"...The staff, without necessarily agreeing with counsel's analysis, will not recommend Commission action if this company transmits an active roadshow as described herein in reliance upon counsel's opinion that such transmissions are not prospectuses within the meaning of 1933 Act section 2(a)(10). The staff notes that the transmission of an active roadshow will not be conducted before the registration statement is filed with the Commission in connection with the particular public offering of securities. The company will provide a commercial online service that will enable issuers to transmit live roadshows, and audio-visual recordings thereof, in connection with registered public offerings. Issuers, underwriters and authorized viewers would be able to participate real-time via the Internet. Each active roadshow will be protected so that access will be limited solely to those persons given a password. All passwords will be assigned only by the managing underwriter. A password will not provide access to any roadshow other than the one for which it is issued. Access to a roadshow will be restricted to qualified investors who would customarily be invited to attend a traditional roadshow. The company will enter into written contracts with the managing underwriter under which the underwriter will agree to conduct the roadshow such that the information presented is not inconsistent with the prospectus delivered to viewers. Each roadshow will be preceded by, and will conclude with, visual disclosure regarding the prospectus, including whether it has been declared effective by the Commission. The compensation received by the company for the secure transmission of the active roadshows will not be contingent upon the degree of success of the underlying offering, nor will it be related to the size of the offering."
 

        June 3, 1999
       
        CONFIDENTIAL TREATMENT REQUESTED
       
        Catherine T. Dixon, Chief Counsel
       
        Division of Corporation Finance
       
        U.S. Securities and Exchange Commission
       
        Mail Stop 3-3
       
        450 Fifth Street, N.W.
       
        Washington, D.C. 20549
       
        Re: No Action Request
       
        Section 2(a)(10) of the Securities Act of 1933, as amended
       
        Dear Ms. Dixon:
       
        Van Valkenberg Furber Law Group is special counsel to Activate.net Corporation ("Activate" or the "Company"). Activate desires to provide a commercial online service which will enable issuers to transmit live road shows, and audio-visual recordings thereof, in connection with registered offerings to the public. Information to be presented at such electronic road shows would, of course, be subject to the same rules and regulations as traditional road shows. We would appreciate confirmation, in the form of a no-action response from the staff of the Securities and Exchange Commission (the "Commission"), of our opinion that Activate may transmit road shows for public offerings over the Internet under facts and circumstances described herein, and such transmissions will not constitute a "prospectus" pursuant to Section 2(a)(10) of the Securities Act of 1933, as amended (the "Securities Act").
       
       

        Activate has designed its proposed service to offer issuers and underwriters the ability to mirror, as closely as possible, the functionality of a traditional road show, except that instead of having to organize and travel to numerous cities for face-to-face meetings, issuers, underwriters and authorized viewers would be able to participate in one-to-many real-time communications over the Internet (a "Live Roadshow"). In addition, Activate proposes to offer an online service transmitting an audio-visual recording of a specific Live Roadshow (an "On-Demand Roadshow"). As used herein, an "Activate Roadshow" shall mean both a Live Roadshow and an On-Demand Roadshow. The content of each Activate Roadshow would reside on Activate's network of dedicated servers. The Activate network is a set of hardware, streaming media server software and related tools used to transmit business to business communications over the Internet. The Activate network enables the Company to securely acquire content from a source and then securely transmit audio and video content over the Internet to end-users with access rights to the content, and it currently operates twenty-four hours a day, seven days a week to provide communications services (unrelated to the offer or sale of securities) to the Company's customers (which includes several Fortune 500 and numerous public emerging growth companies).
       
        Each Activate Roadshow will be protected such that access will be limited solely to those persons given a password, and each password will be assigned solely by the managing underwriter(s) for the offering. Further, the password for access to an Activate Roadshow will not provide access to any other Activate Roadshow (thus, viewers of an Activate Roadshow for any particular public offering will not be able to use the same password to gain access to or view an Activate Roadshow for any other public offering). The Company will monitor traffic on a real-time basis, and will provide the managing underwriter(s) of each offering relevant verification statistics concerning access and use (including, without limitation, the names of all viewers) for each Activate Roadshow. The Company will enter into written contracts with the managing underwriter(s) pursuant to which such underwriter(s) will agree to comply with the foregoing access and content restrictions.
       
        The website or corporate Intranet providing access to an Activate Roadshow would contain video, audio, controls, communication and a slide screen. In connection with the transmission of a Live Roadshow, Activate will (i) use streaming media technology to transmit, on a real-time basis, a "live" road show presentation and (ii) use text-based communication technology to permit authorized viewers to electronically transmit, on a real-time basis, questions to the issuer and managing underwriter(s). The presentation content for any particular Activate Roadshow, including any question and answer session, will be exclusively controlled by the managing underwriter(s) for the offering. It is anticipated that any questions will be read aloud (so that all persons can clearly understand the question) and not be pre-screened or otherwise restricted; that is, all questions will be answered in the order received. Subject to the foregoing, the managing underwriter(s) controlling the content of the Activate Roadshow may reserve the right to indicate in advance that there will be an objective limit to the number of questions asked or the time period for any question and answer session. The Company will enter into written contracts with the managing underwriter(s) pursuant to which such underwriter(s) will agree to comply with the foregoing questions and answer procedures.
       
        An On-Demand Roadshow would simply be a precise reproduction (i.e., a recording) of the entire version of an actual Live Roadshow, including all presentation aids used at the Live Roadshow (slides, charts, video tapes, etc.), in full audio and video format. It is expected that only one specific Live Roadshow would become an On-Demand Roadshow, however, in no case will more than one version of an On-Demand Roadshow relating to any offering be accessible at any time. An On-Demand Roadshow will not be edited for content, except that the Company would reserve the right to edit out "dead time" arising through logistical, organizational or similar problems at a Live Roadshow, and provide additional information to eliminate or correct any misleading information, misstatements or mistakes by adding scrolling corrections across the screen as the original audio-visual version is transmitted (including an invitation to viewers to contact the appropriate institutional salesman at the managing underwriter(s) for further information concerning such corrections.)
       
        While it is anticipated that viewers will generally view Activate Roadshows in their entirety, they will have the ability to interrupt their viewing and view less than the entire Activate Roadshow (similar to the ability of an in-person attendee to arrive late and leave and reenter the room at any time). Consistent with Rule 134 under the Securities Act, each Activate Roadshow would also provide contact and other information for authorized viewers to obtain additional information about the offering or the issuer.
       
        Activate does not employ, nor is it affiliated with, any registered broker/dealers. The Company will not: (a) hold any investor or customer funds; (b) participate in the negotiation or structuring of any transactions in which securities are to be offered or sold; (c) prepare any substantive disclosure transmitted during an Activate Roadshow, or (d) be responsible for the solicitation of any prospective investors in connection with any Activate Roadshow. Finally, the Company will not be an affiliate of any issuer of securities that is the subject of any Activate Roadshow.
       
       

        Access to an Activate Roadshow will be restricted to qualified investors who would customarily be invited to attend a traditional road show, such as institutional investors, securities firms, trading and sales personnel from participants in the offering and research analysts. To view an Activate Roadshow, an investor must have a user name and receive a password from an authorized representative of a managing underwriter for the offering.
       
        The managing underwriter(s) for each offering will agree in writing with the Company not to assign any passwords to enable a viewer to view an Activate Roadshow unless: (a) a registration statement relating to the offering is on file with the Commission; (b) the viewer is an institutional investor or other person of a type the underwriter would customarily invite to a road show; and (c) the viewer has been provided with a copy of the statutory prospectus. This prospectus will be delivered by the underwriter either in paper format or, for customers from whom the lead underwriter has received advance consent, by electronic delivery (consistent with the Commission's positions regarding use of electronic media for delivery of information set forth in SEC Rel. No. 33-7233 (October 6, 1995) and SEC Rel. No. 33-7288 (May 9, 1996). Because the registration statement will not be effective at the time an Activate Roadshow is transmitted, the prospectus distributed to the viewer will be a Section 10(b) preliminary prospectus (i.e., a "red herring"). During the period between effectiveness and pricing of the offering under Rule 430A, the prospectus distributed in connection with an Activate Roadshow will be a Section 10(a) statutory prospectus.
       
        The Company will enter into written contracts with the managing underwriter(s) pursuant to which such underwriter(s) will agree to conduct the roadshow such that information disclosed in the Activate Roadshow, including any statements made by representatives of the issuer, is not inconsistent with the prospectus delivered to viewers. It is understood that the information disclosed in an Activate Roadshow, even if not prospectuses within the meaning of Section 2(a)(10) of the Securities Act, is and will be subject to the anti-fraud provisions of Section 12(a)(2) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934, as amended.
       
        Each Activate Roadshow will be preceded by and will conclude with the following statement:
       
        "A prospectus or preliminary prospectus has been furnished to each person authorized to receive this transmission. You should refer to the prospectus, and to the registration statement of which it is a part, for more complete information about the offering. By electing to view this transmission, you represent, warrant and agree that you will not videotape, record or otherwise attempt to reproduce or re-transmit the content of this transmission."
       
        For offerings for which a registration statement has been filed with the Commission but is not effective, the transmission will also include the following visual disclosure:
       
        "The issuer of the securities discussed in this transmission has filed a registration statement with the Securities and Exchange Commission covering the offer and sale of the securities. The registration statement has not yet become effective. These securities may not be sold, nor may offers to buy them be accepted before the registration statement becomes effective. This transmission does not offer any securities to you or ask you to buy any securities. The securities will not be sold in any state in which the sale would be illegal before registration or qualification under the securities laws of that state."
       
        Activate Roadshow content (audio, video, and slides) will be protected against copying, downloading and printing utilizing the advantages of streaming media technology (which cannot be copied or downloaded) and the Company's technology security features (which prevent viewers from copying or downloading any text-based (e.g., slides) or graphical information on the screen). Such transmissions will also be protected so that an authorized viewer will be able to view a Live Roadshow once, and an On-Demand Roadshow any number of times during a single 24-hour period only (which will commence upon the viewer's first access to a Live or On-Demand Roadshow for any offering). Once the registration statement has been declared effective and the distribution for any offering has been commenced, the Company will thereafter deny access to any Activate Roadshow related to that offering.
       
       

        The compensation to be received by the Company for secure transmission of Activate Roadshows will in no way be contingent upon the degree of success of an underlying offering, and will not be related to the size of an offering. The fees to be charged by the Company will be solely related to the labor and transmission costs associated with each particular Activate Roadshow. The Company may also collect fees from viewers on a subscription or pay-per-view basis for providing access to Activate Roadshows. In all such cases, viewers will have been authorized by the managing underwriter(s) to view the Activate Roadshow, in the manner described above.
       
       

        Section 5(b) of the Securities Act makes it unlawful for any person to transmit a prospectus through interstate commerce with respect to an offering for which a registration statement has been filed unless the prospectus meets the requirements of Section 10 of the Act. Section 2(a)(10) of the Securities Act defines the term "prospectus" to mean "any prospectus, notice, circular, advertisement, letter, or communication, written or by radio or television, which offers any security for sale or confirms the sale of any security." A communication sent or given after the effective date of the registration statement. however, is generally not deemed to be a prospectus so long as the recipient of the communication is given a prospectus meeting the requirements of Section 10(a) at or prior to the time of the communication.
       
        Traditional road show presentations that are made after the filing but prior to the effectiveness of a registration statement ordinarily are not considered prospectuses, since these presentations are oral and visual, and not written. Video and audio transmissions of road shows to a defined, limited audience should be treated the same way, even though such transmissions may resemble some of the same technology as television and radio. This is so because when Congress used the terms "radio" and "television" in Section 2(a)(10), Congress was concerned with mass communications to the public through "broadcasts" to an undefined, unlimited audience. The problem with such broadcasts is that they do not enable the "broadcasters" to identify the investors viewing the presentation or ensure that those viewers have previously received a prospectus meeting the requirements of Section 10. Conversely, controlled transmissions to the types of investors who ordinarily attend road shows, and to whom prospectuses have been supplied, do not present such problems, and thus do not implicate the policies underlying the prospectus requirements of the Securities Act.
       
        This reading of the statute is consistent with four recent no-action positions taken by the Commission with respect to similar services. See SEC No-Action Letter Re: Thomson Financial Services, Inc. (September 4, 1998) ("Thomson"); SEC No-Action Letter Re: Bloomberg L.P. (December 1, 1997) ("Bloomberg"); SEC No-Action Letter Re: Net Roadshow (September 8, 1997) ("Net Roadshow"); and SEC No-Action Letter Re: Private Financial Network (March 12, 1997) ("PFN").
       
        The Company has designed its service to limit the audience of viewers solely to the types of investors who would customarily be invited to attend a traditional road show, such as institutional investors, securities firms, trading and sales personnel from participants in an offering and research analysts. In that regard, the Company's service is similar to other services that have received no-action positions from the staff, particularly, Thomson and Net Roadshow. Similarly, the Company proposes to circumscribe access to and use of the Company's electronic road show transmissions. Access to Activate Roadshows will be limited solely to persons given passwords by an authorized representative of a managing underwriter for the offering. Such passwords will enable a viewer to view an Activate Roadshow an unlimited number of times for a 24 hour period only (like Thomson and Bloomberg). Only one password will be given to any user name (like Net Roadshow), and only one version of any On-Demand Roadshow relating to any offering will be available at any time. Once the registration statement has been declared effective and the distribution for any offering has been commenced, the Company will thereafter deny access to any Activate Roadshow related to that offering. In addition, like each of the other no-action letter services, viewers of an Activate Roadshow will be prohibited from copying, downloading or redistributing any road show material, although printing and downloading prospectuses may be allowed.
       
        The Company has designed its service to mirror, as closely as possible, the functionality and experience of a traditional face-to-face roadshow. Like each of the other no-action letter services, editing will be allowed only in very limited circumstances and the issuer and/or managing underwriter(s) will have exclusive control over the content of the roadshow (subject to the obligation to ensure that information in the electronic road show does not vary from the filed prospectus). The Company would reserve the right to edit out "dead time" arising through logistical, organizational or similar problems at a Live Roadshow, and provide additional information to eliminate or correct any misleading information, misstatements or mistakes by adding scrolling corrections across the screen as the original audio-visual version is transmitted (including an invitation to viewers to contact the appropriate institutional salesman at the managing underwriter(s) for further information concerning such corrections.)
       
        What distinguishes the Company's Live Roadshow service from prior no-action letter services is that Activate will use text-based streaming technology to permit authorized viewers to electronically transmit questions during a Live Roadshow, which questions will then be read aloud and answered for the benefit of all viewers. The Company's text-based streaming technology provides a functionality and experience more closely resembling a traditional roadshow, in that it facilitates greater communication by and among the issuer, the managing underwriter(s), and authorized viewers, including a meaningful opportunity for persons electronically viewing a Live Roadshow to ask questions and receive answers. We believe the staff should view this feature as an advancement over current electronic road show practices.
       
        The Company has designed its service to ensure that the prospectus delivery methodologies of underwriters who utilize Activate Roadshow services are consistent with the prospectus delivery methodologies of underwriters who utilize prior no-action letter services. The managing underwriter(s) for an offering will be contractually obligated to ensure, among other things, that no passwords are assigned prior to the time a registration statement relating to the offering is on file with the Commission or to any viewer that has not been provided a copy of the prospectus. Like all of the prior no-action letter services, issuers and managing underwriter(s) will be obligated to make sure their presentations are not inconsistent with the most recent prospectus on file with the Commission, and viewers will be told (before and after) each road show presentation that a prospectus should be reviewed before an investment decision is made.
       
        Finally, the Company has designed its compensation arrangements for providing its Activate Roadshow services consistent with the compensation arrangements of prior no-action letter services. The compensation to be received by the Company will in no way be contingent upon the degree of success of an underlying offering, and will not be related to the size of an offering. The fees to be charged by the Company will be solely related to the labor and transmission costs associated with each particular Activate Roadshow. As such, the fees to be charged by the Company are analogous to fees charged by financial printers for production and delivery costs relating to an offering.
       
        Therefore, we believe that the proposed activities of our client should be viewed with favor by the staff as consistent with, and in one respect an advancement over, current public offering electronic road show practices. Accordingly, the Company's proposed Activate Roadshow services should likewise be viewed as the equivalent of an oral statement and not as the delivery of a document that would be a prospectus within the meaning of Section 2(a)(10) of the Securities Act.
       
       

        In view of the foregoing, we are of the opinion that the transmission of an Activate Roadshow over the Activate network under the circumstances described above should not be deemed to involve the transmission of a prospectus within the meaning of Section 2(a)(10) of the Securities Act. We respectfully request that the staff agree not to recommend that the Commission commence enforcement action against the Company if it provides the services described above.
       
        In accordance with the procedures set forth in Securities Act Release Nos. 6259 (Dec. 5, 1980) and 5127 (Jan.25, 1971), seven copies of this letter are submitted herewith, and the specific subsections of the particular statute to which this letter pertains are indicated in the upper right-hand corner of the first page of this letter and each copy. We respectfully request the opportunity to consult with the staff if the staff proposes to deny or withhold any part of the no-action relief requested herein.
       
       

        Pursuant to Rule 81(b) of the Commission's Regulation Concerning Information and Requests, 17 C.F.R. ¤200.81(b), we further request that the staff accord confidential treatment of this letter and the staff response thereto until the earlier of 120 days from the date of such response or Activate's first public announcement of the information contained in this letter. This request for confidential treatment is being submitted because certain of the facts set forth above are not now public and premature disclosure of them could adversely affect Activate.
       
        If you have any questions or desire any additional information, representations or clarifications regarding this no-action and confidential treatment request, please telephone me at (206) 464-0489.
       
        Very truly yours,
       
        Bradley B. Furber
       
        Cc: Sanjay Shirodkar
       
        1325 FOURTH AVENUE, SUITE 1200
       
        SEATTLE, WA 98101-2509
       
        PHONE: (206) 464-0489
       
        FAX: (206) 464-2857
       
        E-MAIL: brad@vvflg.com
       
       

        PUBLICLY AVAILABLE SEPTEMBER 21, 1999
       
        June 3, 1999
       
        RESPONSE OF THE OFFICE OF CHIEF COUNSEL
       
        DIVISION OF CORPORATION FINANCE
       
        Re: Activate.net Corporation ("Activate")
       
        Incoming letter dated June 3, 1999
       
        Based on the facts presented, but without necessarily agreeing with your analysis, the Division will not recommend enforcement action to the Commission if Activate transmits an Activate Roadshow (as defined in your letter) for the purposes and pursuant to the procedures described in your letter, in reliance upon your counsel's opinion that such transmissions are not prospectuses within the meaning of Section 2(a)(10) of the Securities Act of 1933. The Division notes that the transmission of an Activate Roadshow will not be conducted before the registration statement is filed with the Commission in connection with the particular public offering of securities.
       
        Your request for confidential treatment pursuant to Rule 81(b) of the Commission's Regulation Concerning Information and Requests [17 C.F.R. ¤200.81(b)], has been granted until the earlier of (a) 120 days from the date of this response; or (b) the date that any information contained in your letter or this response is made publicly available by Activate.
       
        This position is based on the facts and circumstances outlined in your letter, as well as your counsel's opinion as described therein. Accordingly, any different facts or conditions might require a different conclusion. In addition, this response expresses the Division's position on enforcement action only, and as such does not express any legal conclusion on the question presented. Finally, because regulatory responses to legal issues raised by technological developments may evolve, you should be aware that this no-action position may be reevaluated in the future by either the Division or the Commission.
       
        Sincerely,
       
        Sanjay M. Shirodkar
       
        Special Counsel
       

 

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