AS FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-62420
PROSPECTUS
640,791 SHARES
LIFEMINDERS, INC.
COMMON STOCK
This prospectus relates to the public offering, which is not being
underwritten, of 640,791 shares of our common stock, which are held by some of
our current stockholders.
The prices at which such stockholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares.
Our common stock is quoted on the Nasdaq National Market under the symbol
"LFMN." On October 9, 2001, the average of the high and low price for the common
stock was $1.61.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE SEE
"RISK FACTORS" BEGINNING ON PAGE 5, AND IN THE DOCUMENTS WE FILE WITH THE
SECURITIES AND EXCHANGE COMMISSION THAT ARE INCORPORATED BY REFERENCE IN THIS
PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is October 12, 2001
THE COMPANY
LifeMinders is an online direct marketing company that sends personalized
email messages to a permission-based membership comprised of more than 20
million members. We send to our members personalized email messages, or
newsletters, in lifestyle-based interest categories, garnered from member
information obtained during the registration process as well as from behavioral
information through member interaction within our emails. Our email messages
contain helpful reminders and tips directed toward our members' interests and
hobbies and personal events like birthdays and anniversaries.
Late in the fourth quarter of 2000, we initiated significant expense
reductions that included reducing our workforce by 24% during the first quarter
of 2001. On May 10, 2001, we announced a significant scaling back of our
business operations and reduction in workforce to a team of approximately 30 to
35 employees to maintain selected email products while we evaluated strategic
alternatives for the company. This decision was based on the continued decline
in revenue from online advertising historically and for the foreseeable future.
In June 2001, we entered into a letter of intent with Cross Media Marketing
Corporation to negotiate a definitive merger agreement. In July 2001, we signed
the original merger agreement with Cross Media, whereby LifeMinders would be
merged with and into Cross Media. On August 20, 2001, we signed an amended and
restated merger agreement with Cross Media.
The merger agreement provides that, upon completion of the merger, shares
of LifeMinders common stock held by LifeMinders stockholders will be converted
into the right to receive cash, Cross Media common stock or a prescribed mix of
cash and Cross Media common stock, as each LifeMinders stockholder elects,
subject to procedures and limitations. If LifeMinders stockholders collectively
elect to receive more than the maximum cash consideration available for
LifeMinders stockholders in the merger, those LifeMinders stockholders electing
to receive all cash will instead receive a mix of cash and Cross Media common
stock. In order to complete the merger, stockholders of both companies must
adopt the merger agreement. Both the LifeMinders and the Cross Media special
meetings of the stockholders to vote on adoption of the merger agreement are
scheduled to be held on October 24, 2001. The record date to determine
stockholders entitled to vote at those meetings was September 17, 2001. We
provide you with more information about the proposed merger below under the
caption "Proposed Merger with Cross Media."
LifeMinders was incorporated in Maryland on August 9, 1996 under the name
of MinderSoft, Inc. In January 1999, LifeMinders changed its name to
LifeMinders.com, Inc. and reincorporated in Delaware on July 2, 1999. In June
2000, by way of merger, LifeMinders changed its name to LifeMinders, Inc. Our
principal executive and administrative offices are located at 13530 Dulles
Technology Drive, Suite 500, Herndon, Virginia 20171 and our telephone number is
(703) 707-8261.
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PROPOSED MERGER WITH CROSS MEDIA
AS DISCUSSED ABOVE, LIFEMINDERS HAS ENTERED INTO AN AMENDED AND RESTATED
MERGER AGREEMENT WITH CROSS MEDIA MARKETING CORPORATION PURSUANT TO WHICH
LIFEMINDERS WOULD BE MERGED WITH AND INTO CROSS MEDIA. IN CONNECTION WITH THE
PROPOSED MERGER, LIFEMINDERS AND CROSS MEDIA FILED A JOINT PROXY
STATEMENT/PROSPECTUS WITH THE SECURITIES AND EXCHANGE COMMISSION. THE JOINT
PROXY STATEMENT/PROSPECTUS IS AVAILABLE FREE OF CHARGE ON THE SEC'S INTERNET
SITE AS PART OF THE EDGAR DATABASE (HTTP://WWW.SEC.GOV). IN ADDITION,
LIFEMINDERS WILL PROVIDE YOU WITH A COPY OF THE JOINT PROXY STATEMENT/PROSPECTUS
FREE OF CHARGE UPON REQUEST. IF YOU ARE CONSIDERING AN INVESTMENT IN LIFEMINDERS
COMMON STOCK WE URGE YOU TO READ CAREFULLY THE JOINT PROXY STATEMENT/PROSPECTUS
BECAUSE IT CONTAINS IMPORTANT INFORMATION REGARDING LIFEMINDERS AND THE PROPOSED
MERGER.
Under the terms of the merger agreement between LifeMinders and Cross
Media, if the merger is consummated Cross Media will pay aggregate merger
consideration of $24 million in cash and issue approximately 22.5 million shares
of its common stock (approximately 4.5 million shares after giving effect to a
proposed one-for-five share reverse split of Cross Media common stock), assuming
that no LifeMinders' stock options are exercised or forfeited prior to the date
on which the merger is completed and that LifeMinders stockholders elect to
receive the maximum cash consideration. If LifeMinders stockholders do not elect
to receive the maximum cash consideration, then the number of shares of common
stock that Cross Media will issue in the merger will increase by that number of
shares equal to $24 million less the amount of the total cash consideration paid
in the merger, divided by $1.9845 (prior to giving effect to the proposed
reverse split of Cross Media common stock). The $1.9845 value of the Cross Media
common stock used for this purpose is based on the average last sale price of
Cross Media common stock for the 20 trading days immediately preceding July 18,
2001, the date of the original merger agreement, and is not necessarily
indicative of the value of such stock. The value of the aggregate merger
consideration will depend upon the market price of Cross Media common stock on
the date the merger is completed. The aggregate merger consideration will
increase by an amount equal to the aggregate exercise price of any LifeMinders
options with an exercise price of $2.57 per share or less that are exercised
before the merger is completed. The per share consideration payable to
LifeMinders stockholders is not affected by any such increase in the aggregate
merger consideration.
In connection with the merger, each LifeMinders stockholder can elect to
receive all cash, all stock or a prescribed mix of approximately 33.3% cash and
66.7% stock, provided that in no event will the aggregate merger consideration
paid to LifeMinders stockholders exceed $24 million, plus approximately 33.3% of
the aggregate exercise price of any options to purchase LifeMinders common stock
with an exercise price equal to or below $2.57 per share that are exercised on a
cash basis between July 18, 2001 and the closing date of the merger. Each share
of LifeMinders common stock will be converted into approximately:
- $2.57 in cash, for those LifeMinders stockholders electing to receive all
cash, but if elections made by LifeMinders stockholders would require
Cross Media to pay more than the aggregate maximum cash portion of the
merger consideration, the amount of cash will be reduced, with the
difference being paid in shares of Cross Media common stock, valued for
this purpose at $1.9845 per share (prior to giving effect to a proposed
reverse split of Cross Media common stock);
- 1.2964 shares of Cross Media common stock (.2593 shares after giving
effect to a proposed reverse split of Cross Media common stock) for those
LifeMinders stockholders electing to receive all stock; or
- $0.86 in cash and .8643 shares of Cross Media common stock (.1729 shares
after giving effect to a proposed reverse split of Cross Media common
stock), for those LifeMinders stockholders electing to receive the
prescribed mix.
We cannot predict the actual mix of cash and Cross Media common stock that
will be received by LifeMinders stockholders electing to receive all cash, but
the per share cash portion cannot be less than approximately $0.86, and the per
share stock portion cannot exceed .8643 shares of Cross Media common stock
(approximately .1729 shares after giving effect to a proposed reverse split of
Cross Media common stock).
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The completion of the merger depends upon the satisfaction or waiver of a
number of conditions, including the adoption of the merger agreement by the
stockholders of record of both LifeMinders and Cross Media. LifeMinders and
Cross Media can agree to terminate the merger agreement without completing the
merger, and either company can terminate the merger agreement under various
circumstances. Under certain circumstances, the merger agreement requires
LifeMinders to pay Cross Media a termination fee of $2.8 million.
The affirmative vote of the holders of a majority of the shares of
LifeMinders common stock outstanding and entitled to vote is required to adopt
the merger agreement. LifeMinders has scheduled a special meeting of its
stockholders to be held on October 24, 2001. The LifeMinders board of directors
has fixed the close of business on September 17, 2001 as the LifeMinders record
date for the determination of holders of shares of LifeMinders common stock
entitled to notice of and to vote at the LifeMinders special meeting. THEREFORE,
IF YOU DID NOT HOLD LIFEMINDERS COMMON STOCK ON THE CLOSE OF BUSINESS OF
SEPTEMBER 17, 2001, YOU WILL NOT BE ENTITLED TO VOTE ON THE PROPOSAL TO ADOPT
THE MERGER AGREEMENT WITH CROSS MEDIA, EVEN IF YOU ARE CURRENTLY A HOLDER OF
LIFEMINDERS COMMON STOCK. Certain LifeMinders stockholders have agreed in
writing with Cross Media to vote shares constituting approximately 24.5% of the
outstanding LifeMinders common stock in favor of the merger agreement.
The affirmative vote of the holders of a majority of the shares of Cross
Media common stock outstanding and entitled to vote is required to adopt the
merger agreement. Cross Media has scheduled a special meeting of its
stockholders to be held on October 24, 2001 to vote on a proposal to adopt the
merger agreement with LifeMinders as well as certain additional proposals,
including a proposed one-for-five share reverse split of Cross Media common
stock. The Cross Media board of directors has fixed the close of business on
September 17, 2001 as the Cross Media record date for the determination of
holders of shares of Cross Media common stock entitled to notice of and to vote
at the Cross Media special meeting. Certain Cross Media stockholders have agreed
in writing with LifeMinders to vote shares constituting approximately 59.6% of
the outstanding Cross Media common stock in favor of the merger agreement.
After the merger, Cross Media will continue to be managed by its current
directors and officers. In addition, Jonathan Bulkeley, who is currently the
Chairman of the Board of Directors and Chief Executive Officer of LifeMinders,
and Douglas A. Lindgren, a director of LifeMinders, will become directors of
Cross Media.
LifeMinders stockholders have the right to elect the form of consideration
they would receive in the merger, subject to certain procedures and limitations.
To elect the form of consideration that a LifeMinders stockholder wishes to
receive, LifeMinders stockholders must complete an election form and deliver it
to American Stock Transfer & Trust Company, the merger exchange agent, prior to
5:00 p.m., New York City time, on October 24, 2001, the date of the LifeMinders
special meeting. ANY LIFEMINDERS STOCKHOLDER WHO DOES NOT MAKE AN EFFECTIVE
ELECTION PRIOR TO THE ELECTION DEADLINE, AND ANY LIFEMINDERS STOCKHOLDER WHO
ACQUIRES SHARES OF LIFEMINDERS COMMON STOCK AFTER THE ELECTION DEADLINE, WILL
LOSE THE RIGHT TO CHOOSE THE CONSIDERATION HE OR SHE WILL RECEIVE AS A RESULT OF
THE MERGER AND WILL BE DEEMED TO HAVE ELECTED TO RECEIVE ONLY CROSS MEDIA COMMON
STOCK. Once a LifeMinders stockholder signs the election form, he or she will no
longer be able to trade or sell his or her shares of LifeMinders common stock.
If you purchase LifeMinders common stock, you should obtain an election form
from your broker/dealer or contact Allison Abraham, our President, at (703)
885-1315 or the exchange agent at (877) 777-0800 to obtain an election form.
We urge you to read carefully the joint proxy statement/prospectus, which
includes as an attachment a copy of the amended and restated merger agreement.
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RISK FACTORS
An investment in our company involves a high degree of risk. You should
carefully consider the risks below, together with the other information
contained or incorporated by reference in this prospectus, before you decide to
buy our common stock. The risks and uncertainties described below are not the
only ones facing our company and there may be additional risks that we do not
presently know of or that we currently deem immaterial. If any of these risks
occur, our business, financial condition, cash flow or results of operations
could be materially adversely affected. In such case, the trading price of our
common stock could decline.
RISKS RELATING TO LIFEMINDERS
The following risks relate to LifeMinders and its current business
operations and financial condition. If the proposed merger with Cross Media is
completed, LifeMinders will be merged with and into Cross Media and will no
longer operate as a separate stand-alone company. The risks associated with
LifeMinders, its business operations and financial condition may change in the
future if the proposed merger with Cross Media is completed.
IF THE PROPOSED MERGER WITH CROSS MEDIA IS NOT COMPLETED, WE MAY DISCONTINUE OUR
OPERATIONS AND LIQUIDATE.
If the proposed merger with Cross Media is not completed and we are unable
to conclude that another sale or merger transaction would be in the best
interests of our stockholders, our board of directors may determine that the
best alternative is to discontinue operations, sell our remaining non-cash
assets and, after payment of all obligations, distribute the net proceeds to our
stockholders. The amount and timing of any distributions to stockholders in a
liquidation cannot be determined because they would depend on a variety of
factors, including the amount of proceeds received from any asset sales or
dispositions, the time and amount required to resolve outstanding obligations
and the amount of any reserves for future contingencies. In addition, we will
have incurred substantial costs associated with the merger which will be payable
regardless of whether the merger is consummated. Payment of these costs will
reduce our remaining cash balance and the amount that would otherwise be
distributable to our stockholders in a liquidation. In certain circumstances, we
are obligated to pay Cross Media a fee of $2.8 million if the merger agreement
is terminated, which would further reduce our cash balance.
WE HAVE SCALED BACK OUR BUSINESS OPERATIONS AND HAVE SIGNIFICANTLY REDUCED OUR
WORK FORCE. WE EXPECT THAT THESE ACTIONS, COUPLED WITH CONTINUING WEAKNESS IN
THE ONLINE ADVERTISING MARKET, WILL SIGNIFICANTLY REDUCE ANY FUTURE REVENUES.
As announced on May 10, 2001, our board of directors decided to
significantly scale back our business operations and reduce our work force. We
believe that our revenues from online advertising and other existing lines of
business for the foreseeable future will continue to decline substantially from
that reported in prior periods. We expect this decline because, among other
reasons, we believe that:
- the market for online advertising will continue to decline significantly;
- opportunities for online advertising revenues will decline because the
company will be producing and delivering a substantially lower number of
emails;
- we do not expect to develop any new email products during this period;
and
- our management and other key employees will spend a significant portion
of their time completing the merger, or in the event the merger is not
completed, in identifying and evaluating strategic alternatives.
In addition, our existing advertising customers may choose not to place
online advertising with us as a result of concerns about the future of our
business operations.
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WE HAVE INCURRED SIGNIFICANT LOSSES AND, IF THE PROPOSED MERGER WITH CROSS MEDIA
IS NOT COMPLETED, EXPECT CONTINUED LOSSES FOR THE FORESEEABLE FUTURE.
We have never achieved profitability and, if the proposed merger with Cross
Media is not completed and we continue our operations, expect to continue to
incur operating losses for the foreseeable future. As of June 30, 2001, we had
an accumulated deficit of $194.3 million. We incurred net losses of $50.7
million for the six months ended June 30, 2001, and $109.5 million for the year
ended December 31, 2000. We cannot be certain that, if the merger is not
completed and the company continues its operations, we will ever generate
sufficient revenue to achieve profitability. If our future revenue is lower than
currently anticipated, or our operating expenses exceed our estimates, we would
incur greater losses than anticipated and we would be required to further reduce
our cash balance to support our continued operations. Such circumstances could
make us less desirable as an acquisition candidate, reduce our value in any sale
or merger transaction, and reduce the amount of proceeds available to our
stockholders in the event of a liquidation. If this merger is not completed,
there is no guarantee that we will be able to identify or successfully complete
a sale or merger of the company.
OUR COMMON STOCK HAS EXPERIENCED A SHARP DECLINE IN VALUE. IF THE PROPOSED
MERGER WITH CROSS MEDIA IS NOT COMPLETED, OUR STOCK PRICE MAY CONTINUE TO
DECLINE.
The market price of our common stock has experienced a decline and, if the
merger is not completed, may decline further as a result of our decision to
scale back business operations, or as a result of fluctuations in our quarterly
results of operations. The market price of our common stock has declined from a
high of $91.00 per common share at March 9, 2000 to a low of $0.53 at April 3,
2001. On October 9, 2001, the closing price per share of our common stock as
reported on The Nasdaq National Market was $1.65 per share. We believe that the
market price of our common stock has been significantly and adversely affected
by the sharp decline in the online advertising market.
We also believe that, if the merger is not completed, our common stock
price may decline further in the future as a result of our decision to scale
back operations and because of the significantly lower revenues reported in our
quarterly results of operations for the quarters ended December 31, 2000, March
31, 2001 and June 30, 2001. In addition, we believe that in the future,
fluctuations in our quarterly results and the negative online advertising
market, as well as many of the other risk factors pertaining to us, may
negatively affect our quarterly operating results and contribute to fluctuations
in our common stock price.
If the proposed merger with Cross Media is not completed, we may continue
to seek and evaluate potential strategic alternatives, including a potential
sale or merger of the company. A further decline in the price of our common
stock may adversely affect our ability to complete an alternative transaction
using our stock as all or part of the consideration.
In addition, if the price of our common stock remains low, it may be
delisted by Nasdaq and become subject to special rules applicable to low priced
stocks, which may reduce the liquidity of the shares.
OUR ABILITY TO CONTINUE TO OPERATE OUR SCALED DOWN BUSINESS, COMPLETE THE
PROPOSED MERGER WITH CROSS MEDIA, OR IDENTIFY, EVALUATE AND COMPLETE ALTERNATIVE
TRANSACTIONS IF THIS MERGER IS NOT COMPLETED, IS DEPENDENT UPON OUR ABILITY TO
RETAIN THE REMAINING MEMBERS OF MANAGEMENT AND OTHER KEY EMPLOYEES.
Since the fourth quarter of 2000, we have laid off approximately 85% of our
workforce. We may have difficulty retaining the remaining members of our
management team and other key employees on whom we will depend to continue to
operate our scaled down business and complete this merger, and, if the merger is
not completed, to assist in identifying, evaluating and completing any
alternative transactions. If we are unable to retain our management and other
key employees through this process, continuation of our business operations and
our ability, if necessary, to identify, evaluate and complete an alternative
transaction could be materially and adversely affected. We cannot be certain
that these key employees will remain with us until the merger is completed or,
if this merger is not completed, until we can identify, evaluate and complete an
alternative transaction.
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WE HAVE ONLY A LIMITED OPERATING HISTORY UPON WHICH TO EVALUATE OUR BUSINESS AND
PROSPECTS.
We have only a limited operating history upon which to evaluate our
business and prospects and the online direct marketing industry is relatively
new and rapidly evolving. This presents many risks and uncertainties including:
- the ability to compete effectively against other companies;
- the need to retain and motivate qualified personnel;
- the ability to anticipate and adapt to the changing market;
- the ability to develop and introduce new products and services and
continue to develop and upgrade technology; and
- the need to attract and retain a large number of customers from a variety
of industries.
We have also historically depended on the growing use of the Internet for
advertising, commerce and communications, and on general economic conditions.
We cannot assure you that we will successfully address these risks and
uncertainties, particularly because of our recent scaling back of operations. If
the merger is not completed, and we are unsuccessful in addressing these risks
and uncertainties, we may not be able to generate sufficient revenue to fund our
continued operations. In that event, we would be required to reduce our cash
balances to fund operations, which could make us less desirable as an
acquisition candidate or reduce our value in any sale or merger transaction, and
would reduce the amount of proceeds available for distribution to our
stockholders in the event of a liquidation of the company.
IF THE PROPOSED MERGER WITH CROSS MEDIA IS NOT COMPLETED, WE MAY NOT BE ABLE TO
GENERATE SUFFICIENT REVENUE TO SUPPORT OUR CONTINUED OPERATIONS IF THE MARKET
FOR ONLINE ADVERTISING, WHICH IS NEW AND UNPREDICTABLE, DOES NOT DEVELOP AND
EXPAND.
We have historically derived a substantial portion of our revenue from
online advertising and direct marketing, including both email and Web-based
programs. The profit potential for this business model is unproven. The Internet
has not existed long enough as an advertising medium to demonstrate its
effectiveness relative to traditional advertising. Advertisers and advertising
agencies that have historically relied on traditional advertising may be
reluctant or slow to adopt online advertising. Many potential advertisers have
limited or no experience using email or the Web as an advertising medium. They
may have allocated only a limited portion of their advertising budgets to online
advertising, or may find online advertising to be less effective for promoting
their products and services than traditional advertising media. Further, our
email and Web-based programs may not generate sufficient user traffic with
demographic characteristics attractive to advertisers. We are also affected by
general industry conditions governing the supply and demand of Internet
advertising.
Our results of operations have been adversely affected in recent quarters
as a result of a significantly declining market for online advertising, and we
expect that those adverse market conditions will continue. If the market for
online advertising fails to improve or deteriorates more than we expect and the
merger is not completed, we may not be able to generate sufficient revenue to
support our continued operations. In that event, we would be required to reduce
our cash balance, which could make us less desirable as an acquisition candidate
or reduce our value in any sale or merger transaction, and would reduce the
amount of proceeds available for distribution to our stockholders in the event
of a liquidation of the company.
OUR ADVERTISING CUSTOMERS AND THE COMPANIES WITH WHICH WE HAVE OTHER BUSINESS
RELATIONSHIPS MAY EXPERIENCE ADVERSE BUSINESS CONDITIONS THAT COULD ADVERSELY
AFFECT OUR BUSINESS.
Some of our customers may experience difficulty in supporting their current
operations and implementing their business plans. These customers may reduce
their spending on our products and services, or may not be able to discharge
their payment and other obligations to us. The non-payment or late payment of
amounts due
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to us from a significant customer would negatively impact our financial
condition. These circumstances are influenced by general economic and industry
conditions, and could have a material adverse impact on our business, financial
condition and results of operations. In addition to intense competition, the
overall market for Internet advertising has been characterized in recent
quarters by increasing softness of demand, the reduction or cancellation of
advertising contracts, an increased risk of uncollectible receivables from
advertisers, and the reduction of Internet advertising budgets, especially by
Internet-related companies. Our customers may experience difficulty in raising
capital, or may be anticipating such difficulties, and therefore may elect to
scale back the resources they devote to advertising, including on our system.
Other companies in the Internet industry have depleted their available capital,
and could cease operations or file for bankruptcy protection. If the proposed
merger with Cross Media is not completed and the current environment for our
customers and the demand for Internet advertising does not improve, our
business, results of operations and financial condition could be materially
adversely affected.
IF WE DO NOT MAINTAIN AN ENGAGED MEMBER BASE, WE MAY NOT BE ABLE TO COMPETE
EFFECTIVELY FOR, OR MAINTAIN, ADVERTISERS AND OUR BUSINESS COULD BE ADVERSELY
AFFECTED.
Our revenue has been derived primarily from advertisers seeking an engaged,
targeted audience for their advertisements. Although we intend to continue to
produce and distribute emails to our members, we have scaled back our business
operations and have reduced the number of emails we send to members. We have
discontinued most of our member related marketing activities. Accordingly, we do
not expect growth in our member base, nor do we expect to develop new products.
A significant portion of our revenue has historically been derived from
performance-based and revenue sharing arrangements. Under these arrangements,
advertisers pay us in part based on member responses to advertisements and
promotions placed in email newsletters. If our members do not respond to
advertisements and promotions placed in email newsletters, our revenue could be
materially and adversely affected.
If we are unable to maintain an engaged member base by keeping our current
members active (i.e., opening email newsletters and responding to the
advertisements contained in those newsletters), advertisers could find our
audience less attractive and effective for promoting their products and
services. We currently expect that we will experience difficulty retaining our
existing advertisers, and have ceased our efforts to solicit additional
advertisers, which will likely reduce our future revenues from online
advertising and opt-in advertising, which represent a majority of our revenues
to date.
COMPETITION IN THE ONLINE ADVERTISING MARKET INDUSTRY IS INTENSE, AND OUR SCALED
BACK OPERATIONS MAY MAKE IT MORE DIFFICULT FOR US TO COMPETE EFFECTIVELY AND MAY
REDUCE OUR ABILITY TO RETAIN AND ATTRACT ADVERTISERS.
If the proposed merger with Cross Media is not completed and we continue
operations, we will continue to face intense competition from both traditional
and online advertising and direct marketing businesses. Our scaled back
operations will make it more difficult to compete effectively with our
competitors. If we are not able to compete effectively, we may not be able to
retain current advertisers or attract new advertisers. This would reduce our
revenues and we would need to reduce our cash balance to support our continued
operations, which could make us less desirable for an alternative transaction
and would reduce the amount of proceeds available for distribution to
stockholders in the event of a liquidation. We face competition for marketing
dollars from online portals and community Web sites such as AOL, Yahoo!, and
CNET Networks, Inc. In addition, other companies offer competitive email direct
marketing services, including coolsavings.com, MyPoints.com, NetCreations,
YesMail.com and Digital Impact. Additionally, traditional advertising agencies
and direct marketing companies may seek to offer online products or services
that compete with those offered by us.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than us. Our competitors will most likely continue to develop and
market new technologies and products and to conduct research allowing them to
identify and respond to changes in customer requirements. In addition, these
competitors will continue to aggressively market and sell their
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products and services. We have scaled back our operations, resulting in a lack
of material resources being committed to marketing and sales activities by us.
As a result, it is unlikely that, if the merger is not completed, we will be
able to effectively compete in the market for a long period of time, and our
business, results of operations or financial condition will be materially and
adversely affected.
WE RELY HEAVILY ON OUR INTELLECTUAL PROPERTY RIGHTS AND OTHER PROPRIETARY
INFORMATION, AND ANY FAILURE TO PROTECT AND MAINTAIN THESE RIGHTS AND
INFORMATION COULD PREVENT US FROM COMPETING EFFECTIVELY.
Our ability to continue operations in the event the merger is not completed
is substantially dependent on our internally developed technologies and
trademarks, which we seek to protect through a combination of patent, copyright,
trade secret and trademark law, as well as confidentiality or license agreements
with employees, consultants, and corporate and strategic partners. If we are
unable to prevent the unauthorized use of our proprietary information or if our
competitors are able to develop similar technologies independently, the
competitive benefits of our technologies, intellectual property rights and
proprietary information will be diminished. These circumstances could also make
the company less desirable in an alternative transaction.
WE DEPEND HEAVILY ON OUR NETWORK INFRASTRUCTURE AND IF THIS FAILS IT COULD
RESULT IN UNANTICIPATED EXPENSES, AS WELL AS PREVENT OUR MEMBERS FROM
EFFECTIVELY UTILIZING OUR SERVICES. THIS COULD NEGATIVELY IMPACT OUR ABILITY TO
RETAIN MEMBERS AND ADVERTISERS.
Our ability to successfully create and deliver our email newsletters
depends in large part on the capacity, reliability and security of our
networking hardware, software and telecommunications infrastructure. Failures of
the network infrastructure could result in unanticipated expenses to address
such failures and could prevent our members from effectively utilizing our
services, which could prevent us from retaining members and advertisers. We do
not have fully redundant systems or a formal disaster recovery plan. The system
is susceptible to natural and man-made disasters, including earthquakes, fires,
floods, power loss and vandalism. Further, telecommunications failures, computer
viruses, electronic break-ins or other similar disruptive problems could
adversely affect the operation of the systems. Our insurance policies may not
adequately compensate us for any losses that may occur due to any damages or
interruptions in the systems. Accordingly, we could be required to make capital
expenditures in the event of unanticipated damage.
In addition, our members depend on Internet service providers, or ISPs, for
access to the LifeMinders Web site. Due to the rapid growth of the Internet,
ISPs and Web sites have experienced significant system failures and could
experience outages, delays and other difficulties due to system failures
unrelated to our systems. These problems could harm our business by preventing
our members from effectively utilizing our services.
OUR QUARTERLY RESULTS OF OPERATIONS MAY FLUCTUATE IN FUTURE PERIODS AND WE MAY
BE SUBJECT TO SEASONAL AND CYCLICAL PATTERNS THAT MAY NEGATIVELY IMPACT OUR
STOCK PRICE.
We believe that our business may be subject to seasonal fluctuations.
Advertisers historically have placed fewer advertisements during the first and
third calendar quarters of each year.
Further, Internet user traffic typically drops during the summer months,
which potentially could reduce the amount of advertising placed during that
period. Expenditures by advertisers and direct marketers tend to vary in cycles
that reflect overall economic conditions as well as budgeting and buying
patterns. Our revenue has in the past been, and may in the future be, materially
affected by a decline in the economic prospects of customers or in the economy
in general, which could alter our customers' spending priorities or budget
cycles. Because of these and other factors, our revenues and operating results
may vary significantly from quarter-to-quarter.
THE CONTENT CONTAINED IN OUR EMAILS MAY SUBJECT US TO SIGNIFICANT LIABILITY FOR
NEGLIGENCE, COPYRIGHT OR TRADEMARK INFRINGEMENT OR OTHER MATTERS.
If any of the content that we create and deliver to our members or any
content that is accessible from our emails through links to other Web sites
contains errors, third parties could make claims against us for losses
9
incurred in reliance on such information. In addition, the content contained in
or accessible from our emails could include material that is defamatory,
violates the copyright or trademark rights of third parties, or subjects us to
liability for other types of claims. Our general liability insurance may not
cover claims of these types or may not be adequate to indemnify us for all
liability that may be imposed. Any imposition of liability, particularly
liability that is not covered by insurance or is in excess of insurance
coverage, could result in significant costs and expenses and damage our
reputation.
We have also entered into agreements with certain e-commerce partners under
which we may be entitled to receive a share of certain revenue generated from
the purchase of goods and services through direct links to our e-commerce
partners from the emails sent by us. These agreements may expose us to
additional legal risks and uncertainties, including potential liabilities to
consumers of those products and services by virtue of our involvement in
providing access to those products or services, even if we ourselves do not
provide those products or services. Any indemnification provided to us in our
agreements with these parties, if available, may not adequately protect us.
CONCERNS ABOUT, OR BREACHES OF, THE SECURITY OF OUR MEMBER DATABASE COULD RESULT
IN SIGNIFICANT EXPENSES TO PREVENT BREACHES, AND SUBJECT US TO LIABILITY FOR
FAILING TO PROTECT THE MEMBERS' INFORMATION.
We maintain a database containing information about our members.
Unauthorized users accessing our systems remotely may access our database or
authorized users may make unauthorized copies of all or part of the database for
their own use in violation of specific agreements to the contrary. As a result
of these security and privacy concerns, we may incur significant costs to
protect against the threat of security breaches or to alleviate problems caused
by security breaches, and we may be unable to effectively target direct
marketing offers to members or may be subject to legal claims of members if
unauthorized third parties gain access to our system and alter or destroy
information in our database. Also, any public perception that we engaged in the
unauthorized release of member information, whether or not correct, would
adversely affect our ability to retain members.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY THE REFUSAL OF ONE OR MORE ELECTRONIC
EMAIL DELIVERY PROVIDERS TO DELIVER OUR, OR OUR CUSTOMERS', MESSAGES.
Our business may be adversely affected by the unilateral election of
certain domain administrators to block, filter or otherwise prevent the delivery
of Internet advertising or commercial emails to their users. We cannot assure
you that the number of domains which establish policies restricting their users
receipt of commercial deliveries as consideration for receiving service will not
become increasingly more popular, thereby diminishing the reach of our service,
or the service of our customers.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY PRODUCTS OFFERED BY THIRD PARTIES.
Our ability to continue operating our business may be adversely affected by
the adoption by computer users of technologies that harm the performance of our
products and services, such as technologies that allow domain administrators on
the aggregate level, or individual users managing their own electronic email
accounts, to block, filter or otherwise prevent the delivery of Internet
advertising or commercial emails, or to block access to any services that use
cookies or other tracking technologies. We cannot assure you that the number of
domains or individual computer users who employ these or other similar
technologies will not increase, thereby diminishing the efficacy of our, or our
customers', services. Our business, financial condition and results of
operations could be materially and adversely affected if one or more of these
technologies is widely accepted.
SWEEPSTAKES REGULATION MAY LIMIT OUR ABILITY TO CONDUCT SWEEPSTAKES AND OTHER
CONTESTS, WHICH COULD NEGATIVELY IMPACT OUR ABILITY TO RETAIN MEMBERS.
The conduct of sweepstakes, lotteries and similar contests, including by
means of the Internet, is subject to extensive federal, state and local
regulation, which may restrict our ability to offer contests and sweepstakes
10
in some geographic areas or altogether. Any restrictions on these promotions
could adversely affect our ability to retain members.
IF THE PRICE OF OUR STOCK REMAINS VOLATILE, WE MAY BECOME SUBJECT TO SECURITIES
LITIGATION, WHICH IS EXPENSIVE AND COULD DIVERT OUR RESOURCES.
In the past, following periods of market volatility in the price of a
company's securities, security holders have instituted class action litigation.
Many companies in the industry in which we operate have been subject to this
type of litigation. Our stock price has been volatile since the company's
initial public offering in November 1999. If the market value of our stock
continues to experience adverse fluctuations, and we become involved in this
type of litigation, regardless of the outcome, we could incur substantial legal
costs and management's attention could be diverted, causing the business to
suffer.
OUR BUSINESS MAY BE ADVERSELY AFFECTED IF DEMAND FOR INTERNET ADVERTISING FAILS
TO GROW AS PREDICTED OR DIMINISHES.
The Internet advertising industry is new and rapidly evolving, and it
cannot yet be compared with traditional advertising media to gauge its
effectiveness. As a result, demand and acceptance for Internet advertising
solutions is uncertain. Many of our advertising customers have limited
experience using the Internet for advertising purposes and they have allocated
only a limited portion of their advertising budgets to Internet advertising. The
adoption of Internet advertising, particularly by those entities that have
historically relied upon traditional media for advertising, requires the
acceptance of a new way of conducting business, exchanging information and
advertising products and services. These customers may find Internet advertising
to be less effective for promoting their products and services relative to
traditional advertising media. We cannot assure you that our advertising
customers will continue to allocate a portion of their advertising budget to
Internet advertising or that the demand for Internet advertising will continue
to develop to sufficiently support Internet advertising as a significant
advertising medium. Our results of operations have been adversely affected in
recent quarters as a result of a significantly declining market for online
advertising, and we expect that these adverse market conditions will continue.
If the market for online advertising fails to improve or deteriorates more than
expected, our business, results of operations and financial condition could be
materially and adversely affected.
There are currently no generally accepted standards or tools for the
measurement of the effectiveness of Internet advertising or the planning of
advertising purchases, and generally accepted standard measurements and tools
may need to be developed to support and promote Internet advertising as a
significant advertising medium. Our advertising customers may challenge or
refuse to accept the measurements of advertisement delivery results developed by
us or a third party. In addition, the accuracy of database information used to
target advertisements is essential to the effectiveness of Internet advertising
that may be developed in the future. The information in our database, like any
database, may contain inaccuracies that our customers may not accept.
A significant portion of our revenue has historically been derived from the
delivery of advertisements, which are designed to contain the features and
measuring capabilities requested by advertisers. If advertisers determine that
those ads are ineffective or unattractive as an advertising medium or if we are
unable to deliver the features or measuring capabilities requested by
advertisers, the long-term growth of our online advertising business could be
limited and revenue levels could decline. There are also "filter" software
programs that limit or prevent advertising from being delivered to a user's
computer. The commercial viability of Internet advertising, and our business,
results of operations and financial condition, would be materially and adversely
affected by Web users' widespread adoption of this software.
THE UNAUTHORIZED ACCESS OF CONFIDENTIAL MEMBER INFORMATION THAT WE TRANSMIT OVER
PUBLIC NETWORKS COULD ADVERSELY AFFECT OUR ABILITY TO RETAIN MEMBERS.
Members transmit confidential information to us over public networks and
the unauthorized access of such information by third parties could harm our
reputation and significantly hinder our efforts to retain
11
members. We rely on a variety of security techniques and authentication
technology licensed from third parties to provide the security and
authentication technology to effect secure transmission of confidential
information, including customer credit card numbers. Advances in computer
capabilities, new discoveries in the field of cryptography or other developments
may result in a compromise or breach of the technology used by us to protect
customer transaction data.
PROBLEMS WITH THE PERFORMANCE AND RELIABILITY OF THE INTERNET INFRASTRUCTURE
COULD ADVERSELY AFFECT THE QUALITY AND RELIABILITY OF THE PRODUCTS AND SERVICES
WE OFFER OUR MEMBERS AND ADVERTISERS.
We depend on the Internet infrastructure to deliver attractive, reliable
and timely email newsletters to our members. If Internet usage grows, the
Internet infrastructure may not be able to support the demands placed on it by
this growth, and its performance and reliability may decline. Among other
things, continued development of the Internet infrastructure will require a
reliable network backbone with necessary speed, data capacity and security.
Currently, there are regular failures of the Internet network infrastructure,
including outages and delays, and the frequency of these failures may increase
in the future. These failures may reduce the benefits of our products and
services to our members and undermine our advertising partners' and members'
confidence in the Internet as a viable commercial medium. In addition, the
Internet could lose its viability as a commercial medium due to delays in the
development or adoption of new technology required to accommodate increased
levels of Internet activity or due to government regulation.
WE MAY HAVE TO LITIGATE TO PROTECT OUR INTELLECTUAL PROPERTY AND OTHER
PROPRIETARY RIGHTS OR TO DEFEND CLAIMS OF THIRD PARTIES, AND SUCH LITIGATION MAY
SUBJECT US TO SIGNIFICANT LIABILITY AND EXPENSE.
There is a substantial risk of litigation regarding intellectual property
rights in Internet-related businesses. Legal standards relating to the validity,
enforceability and scope of protection of certain proprietary rights in
Internet-related businesses are uncertain and still evolving. We may have to
litigate in the future to enforce our intellectual property rights, protect our
trade secrets or defend ourself against claims of violating the proprietary
rights of third parties. This litigation may subject us to significant liability
for damages and result in invalidation of proprietary rights. In addition, such
litigation could be time-consuming and expensive to defend, even if not
meritorious, and result in the diversion of management time and attention. Any
of these factors could adversely affect our business operations, financial
results, condition and cash flows.
CHANGES IN GOVERNMENT REGULATION COULD DECREASE OUR REVENUE AND INCREASE OUR
COSTS.
Laws applicable to Internet communications, on-line privacy, digital
advertising, data protection and direct marketing are becoming more prevalent.
Any legislation enacted or regulation issued could dampen the growth and
acceptance of the digital marketing industry in general and of our offerings in
particular. Existing and proposed legislation in the United States, Europe
(following the directive of the European Union) and Canada may impose limits on
our collection and use of certain kinds of information about our members.
Moreover, the laws governing the Internet remain largely unsettled, even in
areas where there has been some legislative action. It may take years to
determine whether, and how, existing laws such as those governing intellectual
property, data protection, libel and taxation apply to the Internet and Internet
advertising. In addition, the growth and development of Internet commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on companies conducting
business over the Internet.
CHANGES IN LAWS RELATING TO DATA COLLECTION AND USE PRACTICES AND THE PRIVACY OF
INTERNET USERS AND OTHER INDIVIDUALS COULD HARM OUR BUSINESS.
New limitations on the collection and use of information relating to
Internet users are currently being considered by legislatures and regulatory
agencies in the United States and internationally. We are unable to predict
whether any particular proposal will pass, or the nature of the limitations in
those proposals that do pass. Since many of the proposals are in their
developmental stages, we are unable to determine the impact these may have on
our business. In addition, it is possible that changes to existing law,
including new
12
interpretations of existing law, could have a material and adverse impact on our
business, financial condition and results of operations.
RISKS RELATING TO THE PROPOSED MERGER WITH CROSS MEDIA
The following risks relate to the proposed merger of LifeMinders into Cross
Media Marketing Corporation, the completion of which is subject to a number of
conditions, including the approval of the stockholders of both corporations.
THE VALUE OF THE AGGREGATE MERGER CONSIDERATION WILL DEPEND ON THE MARKET PRICE
OF THE CROSS MEDIA COMMON STOCK ON THE DATE ON WHICH THE MERGER IS COMPLETED.
Under the terms of the amended and restated merger agreement between
LifeMinders and Cross Media, Cross Media will pay a total of $24 million in cash
and issue approximately 22.5 million shares of its common stock (approximately
4.5 million shares after giving effect to the proposed 1-for-5 share reverse
split of Cross Media common stock), assuming that no LifeMinders' stock options
are exercised or forfeited prior to the date on which the merger is completed
and that LifeMinders stockholders elect to receive the maximum cash
consideration. The value of the aggregate merger consideration will depend upon
the market price of Cross Media common stock on the date on which the merger is
completed. Therefore, LifeMinders stockholders will not know the value of the
aggregate merger consideration at the time they vote on the merger or elect the
form of merger consideration they will receive.
The market price of Cross Media common stock fluctuates and has declined
substantially since July 18, 2001, the date on which the original merger
agreement was signed. The market price of Cross Media common stock on the date
the merger is completed could be lower, and may be significantly lower, than the
market price of Cross Media common stock on July 18, 2001, which would result in
a lower aggregate merger consideration payable to LifeMinders securityholders.
THE VALUE OF THE PER SHARE CONSIDERATION TO BE PAID TO LIFEMINDERS STOCKHOLDERS
WHO RECEIVE CROSS MEDIA COMMON STOCK IN THE MERGER CANNOT CURRENTLY BE
DETERMINED AND WILL VARY DEPENDING ON THE ELECTION THAT A LIFEMINDERS
STOCKHOLDER MAKES.
Since the value of the Cross Media common stock being issued in the merger
will depend on the market price of Cross Media common stock on the date on which
the merger is completed, the value of the per share consideration to be received
by LifeMinders stockholders who receive all or a portion of the merger
consideration in shares of Cross Media common stock cannot currently be
determined. The per share cash consideration is based on a fixed exchange ratio
and will not vary if the market price of the Cross Media common stock changes.
Therefore, the value of the per share merger consideration that LifeMinders
stockholders receive in the merger will likely vary among LifeMinders
stockholders depending on which form of merger consideration that a LifeMinders
stockholder elects to receive.
THE VALUE OF THE PER SHARE STOCK CONSIDERATION MAY BE LESS THAN THE VALUE OF THE
PER SHARE CONSIDERATION PAID TO LIFEMINDERS STOCKHOLDERS WHO ELECT TO RECEIVE
ALL OR A PORTION OF THE MERGER CONSIDERATION IN CASH.
The value of the per share merger consideration was determined based on a
market price of Cross Media common stock of $1.9845 per share, which was the
average last sale price of Cross Media common stock for the 20 trading days
immediately preceding the date of the original merger agreement. Therefore, the
value of the per share merger consideration received by stockholders electing to
receive all or a portion of the merger consideration in shares of Cross Media
common stock will be less, and could be significantly less, than the per share
merger consideration received by LifeMinders stockholders electing to receive
all cash, if the market price per share of Cross Media common stock is less than
$1.9845 on the date the merger is completed.
Using a per share price of $1.57, the closing price of Cross Media common
stock as of September 21, 2001, the last practicable date prior to the printing
of the joint proxy statement/prospectus filed in connection with the merger, the
value of the per share merger consideration that a LifeMinders stockholder who
elects to receive only Cross Media common stock would receive would be $2.04.
Using the same per share price, the
13
value of the per share merger consideration that a LifeMinders stockholder
electing to receive the prescribed mix would be $2.21. LifeMinders stockholders
who receive all cash in the merger would be paid $2.57 per share of LifeMinders
common stock. LifeMinders stockholders are urged to obtain a current market
quotation for Cross Media common stock prior to electing the form of merger
consideration they will receive in the merger.
LIFEMINDERS STOCKHOLDERS WHO ELECT TO RECEIVE ALL CASH IN THE MERGER ARE LIKELY
TO RECEIVE A PORTION OF THE MERGER CONSIDERATION IN CROSS MEDIA COMMON STOCK.
Cross Media will not pay more than $24 million of the merger consideration
in cash, plus a portion of the proceeds from the exercise of certain options to
purchase LifeMinders common stock. If elections made by LifeMinders stockholders
would require Cross Media to pay more than the aggregate cash portion of the
merger consideration, the amount of cash received by those LifeMinders
stockholders making all cash elections will be reduced, with the difference
being paid out in the form of Cross Media common stock, valued at $1.9845 (prior
to giving effect to the proposed reverse split of Cross Media common stock) for
this purpose. Accordingly, the higher the percentage of LifeMinders stockholders
electing to receive all cash or the prescribed mix of cash and Cross Media
common stock, the greater the reduction of the cash portion of the merger
consideration that will be paid to those LifeMinders stockholders electing to
receive all cash. At the time LifeMinders stockholders electing to receive all
cash vote on the merger and make elections, such stockholders will not know the
portion of the merger consideration that will be paid in cash. Unless some
LifeMinders stockholders elect to receive or are deemed to have elected to
receive only Cross Media common stock, the ratio of cash to stock that
LifeMinders stockholders electing to receive all cash will receive will not be
significantly greater than that of the LifeMinders stockholders electing the
prescribed mix of cash and Cross Media common stock.
LIFEMINDERS HAS THE RIGHT TO TERMINATE THE MERGER AGREEMENT BASED ON THE MARKET
PRICE OF CROSS MEDIA COMMON STOCK ONLY IF THE MARKET PRICE DROPS BELOW $1.0915
FOR MORE THAN 10 CONSECUTIVE TRADING DAYS.
A reduction in the market price of Cross Media common stock could cause
some LifeMinders stockholders to vote against adoption of the amended and
restated merger agreement. LifeMinders does not have any right to terminate the
merger agreement based on the market price of Cross Media common stock, unless
the volume weighted average closing price for Cross Media common stock over any
10 consecutive trading days between July 18, 2001 and the closing date of the
merger is less than $1.0915 per share.
CROSS MEDIA INTENDS TO FILE A REGISTRATION STATEMENT TO REGISTER FOR RESALE
APPROXIMATELY 30 MILLION SHARES OF ITS COMMON STOCK, WHICH MAY CAUSE THE MARKET
PRICE OF THE CROSS MEDIA COMMON STOCK TO DECLINE.
Current Cross Media stockholders have the right to require Cross Media to
register for resale a substantial number of shares of common stock or shares of
common stock into or for which their convertible securities, options or warrants
are convertible or exercisable, which may facilitate the sale of these shares in
the public market. Cross Media intends to file one or more registration
statements prior to the closing of the merger to register approximately 30
million shares of Cross Media common stock (approximately 6 million shares after
giving effect to the proposed reverse split of Cross Media common stock), and to
cause such registration statements to become effective as soon as practicable
following filing. As a result, a substantial number of shares of Cross Media
common stock in relation to the public float of Cross Media common stock will
become eligible for sale in the public market. As a result of future sales of
such common stock, or the perception that these sales could occur, the market
price of Cross Media common stock may decline and could decline significantly
before or at the time the merger is completed or immediately thereafter.
IF LIFEMINDERS STOCKHOLDERS WHO RECEIVE CROSS MEDIA COMMON STOCK IN THE MERGER
SELL THAT STOCK IMMEDIATELY, IT COULD CAUSE A DECLINE IN THE MARKET PRICE OF
CROSS MEDIA COMMON STOCK.
All of the shares of Cross Media common stock to be issued in the merger
will be registered with the SEC and therefore will be immediately available for
resale in the public market, except that shares issued in the merger to
LifeMinders stockholders who are affiliates of LifeMinders before the merger or
who become
14
affiliates of Cross Media after the merger will be subject to certain
restrictions on transferability. The number of shares of Cross Media common
stock to be issued to LifeMinders stockholders in connection with the merger and
immediately available for resale will be substantial compared to the number of
shares of Cross Media common stock currently in the public market. LifeMinders
stockholders who are not affiliates may elect to sell the stock they receive
immediately after the merger. As a result of future sales of such common stock,
or the perception that these sales could occur, the market price of Cross Media
common stock may decline and could decline significantly before or at the time
the merger is completed or immediately thereafter. If this occurs, or if other
holders of Cross Media common stock sell significant amounts of Cross Media
common stock immediately after the merger is completed, it is likely that these
sales would cause a decline in the market price of Cross Media common stock.
THE ANTICIPATED TAX TREATMENT OF THE MERGER MAY NOT BE SUSTAINED.
Both Cross Media and LifeMinders anticipate that the merger will qualify as
a "reorganization" for federal income tax purposes, so that LifeMinders
stockholders receiving Cross Media common stock in exchange for their
LifeMinders common stock may defer tax on all or a portion of any gain realized
on the exchange. It is anticipated that each of Cross Media and LifeMinders will
receive an opinion from its respective counsel that the merger will qualify as a
reorganization. However, factual developments could make it uncertain whether
the merger would so qualify. In addition, an opinion, though received, might be
disputed by the Internal Revenue Service. Neither Cross Media nor LifeMinders
can assure you that the merger will qualify as a reorganization.
THE ANTICIPATED BENEFITS OF THE MERGER MAY NOT BE REALIZED IN A TIMELY FASHION,
OR AT ALL, AND CROSS MEDIA'S OPERATIONS MAY BE ADVERSELY AFFECTED IF THE
OPERATION OF LIFEMINDERS' BUSINESS DIVERTS TOO MUCH ATTENTION AWAY FROM CROSS
MEDIA'S EXISTING BUSINESS.
The success of the merger will depend, in part, on Cross Media's ability to
realize the anticipated revenue enhancements, growth opportunities and synergies
of combining with LifeMinders and effectively utilize the net cash and other
resources Cross Media will have following the merger. The merger involves risks
related to the integration and management of acquired technology and operations
and personnel. The integration of the businesses will be a complex,
time-consuming and potentially expensive process and may disrupt Cross Media's
business if not completed in a timely and efficient manner. Some of the
difficulties that may be encountered by the combined company include:
- the diversion of management's attention from other ongoing business
concerns;
- the inability to utilize the acquired member database and technology
effectively to grow Cross Media's business; and
- potential conflicts between business cultures.
If Cross Media's management focuses too much time, money and effort to
integrate LifeMinders' operations and assets, they may not be able to execute
Cross Media's overall business strategy.
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT CROSS MEDIA'S OR
LIFEMINDERS' STOCK PRICES, FUTURE BUSINESS AND OPERATIONS.
If the merger is not completed for any reason, Cross Media and LifeMinders
may be subject to a number of material risks, including the following:
- LifeMinders may be required, under certain circumstances, to pay to Cross
Media a termination fee of up to $2.8 million;
- Both companies may experience a negative reaction, from both the
financial markets and customers of each company, to the termination of
the merger; and
- Each company must pay the costs related to the merger, such as amounts
payable to legal and financial advisors and independent accountants, even
if the merger is not completed.
15
THE LIFEMINDERS' BOARD OF DIRECTORS HAS DETERMINED THAT THE CROSS MEDIA MERGER
IS IN THE BEST INTERESTS OF ALL OF THE LIFEMINDERS STOCKHOLDERS; HOWEVER,
INDIVIDUAL LIFEMINDERS STOCKHOLDERS MAY NOT HAVE AN OPPORTUNITY TO CONSIDER OR
VOTE UPON AN ALTERNATIVE TRANSACTION.
Under the amended and restated merger agreement, LifeMinders is obligated
to complete the merger with Cross Media unless, among other things, the
LifeMinders board of directors determines in good faith, after receipt of advice
from outside counsel, that the failure to terminate the merger agreement would
likely be inconsistent with the fiduciary duties of LifeMinders' directors to
the LifeMinders stockholders under applicable law with respect to a superior
proposal. Therefore, even though LifeMinders may receive communications from
other parties regarding possible alternative transactions, LifeMinders may not
be able to pursue alternative transactions that an individual LifeMinders
stockholder finds to be more favorable to such individual stockholder's
interests than the Cross Media merger. LifeMinders stockholders that vote
against adoption of the amended and restated merger agreement will not have
appraisal rights in connection with the merger.
PLAN OF DISTRIBUTION
We are registering all 640,791 shares on behalf of certain selling
stockholders. All of the shares were issued by us in connection with our
acquisition of eCoupons.com Inc. We will receive no proceeds from this offering.
The selling stockholders named in the table below or pledgees, donees,
transferees or other successors-in-interest selling shares received from a named
selling stockholder as a gift, partnership distribution or other non- sale
related transfer after the date of this prospectus (collectively, the "Selling
Stockholders") may sell the shares from time to time. The Selling Stockholders
will act independently of us in making decisions with respect to the timing,
manner and size of each sale. The sales may be made on one or more exchanges or
in the over-the-counter market or otherwise, at prices and at terms then
prevailing or at prices related to the then-current market price, or in
negotiated transactions. The Selling Stockholders may effect such transactions
by selling the shares to or through broker-dealers. The shares may be sold by
one or more of, or a combination of, the following:
- a block trade in which the broker-dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this prospectus;
- an exchange distribution in accordance with the rules of such exchange;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
- in privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution. In effecting sales,
broker-dealers engaged by the Selling Stockholders may arrange for other
broker-dealers to participate in the resales.
The Selling Stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with Selling Stockholders. The
Selling Stockholders also may sell shares short and redeliver the shares to
close out such short positions. The Selling Stockholders may enter into option
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The Selling Stockholders also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned, or upon a default the broker-dealer may sell the pledged
shares pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Stockholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principals, or both.
Compensation as to a particular
16
broker-dealer might be in excess of customary commissions and will be in amounts
to be negotiated in connection with the sale. Broker-dealers or agents and any
other participating broker-dealers or the Selling Stockholders may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act of
1933, as amended, in connection with sales of the shares. Accordingly, any such
commission, discount or concession received by them and any profit on the resale
of the shares purchased by them may be deemed to be underwriting discounts or
commissions under the Securities Act. Because Selling Stockholders may be deemed
to be "underwriters" within the meaning of Section 2(11) of the Securities Act,
the Selling Stockholders will be subject to the prospectus delivery requirements
of the Securities Act. In addition, any securities covered by this prospectus
which qualify for sale pursuant to Rule 144 promulgated under the Securities Act
may be sold under Rule 144 rather than pursuant to this prospectus. The Selling
Stockholders have not, to our knowledge, entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their shares. To our knowledge, there is no underwriter or
coordinating broker acting in connection with the proposed sale of shares by
Selling Stockholders.
The shares may be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act of
1934, as amended, any person engaged in the distribution of the shares may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of such
distribution. In addition, each Selling Stockholder will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations under the Exchange Act, including Regulation M, which provisions may
limit the timing of purchases and sales of shares of our common stock by the
Selling Stockholders. We will make copies of this prospectus available to the
Selling Stockholders and have informed them of the need for delivery of copies
of this prospectus to purchasers at or prior to the time of any sale of the
shares.
We will file a supplement to this prospectus, if required, pursuant to Rule
424(b) under the Securities Act upon being notified by a Selling Stockholder
that any material arrangement has been entered into with a broker-dealer for the
sale of shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer. Such supplement will
disclose:
- the name of each such Selling Stockholder and of the participating
broker-dealer(s);
- the number of shares involved;
- the price at which such shares were sold;
- the commissions paid or discounts or concessions allowed to such broker-
dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this prospectus;
and
- other facts material to the transaction.
In addition, upon being notified by a Selling Stockholder that a donee or
pledgee intends to sell more than 500 shares, we will file a supplement to this
prospectus.
We will be permitted to suspend the use of this prospectus for a period of
up to 90 days under certain circumstances relating to pending corporate
developments and similar events.
We will bear all costs, expenses and fees in connection with the
registration of the shares. The Selling Stockholders will bear all commissions
and discounts, if any, attributable to the sales of the shares. The Selling
Stockholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act.
17
SELLING STOCKHOLDERS
The following table sets forth the number of shares beneficially owned by
each of the Selling Stockholders as of the date of this prospectus. None of the
Selling Stockholders has had, to our knowledge, a material relationship with us
within the past three years other than as a result of the ownership of the
shares or our other securities or as a result of their employment with us as of
and/or after the date of the closing of our acquisition of eCoupons.com Inc. No
estimate can be given as to the amount of shares that will be held by the
Selling Stockholders after completion of this offering because the Selling
Stockholders may offer all, some or none of the shares and because there
currently are no agreements, arrangements or understandings with respect to the
sale of any of the shares. The shares offered by this prospectus may be offered
from time to time by the Selling Stockholders named below during the period
commencing on the date of this prospectus and continuing for so long as the
registration statement on Form S-3 of which this prospectus is a part remains
effective. Our obligation to maintain the effectiveness of the registration
statement will terminate on October 12, 2002.
The Selling Stockholders named below provided us the information contained
in the following table with respect to themselves and the respective number of
shares of common stock beneficially owned by them and which may be sold by them
under this prospectus. We have not independently verified this information. Each
of the Selling Stockholders owns less then 1% of our outstanding shares of
common stock.
<Table>
<Caption>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY REGISTERED FOR
NAME OWNED(1)(2) SALE HEREBY
---- ---------------- ----------------
Avcom Technologies.......................................... 8,383 7,545
Richard A. Ball............................................. 28,503 25,652
Thomas Ball................................................. 100,186 90,698
The Richard Clifford Banks Revocable Trust
Dtd 9/2/93, Richard C. Banks, Trustee..................... 1,198 1,078
Mark D. Brazeal............................................. 359 323
Warren G. Bullock........................................... 20,478 18,431
Bullock & Yeager, Inc....................................... 19,821 17,838
Central Illinois Anesthesia Services Ltd. Profit Sharing
Plan, Michael de Anda, Trustee............................ 11,976 10,778
John Connors................................................ 185 166
Margaret M. Cragin.......................................... 719 647
Michael P. Crosson.......................................... 11,976 10,778
Michael de Anda............................................. 7,186 6,467
Kingman Douglass............................................ 599 539
Frank Duffy................................................. 618 556
Erik Duisenberg............................................. 154 139
Harry P. Gelles............................................. 1,121 1,009
Roger E. George............................................. 1,198 1,078
Steve Goldsworthy........................................... 17,964 16,168
John Graham................................................. 13,174 11,857
Adi R. and Rutty A. Guzdar.................................. 11,976 10,778
Dinshaw Guzdar.............................................. 38,276 37,741
Hardeight, LLC
c/o Bernie Butler-Hardeight LLC........................... 3,593 3,234
Bush Helzberg............................................... 11,976 10,778
Gordon Hodge................................................ 4,191 3,771
Ted Hollifield.............................................. 599 539
A. Preston Hood............................................. 6,527 5,874
Taylor P. Hood.............................................. 37,784 34,006
David Horn.................................................. 4,192 3,773
</Table>
18
<Table>
<Caption>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY REGISTERED FOR
NAME OWNED(1)(2) SALE HEREBY
---- ---------------- ----------------
Kent Kearny................................................. 1,437 1,293
Douglas Knittle............................................. 34,491 31,041
Lisa Konie.................................................. 240 216
The Latta Family Trust...................................... 3,755 3,379
Lane MacDonald.............................................. 1,796 1,616
John R. Mackall............................................. 1,095 985
Frank N. Magid.............................................. 719 647
Magnuson Revocable Trust dated 1/14/1994, Richard P. and Amy
C. Magnuson, Trustees..................................... 92,215 82,994
Mickey E. Miller............................................ 1,437 1,293
John D. Minnick............................................. 13,617 12,255
John D. Minnick, custodian for Sean Michael Minnick, Under
the Uniform Gift to Minors Act............................ 2,922 2,629
SEP FBO John D. Minnick DLISC............................... 4,192 3,773
Nicole de Moulpied.......................................... 154 139
Norman Nelson............................................... 10,180 9,162
Edward M. Philip............................................ 2,436 1,984
Jim Philip.................................................. 2,204 1,984
Daniel Porter............................................... 1,437 1,293
Rekhi family Trust dated 12/15/89, Kanwal S Rekhi and Ann H.
Rekhi, Trustees........................................... 11,976 10,778
Benjamin Rekhi Trust dated 12/15/89, Kanwal S Rekhi and Ann
H. Rekhi, Trustees........................................ 2,994 2,695
Raj-Ann Kaur Rehki Trust dated 12/15/89, Kanwal S Rekhi and
Ann H. Rekhi, Trustees.................................... 2,994 2,695
Edward J. Savage............................................ 419 377
James Sharp................................................. 1,437 1,293
Thomas Sharp................................................ 1,437 1,293
William T. Sharp............................................ 115,628 104,066
Lars Finskud................................................ 18,563 16,707
Stanford Business School Angel Fund......................... 1,317 1,185
JM Thies Trust No. 1........................................ 20,839 18,755
Terry L. Wike............................................... 7,186 6,467
WS Investment Company 99A,
c/o Robert Latta.......................................... 2,994 2,695
WS Investment Company 99B,
c/o Robert Latta.......................................... 1,796 1,616
</Table>
---------------
(1) Information set forth in the table regarding shares owned by the Selling
Stockholders is provided to the best of our knowledge based on information
provided to us by the Selling Stockholders.
(2) Includes shares held in escrow for the benefit of the Selling Stockholders
to secure indemnification obligations of the Selling Stockholders under the
terms of the Agreement and Plan of Merger pursuant to which we acquired
eCoupons.com Inc. An aggregate of 61,259 shares were deposited in escrow on
a pro rata basis in accordance with the relative ownership percentages in
eCoupons.com Inc. of the Selling Stockholders. To the extent that any of the
shares held in escrow are returned to us in satisfaction of the
indemnification obligations, the total number of shares initially owned by
the Selling Stockholders would be reduced according to their respective pro
rata interests in the shares held in escrow that are returned to us.
19
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room located at 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of the SEC's public reference
facilities by calling the SEC at 1-800-SEC-0330. Our SEC filings are also
available to the public at the SEC's web site at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Section 13a, 13(c), 14, or 15(d) of the Securities Exchange
Act of 1934, as amended, after the date of this prospectus and until our
offering is completed.
1. Our Annual Report on Form 10-K/A for the year ended December 31, 2000,
as filed on May 16, 2001;
2. Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001
and June 30, 2001;
3. Our Current Reports on Form 8-K filed on February 9, 2001, May 11, 2001,
July 19, 2001 and August 22, 2001; and
4. The description of our common stock contained in our registration
statement on Form 8-A filed November 16, 1999, including any amendments
or reports filed for the purpose of updating such descriptions.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
LifeMinders, Inc.
13530 Dulles Technology Drive, Suite 500
Herndon, VA 20171-3414
Attention: Allison Abraham, President
703-885-1315
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of the document.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the Selling
Stockholders.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us by
Brobeck, Phleger & Harrison LLP, Washington, D.C.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K/A for the year ended December 31,
2000, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
20
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We have not authorized any person to make a statement that differs from
what is in this prospectus. If any person does make a statement that differs
from what is in this prospectus, you should not rely on it. This prospectus is
not an offer to sell, nor is it seeking an offer to buy, these securities in any
state in which the offer or sale is not permitted. The information in this
prospectus is complete and accurate as of its date, but the information may
change after that date.
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TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
The Company........................... 2
Proposed Merger with Cross Media...... 3
Risk Factors.......................... 5
Plan of Distribution.................. 16
Selling Stockholders.................. 18
Where You Can Find More Information... 20
Incorporation of Certain Documents By
Reference........................... 20
Use of Proceeds....................... 20
Legal Matters......................... 20
Experts............................... 20
Table of Contents..................... 21
</Table>
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LIFEMINDERS, INC.
640,791 SHARES
OF COMMON STOCK
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PROSPECTUS
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OCTOBER 12, 2001
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