensive
income (loss) relates to its foreign currency translation adjustments.
2. MARKETABLE SECURITIES
During 1998, the Company purchased marketable securities and classified
them as available for sale securities in accordance with the SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities. These
marketable securities were valued at cost at December 31, 1998 which
approximated market value. In 1999, the Company sold these marketable securities
and realized a gain of approximately $4,500.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1999
-------- ---------
<S> <C> <C>
Computer equipment.......................................... $298,454 $ 648,063
Motor vehicles.............................................. 119,389 112,959
Office furniture, fixtures and equipment.................... 199,413 467,643
-------- ---------
617,256 1,228,665
Less accumulated depreciation............................... (263,949) (514,431)
-------- ---------
$353,307 $ 714,234
======== =========
</TABLE>
F-22
<PAGE> 106
REAL MEDIA EUROPE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31 1997, 1998 and 1999
4. COMMON STOCK
Common stock consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Real Media (UK) Ltd.: L1 par value; 100,000 shares
authorized, issued and outstanding........................ $170,078 $170,078
Real Media S.A.: CHF1,000 par value; 500 shares authorized,
issued and outstanding.................................... 343,300 343,300
Real Media SARL: FRF100 par value; 10,000 participation
rights authorized, issued and outstanding................. 169,423 169,423
Real Media Deutschland GmbH: Capital contribution
DM50,000.................................................. 27,876 27,876
-------- --------
$710,677 $710,677
======== ========
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Company pays license fees to Real Media, Inc. based on a licensing
agreement for its proprietary product Open AdStream(TM). An affiliated company
made a prepayment to Real Media, Inc. in the amount of $551,000 during 1998. At
December 31, 1998 and 1999, the balance of this prepayment was $474,000 and
$358,000, respectively, and is included in due from affiliates. The amounts due
to the affiliated company are included in due to affiliates at December 31, 1998
and 1999, respectively.
The Company's subsidiaries have various loan facilities with PubliGroupe
S.A. Interest accrues on these loans at rates ranging between 4.0% and 6.75% per
annum. No amounts relating to these loan facilities have been repaid. The
outstanding balances plus interest are disclosed as notes payable to affiliate
(see Note 11).
The Company surrendered $490,000 of trading losses for the year ended
December 31, 1998 to Powers International Ltd., an affiliate of PubliGroupe
S.A., as allowed for group relief purposes under Section 412 of the Income and
Corporation Taxes Act of 1988 in United Kingdom.
Due to affiliates consists of employee expenses, advertising campaign
expenses and prepaid licensing fees paid by affiliated companies on behalf of
the Company.
Due from affiliates consists of prepaid licensing fees and various expenses
and software services provided by the Company on behalf of affiliated companies.
6. INCOME TAXES
The Company accounts for income taxes using the liability method required
by SFAS No. 109, Accounting for Income Taxes.
At December 31, 1998 and 1999, the Company has net operating loss
carryforwards of approximately $656,000 and $442,000, respectively, for Federal,
state and local income tax purposes. The remaining net operating loss
carryforwards expire in 2005 and 2006.
The net operating loss carryforwards described above, will give rise to
future tax deductions and should be accounted for as deferred tax assets. Such
deferred tax assets have been fully offset by a valuation allowance, due to the
uncertainty of the realization of these assets.
F-23
<PAGE> 107
REAL MEDIA EUROPE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31 1997, 1998 and 1999
There were no other material temporary differences between carrying amounts
of assets and liabilities for financial reporting purposes and amounts used for
income taxes.
The effective income tax rate differs from the statutory rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Statutory rate.............................................. (37)% (37)% (35)%
Loss for which no tax benefit was provided.................. 37 37 35
--- --- ---
Effective tax rate.......................................... 0% 0% 0%
=== === ===
</TABLE>
7. COMMITMENTS
Operating Lease Commitments
The Company leases office space and equipment under various noncancellable
operating leases. Minimum rental commitments under such operating leases are as
follows:
<TABLE>
<S> <C>
Year ending December 31:
2000...................................................... 317,000
2001...................................................... 186,000
2002...................................................... 132,000
2003...................................................... 82,000
2004...................................................... 33,000
--------
$750,000
========
</TABLE>
Rent expense for the years ended December 31, 1997, 1998 and 1999 was
approximately $42,000, $193,000 and $369,000, respectively.
Capital Lease Commitments
The Company leases vehicles which meet the criteria for capitalization in
accordance with SFAS No. 13, Accounting for Leases. These leased assets are
recorded as vehicles in property and equipment and had gross costs of $89,553 at
December 31, 1998, and 1999. These leased assets are being amortized over a four
year life. Accumulated amortization at December 31, 1998 and 1999 was $27,034
and $50,434, respectively. Amortization expense on these assets is included with
depreciation expense in the combined financial statements.
Future leasing commitments under capital leases at December 31, 1999 are as
follows:
<TABLE>
<S> <C>
2000........................................................ 61,370
Less: imputed interest...................................... (2,176)
-------
Capital lease obligation.................................... $59,194
=======
</TABLE>
8. BENEFIT PLAN
The Company participates in pension plans covering substantially all
salaried employees of the Company. Eligible employees make contributions to the
plans based on a percentage of each employee's annual salary, ranging from 5% to
9%. Under certain plans, the Company is required to make matching
F-24
<PAGE> 108
REAL MEDIA EUROPE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31 1997, 1998 and 1999
contributions.
The pension expense allocated to the Company for the years ended December
31, 1997, 1998 and 1999 was $6,000, $58,000 and $107,000, respectively.
9. GEOGRAPHICAL SEGMENTS
The Company's operations are primarily located in France, Germany,
Switzerland and the United Kingdom.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
---------- ----------- -----------
<S> <C> <C> <C>
REVENUE
France............................................... $ -- $ 569,938 $ 2,378,683
Germany.............................................. 130,749 1,700,655 5,054,856
Switzerland.......................................... 791,840 2,913,958 7,263,414
United Kingdom....................................... 2,397 252,080 2,323,957
---------- ----------- -----------
REVENUE.............................................. $ 924,986 $ 5,436,631 $17,020,910
========== =========== ===========
OPERATING RESULTS
France............................................... $ -- $ (473,133) $ (842,014)
Germany.............................................. (22,250) (113,496) (20,973)
Switzerland.......................................... (978,200) (343,410) (916,413)
United Kingdom....................................... (241,227) (1,034,460) (1,497,167)
---------- ----------- -----------
LOSS FROM OPERATIONS................................. $(1,241,677) $(1,964,499) $(3,276,567)
========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
LONG-LIVED ASSETS
France...................................................... $ 47,034 $257,790
Germany..................................................... 69,607 184,022
Switzerland................................................. 91,692 174,125
United Kingdom.............................................. 175,350 198,341
-------- --------
LONG-LIVED ASSETS........................................... $383,683 $814,278
======== ========
</TABLE>
10. CONCENTRATION OF CREDIT RISK
Revenues generated from one web site accounted for 20% and 18% of total
revenue for the years ended December 31, 1998 and 1999, respectively.
11. SUBSEQUENT EVENTS
PubliGroupe S.A. entered into an agreement, subject to customary closing
requirements, including the execution of ancillary agreements, with Real Media,
Inc., a United States affiliated company, to sell all of the capital stock of
the Company to Real Media, Inc. in exchange for shares of capital stock of Real
Media, Inc. In connection with the underlying stock purchase agreement, notes
payable and certain other amounts due PubliGroupe S.A. were contributed to
capital.
F-25
<PAGE> 109
REAL MEDIA EUROPE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Years ended December 31 1997, 1998 and 1999
12. YEAR 2000 (UNAUDITED)
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementations
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change.
For the years ended December 31, 1997, 1998 and 1999, the Company incurred
no significant Year 2000 related expenses and it does not expect to incur
significant Year 2000 related expenses in the future.
The Company is not aware of any material problems resulting from Year 2000
issues, either with its products, its internal systems, or the product and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the Year 2000 to ensure that any serious Year 2000 matters that may arise are
addressed promptly.
F-26
<PAGE> 110
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Real Media, Inc.
We have audited the financial statements of Real Media, Inc. as of December
31, 1998 and 1999 and for each of the three years in the period ended December
31, 1999, and have issued our report thereon dated February 9, 2000 (included
elsewhere in this Registration Statement). Our audits also included the
financial statement schedule listed in Item 16(b) of this Registration
Statement. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
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 set forth therein.
New York, New York
February 9, 2000
F-27
<PAGE> 111
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
REAL MEDIA, INC.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- -------------------------------------- ------------ ------------------------ ------------- ----------
ADDITIONS
------------------------
CHARGED TO CHARGED TO
BALANCE AT COSTS OTHER BALANCE AT
BEGINNING OF AND ACCOUNTS -- DEDUCTIONS -- END OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------- ------------ ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1999:
Reserves and allowances deducted
from asset accounts:
Allowance for uncollectible
accounts....................... $40,000 $403,848 $ -- $110,325(1) $333,523
Year Ended December 31, 1998:
Reserves and allowances deducted
from asset accounts:
Allowance for uncollectible
accounts....................... $ -- $102,302 $ -- $ 62,302(1) $ 40,000
Year Ended December 31, 1997:
Reserves and allowances deducted
from asset accounts:
Allowance for uncollectible
accounts....................... $ -- $ -- $ -- $ -- $ --
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries.
F-28
<PAGE> 112
realmedia logo
<PAGE> 113
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 19,800
NASD Filing Fee............................................. 8,000
Nasdaq National Market Fee.................................. *
SWX Swiss New Market Exchange Fees.......................... *
Blue Sky Fees and Expenses.................................. 7,500
Legal Fees and Expenses..................................... *
Accounting Fees and Expenses................................ *
Director and Officer Liability Insurance.................... *
Registrar and Transfer Agent Fees........................... 10,000
Printing and Engraving Expenses............................. 200,000
Miscellaneous............................................... *
--------
Total............................................. $ *
========
</TABLE>
- ---------------
* To be completed by amendment.
Each amount set forth above, except the SEC registration fee, the NASD
filing fee, Nasdaq National Market and Swiss New Market filing fee, is
estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the General Corporation Law of the State of Delaware,
Real Media has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended. Real Media's bylaws (Exhibit 3.2 hereto)
also provide for mandatory indemnification of its directors and executive
officers, and permissive indemnification of its employees and agents, to the
fullest extent permissible under Delaware law.
Real Media's certificate of incorporation (Exhibit 3.1 hereto) provides
that the liability of its directors for monetary damages shall be eliminated to
the fullest extent permissible under Delaware law. Pursuant to Delaware law,
this includes elimination of liability for monetary damages for breach of the
directors' fiduciary duty of care to Real Media and its stockholders. These
provisions do not eliminate the directors' duty of care and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
non-monetary relief will remain available under Delaware law. In addition, each
director will continue to be subject to liability for breach of the director's
duty of loyalty to Real Media, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for any
transaction from which the director derived an improper personal benefit, and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
Prior to the effective date of this Registration Statement, Real Media will
have entered into agreements with its directors and certain of its executive
officers that require Real Media to indemnify such persons against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
(including expenses of a derivative action) in connection with any proceeding,
whether actual or threatened, to which any such person may be made a party by
reason of the fact that such person is or was a director or officer of Real
Media or any of its affiliated enterprises, provided such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of
II-1
<PAGE> 114
Real Media and, with respect to any criminal proceeding, had no reasonable cause
to believe his or her conduct was unlawful. The indemnification agreements also
set forth certain procedures that will apply in the event of a claim for
indemnification thereunder.
Real Media intends to obtain in conjunction with the effectiveness of this
Registration Statement a policy of directors' and officers' liability insurance
that insures Real Media's directors and officers against the cost of defense,
settlement or payment of a judgment under certain circumstances.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification of the underwriters, their officers and
directors by Real Media for certain liabilities arising under the Securities Act
or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On May 13, 1997, Real Media sold a promissory note to PubliGroupe USA
Holding, Inc. (f/k/a Publicitas USA Holding, Inc.) ("PubliGroupe USA"), a
subsidiary of PubliGroupe S.A. ("PubliGroupe"), for $100,000 in cash, which was
repaid in June 1997.
In June 1997, PubliGroupe purchased 550,000 shares of Common Stock for
$330,000 in cash and loaned Real Media $770,000, which was evidenced by a
promissory note dated June 19, 1997. In December 1997, Real Media issued a
$64,000 note payable to a founding stockholder, which was repaid in April 1998.
In January and February 1998, Real Media issued notes payable to PubliGroupe in
the aggregate principal amount of $225,000. In April 1998, we repaid principal
and interest of $500,000 in connection with the debt and the remaining balance
(aggregating approximately $551,000) was canceled and set up as deferred revenue
in accordance with the Amended and Restated Technology Transfer Agreement, dated
April 8, 1998, between Real Media and PubliGroupe.
On April 8, 1998, Real Media sold 2,195,000 shares of Common Stock to
Advance Internet Inc. ("Advance Internet") for $3 million in cash.
In 1998, Real Media sold 5,062 shares of Common Stock to employees and
consultants for an aggregate consideration of $6,934.94 pursuant to the exercise
of options granted by Real Media. In 1999, Real Media sold 229,970 shares of
Common Stock to employees and consultants for an aggregate consideration of
$88,357 pursuant to the exercise of options granted by Real Media.
On March 29, 1999, Real Media sold an aggregate of 1,111,111 shares of
Common Stock to PubliGroupe USA and Advance Internet for $3 million in cash.
On August 16, 1999, Real Media sold 95,007 shares of Common Stock to
Advance Internet for $500,000 in cash.
Pursuant to a Stock Purchase Agreement among Real Media, PubliGroupe and
Real Media Europe Holding, S.A. dated as of February 8, 2000, Real Media agreed
to issue 16,126,525 shares of Common Stock and 450,000 shares of Series A
Convertible Preferred Stock to PubliGroupe in exchange for all of the
outstanding capital stock of Real Media Europe Holding, S.A. Real Media sold
convertible promissory notes to PubliGroupe dated October 11 and 25, November 9
and December 9, 1999, and January 7 and February 9, 2000, in the aggregate
principal amount of $10 million. These notes are convertible into 1,901,141
shares of Common Stock of Real Media, which are included in the 16,126,525
shares of Common Stock to be received by PubliGroupe in the business combination
upon its consummation, at which time the notes will be canceled.
The sale and issuance of securities in the transactions described above
were exempt from registration under the Securities Act in reliance on Section
4(2) thereof or Rule 701 promulgated thereunder. No underwriters were employed
in any of the above transactions.
II-2
<PAGE> 115
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
The following exhibits are filed herewith unless otherwise indicated:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 Underwriting Agreement among Real Media, Inc., PubliGroupe
S.A., Credit Suisse First Boston Corporation, Banc of
America Securities LLC and Lazard Freres & Co. LLC, dated
, 2000(2)
2.1 Stock Purchase Agreement dated as of February 8, 2000, among
Real Media, Inc., PubliGroupe S.A. and Real Media Europe
Holding S.A.(1)
3.1 Amended and Restated Certificate of Incorporation of Real
Media, Inc.(2)
3.2 Amended and Restated By-laws of Real Media, Inc.(2)
4.1 Stockholders Voting Agreement, dated February , 2000,
among Real Media, Inc., PubliGroupe USA Holding, Inc.,
PubliGroupe S.A., Advance Internet Inc. and certain Founders
named therein(2)
5.1 Opinion of Dechert Price & Rhoads(2)
10.1 Form of Real Media, Inc. Stock Option Agreement(1)
10.2 Real Media, Inc. 1999 Employee Stock Option Plan(1)
10.3 Second Amended and Restated Voting and Stockholders
Agreement, dated February , 2000, among Real Media, Inc.,
PubliGroupe USA Holding, Inc., PubliGroupe S.A., Advance
Internet Inc. and certain Founders named therein(2)
10.4+ Stock Purchase Agreement, dated April 8, 1998, between Real
Media, Inc. and Advance Internet Inc.(1)
10.5 Amended and Restated Voting and Stockholder Agreement, dated
April 8, 1998, among Real Media, Inc., PubliGroupe USA
Holding, Inc., Advance Internet Inc. and the Management
Stockholders listed therein
10.6 Amended and Restated Technology Transfer Agreement, dated
April 8, 1998, among Real Media, Inc., PubliGroupe, S.A. and
Real Media, S.A.
10.7 Amended and Restated Marketing Agreement, dated April 8,
1998, between Real Media, Inc. and Real Media, S.A.
10.8 Amendment to Non-Competition Agreement, dated April 8, 1998,
among Real Media, Inc., PubliGroupe, S.A. and Real Media,
S.A.
10.9+ Stock Purchase Agreement, dated March 29, 1999, among Real
Media, Inc., Advance Internet Inc. and PubliGroupe USA
Holding Inc.(1)
10.10+ Stock Purchase Agreement, dated August 16, 1999, between
Real Media, Inc. and Advance Internet Inc.(1)
10.11 Stock Option Termination and Stock Repurchase Agreement,
dated July 15, 1999, between Real Media, Inc. and David
Morgan(1)
10.12 Technology Transfer Agreement, dated February , 2000,
between Real Media, Inc. and Real Media S.A.(2)
10.13 Trademark and Tradename Agreement, dated February , 2000,
among Real Media, Inc., and Real Media S.A.(2)
10.14 Cooperation Agreement, dated February , 2000, between Real
Media, Inc. and PubliGroupe S.A.(2)
10.15 Interim Administrative Services Agreement, dated February
, 2000, between Real Media, Inc. and PubliGroupe S.A.(2)
</TABLE>
II-3
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.16 Stockholders Agreement, dated February , 2000, among
PubliGroupe S.A., Real Media, Inc. and Real Media Europe
Holding S.A.(2)
10.17 Convertible Promissory Note, dated October 11, 1999, payable
to PubliGroupe S.A.(1)
10.18 Convertible Promissory Note, dated October 25, 1999, payable
to PubliGroupe S.A.(1)
10.19 Convertible Promissory Note, dated November 9, 1999, payable
to PubliGroupe S.A.(1)
10.20 Convertible Promissory Note, dated December 9, 1999, payable
to PubliGroupe S.A.(1)
10.21 Convertible Promissory Note, dated January 7, 2000, payable
to PubliGroupe S.A.(1)
10.22 Agreement of Lease, dated February 1, 1999, between
Renaissance Acquisitions, LLC and Real Media, Inc. and
Addendum thereto, dated August 13, 1999 for office space in
New York, New York(1)
10.23 English translation of Agreement, dated December 14, 1998,
between PubliGroupe, S.A. and CubicMedia GmbH and Amendment
thereto, dated September 10, 1999(1)
10.24 Assignment of Lease, dated October 18, 1999, among
Renaissance Acquisitions, LLC, as successor in interest to
260 Delphi Associates D.I.P., Corporate Concepts, Ltd. and
Real Media, Inc. and Lease dated June 4, 1997, between 260
Delphi Associate's D.I.P. and Corporate Concepts, Ltd. for
office space in New York, New York(1)
10.25 General Lease Agreement, dated March 1, 1999, between Narco
Avionics, Inc. and Real Media, Inc. for office space in Fort
Washington, Pennsylvania(1)
10.26 Office lease, dated January 5, 2000, between HUB Properties
Trust and Real Media, Inc. for office space in Fort
Washington, Pennsylvania(1)
10.27 Employment Agreement between Real Media, Inc. and
Christopher Neimeth, dated as of December 15, 1999(2)
10.28 Convertible Promissory Note, dated February 9, 2000, payable
to PubliGroupe S.A.
21.1 Subsidiaries of Real Media, Inc.(2)
23.1 Consent of Dechert Price & Rhoads (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of ATAG Ernst & Young AG
23.4 Consent of Hans Steiner
23.5 Consent of Heinz Wagli
24.1 Powers of Attorney (included on the signature pages to this
Registration Statement)
27.1 Financial Data Schedule
</TABLE>
- ---------------
(1) Previously filed.
(2) To be filed by amendment.
+ Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
(b) Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
(a) 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.
II-4
<PAGE> 117
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining the liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 118
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York on February 28, 2000.
REAL MEDIA, INC.
By: /s/ CHRISTOPHER D. NEIMETH
------------------------------------
Christopher D. Neimeth
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Christopher D. Neimeth and Norman M.
Blashka, each and individually, his or her attorneys-in-fact, with full power of
substitution and resubstitution, for him or her in any and all capacities, to
sign any or all amendments or post-effective amendments to this Registration
Statement or any Registration Statement for the same offering that is effective
upon filing pursuant to Rule 462 under the Securities Act of 1933, as amended,
and to file the same with exhibits thereto and other documents in connection
therewith or in connection with the registration of Common Stock under the
Securities Exchange Act of 1934, as amended, with the Securities and Exchange
Commission, granting unto each of such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary in connection with such matters and hereby ratifying and confirming
all that each such attorney-in-fact, or his agent or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ DAVID R. MORGAN Chairman of the Board of February 28, 2000
- --------------------------------------------------- Directors
David R. Morgan
/s/ CHRISTOPHER D. NEIMETH President and Chief Executive February 28, 2000
- --------------------------------------------------- Officer (principal executive
Christopher D. Neimeth officer)
/s/ NORMAN M. BLASHKA Chief Financial Officer February 28, 2000
- --------------------------------------------------- (principal financial and
Norman M. Blashka accounting officer)
* Director February 28, 2000
- ---------------------------------------------------
Walter Annasohn
* Chief Technology Officer and February 28, 2000
- --------------------------------------------------- Director
Gil Beyda
</TABLE>
II-6
<PAGE> 119
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
* Director February 28, 2000
- ---------------------------------------------------
Michael Newhouse
* Director February 28, 2000
- ---------------------------------------------------
Mark Pinney
* Director February 28, 2000
- ---------------------------------------------------
Peter Weinberger
* Director February 28, 2000
- ---------------------------------------------------
Pascal Zahner
*By: /s/ CHRISTOPHER D. NEIMETH
- --------------------------------------------------
Christopher D. Neimeth
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 120
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 Underwriting Agreement among Real Media, Inc., PubliGroupe
S.A., Credit Suisse First Boston Corporation, Banc of
America Securities LLC and Lazard Freres & Co. LLC, dated
, 2000(2)
2.1 Stock Purchase Agreement dated as of February 8, 2000, among
Real Media, Inc., PubliGroupe S.A. and Real Media Europe
Holding S.A.(1)
3.1 Amended and Restated Certificate of Incorporation of Real
Media, Inc.(2)
3.2 Amended and Restated By-laws of Real Media, Inc.(2)
4.1 Stockholders Voting Agreement, dated February , 2000, among
Real Media, Inc., PubliGroupe USA Holding, Inc., PubliGroupe
S.A., Advance Internet Inc. and certain Founders named
therein(2)
5.1 Opinion of Dechert Price & Rhoads(2)
10.1 Form of Real Media, Inc. Stock Option Agreement(1)
10.2 Real Media, Inc. 1999 Employee Stock Option Plan(1)
10.3 Second Amended and Restated Voting and Stockholders
Agreement, dated February , 2000, among Real Media, Inc.,
PubliGroupe USA Holding, Inc., PubliGroupe S.A., Advance
Internet Inc. and certain Founders named therein(2)
10.4+ Stock Purchase Agreement, dated April 8, 1998, between Real
Media, Inc. and Advance Internet Inc.(1)
10.5 Amended and Restated Voting and Stockholder Agreement, dated
April 8, 1998, among Real Media, Inc., PubliGroupe USA
Holding, Inc., Advance Internet Inc. and the Management
Stockholders listed therein
10.6 Amended and Restated Technology Transfer Agreement, dated
April 8, 1998, among Real Media, Inc., PubliGroupe, S.A. and
Real Media, S.A.
10.7 Amended and Restated Marketing Agreement, dated April 8,
1998, between Real Media, Inc. and Real Media, S.A.
10.8 Amendment to Non-Competition Agreement, dated April 8, 1998,
among Real Media, Inc., PubliGroupe, S.A. and Real Media,
S.A.
10.9+ Stock Purchase Agreement, dated March 29, 1999, among Real
Media, Inc., Advance Internet Inc. and PubliGroupe USA
Holding Inc.(1)
10.10+ Stock Purchase Agreement, dated August 16, 1999, between
Real Media, Inc. and Advance Internet Inc.(1)
10.11 Stock Option Termination and Stock Repurchase Agreement,
dated July 15, 1999, between Real Media, Inc. and David
Morgan(1)
10.12 Technology Transfer Agreement, dated February , 2000,
between Real Media, Inc. and Real Media S.A.(2)
10.13 Trademark and Tradename Agreement, dated February , 2000,
among Real Media, Inc., and Real Media S.A.(2)
10.14 Cooperation Agreement, dated February , 2000, between Real
Media, Inc. and PubliGroupe S.A.(2)
10.15 Interim Administrative Services Agreement, dated February ,
2000, between Real Media, Inc. and PubliGroupe S.A.(2)
10.16 Stockholders Agreement, dated February ,2000, among
PubliGroupe S.A., Real Media, Inc. and Real Media Europe
Holding S.A.(2)
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.17 Convertible Promissory Note, dated October 11, 1999, payable
to PubliGroupe S.A.(1)
10.18 Convertible Promissory Note, dated October 25, 1999, payable
to PubliGroupe S.A.(1)
10.19 Convertible Promissory Note, dated November 9, 1999, payable
to PubliGroupe S.A.(1)
10.20 Convertible Promissory Note, dated December 9, 1999, payable
to PubliGroupe S.A.(1)
10.21 Convertible Promissory Note, dated January 7, 2000, payable
to PubliGroupe S.A.(1)
10.22 Agreement of Lease, dated February 1, 1999, between
Renaissance Acquisitions, LLC and Real Media, Inc. and
Addendum thereto, dated August 13, 1999 for office space in
New York, New York(1)
10.23 English translation of Agreement, dated December 14, 1998,
between PubliGroupe, S.A. and CubicMedia GmbH and Amendment
thereto, dated September 10, 1999(1)
10.24 Assignment of Lease, dated October 18, 1999, among
Renaissance Acquisitions, LLC, as successor in interest to
260 Delphi Associates D.I.P., Corporate Concepts, Ltd. and
Real Media, Inc. and Lease dated June 4, 1997, between 260
Delphi Associate's D.I.P. and Corporate Concepts, Ltd. for
office space in New York, New York(1)
10.25 General Lease Agreement, dated March 1, 1999, between Narco
Avionics, Inc. and Real Media, Inc. for office space in Fort
Washington, Pennsylvania(1)
10.26 Office lease, dated January 5, 2000, between HUB Properties
Trust and Real Media, Inc. for office space in Fort
Washington, Pennsylvania(1)
10.27 Employment Agreement between Real Media, Inc. and
Christopher Neimeth, dated as of December 15, 1999(2)
10.28 Convertible Promissory Note, dated February 9, 2000, payable
to PubliGroupe S.A.
21.4 Subsidiaries of Real Media, Inc.(2)
23.1 Consent of Dechert Price & Rhoads (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of ATAG Ernst & Young AG
23.4 Consent of Hans Steiner
23.5 Consent of Heinz Wagli
24.1 Powers of Attorney (included on the signature pages to this
Registration Statement)
27.1 Financial Data Schedule
</TABLE>
- ---------------
(1) Previously filed.
(2) To be filed by amendment.
+ Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE> 1
EXHIBIT 10.5
AMENDED AND RESTATED VOTING AND STOCKHOLDERS AGREEMENT
THIS AMENDED AND RESTATED VOTING AND STOCKHOLDERS AGREEMENT
(the "Agreement") is made this 8th day of April, 1998, by and among REAL MEDIA,
INC., a Delaware corporation (the "Company"), PUBLIGROUPE USA HOLDING, INC.
("PUBLIGroupe" or a "Purchaser"), a Purchaser of the Company's Common Stock
pursuant to a certain Stock Purchase and Stockholder Agreement dated as of June
19, 1997 (the "PUBLIGroupe Purchase Agreement"), ADVANCE INTERNET, INC., a New
Jersey corporation ("Advance" or a "Purchaser"), a Purchaser of the Company's
Common Stock pursuant to a certain Stock Purchase Agreement dated as of the date
hereof (the "Purchase Agreement") and the persons listed as Management
Stockholders in the signature pages hereto (collectively, the "Management
Stockholders" and individually, a "Management Stockholder").
WHEREAS, the Company, PUBLIGroupe and the Management
Stockholders have entered into a Voting Agreement dated as of December 3, 1996,
as amended and restated on June 19, 1997 (the "Original Voting Agreement"); and
WHEREAS, PUBLIGroupe has previously purchased from the
Company, and on the date hereof Advance is purchasing from the Company shares of
its Common Stock, and hereafter each of PUBLIGroupe and Advance may, from time
to time, purchase from the Company additional shares of its Common Stock
(together, the "Purchaser Stock"); and
WHEREAS, the Company and the Management Stockholders are
parties to a Stockholders' Agreement dated August 31, 1996 (the "Original
Stockholders' Agreement"); and
WHEREAS, the Purchasers and the Management Stockholders wish
to set forth their entire understanding with respect to the voting and
disposition of their Shares (as defined below), and the parties are willing to
execute this Agreement and to be bound by the provisions hereof;
NOW, THEREFORE, in consideration of the premises, the
agreements set forth below, and the parties' desire to further the interests of
the Company and its present and future stockholders, the parties agree as
follows:
1. DEFINITION. As used in this Agreement, the term "Shares"
means all shares of equity securities of the Company (i) now or hereafter owned
(either beneficially or of record) by a Management Stockholder or a Purchaser
(including Purchaser Stock), and (ii) which a Management Stockholder or a
Purchaser does not own (either beneficially or of record) but as to which now
or hereafter has the right to exercise voting control.
2. TERM. This Agreement shall continue with respect to each
Purchaser until such time as such Purchaser owns or controls less than ten
percent (10%) of the outstanding Shares of the Company. This Agreement shall
terminate absolutely at such time as both Purchasers each owns less than ten
percent (10%) of the outstanding shares of the Company.
<PAGE> 2
3. DESIGNATION OF NOMINEES.
(a) Each Purchaser shall have the right to designate two(2)
nominees (individually, a "Purchaser Nominee") for election as directors of the
Company.
(b) The Management Stockholders, voting as a single class,
shall have the right to designate three (3) nominees (each a "Management
Stockholder Nominee") for election as directors of the Company.
4. ELECTION OF DIRECTORS. At each meeting (or written action
in lieu of a meeting) of stockholders of the Company at or by which any
Purchaser Nominee or any Management Stockholder Nominee is to be elected, the
Purchasers and the Management Stockholders shall vote all their Shares to elect
such Purchaser Nominees and/or Management Stockholder Nominees, as applicable.
In the event a Purchaser decides not to designate its Purchaser Nominees,
Management Stockholders may vote all or any of their Shares to elect any person
nominated for election as a director of the Company. In the event Management
Stockholders decide not to designate any Management Stockholder Nominee,
Purchasers may vote all or any of its Purchaser Stock to elect any person
nominated for election as a director of the Company.
5. SUCCESSOR DIRECTORS.
(a) If any Purchaser Nominee shall cease to serve as a
director for any reason, the Purchaser who designated such Purchaser Nominee
shall have the right to designate a successor Purchaser Nominee.
(b) If any Management Stockholder Nominee shall cease to
serve as a director for any reason, the Management Stockholders, voting as a
single class, shall have the right to designate a successor Management
Stockholder Nominee.
(c) If (i) a Purchaser notifies the Company that it desires
to remove any of its Purchaser Nominees as a director and/or designate a
successor Purchaser Nominee or (ii) all of the Management Stockholders notify
the Company that they desire to remove a Management Stockholder Nominee or (iii)
the Management Stockholders, voting as a single class desire to designate a
successor Management Stockholder Nominee, the Company shall, at the request of a
Purchaser or the Management Stockholders, as applicable, use its best efforts to
ensure that a meeting of stockholders of the Company is promptly called for such
purpose.
6. MANAGEMENT AND CONTROL.
(a) Without the prior affirmative vote or consent of at
least six of the seven members of the Company's Board of Directors, the Company
shall not:
(i) adopt or effect any plan of sale, merger,
consolidation, dissolution, reorganization or recapitalization of the Company;
(ii) increase or decrease the number of directors
constituting the Board of Directors of the Company; or
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<PAGE> 3
(iii) enter into a significant new line of business
which is unrelated to its then existing business.
(b) without the prior affirmative vote or consent of at
least five of the seven members of the Company's Board of Directors, the Company
shall not:
(i) sell all or substantially all of the assets of the
Company, provide , however, that any sale of all or substantially all of the
assets of the Company's online advertising business shall require the consent of
Advance;
(ii) make any capital expenditures of one million
dollars ($1,000,000) or more which are not included in the Company's capital
budget;
(iii) remove, terminate or request the resignation of
the Company's chief executive officer or appoint a new chief executive officer
of the Company, provided that with respect to this subsection (iii), the vote or
consent of at least five directors shall be required only so long as David
Morgan is the chief executive officer of the Company, and at any time that David
Morgan is not the chief executive officer, then the affirmative vote or consent
of at least four of the seven members of the Company's board of directors shall
be required with respect to the actions set forth in this subparagraph (iii).
(c) The annual operating budget for the Company shall be
subject to approval by at least four of the seven members of the Company's Board
of Directors. If the Company shall commence operations in a new fiscal year
prior to the adoption of the annual operating budget for such year, then the
Company shall continue to operate under the budget adopted for the immediately
preceding fiscal year until such time as the new operating budget shall be
adopted.
(d) The chief executive officer of the Company shall be
responsible for the day-to-day operations and decisions for the Company.
7. RIGHT OF FIRST OFFER.
(a) If at any time after the date hereof the Company
desires to issue new equity securities other than equity securities issued from
the Reserve (as defined below), the Company shall submit a written notice to
Purchasers including in such notice an offer to sell (the "Offer to Sell") the
equity securities (the "Offered Shares") on terms and conditions, including
price, of the proposed sale, and any other material facts relating to the
proposed sale.
(b) Purchasers may, at their election, purchase any or all
of the Offered Shares. The purchase of Offered Shares shall be made by each
Purchaser who elects to purchase any Offered Shares in proportion to its equity
ownership interest in the Company at the time the offer to Sell is given by the
Company, or in such other amounts as they may agree, provided, however, that in
the event a Purchaser shall elect not to purchase any of the Offered Shares (or
an amount less than such Purchasers pro rata share), the other Purchaser may
elect to purchase any or all of the portion of the remaining offered Shares.
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<PAGE> 4
(c) If a Purchaser elects to purchase any Offered Shares
(the "Accepted Shares," and together with the Shares previously purchased, the
"Purchaser Stock"), such Purchaser shall communicate in writing its election to
purchase all of the Accepted Shares from the Company, within thirty (30) days of
the date the Offer was made. Such communication shall, when taken in conjunction
with the offer, be deemed to constitute a valid, legally binding and enforceable
agreement for the sale and purchase of the Offered Shares. Sales of the Offered
Shares to be sold by the Company pursuant to this Section 7 shall be made at the
offices of the Company on the 45th day following the date the Offer was made (or
if such 45th day is not a business day, then on the next succeeding business
day) (the "Transaction Date"). Such sales shall be effected by the Company's
delivery to each Purchaser of a certificate or certificates evidencing the
Offered Shares to be purchased by such Purchaser, duly endorsed for transfer to
such Purchaser, against payment to the Company of the purchase price therefor by
the Purchasers payable by wire transfer in immediately available U.S. dollar
funds.
(d) If the Purchasers do not purchase all of the offered
Shares, any offered Shares which are not purchased by the Purchasers may be sold
by the Company at any time within ninety (90) days after the date the Offer to
Sell was made, subject to the other provisions of this Agreement. Any such sale
shall be made only to a "Permitted Buyer", as hereinafter defined, at not less
than the price and upon such other terms and conditions, if any, which are
substantially the same as, and no more favorable to the proposed buyer than,
those specified in the Offer to Sell. Any offered Shares not sold within such
ninety (90) day period shall continue to be subject to the requirements of this
Section 7, unless otherwise stated in this Agreement. For purposes of this
Section 7, a "Permitted Buyer" shall mean any person or entity other than a
person or entity which is engaged in the business of newspaper publishing,
publishing on the Internet for the primary purpose of selling advertising or
subscriptions, or providing advertising service in competition with PubliGroupe,
S.A.
(e) As used in this Section 7, the term "Reserve" shall
mean (i) the shares of capital stock to be issued pursuant to warrants, options,
agreements, subscription rights, convertible or exchangeable securities, or
other commitments of the Company to issue or sell capital stock which are
currently outstanding and disclosed on Schedule 3.1.7 to the Purchase Agreement
and (ii) up to 200,000 shares of capital stock to be issued pursuant to such
options, warrants, rights or other securities which may hereafter be granted or
issued to employees and consultants of the Company with the approval of a
majority of the Board of Directors of the Company.
8. RESTRICTIONS ON TRANSFER BY PURCHASERS.
(a) Neither Purchaser shall sell, assign, transfer, pledge,
hypothecate, make gifts of or in any manner whatsoever dispose of (other than in
connection with a redemption or purchase by the issuer thereof) or encumber (any
such sale, assignment, transfer, pledge, hypothecation, gift or disposition
being hereinafter referred to in this Section 8 as a "Transfer") any Purchaser
Stock or any interest therein, except pursuant to a Permitted Transfer in
accordance with Section 8(b). Any purported Transfer by a Purchaser in violation
of this Agreement shall be null and void and of no force and effect and the
purported transferee shall have no rights or privileges in or with respect to
the Company.
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<PAGE> 5
(b) Notwithstanding anything to the contrary contained
herein, a Purchaser may Transfer any or all of its Purchaser Stock pursuant to a
Permitted Transfer (as defined below) if: prior to the consummation of any such
Permitted Transfer (other than a Transfer described by clauses (1) or of the
definition of "Permitted Transfer" below): (i) such Purchaser notifies the
Company in writing of the proposed Permitted Transfer; and (ii) the proposed
transferee agrees in a writing delivered to the Company to become a party to
this Agreement and pursuant to which writing such proposed transferee (A) shall
be bound by the terms and conditions of this Agreement in the same manner and to
the same extent as such Purchaser, and (3) shall be entitled to the benefit of
the provisions of this Agreement in the same manner and to the same extent as
such Purchaser. For purposes of this Agreement, a "Permitted Transfer" shall
mean any Transfer of Purchaser Stock: (1) by a Purchaser in connection with a
public offering by the Company of its common stock in which the Purchaser is
permitted to register Purchaser Stock or (2) by a Purchaser to the Company or
its designated assignees; and (3) by a Purchaser to any subsidiary or affiliate
in which such Purchaser (or its ultimate parent company) owns, directly or
indirectly, at least a majority of the outstanding shares of voting stock of
such subsidiary or affiliate, or any person (other than a corporation) in which
such Purchaser (or its ultimate parent company) owns at least a majority of the
equity interests of such person (provided that such Purchaser (or its ultimate
parent company) continues to beneficially own, whether directly or indirectly,
at least a majority of the shares of voting stock or equity interests of such
subsidiary or other person).
(c) Prior to any proposed Transfer of any Purchaser Stock
(other than a Transfer described by clauses (1) or (2) of the definition of
"Permitted Transfer" above), the Purchaser (i) shall give written notice to the
Company describing the manner and circumstances of the proposed Transfer, and
(ii) unless waived by the Company, shall deliver a written opinion of legal
counsel, addressed to the Company and the transfer agent, if other than the
Company, and in customary form and substance to each addressee, to the effect
that the proposed Transfer of the Shares may be effected without registration
under the United States Securities Act of 1933 ("Securities Act") and applicable
state securities laws.
9. RESTRICTIONS ON TRANSFERS.
(a) No Management Stockholder shall sell, assign, transfer,
pledge, hypothecate, make gifts of or in any manner whatsoever dispose of (other
than in connection with a redemption or purchase by the issuer thereof) or
encumber (any such sale, assignment, transfer, pledge, hypothecation, gift or
disposition being hereinafter referred to in this Section 9 as a "Transfer") any
Shares or any interest therein, except pursuant to a Permitted Transfer in
accordance with Section 9(b). Any purported Transfer by any Management
Stockholder in violation of this Agreement shall be null and void and of no
force and effect and the purported transferee shall have no rights or privileges
in or with respect to the Company.
(b) Notwithstanding anything to the contrary contained
herein, a Management Stockholder may Transfer any and all Shares pursuant to a
Permitted Transfer (as defined below) if: (i) prior to the consummation of any
such Permitted Transfer, the Management Stockholder proposing the Permitted
Transfer notifies the Company in writing of the proposed Permitted Transfer; and
(ii) in the case of Permitted Transfers described by clauses (1) and (3) of the
definition of "Permitted Transfer" below, the proposed transferee agrees in a
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<PAGE> 6
writing delivered to the Company to become a party to this Agreement and
pursuant to which writing such proposed transferee (A) shall be bound by the
terms and conditions of this Agreement in the same manner and to the same extent
as the Management Stockholder who proposes to Transfer such Shares, and (B)
shall be entitled to the benefit of the provisions of this Agreement in the same
manner and to the same extent as the Management Stockholder who proposes to
Transfer such Shares. For purposes of this Agreement, a "Permitted Transfer"
shall mean any Transfer of Securities: (1) by any management Stockholder who is
a natural person to such Management Stockholder's spouse or children or by will
or the laws of descent and distribution on account of the death of such
Management Stockholder to such stockholder's spouse or descendants; (2) by any
Management Stockholder in connection with a public offering, provide , the
Purchasers are offered the right to participate in such offering on the same
terms and conditions as the Management Stockholders participating in such
offering and each Purchaser is permitted (but not required) to sell in such
offering not less than an amount of such Purchaser's Stock equal to the amount
of such Purchaser's Stock multiplied by a fraction, the numerator of which is
the number of shares of Purchaser Stock then held by such Purchaser and the
denominator of which is the sum of the number of shares of Purchaser Stock then
held by such Purchaser plus the number of Shares to be sold by all Management
Stockholders and the other Purchaser in such offering; (3) by any Management
Stockholder to (I) any corporation, partnership or other business entity in
which such Management Stockholder or Management Stockholders owns, directly or
indirectly, all of the equity interests of such entity (provided that such
Management Stockholder or Management Stockholders, together with any person
described in clause (1) above, continues to beneficially own, whether directly
or indirectly, all of the equity interests of such entity), or (II) to any of
the Management Stockholders on the date hereof; or (III) to any employee or
consultant of the Company at the time of transfer.
(c) Prior to any proposed Transfer of any Shares (other
than a Transfer described by clause (2) of the definition of "Permitted
Transfer" above), the Management Stockholder (i) shall give written notice to
the Company describing the manner and circumstances of the proposed Transfer,
and (ii) unless waived by the Company, shall deliver a written opinion of legal
counsel, addressed to the Company and the transfer agent, if other than the
Company, and in customary form and substance to each addressee, to the effect
that the proposed Transfer of the Shares may be effected without registration
under the United States Securities Act of 1933 ("Securities Act") and applicable
state securities laws.
10. LEGEND. Each certificate evidencing Shares issued
following the date hereof shall bear a legend substantially as follows:
"The shares represented by this certificate are subject to the
terms and conditions of a certain Amended and Restated Voting
and Stockholders Agreement dated as of April 1998, a copy of
which the Company will furnish to the holder of this
certificate upon request and without charge."
11. NOTICES. All notices or other communications given
hereunder shall be in writing and shall be deemed effective upon delivery at the
address of the party to be notified and shall be mailed by certified or
registered mail, return receipt requested, delivered by courier, telecopied, or
sent by other facsimile method (notices by telecopy or facsimile must be
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<PAGE> 7
confirmed by next day courier delivery to be effective), addressed to the
address specified below such party's signature hereto or such other address as
such party may subsequently notify the other parties of in writing.
12. ENTIRE AGREEMENT AND AMENDMENTS; TERMINATION OF ORIGINAL
AGREEMENT. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes in its entirety the Original
Stockholder's Agreement, Original Voting Agreement and the PUBLIGroupe Stock
Purchase Agreement. The rights and obligations created by this Agreement are in
addition to any rights existing under the Certificate of Incorporation and
Bylaws of the Company. Neither this Agreement nor any provision hereof may be
waived, modified, amended or terminated except by a written agreement signed by
the Company, Management Stockholders holding at least sixty-six and two thirds
percent (66 2/3%) of the Management Stockholders, Shares, and both of the
Purchasers.
13. GOVERNING LAW; SUCCESSORS AND ASSIGNS. This Agreement
shall be governed and construed in accordance with the laws of the State of New
York (without giving effect to its conflicts of laws principles) and shall bind
and inure to the benefit of the heirs, personal representatives, executors,
administrators, successors and assigns of the parties. Without limiting the
generality of the foregoing, all covenants and agreements of the Management
Stockholders shall bind any and all subsequent holders of Shares, and the
Company agrees that it shall not transfer on its records any such Shares unless
(i) the transferor Management Stockholder shall have first delivered to the
Company and the Purchaser the written agreement of the transferee to be bound by
this Agreement to the same extent as if such transferee had originally been a
Management Stockholder hereunder, as the case may be, and (ii) the certificate
or certificates evidencing the Shares so transferred bear the legend specified
in Section 10.
14. CAPTIONS. Captions are for convenience only and are not
deemed to be part of this Agreement.
15. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this
Voting Agreement as of the day and year first above written.
<TABLE>
<S> <C>
REAL MEDIA, INC. MANAGEMENT STOCKHOLDERS
By:/s/ David Morgan /s/ David Morgan
---------------------------------------- ----------------------------------
Name: David Morgan David Morgan
Title: President Address: 334 E. 77th
Address: 32 East 31st Street New York, NY
9th Floor
New York, NY 10016
/s/ Gil Beyda
----------------------------------
Gil Beyda
Address: 1504 Friends Lane
Maple Glen, PA 19802
PUBLIGROUPE USA HOLDING, INC.
By:/s/ Walter Annasohn / /s/ Gilles Meilhac /s/ Mark Pinney
---------------------------------------- ----------------------------------
Walter Annasohn/Gilles Meilhac Mark Pinney
Address: 42 West 15th St.,
#7
New York, NY 10011
ADVANCE INTERNET, INC.
By:/s/ Donald Perri
----------------------------------------
/s/ Charles Smith
----------------------------------
Charles Smith
Address: 295 Church St., #4
New York, NY 10013
/s/ Joshua Rosen
----------------------------------
Joshua Rosen
Address: 13-15A Glouchester Street
London SNIV 20B
UK
</TABLE>
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<PAGE> 1
EXHIBIT 10.6
AMENDED AND RESTATED
TECHNOLOGY TRANSFER AGREEMENT
THIS AMENDED AND RESTATED TECHNOLOGY TRANSFER AGREEMENT (the
"Agreement"), is made this 7th day of April, 1998 among REAL MEDIA, INC., a
Delaware corporation ("Real Media USA"), PUBLIGROUPE, S.A. (formerly Publicitas
Holding, S.A.), a company organized under the laws of Switzerland
("PUBLIGroupe"), and REAL MEDIA, S.A., a subsidiary company of PUBLIGroupe
organized under the laws of Switzerland ("Real Media Europe") and such other
companies which are controlled directly or indirectly by PUBLIGroupe or Real
Media Europe (together, the "European Companies").
Background
The parties hereto have entered into a certain Technology
Transfer Agreement dated December 3, 1996 (the "Technology Agreement"). Real
Media USA is currently engaged in discussions with Advance Publications
("Advance") to enter into a joint business relationship pursuant to which
Advance will, among other things, invest approximately $3 million in Real Media
USA and enter into a strategic partnership with Real Media USA for the
production and distribution advertising programs and content.
PUBLIGroupe USA Holdings, Inc. ("PUBLIGroupe USA"), a
subsidiary of PUBLIGroupe, is the owner of approximately 41% of the issued and
outstanding capital stock of Real Media USA and the transactions with Advance
will benefit Real Media USA.
It is a condition to the transactions with Advance that the
Technology Agreement be amended and restated on the terms and conditions
hereinafter set forth.
Terms
NOW THEREFORE, for good and valuable consideration and
intending to be legally bound hereby, the parties agree as follows:
1. Definition. Capitalized Terms not otherwise defined herein
shall have the meanings set forth below.
"Business" shall mean the business of providing Online Content
Providers in Europe with integrated planning, placement and measurement of
advertising and other content using the Technology.
"Europe" shall consist of all territories on the European
continent, including the former Soviet States located in Europe (Belarus,
Ukraine, Moldavia, Estonia, Latvia and Lithuania) and all of Russia.
<PAGE> 2
"Marketing Agreement" shall mean the Amended and Restated
Marketing Agreement dated as of the date hereof between Real Media USA and
PUBLIGroupe, as such Agreement may be amended from time to time.
"Online Content Provider in Europe" shall mean an online
content provider whose primary offices are located in Europe or which publishes
online content designed primarily for readers in Europe and seeks advertising
for products and services marketed in Europe.
"Products" shall mean the software products set forth on
Exhibit B and such other software products that utilize the Technology primarily
for the Business.
"Technology" shall mean the technology referred to by Real
Media USA as the AdStream system used in the management of online content, as
described in Exhibit A attached hereto, including improvements thereto as
described in Section 8 of this Agreement.
"Trademark Agreement" shall mean the Trademark and Tradename
Agreement dated December 6, 1996 pursuant to which Real Media USA provides
PUBLIGroupe and Real Media Europe with certain rights to use the REAL MEDIA,
ADSTREAM and MEDIAEXPRESS trademarks and tradenames and support services, as
such Agreement may be amended from time to time.
2. Grant of License; Use of Technology. Real Media USA grants
the European Companies the license and night to use, reproduce, modify and
enhance solely in connection with the operation of the Business in Europe, the
Technology. The European Companies shall not use the Technology in connection
with any other service, product or business other than the Business, or in any
other country or territory other than Europe. Notwithstanding the foregoing,
this Agreement will not extend to any country or territory in which the
Technology will not be afforded protection as trade secrets and copyrighted
works, or where prior approval of any governmental authority is required in that
country or territory, or to any country or territory to which the extension of
this Agreement would violate the laws of the United States. Real Media USA has
delivered to the European Companies copies of discs, documents, tapes, source
codes and other records and media in which the Technology has been written,
recorded, or otherwise embodied (the "Technology Records").
3. Exclusivity. Subject to Paragraph 13 hereof and with the
exception of the Netscape Bundled Software (as defined below), during the term
of this Agreement Real Media USA will not use, and will not grant the right to
any third party to use, reproduce, modify, enhance, relicense, market and
exploit the Technology and/or the Products in connection with the Business in
Europe. Real Media USA retains all rights to use and license the use of the
Technology outside Europe. For purposes of this Agreement the term "Netscape
Bundled Software" shall mean any suite of software products offered by Netscape
Communications Corporation, or its successors ("Netscape") that includes the
Products only so long as (1) the European Companies are paid a fee of 50% of the
revenue received by Real Media USA from Netscape for sales of the Netscape
Bundled Software in Europe, (11) the list purchase price to
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<PAGE> 3
end users for the Netscape Bundled Software shall equal or exceed three times
the then current end user list price being charged by the European Companies for
the Product incorporated into the software suite. Real Media USA will provide
the European Companies with reasonable details of any ongoing negotiations with
Netscape for bundled software incorporating the Products to be sold in Europe,
and Real Media USA will solicit the cooperation and assistance of the European
Companies in developing the strategy for marketing the Netscape Bundled Software
in Europe.
4. Reseller Arrangements.
(a) The European Companies shall, subject to Paragraph 13
hereof, have the exclusive right to relicense the Products and to provide
related technical services in Europe, in its sole and complete discretion,
including, but not limited to the right to set relicense fees and the charges
for related technical services. All of the costs and expenses incurred by the
European Companies relating to the relicensing of the Products and the provision
of related technical services, or otherwise, except for those costs described in
Paragraph 5, will be borne by the European Companies. The European Companies are
not, and shall not do business as the representative, agent, franchisee, servant
or employee of Real Media USA but shall act solely as an independent contractor.
The European Companies may relicense the Products and provide related technical
services, only upon procuring from each customer a properly completed and
executed non-exclusive Product license agreement in a form substantially similar
to the attached Annex A; this licensing agreement may be properly completed and
executed online by the licensees.
(b) The European Companies shall ensure that all copies of
the Products delivered to customers shall retain the proprietary and copyright
notices and legends supplied by Real Media USA and shall keep a record
identifying each copy of the Product and the customer to whom it has been
delivered.
(c) The European Companies shall report and pay Real Media
USA on a quarterly basis fee on all receipts for Products and related technical
services sold in the previous quarter. Payments to Real Media USA shall be
computed as a percentage of the gross sales price for the Products and related
technical services sold to end users calculated in accordance with the fee
schedule attached as Schedule I based upon all such sales from and after January
1, 1998. Payments shall be made in United States currency to a Bank designated
by Real Media USA within thirty (30) days of end of each quarter, provided that
$275,451 of such fees shall be payable by the European Companies as a prepaid
license fee (the "Prepaid License Fee"), the receipt of which is hereby
acknowledged by Real Media USA. No quarterly fees shall be due and payable until
such time as the European Companies have achieved sales hereunder which
otherwise would have resulted in the payment of $275,451 of fees to Real Media
USA. The PUBLIGroupe Notes (as defined below) shall be surrendered for
cancellation upon execution of this Agreement and the receipt by PUBLIGroupe of
$500,000 to be paid by Real Media USA. The term "PUBLIGroupe Notes" shall (i)
mean a certain Convertible Promissory
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<PAGE> 4
Note payable by Real Media USA to PUBLIGroupe and (ii) three promissory notes
payable to PUBLIGroupe in the aggregate principal amount of $225,000.
5. Development Services. Real Media USA shall provide
PUBLIGroupe and Real Media Europe the exclusive use of one (1) senior level
software development engineer located at its development facilities, and other
technology development resources as may be available and needed by PUBLIGroupe
or Real Media Europe on a project basis. Real Media Europe shall select such
engineer who will be its employee, subject to the reasonable consent of Real
Media USA with respect to such engineer's compensation. The costs of supporting
this engineer, and the other technology development resources, shall be borne by
the European Companies and $275,451 of the cost of such development services
shall be payable by the European Companies as a prepaid development services fee
(the "Prepaid Development Services Fee"), the receipt of which is hereby
acknowledged by Real Media USA. Real Media USA shall provide quarterly
statements listing in reasonable detail its actual costs for providing
development services hereunder and such statements shall be paid by the European
Companies within 30 days of their presentation; provided, however, that the
European Companies shall pay only for such costs which are incurred by Real
Media USA in excess of the $275,451 Prepaid Development Services Fee.
6. Regulatory Matters.
(a) The European Companies shall comply with the laws of
all countries in respect of which licenses are granted under this Agreement
relating to the marking, of products with suitable patent and/or copyright
notices, as applicable.
(b) The European Companies shall not, without the prior
written consent of Real Media USA, transmit any Technology or any information
received from Real Media USA, directly or indirectly, to any country to which
export of such information or product is prohibited by United States government
regulations as issued from time to time relating to the exportation of technical
data of United States origin. Real Media USA shall take reasonable steps to
undertake to comply with United States laws and regulations which result in the
least restriction on the use of the Technology by the European Companies.
(c) Notwithstanding any other provision of this Agreement,
Real Media USA may grant non-exclusive licenses under the Technology to third
parties, to the extent necessary to comply with applicable compulsory license
requirements and to keep any patents of the Technology in full force, all of the
foregoing subject to the consent of PUBLIGroupe or Real Media Europe, such
consent not to be unreasonably withheld.
(d) To the extent that Real Media USA deems it necessary or
desirable to obtain approval of, record, or register this license, the European
Companies shall at Real Media USA's expense, cooperate fully with Real Media USA
or Real Media USA's designee (including the execution of all documents which
Real Media USA deems necessary or desirable) in seeking such approval and
effecting such recording or registration, and in withdrawing or canceling any
such approval, recording or registration upon the termination of this Agreement.
- 4 -
<PAGE> 5
(e) Real Media USA and the European Companies shall
co-operate fully in the preparation and submission of any necessary
application/notification to the Commission of the European Communities in
respect this Agreement with a view to securing negative clearance or exemption
for the terms agreed at the date hereof The costs of preparing and submitting
such application/notification shall be borne by the European Companies.
7. Delivery of Technology. Except as required by the terms of
any relicensing of the Products as permitted under this Agreement, the European
Companies will not cause any additional copies of the Technology Records to be
made without Real Media USA's prior written consent. The European Companies will
treat the Technology as secret and confidential, will take all reasonable
precautions to prevent the unauthorized disclosure of the Technology (including
without limitation following the most stringent security procedures that it
follows with its own trade secrets and confidential information), and will not
disclose the Technology to anyone other than those of its employees and agents
who require such knowledge in order that the European Companies may carry out
its duties under this Agreement and the Marketing Agreement. The European
Companies' obligation to maintain secrecy and confidentiality shall not extend
to any issued patents or any Technology which is or becomes public knowledge
through no act or omission of the European Companies.
8. Improvements.
(a) If Real Media USA invents, develops, acquires or learns
of any improvements to the Technology during the period beginning with the date
of this Agreement and ending on November 30, 2003, Real Media USA will promptly
notify the European Companies of such improvements, and such improvements will
be considered "Technology" for the purposes of this Agreement; provided,
however, that if the license granted hereunder shall be rendered non-exclusive
in accordance with Paragraph 13 hereof, any improvements made thereafter to the
Technology shall not be subject to the terms of this Agreement.
(b) If either of the European Companies invents, develops,
acquires or learns of any improvements to the Technology during the period
beginning with the date of this Agreement and ending on November 30, 2003, the
European Companies will promptly notify Real Media USA of such improvements. The
European Companies hereby grant to Real Media USA a fully paid-up license to all
rights to use and market such improvements outside of Europe for the term of
this Agreement; provided, however, that if the license granted hereunder shall
be rendered non-exclusive in accordance with Paragraph 13 hereof, any
improvements made thereafter to the Technology shall not be subject to the terms
of this Agreement. The European Companies shall have full, sole and exclusive
ownership of such rights and the rights to implement and market these
improvements within Europe. Additionally, Real Media USA agrees to make such
assignments to Real Media Europe as are reasonably requested by Real Media
Europe of any copyright or any other intellectual property rights in any
software enhancements created by the engineer described in Paragraph 5 of this
Agreement.
9. Patent and Copyright Protection. Real Media USA makes no
representations or warranties concerning the Technology or its patentability,
and no
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<PAGE> 6
representations or warranties that Real Media Europe's use of any Marks (as such
term is defined in the Trademark and Tradename Agreement as of the 3rd day of
December, 1996 by and between Real Media and the European Companies) will not
infringe the rights of any third party. Real Media USA has no obligation to
indemnify Real Media Europe or PUBLIGroupe in the event that Real Media Europe's
use of Technology, conduct of the Business, or sale of a product or service,
infringes or is claimed to infringe the rights of any third party.
Notwithstanding the foregoing, Real Media USA at its own expense will seek such
patent and copyright protection in Europe as Real Media USA deems advisable, and
take such steps as Real Media USA and PUBLIGroupe together deem prudent to
protect the Technology against infringement. Notwithstanding the foregoing, Real
Media USA will seek such patent and copyright protection in respect of the
Technology in Europe as Real Media USA deems advisable, and Real Media Europe
shall provide reasonable co-operation to Real Media USA in relation to the
seeking of such protection. Where local copyright law in any country in Europe
is not adequate to protect the Technology, Real Media Europe acknowledges that
Real Media USA shall be entitled to patent the Technology in such countries, and
Real Media Europe shall reimburse to Real Media USA the reasonable costs and
fees of obtaining such patents in Europe. Neither PUBLIGroupe nor Real Media
Europe will, directly or indirectly, (i) apply for any patents in respect of any
aspect of the Technology, (ii) enter into any Agreement with any third party
which in any way alters, diminishes, or restricts the rights of Real Media USA
or Real Media Europe in any aspect of the Technology or places any restrictions
or conditions upon the use of any Technology (provided that nothing contained
herein shall preclude the grant of any relicense of the Products as permitted
under this Agreement), or (iii) take any other action that would prejudice or
interfere with Real Media USA's ownership of any Technology or the patents in
any Technology. Nothing in this Paragraph 9 shall restrict or prevent the
European Companies from prosecuting or defending as applicable any action in
Europe for infringement involving the Technology and/or the Products in
accordance with Paragraph 10.
10. Infringement.
(a) If either the European Companies or Real Media USA
become aware of any unauthorized use or infringement by any third party of any
Technology in Europe, each of them will promptly notify the other. Following
such notification, Real Media USA and PUBLIGroupe shall for the period of 21
days following such notification attempt in good faith to agree what action
should be taken and: (i) if either Real Media USA or PUBLIGroupe wants to take
action to prevent such infringement continuing (the "Proceeding Party") but the
other party declines to take action (the "Declining Party"), the Proceeding
Party shall be entitled upon the expiration of such period or at any time
thereafter to proceed at its discretion and shall pay the costs of the action
and retain any amounts recovered, and the Declining Party shall provide
reasonable co-operation and assistance in connection with such action at the
Proceeding Party's cost; or (ii) if both Real Media USA and PUBLIGroupe want to
take action but they cannot agree on the form of action to take within such
period, PUBLIGroupe and/or Real Media Europe shall be solely entitled to bring
any claim for infringement by any third party in respect of the use of the
Technology in Europe and retain any amounts recovered, and Real Media USA shall
at its
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<PAGE> 7
own cost provide such reasonable co-operation and assistance as may be
requested by the European Companies in connection with any such action.
(b) If either European Companies or Real Media USA become
aware of any assertion by any third party that PUBLIGroupe and/or Real Media
Europe's use of any Technology constitutes patent, copyright, or trade secret
infringement, or any other tortious act, each of them will promptly notify the
other.
(c) In the event that such any such assertion as described
in sub-paragraph (b) of this Clause 10 results in a claim being brought in
Europe against either or both of the European Companies: (i) they shall have the
right at their discretion to defend any such claim and shall be responsible for
paying the costs of the defense; and (ii) Real Media USA shall provide
reasonable co-operation and assistance to the European Companies in connection
with the defense of such claim, provided that the European Companies shall not
be entitled to settle any claim or make any admission in respect of such claim
which would prejudice Real Media USA's ownership of the Technology without the
written consent of Real Media USA. If Real Media USA declines to give consent
within 21 days of a request made by the European Companies in circumstances
where the European Companies wish to settle a claim or make an admission as
described in the preceding sentence, Real Media USA shall have conduct of and
shall be responsible for bearing all the costs of the defense of such claim as
of the expiration of such 21 day period.
(d) In the event that any such assertion as described in
sub-paragraph (b) of this Clause 10 results in a claim being brought in Europe
against Real Media USA, the following shall apply: (i) Real Media USA shall have
the right at its discretion to defend any such claim and shall be responsible
for paying the costs of the defense; and (ii) the European Companies shall
provide reasonable assistance to Real Media USA in connection with the defense
of such claim, provided that Real Media USA shall not be entitled to settle any
claim or make any admission in respect of such claim which could prejudice or
harm the rights of either or both of the European Companies under this Agreement
without the prior written consent of the European Companies. If the European
Companies decline to give consent within 21 days of a request made by Real Media
USA in circumstances where Real Media USA wishes to settle a claim or make an
admission as described in the preceding sentence, the European Companies shall
have conduct of and shall be responsible for bearing all the costs of the
defense of such claim as of the expiration of such 21 day period.
11. Liability. Real Media USA makes no representation,
guarantee or warranty, express or implied, as to the results to be expected from
use of any of the inventions contained in the Technology or from the manufacture
or sale of any product or service using or embodying the Technology. Real Media
USA shall have no responsibility under any legal principle to real Media Europe,
PUBLIGroupe, or others for the quality or performance of any product or service
using or embodying the Technology, for the claims of third parties relating to
any product or service using or embodying the Technology or sold by Real Media
Europe. In no
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<PAGE> 8
event shall Real Media USA be liable to the European Companies for indirect,
special, incidental or consequential damages under this Agreement or otherwise.
12. Term and Termination. This Agreement will commence on the
date of this Agreement and continue until November 30, 2003, unless terminated
upon the mutual agreement of Real Media USA and PUBLIGroupe, or unless
terminated as follows:
(a) Real Media USA may terminate this Agreement
immediately if PUBLIGroupe Holding, S.A. becomes insolvent, falls to operate in
the ordinary course of business, or is unable to pay its debts when due, or
makes any assignment for the benefit of creditors, or shall file any petition
under the bankruptcy or insolvency laws of any jurisdiction, county or place, or
be adjudicated bankrupt or insolvent.
(b) If Real Media USA on the one hand, or PUBLIGroupe
and/or Real Media Europe on the other hand, commits a breach of any of the
material terms and provisions of this Agreement or the Trademark Agreement, the
non-breaching party may terminate this Agreement after providing written notice
describing such breach and the steps needed to cure such breach, and allow the
breaching party thirty (30) days after the delivery of such notice in which to
cure such breach. If the breach is not cured, then this Agreement shall
terminate sixty (60) days after the date of delivery of notice. The failure of a
party to terminate this Agreement for any one or more acts or instances
constituting a breach shall in no way be construed as a waiver, express or
implied, of such party's right to terminate for any other act or instance of
like or different nature.
13. Effect of Termination.
(a) Upon the termination of this Agreement for the reasons
set forth in Subsections 12(a) or 12(b) by reason of a breach by one of the
European Companies, (i) except for those continuing rights described in
Subsection (b) below, Real Media Europe's right to use the Technology and all of
PUBLIGroupe's and Real Media Europe's other rights under this Agreement shall
cease except with respect to licensees of Real Media Europe subject to the terms
provided in such licensing agreements, (ii) Real Media Europe will immediately
return to Real Media USA all copies of all Technology Records and will erase or
destroy all other copies in its possession or control other than those needed in
connection with the continuing rights described in Subsection (b) below, and
(iii) and subject to Subsection (b) below, all of the other rights, duties and
obligations of the parties hereunder shall terminate except Real Media Europe's
obligations (1) under Section 7, and (2) to cooperate in Real Media USA or Real
Media Europe's prosecution or defense of any infringement claims in accordance
with Section 10.13.
(b) Upon termination of this Agreement for the reasons set
forth in Subsections 12(a) or 12(b) by reason of a breach by one of the European
Companies, Real Media USA acknowledges that any sub-licenses granted by Real
Media Europe in respect of the Technology which are in force as at the date of
termination shall continue in force until the date of expiration or termination
of each such sub-license in accordance with its terms. The Parties agree that
the provisions of this Agreement shall continue to apply as between the Parties
in
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<PAGE> 9
respect of any sub-licenses as described in this Subsection (b) to the extent
required to give effect to the provisions of this Subsection (b).
(c) Upon the termination of this Agreement for any reason
other than those set forth in Subsections 12(a) or 12(b) by reason of a breach
by on of the European Companies, (i) Real Media Europe shall continue to have
the right to use and to relicense the Technology on a non-exclusive basis, (ii)
all of the PUBLIGroupe's and Real Media Europe's other rights under this
Agreement shall cease, including without limitation the right to receive
improvements under Subsection 8(a).
14. Assignment, Sublicensing. The rights granted to Real Media
Europe under this Agreement are personal to Real Media Europe. Subject to the
express terms hereof, Real Media USA does not grant, and nothing in this
Agreement shall be construed as granting, Real Media Europe the right to
directly or indirectly sublicense or authorize others to use the Technology.
Real Media Europe may not directly or indirectly assign or transfer to any third
party all or any part of its rights or duties under this Agreement, provided,
however, that Real Media USA and the European Companies may freely assign or
transfer their rights and obligations under this Agreement to a corporate
affiliate in which there is direct or indirect common ownership of 50% or more
or to the successor of the business to which this Agreement relates.
15. Miscellaneous.
(a) All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows: (i) if to Real Media USA, Real Media,
Inc., 32 East 31st Street, New York, New York 10016, attention: President; and
(ii) if to PUBLIGroupe or Real Media Europe: PUBLIGroupe Holding, S.A., Avenue
des Mousquines 4, CH-1005, Lausanne, Switzerland, with a copy to Squadron,
Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New York 10176,
attention: Joseph R. Rackman; or, in any such case, at such other address or
addresses as shall have been furnished in writing by such party to the other.
(b) This Agreement shall be governed by the laws of the
State of New York, Unites States of America, and may be amended or modified only
by a writing executed by all parties, and shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
(c) The invalidity of any provision of this Agreement will
not affect the validity of the remaining provisions, and this Agreement will be
construed as if such invalid provision had been omitted.
(d) In the event of a breach by any party hereto of the
terms of this Agreement, the other party or parties shall be entitled to all of
their remedies at law or in equity. The parties hereto acknowledge that a breach
of this Agreement will cause irreparable damage to
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<PAGE> 10
the other party or parties, the exact amount of which will be difficult or
impossible to ascertain, and that remedies at law for any such breach will be
inadequate. Accordingly, the parties hereto acknowledge that, upon a breach of
this Agreement, the other party or parties shall be entitled to injunctive or
other equitable relief, without posting bond or other security.
(e) This Agreement sets forth all of the promises and
undertakings between the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings, express
or implied, oral or written with respect to the subject matter hereof.
This Agreement has been written in the English language. In the event of
conflict between the English version and any version in any other language, the
English version shall prevail.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date and year first above written.
REAL MEDIA, INC.
By: /s/ David Morgan
Name: David Morgan
----------------------------
Title: President
PUBLIGROUPE HOLDING, S.A.
By: /s/ Annasohn By: /s/ HP Rohner
---------------------------- ---------------------
Name: Assasohn W HP Rohner
Title: Senior Vice President Senior Vice President
6/4/98
REAL MEDIA, S.A.
By: /s/ Pascal Zahner s/ HP Rohner
---------------------------- ---------------------
Name: Pascal Zahner HP Rohner
Title: Managing Director President
6/4/98
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<PAGE> 12
Exhibit A
For purposes of the Technology Agreement, the "Technology" shall be defined as
all computer software, source code and systems created, modified or enhanced by
Real Media USA relating to the development and operation of its Open AdStream
technology or any successor thereto which in any manner performs the same or
substantially similar function and all other software, source code and systems
which shall be developed during the applicable periods which is used for the
Business.
<PAGE> 13
Exhibit B
Products
Open AdStream
<PAGE> 14
Schedule l
<TABLE>
<CAPTION>
Commissions Percentage of Gross End User Sales*
----------- ------------------------------------
Annual Revenue (US Dollars) Initial Sale Renewal
- --------------------------- ------------ -------
<S> <C> <C>
0 - 100,000 17.5% 10%
101,000 - 200,000 15.0% 7.5%
Over 200,000 12.5% 5.0%
</TABLE>
* Based on revenue received by Real Media Europe for relicense and
related technical services, exclusive of taxes and governmental fees,
for sales which are made by the European Companies to end users
directly.
Additionally, commissions shall be payable equal to thirty percent of
revenue received by Real Media Europe for relicense and related
technical services, exclusive of taxes and governmental fees, for sales
which are made by the European Companies through intermediaries.
<PAGE> 1
EXHIBIT 10.7
AMENDED AND RESTATED
MARKETING AGREEMENT
THIS MARKETING AGREEMENT (the "Agreement") is made this ____
day of April, 1998 between Real Media, Inc., a Delaware corporation (the "Real
Media USA"), PUBLIGroupe S.A. and Real Media S.A., a company organized under the
laws of Switzerland ("Real Media CH", together with PUBLIGroupe S.A., the
"European Companies").
BACKGROUND
WHEREAS, Real Media USA and PUBLIGroupe S.A. had entered into
a Marketing Agreement (the "Marketing Agreement"), Stock Purchase and
Stockholders Agreement (the "Stock Purchase Agreement"), a Voting Agreement (the
"Voting Agreement"), and a Non-Competition Agreement (the "Non-Competition
Agreement" and collectively with the Stock Purchase Agreement and the Voting
Agreement, the "Operative Agreements"), each dated as of the 3rd day of
December, 1996; and
WHEREAS, Real Media USA will, subject to the terms and
conditions set forth herein, provide advertising operating system support
services to Real Media CH or its affiliates; and
WHEREAS, the parties hereto wish to amend and restate in
entirety their entire understanding with respect to the Marketing Agreement, and
the parties are willing to execute this Agreement and to be bound by the
provisions thereof.
NOW, THEREFORE, in consideration of the covenants set forth
herein, and intending to be legally bound hereby, the parties agree as follows:
AGREEMENT
1. REPRESENTATIONS OF REAL MEDIA USA. Real Media USA
represents and warrants to the European Companies that it is not a party to any
confidentiality or other agreement or restriction that would restrict or
interfere with its performance of this Agreement. Real Media USA further
represents and warrants to the European Companies that this Agreement
constitutes a valid and binding agreement enforceable according to its terms
against Real Media USA.
2. REPRESENTATIONS OF THE EUROPEAN COMPANIES. The European
Companies represent and warrant to Real Media USA that they are not parties to
any confidentiality or other agreement or restriction that would restrict or
interfere with its performance of this Agreement. The European Companies further
represent and warrant to Real Media USA that this Agreement constitutes a valid
and binding agreement enforceable according to its terms against the European
Companies.
<PAGE> 2
3. CROSS MARKETING AGREEMENT.
(a) Real Media USA shall place all advertising with online
content providers using the Technology (as such term is defined below) located
within or specifically targeting the European Market (as such term is defined in
the Non-Competition Agreement) through the European Companies. Pricing for such
placements shall be upon most favorable terms.
(b) The European Companies shall place all advertising with
online content providers using the Technology located within or specifically
targeting the North American Market (as such term is defined in the
Non-Competition Agreement) through Real Media USA. Pricing for such placements
shall be upon most favorable terms.
(c) Real Media USA agrees to use its best efforts to
establish the Real Media Technology (as defined below) with online content
providers located within or specifically targeting the North American Market.
(d) The European Companies agree to use its best efforts to
establish the Real Media Technology with online content providers located within
or specifically targeting the European Market.
(e) As used herein, "Real Media Technology" means all
computer software, source code and systems created, modified, or enhanced by
Real Media USA relating to the development and operation of its AdStream
technology and all other software, source code and systems which shall be
developed during the applicable periods which relates to Online and Interactive
Content Management. As used herein, "Online and Interactive Content Management"
shall mean systems relating to the planning, placement and execution of
advertising and advertising campaigns; systems relating to the management of
editorial content on online or other interactive media; systems relating to the
networking of online or other interactive media; and any other similar systems.
As used herein, "Technology" shall mean Real Media Technology and any other
similar technologies relating to Online and Interactive Content Management.
(f) Compliance with this Section 3 shall not constitute a
breach or violation of the Non-Competition Agreement.
4. OBLIGATIONS OF REAL MEDIA USA.
(a) Real Media USA shall provide to the European Companies
all technical back-up support reasonably required by the European Companies
(b) Real Media USA shall use reasonable good-faith efforts
to establish and maintain an information and technology infrastructure to
facilitate communications among Real Media USA and the European Companies (an
"Intranet"). Once established, each
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<PAGE> 3
party shall be responsible for its own costs for use of such Intranet (not to
include routine maintenance, which cost shall be borne by Real Media USA).
(c) Real Media USA shall coordinate marketing efforts with
the European Companies in Real Media USA's reasonable discretion for the purpose
of developing the "Real Media" brands in the North American and European
Markets.
(d) Real Media USA shall give the European Companies a
reasonable first bid on goods and services required by Real Media USA, which
Real Media USA reasonably believes may be efficiently provided by the European
Companies.
(e) Real Media USA shall provide those additional services
as the parties may determine according to subsequent joint marketing
implementation agreements.
5. OBLIGATIONS OF THE EUROPEAN COMPANIES.
(a) The European Companies shall coordinate marketing
efforts with Real Media USA in the reasonable discretion of the European
Companies for the purpose of developing the "Real Media" brand in the North
American and European Markets.
(b) The European Companies shall give Real Media USA a
reasonable first bid on goods and services required by the European Companies
which The European Companies reasonably believe may be efficiently provided by
Real Media USA.
(c) The European Companies shall provide those additional
services as the parties may determine according to subsequent joint marketing
implementation agreements.
6. TERMINATION; RENEWAL. This Agreement shall terminate and
expire on November 30, 2003, provided, however, that unless written notice is
delivered to all other parties to this Agreement no later than ninety (90) days
prior to the expiration date hereof, such expiration date shall be automatically
extended for an additional one-year period.
7. REMEDIES. Real Media USA on the one hand and the European
Companies on the other hand each acknowledge that its promised obligations
hereunder are of a special, unique, unusual, extraordinary and intellectual
character which give them peculiar value the loss of which cannot be reasonably
or adequately compensated in an action at law, and that, in the event there is a
breach hereof by one of the parties (the "Breaching Party"), the other party
(the "Non-Breaching Party") will suffer irreparable harm, the amount of which
will be impossible to ascertain. Accordingly, the Non-Breaching Party shall be
entitled, if it so elects, to institute and prosecute proceedings in any court
of competent jurisdiction in the United States, either at law or in equity, to
obtain damages for any breach or to obtain or enforce specific performance of
the provisions or to enjoin the Breaching Party from committing any act in
breach of this Agreement. The remedies granted to the Non-Breaching Party in
this Agreement are cumulative and are in addition to remedies otherwise
available to such Non-Breaching Party
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<PAGE> 4
at law or in equity. The specific performance remedies shall not apply to
breaches of Sections 4 and 5.
8. WAIVER OF BREACH. The waiver by a Non-Breaching Party of a
breach of any provision of this Agreement by a Breaching Party shall not operate
or be construed as a waiver of any other or subsequent breach by such Breaching
Party of any other provision.
9. CONSIDERATION. Each of the parties hereto acknowledge that
the benefits accruing to it as a result of the execution and delivery of the
Amended and Restated Technology Transfer Agreement of even date is good,
sufficient, independent and valid consideration for the covenants contained
herein.
10. NOTICES. All notices required or permitted hereunder shall
be in writing and shall be sent by certified or registered mail, return receipt
requested, postage prepaid, as follows:
(i) If to Real Media USA:
Real Media, Inc.
32 East 31st Street
New York, New York 10016
Attention: President
with a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
Philadelphia, PA 19103
Attention: Gil C. Tily
(ii) If to Real Media CH:
c/o PUBLIGroupe S.A.
Avenue des Mousquines 4, CH-1005
Lausanne, Switzerland
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Joseph R. Rackman
or to any such other address as any such party may designate in a written notice
served upon the other parties in the manner provided herein. All notices
required or permitted hereunder shall be
- 4 -
<PAGE> 5
deemed duly given and received on the second business day next succeeding the
date of mailing if sent by certified or registered mail.
11. SEVERABILITY. If any term or provision of this Agreement
and the application thereof to any person or circumstance shall, to any extent,
be held invalid or unenforceable by a court of competent jurisdiction, the
remainder of this Agreement or the application of any such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby, and each term and provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
If any of the provisions contained in this Agreement shall for any reason be
held to be excessively broad as to duration, scope, activity or subject, it
shall be construed by limiting and reducing it, so as to be valid and
enforceable to the extent compatible with the applicable law or the
determination by a court of competent jurisdiction.
12. GOVERNING LAW. The implementation and interpretation of
this Agreement shall be governed by and enforced in accordance with the laws of
the State of New York, without giving effect to the conflicts of laws provisions
thereof.
13. BINDING EFFECT AND ASSIGNABILITY. The rights and
obligations of all parties hereto under this Agreement shall inure to the
benefit of and shall be binding upon their heirs, successors and assigns but may
not be assigned without the prior written consent of all parties hereto except
that Real Media CH may assign its rights and obligations hereunder to any entity
that is directly or indirectly owned 50% or more by PUBLIGroupe S.A.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement with respect to the subject matter hereof and thereof between the
parties hereto and replaces and supersedes as of the date hereof any and all
prior oral or written agreements and understandings between the parties hereto
with respect to the subject matter hereof and the Marketing Agreement as of the
3rd day of December, 1996, by and between Real Media USA, and PUBLIGroupe S.A.
(previously known as Publicitas Holding, S.A.). This Agreement may only be
modified by an agreement in writing executed by all parties hereto.
15. SUBMISSION TO JURISDICTION. Real Media CH hereby submits
to the jurisdiction of the courts of New York County, New York for purposes of
enforcement of this Agreement.
16. COUNTERPART SIGNATURES. This Agreement may be executed by
the parties in any number of counterparts and each executed copy shall be an
original for all purposes.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this
Agreement the date and year first written above.
REAL MEDIA, INC.
By: /s/ David Morgan
-------------------------------------
Name: David Morgan
Title: President
REAL MEDIA S.A.
By: /s/ Hans Peter Rohner
-------------------------------------
Name: Hans Peter Rohner 9/4/98
Title: President
By: /s/ Pascal Zahner
-------------------------------------
Name: Pascal Zahner
Title: Managing Director
PUBLIGROUPE S.A.
By: /s/ Hans Peter Rohner
-------------------------------------
Name: Hans Peter Rohner 9/4/98
Title: Senior Vice President
By: /s/ Walter Annasohn
-------------------------------------
Name: Walter Annasohn
Title: Senior Vice President
- 6 -
<PAGE> 1
EXHIBIT 10.8
AMENDMENT TO NON-COMPETITION AGREEMENT
This is an Amendment to a certain Non-Competition Agreement
(the "Amendment") dated as of April __, 1998 between Real Media, Inc., a
Delaware corporation ("Real Media USA"), PUBLIGroupe S.A. (formerly Publicitas
Holding), a company organized under the laws of Switzerland ("PUBLIGroupe"); and
Real Media, SA, a subsidiary of PUBLIGroupe organized under the laws of
Switzerland ("Real Media Europe"; and, together with PUBLIGoupe, the "European
Companies").
BACKGROUND
WHEREAS, Real Media USA and the European Companies have
entered into an Amended and Restated Technology Transfer Agreement (the
"Restated Technology Agreement") and an Amended and Restated Marketing Agreement
(the "Restated Marketing Agreement") on the date hereof, and
WHEREAS, the parties desire to amend the Non-Competition
Agreement dated December 3, 1996 (the "Non-Competition Agreement") in certain
respects.
NOW, THEREFORE, in consideration of the covenants set forth
herein, and intending to be legally bound hereby, the parties agree as follows:
AGREEMENT
1. Background. The first "Whereas" clause of the
Non-Competition Agreement is hereby amended so that the term "Technology
Agreement" refers to the Restated Technology Agreement and the term "Marketing
Agreement" refers to the Restated Marketing Agreement.
2. Termination Date. The second "Whereas" clause is deleted
and the term "Termination Date" is hereby amended to mean November 30, 2003,
unless extended pursuant to the Restated Marketing Agreement.
3. Restrictive Covenants. Paragraph 4(b)(i) is amended and
restated to read "(i) the Termination Date and".
4. Confirmation; Counterpart Signatures. Except as amended
hereby, the provisions of the Non-Competition Agreement are hereby ratified and
confirmed. The Amendment may be executed by the parties in any number of
counterparts and each executed copy shall be an original for all purposes.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have executed this
Agreement the date and year first written above.
REAL MEDIA, INC.
By: /s/ David Morgan
Name: David Morgan
Title: President
REAL MEDIA S.A.
By: /s/ Hans Peter Rohner
Name: Hans Peter Rohner 9/4/98
Title: President
By: /s/ Pascal Zahner
Name: Pascal Zahner
Title: Managing Director
PUBLIGROUPE S.A.
By: /s/ Hans Peter Rohner
Name: Hans Peter Rohner 9/4/98
Title: Senior Vice President
By: /s/ Walter Annasohn
Name: Walter Annasohn
Title: Senior Vice President
- 2 -
<PAGE> 1
Exhibit 10.28
CONVERTIBLE PROMISSORY NOTE
$1,600,000 As of February 9, 2000
FOR VALUE RECEIVED, REAL MEDIA, INC., a New York corporation with offices
at 260 Fifth Avenue, 4TH floor, New York, NY 10001 ("Maker"), hereby promises to
pay to the order of PUBLIGROUPE SA, a Swiss corporation c/o Squadron, Ellenoff,
Plesent & Sheinfeld, LLP at 551 Fifth Avenue, New York, NY 10176 ("Holder"), or
its assigns, at the offices of Holder set forth above or at such place as Holder
may direct, in lawful money of the United States, the principal amount of ONE
MILLION SIX HUNDRED THOUSAND DOLLARS AND NO CENTS ($1,600,000.00), together with
interest from the date hereof on the outstanding principal amount hereof at the
prime rate, determined from time to time by Citibank, N.A., New York, New York,
computed on the basis of the actual number of days elapsed in a year consisting
of 360 days. Any change in the rate of interest hereunder shall be effective as
of the opening of business on the effective date of the corresponding change in
such prime rate. The outstanding principal amount hereof and the accrued
interest shall be due and payable in one lump sum on February 1, 2001.
1. APPLICATION OF PAYMENTS. All payments hereunder, including any
prepayments, shall be applied (a) first, to any amounts due pursuant to Section
5 hereof; (b) second, to outstanding interest; and (c) third, to principal.
2. PREPAYMENT. The outstanding principal balance from time to time
evidenced by this Note may be prepaid by Maker at any time, without penalty or
premium; provided that any such prepayment shall be applied in accordance with
Section 1 hereof.
3. EVENTS OF DEFAULT. Holder, at its option, may declare an event of
default, accelerate the indebtedness represented hereby and declare the same due
and payable upon any of the following events: (a) failure of Maker to pay any
principal or interest when due or any other breach of its obligations hereunder,
(b) if any moratorium, bankruptcy, insolvency, reorganization, arrangement,
assignment for the benefit of creditors, composition or like proceeding or any
proceeding for the appointment of a trustee, receiver, conservator or similar
official shall be commenced on behalf of, or against, Maker, or (c) upon a
breach by the Maker of any of its obligations under the agreement of even date
by and between Maker and Holder.
4. WAIVER. Maker waives presentment, demand for payment, protest,
diligence in bringing suit, notion of protest and notice of dishonor and all
other notices and demands of any kind.
5. EXPENSES. Maker agrees to pay all reasonable costs and expenses
incurred by Holder in enforcement of Maker's obligations hereunder, including,
without limitation, attorneys' fees and expenses.
6. ASSIGNMENT. This Note shall inure to the benefit of Holder and its
successors and assigns and shall be binding upon Maker and its heirs, successors
and assigns. This Note may be assigned by Holder, in whole or in part, from
<PAGE> 2
time to time, at its sole option. Maker may not assign, delegate or otherwise
transfer any of its obligations hereunder.
7. Conversion. This Note shall be convertible into common stock of Maker
coincident with the investment of an additional $8.4 million by Holder in the
common stock of Maker, at the then to be determined conversion price.
8. Governing Law; Jurisdiction. This Note shall be governed by the laws
of the State of New York, without regard to its principles of conflicts of laws.
Maker hereby submits to the exclusive jurisdiction of the courts of the State
of New York located in New York County and agrees that venue will be proper in
any such court.
9. Remedies. The remedies of Holder herein provided for are cumulative
and not exclusive of any remedies provided by law. No failure on the part of
Holder to exercise, no delay by Holder in exercising and no course of dealing
with respect to, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by Holder of any right hereunder preclude
any other or further exercise thereof or the exercise of any other right. A
waiver by Holder of any breach of any provision of this Note shall not operate
or be construed as a waiver of similar or dissimilar provisions at the same
time or at any prior or subsequent time. Maker hereby waives any right to
set-off or counterclaim against Holder with respect to the obligations of Maker
under this Note.
10. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be sufficiently given on the date when
delivered in person or two days after having been mailed by registered or
certified mail, postage prepaid, addressed to Maker or Holder, as the case may
be, at their respective addresses set forth above or at such other addresses as
shall be furnished by notice to the other party.
11. Miscellaneous. This Note may not be changed orally, but only by an
instrument in writing executed by Maker and Holder. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by the Maker or Holder which are not set
forth expressly in this Note. The invalidity or unenforceability of any
provision or provisions of this Note shall not effect the validity or
enforceability of any other provisions of this Note, which shall remain in full
force and effect. The headings contained herein are for reference purposes only
and shall not in any way affect the meaning or interpretation of any provision
or provisions of this Note.
IN WITNESS WHEREOF, Maker has executed this Note as of the date first
written above.
REAL MEDIA, INC.
By: /s/ Norman M. Blashka
_________________________________
Norman M. Blashka
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 9, 2000 in the Registration Statement (Form
S-1) and related Prospectus of Real Media, Inc. for the registration of shares
of its common stock.
/s/ Ernst & Young LLP
New York, NY
February 28, 2000
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 21, 2000 in the Registration Statement (Form
S-1) and related Prospectus of Real Media, Inc. for the registration of shares
of its common stock.
/s/ ATAG Ernst & Young AG
Zurich, Switzerland
February 28, 2000
<PAGE> 1
Exhibit 23.4
February 28, 2000
I consent to being named as a person about to become a director of Real
Media, Inc. in Amendment No. 1 to the Registration Statement on Form S-1 of Real
Media, Inc. being filed on the date written above.
/s/ Hans Steiner
------------------------------
Hans Steiner
<PAGE> 1
Exhibit 23.5
February 28, 2000
I consent to being named as a person about to become a director of Real
Media, Inc. in Amendment No. 1 to the Registration Statement on Form S-1 of
Real Media, Inc. being filed on the date written above.
/s/ Heinz Wagli
------------------------
Heinz Wagli
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REAL MEDIA, INC. FOR THE YEAR ENDED DECEMBER 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,389
<SECURITIES> 0
<RECEIVABLES> 4,289
<ALLOWANCES> 334
<INVENTORY> 0
<CURRENT-ASSETS> 5,665
<PP&E> 847
<DEPRECIATION> 237
<TOTAL-ASSETS> 6,513
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<COMMON> 10
<OTHER-SE> 6,056
<TOTAL-LIABILITY-AND-EQUITY> 6,513
<SALES> 8,115
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<CGS> 3,522
<TOTAL-COSTS> 3,522
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 404
<INTEREST-EXPENSE> 95
<INCOME-PRETAX> (9,730)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,730)
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