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As filed with the Securities and Exchange Commission on September 4, 2007.

Registration No. 333-144381

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 2

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

CONSTANT CONTACT, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware	7372	04-3285398
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code No.)	(I.R.S. Employer Identification No.)

Reservoir Place

1601 Trapelo Road, Suite 329

Waltham, Massachusetts 02451

(781) 472-8100

(Address, including zip code, and telephone number,

Including area code, of registrant’s principal executive offices)

Constant Contact, Inc.

Reservoir Place

1601 Trapelo Road, Suite 329

Waltham, Massachusetts 02451

(781) 472-8100

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies to:


Mark G. Borden, Esq. Philip P. Rossetti, Esq. Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 (617) 526-6000		Robert P. Nault, Esq. Constant Contact, Inc. Reservoir Place 1601 Trapelo Road, Suite 329 Waltham, Massachusetts 02451 (781) 472-8100		John R. Utzschneider, Esq. Bingham McCutchen LLP 150 Federal Street Boston, Massachusetts 02110 (617) 951-8000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this form are offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

The information contained in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, Dated September 4, 2007

Shares

Common Stock

$ per share

This is an initial public offering of our common stock. We are offering shares and the selling stockholders identified in this prospectus are offering shares.

We expect that the price to the public in the offering will be between $ and $ per share. The market price of the shares after the offering may be higher or lower than the offering price.

We have applied to include our common stock on the Nasdaq Global Market under the symbol “CTCT.”

Certain of our existing stockholders have indicated an interest in purchasing up to an aggregate of million shares of our common stock in this offering at the public offering price. Because indications of interest are not binding agreements or commitments to purchase, these stockholders may not purchase any common stock in this offering.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 7.


	Per Share	Total

Price to the public	$	$
Underwriting discount
Proceeds, before expenses, to Constant Contact
Proceeds, before expenses, to the selling stockholders

We and the selling stockholders have granted an over-allotment option to the underwriters. Under this option, the underwriters may elect to purchase a maximum of additional shares ( from us and from the selling stockholders) within 30 days following the date of this prospectus to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


CIBC World Markets	Thomas Weisel Partners LLC


William Blair & Company	Cowen and Company	Needham & Company, LLC

The date of this prospectus is , 2007

Prospectus Summary

This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including our financial statements and related notes, and the risk factors beginning on page 7, before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, we use the terms “Constant Contact,” “our company,” “we,” “us” and “our” in this prospectus to refer to Constant Contact, Inc.

Constant Contact

Overview

Constant Contact is the leading provider of on-demand email marketing solutions for small organizations, including small businesses, associations and non-profits, as determined by the size of our customer base. As of July 31, 2007, we had over 130,000 customers. Our customers use our email marketing product to more effectively and efficiently create, send and track professional and affordable permission-based email marketing campaigns. With these campaigns, our customers can build stronger relationships with their customers, clients and members, increase sales and expand membership. Our email marketing product incorporates a wide range of customizable templates to assist in campaign creation, user-friendly tools to import and manage contact lists and intuitive reporting to track campaign effectiveness. In June 2007, we introduced an online survey product that complements our email marketing product and enables small organizations to easily create and send surveys and effectively analyze responses. We are committed to providing our customers with a high level of support, which we deliver via phone, chat, email and our website.

Our email marketing customer base has grown steadily from approximately 25,000 at the end of 2004 to over 130,000 as of July 31, 2007. We estimate that approximately two-thirds of our customers have fewer than ten employees and in the first half of 2007 our top 50 email marketing customers accounted for approximately 1% of our gross email marketing revenue. Our email marketing customers pay a monthly subscription fee that generally ranges between $15 per month and $150 per month based on the size of their contact lists and, in some cases, volume of mailings. For the first half of 2007, our average monthly revenue per email marketing customer was approximately $33. We believe that the simplicity of on-demand deployment combined with our affordable subscription fees and functionality facilitate adoption of our solution by our target customers while generating significant recurring revenue. From January 2005 through July 2007, at least 97.4% of our customers in a given month have continued to utilize our email marketing product in the following month. Since the first quarter of 2002, we have achieved 22 consecutive quarters of growth in customers and revenue.

We acquire our customers through a variety of paid and unpaid sources. Our paid sources include online marketing through search engines, advertising networks and other sites; offline marketing through radio advertising, local seminars and other marketing efforts; and contractual relationships with over 1,700 active channel partners, which include national small business service providers with broad reach such as Network Solutions, LLC, American Express Company and VistaPrint Limited as well as local small business service providers with narrow reach but high influence. Our channel partners refer customers to us through links on their websites and outbound promotions to their customers. Our unpaid sources of customer acquisition include referrals from our growing customer base, general brand awareness and the inclusion of a link to our website in the footer of more than 500 million emails currently sent by our customers each month. During the first half of 2007, approximately 56% of our new email marketing customers were generated through marketing programs and channel partners or were located in geographies where we do offline marketing. Accordingly, we believe that during the first half of 2007 approximately 44% of our new email marketing customers were generated through unpaid sources.

We were founded in 1995 and our on-demand email marketing product was first offered commercially in 2000. In 2006, our revenue was $27.6 million and our net loss was $7.8 million, and in the six months ended June 30, 2007 our revenue was $21.1 million and our net loss was $5.5 million.

Industry Background

We believe that small organizations represent a large market for email marketing. Based on statistics compiled by the U.S. Small Business Administration and others, we believe that our email marketing product could potentially address the needs of more than 27.3 million small organizations in the United States. We believe that all small organizations could benefit by communicating regularly with their constituents and, further, that email marketing with our product is an effective and affordable method to facilitate this type of communication. As of June 2007, we had customers in at least 856 of the 1,004 standard industrial classification, or SIC, codes, which is a method the U.S. government uses to classify industries in the U.S.

To date, however, small organizations have been slower than large organizations to adopt email marketing. Many small organizations lack familiarity with the benefits of email marketing and an understanding of how to prepare, execute and measure a campaign. Similarly, they often do not have the technical expertise necessary to implement email marketing software or the financial resources to hire in-house staff or retain an outside agency to support the effort. We believe that existing alternatives, primarily the use of general email applications, are poorly suited to meeting the email marketing needs of small organizations. General email applications and services, such as Microsoft Outlook^®, America Online^® or Hotmail^®, are designed for one-on-one emails and do not have the formatting, graphics or links needed to produce effective email marketing campaigns. The other major alternative is enterprise email marketing providers that offer sophisticated services for large organizations with sizeable marketing budgets and deliver services at a price and scale far beyond the scope of most small organizations. As a result, we believe there is a significant opportunity for an email marketing product tailored to the needs of small organizations.

Our Products and Services

We provide small organizations with a convenient, effective and affordable way to communicate with their constituents. Our email marketing product provides customers with the following features:


	•	Campaign Creation Wizard. A comprehensive, easy-to-use interface that enables our customers to create and edit email campaigns.

	•	Professionally Developed Templates. Pre-designed email message forms that help our customers to quickly create attractive and professional campaigns.

	•	Contact List Management. These tools help our customers build and manage their email contact lists.

	•	Email Tracking and Reporting. These features enable our customers to review and analyze the overall effectiveness of a campaign by tracking and reporting aggregate and individualized information.

	•	Email Delivery Management. These tools are incorporated throughout our email marketing product and are designed to maintain our high deliverability rates.

	•	Image Hosting. This feature enables customers to store up to five images for free, view and edit these images and resize them as necessary.

	•	Security and Privacy. We protect our customers’ data and require that our customers adopt a privacy policy to assist them in complying with government regulations and email marketing best practices.

In addition, we recently launched an online survey product to enable our customers to survey their customers, clients or members and analyze the responses. Our survey product provides customers with a survey creation wizard, over 40 different preformatted and customizable survey templates, list management capabilities and live customer support.

Business Strengths

We believe that the following business strengths differentiate us from our competitors and are key to our success:


	•	Focus on Small Organizations

	•	Efficient Customer Acquisition Model

	•	High Degree of Recurring Revenue

	•	Consistent Commitment to Customer Service

	•	Software-as-a-Service Delivery

Growth Strategy

Our objective is to grow our market leadership through the following strategies:


	•	Acquire New Customers. We have increased the number of email marketing customers acquired in each of the past 12 quarters and aggressively seek to continue to attract new customers by promoting the Constant Contact brand and encouraging small organizations to try our products.

	•	Increase Revenue Per Customer. As of July 31, 2007, we had an email marketing customer base in excess of 130,000. We seek to increase revenue from each customer through add-on services that enhance our products, such as image hosting.

	•	Provide Additional Products. We plan to continue to invest in research and development to maintain our leadership position in email marketing and to develop and provide our customers with complementary products that are easy-to-use, effective and affordable, such as our recently launched survey product.

	•	Expand Internationally. Customers in over 110 countries and territories currently use our email marketing product, despite limited marketing efforts outside the United States, and we believe that opportunities exist to more aggressively market our products in English-speaking countries.

	•	Pursue Complementary Acquisitions. We follow industry developments and technology advancements and intend to evaluate and acquire technologies or businesses to cost-effectively enhance our products, access new customers or markets or both.

Corporate Information

We were incorporated in Massachusetts in August 1995 under the name Roving Software Incorporated. We reincorporated in Delaware in July 2000 and changed our name to Constant Contact, Inc. in December 2006. Our principal executive offices are located at Reservoir Place, 1601 Trapelo Road, Suite 329, Waltham, Massachusetts 02451, and our telephone number is (781) 472-8100. Our website address is www.constantcontact.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase shares of our common stock.

Constant Contact^®, Do-It-Yourself Email Marketing^®, SafeUnsubscribe^®, Email Marketing 101^®, Email Marketing Hints & Tips^® and other trademarks or service marks of Constant Contact appearing in this prospectus are the property of Constant Contact. This prospectus contains additional trade names, trademarks and service marks of other companies.

The Offering


Common stock offered by us		shares

Common stock offered by the selling stockholders		shares

Common stock to be outstanding after the offering		shares

Use of proceeds		We intend to use our net proceeds from this offering for general corporate purposes, including the development of new products, the acquisition of new customers and capital expenditures. We also intend to use a portion of our net proceeds to repay outstanding debt, which was $3.1 million as of June 30, 2007. We may use a portion of our proceeds for the acquisition of, or investment in, businesses, technologies, products or assets that complement our business. We have no present understandings, commitments or agreements to enter into any acquisitions or make any investments. We will not receive any proceeds from the shares sold by the selling stockholders. See “Use of Proceeds” for more information.

Proposed Nasdaq Global Market symbol		CTCT

The number of shares of our common stock to be outstanding after this offering is based on the number of shares of common stock outstanding as of June 30, 2007, and excludes:


	•	1,951,485 shares of common stock issuable upon the exercise of stock options and warrants outstanding as of June 30, 2007 at a weighted average exercise price of $2.56 per share, of which options and warrants to purchase 585,908 shares of our common stock were exercisable as of June 30, 2007 with a weighted average exercise price of $1.97 per share; and


	•	831,124 shares of common stock available for future issuance under our equity compensation plans as of June 30, 2007.

Unless otherwise stated, all information contained in this prospectus gives effect to a 1-for-100 reverse stock split of our common stock that was effected on November 26, 2002 and a 1.3-for-1 stock split of our common stock to be effected on September 6, 2007, assumes no exercise by the underwriters of their over-allotment option, assumes the exercise of an outstanding warrant to purchase 120,000 shares of redeemable convertible preferred stock and gives effect to the automatic conversion of those preferred shares into 156,000 shares of our common stock upon the closing of this offering, gives effect to the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into 17,146,675 shares of our common stock upon the closing of this offering and gives effect to the restatement of our certificate of incorporation and amendment and restatement of our bylaws to be effective upon completion of this offering.

Entities affiliated with Commonwealth Capital Ventures, which are existing stockholders, have indicated an interest in purchasing up to an aggregate of million shares of our common stock in this offering at the initial public offering price. Assuming an initial public offering price of $ per share, the mid-point of the estimated price range shown on the cover page of this prospectus, these stockholders would purchase up to $ million of our common stock in this offering. However, because indications of interest are not binding agreements or commitments to purchase, these stockholders might not purchase any common stock in this offering.

Summary Financial Information

The following tables present our summary statements of operations data for the three years ended December 31, 2006 and for the six months ended June 30, 2006 and 2007, and our summary historical, pro forma and pro forma as adjusted balance sheet data as of June 30, 2007. The summary statements of operations data for the three years ended December 31, 2006 are derived from our audited financial statements for the three years ended December 31, 2006 included elsewhere in this prospectus. The summary statements of operations data for the six months ended June 30, 2006 and 2007 and the summary balance sheet data as of June 30, 2007 have been derived from our unaudited financial statements included elsewhere in this prospectus. Our unaudited financial statements have been prepared on the same basis as the audited financial statements and notes thereto and, in the opinion of our management, include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the information for the unaudited interim periods. Our historical results for prior interim periods are not necessarily indicative of results to be expected for a full year or for any future period. You should read this data together with our financial statements and related notes included elsewhere in this prospectus and the information under “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


										Six Months Ended
	Year Ended December 31,									June 30,
	2004			2005			2006			2006			2007
	(in thousands, except per share and customer data)
Statements of Operations Data:
Revenue	$	8,071		$	14,658		$	27,552		$	11,829		$	21,111
Cost of revenue(1)		2,211			3,747			7,801			3,354			5,837

Gross profit		5,860			10,911			19,751			8,475			15,274

Operating expenses:(1)
Research and development		2,140			3,355			6,172			2,774			4,971
Sales and marketing		3,385			7,460			18,592			7,084			12,795
General and administrative		856			1,326			2,623			1,079			2,371

Total operating expenses		6,381			12,141			27,387			10,937			20,137

Loss from operations		(521	)		(1,230	)		(7,636	)		(2,462	)		(4,863	)
Interest and other income (expense), net		(34	)		(24	)		(203	)		(306	)		(631	)

Net loss		(555	)		(1,254	)		(7,839	)		(2,768	)		(5,494	)
Accretion of redeemable convertible preferred stock		(3,701	)		(5,743	)		(3,788	)		(3,270	)		(518	)

Net loss attributable to common stockholders	$	(4,256	)	$	(6,997	)	$	(11,627	)	$	(6,038	)	$	(6,012	)

Net loss attributable to common stockholders per share:
Basic and diluted	$	(4.37	)	$	(2.49	)	$	(3.38	)	$	(1.82	)	$	(1.59	)
Weighted average shares outstanding used in computing per share amounts:
Basic and diluted		974			2,813			3,438			3,312			3,770

Other Operating Data:
End of period number of customers(2)		25,229			47,730			89,323			67,061			123,865


(1)		Amounts include stock-based compensation expense, as follows:


Cost of revenue	$	–	$	–	$	25	$	5	$	32
Research and development		–		–		27		4		50
Sales and marketing		6		–		19		4		29
General and administrative		17		17		12		2		92

	$	23	$	17	$	83	$	15	$	203


(2)		We define our end of period number of customers as email marketing customers that we billed directly during the last month of the period.

The following table summarizes our balance sheet data as of June 30, 2007:


	•	on an actual basis;


	•	on a pro forma basis to reflect the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into shares of common stock upon the closing of the offering and the assumed exercise of an outstanding warrant to purchase redeemable convertible preferred stock and subsequent automatic conversion of those shares of preferred stock into common stock; and


	•	on a pro forma as adjusted basis to reflect the pro forma adjustments above, as well as the receipt by us of estimated net proceeds of $ million from the sale of shares of common stock offered by us, at an initial public offering price of $ per share, the mid-point of the estimated price range shown on the cover page of this prospectus, after deducting the estimated underwriting discount and offering expenses payable by us and the payment by us of $3.1 million to repay our outstanding indebtedness as described under “Use of Proceeds.”


	As of June 30, 2007
						Pro Forma
	Actual			Pro Forma		as Adjusted
	(in thousands)

Balance Sheet Data:
Cash, cash equivalents and short-term marketable securities	$	11,192		$	11,252	$
Total assets		19,345			19,405
Deferred revenue		8,047			8,047
Redeemable convertible preferred stock warrant		1,465			–
Notes payable		3,083			3,083
Redeemable convertible preferred stock		35,840			–
Total stockholders’ equity (deficit)		(34,379	)		2,986

Risk Factors

An investment in our common stock involves a high degree of risk. In deciding whether to invest, you should carefully consider the following risk factors. Any of the following risks could have a material adverse effect on our business, financial condition, results of operations or prospects and cause the value of our common stock to decline, which could cause you to lose all or part of your investment. When determining whether to invest, you should also refer to the other information in this prospectus, including the financial statements and related notes.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

If we are unable to attract new customers and retain existing customers on a cost-effective basis, our business and results of operations will be affected adversely.

To succeed, we must continue to attract and retain a large number of customers on a cost-effective basis, many of whom have not previously used an email marketing service. We rely on a variety of methods to attract new customers, such as paying providers of online services, search engines, directories and other websites to provide content, advertising banners and other links that direct customers to our website and including a link to our website in substantially all of our customers’ emails. In addition, many of our new customers are referred to us by existing customers. If we are unable to use any of our current marketing initiatives or the cost of such initiatives were to significantly increase or our efforts to satisfy our existing customers are not successful, we may not be able to attract new customers or retain existing customers on a cost-effective basis and, as a result, our revenue and results of operations would be affected adversely.

Our business is substantially dependent on the market for email marketing services for small organizations.

We derive, and expect to continue to derive, substantially all of our revenue from our email marketing product for small organizations, including small businesses, associations and non-profits. As a result, widespread acceptance of email marketing among small organizations is critical to our future growth and success. The overall market for email marketing and related services is relatively new and still evolving, and small organizations have generally been slower than large organizations to adopt email marketing as part of their marketing mix. There is no certainty regarding how or whether this market will develop, or whether it will experience any significant contractions. Our ability to attract and retain customers will depend in part on our ability to make email marketing convenient, effective and affordable. If small organizations determine that email marketing does not sufficiently benefit them, existing customers may cancel their accounts and new customers may decide not to adopt email marketing. In addition, many small organizations lack the technical expertise to effectively send email marketing campaigns. As technology advances, however, small organizations may establish the capability to manage their own email marketing and therefore have no need for our email marketing product. If the market for email marketing services fails to grow or grows more slowly than we currently anticipate, demand for our services may decline and our revenue would suffer.

U.S. federal legislation entitled Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 imposes certain obligations on the senders of commercial emails, which could minimize the effectiveness of our email marketing product, and establishes financial penalties for non-compliance, which could increase the costs of our business.

In December 2003, Congress enacted Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or the CAN-SPAM Act, which establishes certain requirements for commercial email messages and specifies penalties for the transmission of commercial email messages that are intended to deceive the recipient as to source or content. The CAN-SPAM Act, among other things, obligates the sender of commercial emails to provide recipients with the ability to opt out of receiving future emails from the sender. In addition, some states have passed laws regulating commercial email practices that are significantly more

punitive and difficult to comply with than the CAN-SPAM Act, particularly Utah and Michigan, which have enacted do-not-email registries listing minors who do not wish to receive unsolicited commercial email that markets certain covered content, such as adult or other harmful products. Some portions of these state laws may not be preempted by the CAN-SPAM Act. The ability of our customers’ constituents to opt out of receiving commercial emails may minimize the effectiveness of our email marketing product. Moreover, non-compliance with the CAN-SPAM Act carries significant financial penalties. If we were found to be in violation of the CAN-SPAM Act, applicable state laws not preempted by the CAN-SPAM Act, or foreign laws regulating the distribution of commercial email, whether as a result of violations by our customers or if we were deemed to be directly subject to and in violation of these requirements, we could be required to pay penalties, which would adversely affect our financial performance and significantly harm our business. We also may be required to change one or more aspects of the way we operate our business, which could impair our ability to attract and retain customers or increase our operating costs.

Evolving regulations concerning data privacy may restrict our customers’ ability to solicit, collect, process and use data necessary to conduct email marketing campaigns or to send surveys and analyze the results or may increase their costs, which could harm our business.

Federal, state and foreign governments have enacted, and may in the future enact, laws and regulations concerning the solicitation, collection, processing or use of consumers’ personal information. Such laws and regulations may require companies to implement privacy and security policies, permit users to access, correct and delete personal information stored or maintained by such companies, inform individuals of security breaches that affect their personal information, and, in some cases, obtain individuals’ consent to use personal information for certain purposes. Other proposed legislation could, if enacted, prohibit the use of certain technologies that track individuals’ activities on web pages or that record when individuals click through to an Internet address contained in an email message. Such laws and regulations could restrict our customers’ ability to collect and use email addresses, page viewing data, and personal information, which may reduce demand for our products.

As Internet commerce develops, federal, state and foreign governments may draft and propose new laws to regulate Internet commerce, which may negatively affect our business.

As Internet commerce continues to evolve, increasing regulation by federal, state or foreign governments becomes more likely. Our business could be negatively impacted by the application of existing laws and regulations or the enactment of new laws applicable to email marketing. The cost to comply with such laws or regulations could be significant and would increase our operating expenses, and we may be unable to pass along those costs to our customers in the form of increased subscription fees. In addition, federal, state and foreign governmental or regulatory agencies may decide to impose taxes on services provided over the Internet or via email. Such taxes could discourage the use of the Internet and email as a means of commercial marketing, which would adversely affect the viability of our products.

In the event we are unable to minimize our loss of existing customers or to grow our customer base by adding new customers, our operating results will be adversely affected.

From January 2005 through July 2007, at least 97.4% of our customers in a given month have continued to utilize our email marketing product in the following month. Such historic performance is not indicative of future performance, and there is no guarantee that new customers will demonstrate the loyalty our existing customers have exhibited in the past or that our existing customers will continue to use our products consistently. Our growth strategy requires us to minimize the loss of our existing customers and grow our customer base by adding new customers. Customers cancel their accounts for many reasons, including a perception that they do not use our product effectively, the service is a poor value and they can manage their email campaigns without our product. In some cases, we terminate an account because the customer fails to comply with our standard terms and conditions. We must continually add new customers to replace customers whose accounts are cancelled or terminated, which may involve significantly higher marketing expenditures

than we currently anticipate. If too many of our customers cancel our service, or if we are unable to attract new customers in numbers sufficient to grow our business, our operating results would be adversely affected.

As we expand our customer base through our marketing efforts, our new customers may use our products differently than our existing customers and, accordingly, our business model may not be as efficient at attracting and retaining new customers.

As we expand our customer base, our new customers may use our products differently than our existing customers. For example, a greater percentage of new customers may take advantage of the free trial period we offer but choose to use another form of marketing to reach their constituents. If our new customers are not as loyal as our existing customers, our attrition rate will increase and our customer referrals will decrease, which would have an adverse effect on our results of operations. In addition, as we seek to expand our customer base, we expect to increase our marketing spend in order to attract new customers, which will increase our operating costs. There can be no assurance that these marketing efforts will be successful.

The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.

The market for our products is competitive and rapidly changing, and the barriers to entry are relatively low. With the introduction of new technologies and the influx of new entrants to the market, we expect competition to persist and intensify in the future, which could harm our ability to increase sales and maintain our prices.

Our principal competitors include providers of email marketing products for small to medium size businesses such as Vertical Response, Inc., CoolerEmail Inc., Broadwick Corporation (iContact, formerly Intellicontact), Emma, Inc., Got Corporation (Campaigner^®), Lyris Technologies, Inc. and Topica Inc., as well as the in-house information technology capabilities of prospective customers. Competition could result in reduced sales, reduced margins or the failure of our email marketing product to achieve or maintain more widespread market acceptance, any of which could harm our business. In addition, there are a number of other vendors that are focused on providing email marketing products for larger organizations, including Acxiom Digital (a division of Acxiom Corporation), Alterian Inc., Epsilon Data Management LLC (a subsidiary of Alliance Data Systems Corporation), ExactTarget, Inc., Responsys Inc., Silverpop Systems Inc. and CheetahMail, Inc. (a subsidiary of Experian Group Limited). While we do not compete currently with vendors serving larger customers, we may face future competition from these providers if they determine that our target market presents an opportunity for them. Finally, in the future, we may experience competition from Internet service providers, or ISPs, advertising and direct marketing agencies and other large established businesses, such as Microsoft Corporation, Google Inc. or Yahoo! Inc., possessing large, existing customer bases, substantial financial resources and established distribution channels. If these companies decide to develop, market or resell competitive email marketing products, acquire one of our existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our operating results could be harmed. In addition, one or more of these ISPs or other businesses could decide to offer a competitive email marketing product at no cost or low cost in order to generate revenue as part of a larger product offering.

Our current and potential competitors may have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their products. Our potential competitors may have more extensive customer bases and broader customer relationships than we have. In addition, these companies may have longer operating histories and greater name recognition than we have. These competitors may be better able to respond quickly to new technologies and to undertake more extensive marketing campaigns. If we are unable to compete with such companies, the demand for our services could substantially decline.

If the delivery of our customers’ emails is limited or blocked, the fees we may be able to charge for our email marketing product may not be accepted by the market and customers may cancel their accounts.

ISPs can block emails from reaching their users. Recent releases of ISP software and the implementation of stringent new policies by ISPs make it more difficult to deliver our customers’ emails. We continually improve our own technology and work closely with ISPs to maintain our deliverability rates. If ISPs materially limit or halt the delivery of our customers’ emails, or if we fail to deliver our customers’ emails in a manner compatible with ISPs’ email handling or authentication technologies, then the fees we charge for our email marketing product may not be accepted by the market, and customers may cancel their accounts.

Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees whom we need to support our business.

Competition for highly skilled technical and marketing personnel is extremely intense, and we continue to face difficulty identifying and hiring qualified personnel in many areas of our business. We may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In particular, candidates making employment decisions, particularly in high-technology industries, often consider the value of any equity they may receive in connection with their employment. Any significant volatility in the price of our stock after this offering may adversely affect our ability to attract or retain highly skilled technical and marketing personnel.

In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements and the quality of our services and our ability to serve our customers could diminish, resulting in a material adverse effect on our business.

If economic or other factors negatively affect the small business sector, our customers may become unwilling or unable to maintain accounts with us, which could cause our revenue to decline and impair our ability to operate profitably.

Our email marketing and survey products are designed specifically for small organizations, including small businesses, associations and non-profits that frequently have limited budgets and are more likely to be significantly affected by economic downturns than their larger, more established counterparts. Small organizations may choose to spend the limited funds that they have on items other than our products. Moreover, if small organizations experience economic hardship, they may be unwilling or unable to expend resources on marketing, which would negatively affect the overall demand for our products and could cause our revenue to decline.

If we fail to promote and maintain our brand in a cost-effective manner, we may lose market share and our revenue may decrease.

We believe that developing and maintaining awareness of the Constant Contact brand in a cost-effective manner is critical to achieving widespread acceptance of our existing and future products and attracting new customers. Furthermore, we believe that the importance of brand recognition will increase as competition in our industry increases. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and the effectiveness and affordability of our products for our target customer demographic. Historically, our efforts to build our brand have involved significant expense, and it is likely that our future marketing efforts will require us to incur additional significant expenses. Such brand promotion activities may not yield increased revenue and, even if they do, any revenue increases may not offset the expenses we incur to promote our brand. If we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may lose our existing customers to our competitors or be unable to attract new customers, which would cause our revenue to decrease.

We depend on search engines to attract a significant percentage of our customers, and if those search engines change their listings or our relationship with them deteriorates or terminates, we may be unable to attract new customers, which would adversely affect our business and results of operations.

Many of our customers located our website by clicking through on search results displayed by search engines such as Google and Yahoo!. Search engines typically provide two types of search results, algorithmic and purchased listings. Algorithmic listings cannot be purchased, and instead are determined and displayed solely by a set of formulas designed by the search engine. Purchased listings can be purchased by advertisers in order to attract users to their websites. We rely on both algorithmic and purchased listings to attract a significant percentage of the customers we serve to our website. Search engines revise their algorithms from time to time in an attempt to optimize their search result listings. If search engines on which we rely for algorithmic listings modify their algorithms, this could result in fewer customers clicking through to our website, requiring us to resort to other costly resources to replace this traffic, which, in turn, could reduce our operating and net income or our revenue, harming our business. If one or more search engines on which we rely for purchased listings modifies or terminates its relationship with us, our expenses could rise, or our revenue could decline and our business may suffer. The cost of purchased search listing advertising is rapidly increasing as demand for these channels continues to grow quickly, and further increases could have negative effects on our financial results.

The success of our business depends on the continued growth and acceptance of email as a communications tool, and the related expansion and reliability of the Internet infrastructure. If consumers do not continue to use email, demand for our email marketing products may decline.

The future success of our business depends on the continued and widespread adoption of email as a primary means of communication. Security problems such as “viruses,” “worms” and other malicious programs or reliability issues arising from outages and damage to the Internet infrastructure could create the perception that email is not a safe and reliable means of communication, which would discourage consumers from using email. Consumers’ use of email also depends on the ability of ISPs to prevent unsolicited bulk email, or “spam,” from overwhelming consumers’ inboxes. In recent years, ISPs have developed new technologies to filter unwanted messages before they reach users’ inboxes. In response, spammers have employed more sophisticated techniques to reach consumers’ inboxes. Although companies in the anti-spam industry have started to address the techniques used by spammers, if security problems become widespread or frequent or if ISPs cannot effectively control spam, the use of email as a means of communication may decline as consumers find alternative ways to communicate. Any decrease in the use of email would reduce demand for our email marketing product and harm our business.

Various private spam blacklists have in the past interfered with, and may in the future interfere with, the effectiveness of our products and our ability to conduct business.

We depend on email to market to and communicate with our customers, and our customers rely on email to communicate with their constituents. Various private entities attempt to regulate the use of email for commercial solicitation. These entities often advocate standards of conduct or practice that significantly exceed current legal requirements and classify certain email solicitations that comply with current legal requirements as spam. Some of these entities maintain “blacklists” of companies and individuals, and the websites, ISPs and Internet protocol addresses associated with those entities or individuals, that do not adhere to those standards of conduct or practices for commercial email solicitations that the blacklisting entity believes are appropriate. If a company’s Internet protocol addresses are listed by a blacklisting entity, emails sent from those addresses may be blocked if they are sent to any Internet domain or Internet address that subscribes to the blacklisting entity’s service or purchases its blacklist.

Some of our Internet protocol addresses currently are listed with one or more blacklisting entities and, in the future, our Internet protocol addresses may also be listed with these and other blacklisting entities. There can be no guarantee that we will not continue to be blacklisted or that we will be able to successfully remove

ourselves from those lists. Blacklisting of this type could interfere with our ability to market our products and services and communicate with our customers and could undermine the effectiveness of our customers’ email marketing campaigns, all of which could have a material negative impact on our business and results of operations.

Any efforts we may make in the future to promote our services to market segments other than small organizations or to expand our product offerings beyond email marketing may not succeed.

To date, we have focused our business on providing our email marketing product for small organizations, but we may in the future seek to serve other market segments and expand our service offerings. We recently introduced our new survey product, which enables customers to create and send online surveys and analyze responses, and we are currently developing an add-on archiving service that will enable our customers to archive their past email campaigns. Any efforts to expand beyond the small organization market or to introduce new products beyond our email marketing product, including our survey product, may not result in significant revenue growth, may divert management resources from our existing operations and require us to commit significant financial resources to an unproven business, which may harm our financial performance.

Our customers’ use of our products to transmit negative messages or website links to harmful applications could damage our reputation, and we may face liability for unauthorized, inaccurate or fraudulent information distributed via our products.

Our customers could use our email marketing product to transmit negative messages or website links to harmful applications, reproduce and distribute copyrighted material without permission, or report inaccurate or fraudulent data. Any such use of our products could damage our reputation and we could face claims for damages, copyright or trademark infringement, defamation, negligence or fraud. Moreover, our customers’ promotion of their products and services through our email marketing product may not comply with federal, state and foreign laws. We cannot predict whether our role in facilitating these activities would expose us to liability under these laws.

Even if claims asserted against us do not result in liability, we may incur substantial costs in investigating and defending such claims. If we are found liable for our customers’ activities, we could be required to pay fines or penalties, redesign business methods or otherwise expend resources to remedy any damages caused by such actions and to avoid future liability.

Our existing general liability insurance may not cover all potential claims to which we are exposed or may not be adequate to indemnify us for all liabilities that may be imposed. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage would increase our operating losses and reduce our net worth and working capital.

If we fail to enhance our existing products or develop new features, our products may become obsolete or less competitive and we could lose customers.

If we are unable to enhance our existing products or develop new products that keep pace with rapid technological developments and meet our customers’ needs, our business will be harmed. Creating and designing such enhancements and new products entail significant technical and business risks and require substantial expenditures and lead-time, and there is no guarantee that such enhancements and new products will be completed in a timely fashion or accepted by the market. If we cannot enhance our existing services or develop new products or if we are not successful in selling such enhancements and new products to our customers, we could lose customers or have difficulty attracting new customers, which would adversely impact our financial performance.

Our relationships with our channel partners may be terminated or may not continue to be beneficial in generating new email marketing customers, which could adversely affect our ability to increase our customer base.

We maintain a network of over 1,700 active channel partners, which include national small business service providers such as Network Solutions, LLC, American Express Company and VistaPrint Limited as well as local small business service providers such as local web developers and marketing agencies, who refer customers to us through links on their websites and outbound promotion to their customers. Approximately 15% of our new email marketing customers in the first half of 2007 were generated from our channel partners. If we are unable to maintain our contractual relationships with existing channel partners or establish new contractual relationships with potential channel partners, we may experience delays and increased costs in adding customers, which could have a material adverse effect on us. The number of customers we are able to add through these marketing relationships is dependent on the marketing efforts of our partners, and a significant decrease in the number of gross customer additions generated through these relationships could adversely affect the size of our customer base and revenue.

Our growth could strain our personnel resources and infrastructure, and if we are unable to implement appropriate controls and procedures to manage our growth, we may not be able to successfully implement our business plan.

We are currently experiencing a period of rapid growth in our headcount and operations, which has placed, and will continue to place, to the extent that we are able to sustain such growth, a significant strain on our management and our administrative, operational and financial reporting infrastructure.

Our success will depend in part on the ability of our senior management to manage this growth effectively. To do so, we must continue to hire, train and manage new employees as needed. If our new hires perform poorly, or if we are unsuccessful in hiring, training, managing and integrating these new employees, or if we are not successful in retaining our existing employees, our business may be harmed. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational and financial controls and update our reporting procedures and systems, which may include installing a new billing system. The addition of new employees and the capital investments that we anticipate will be necessary to manage our growth will increase our cost base, which will make it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short term. If we fail to successfully manage our growth, we will be unable to execute our business plan.

If we fail to retain our key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.

Our future depends, in part, on our ability to attract and retain key personnel. Our future also depends on the continued contributions of our executive officers and other key technical personnel, each of whom would be difficult to replace. In particular, Gail F. Goodman, our Chairman, President and Chief Executive Officer, is critical to the management of our business and operations and the development of our strategic direction. The loss of the services of Ms. Goodman or other executive officers or key personnel and the process to replace any of our key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.

Any significant disruption in service on our website or in our computer systems, or in our customer support services, could reduce the attractiveness of our products and result in a loss of customers.

The satisfactory performance, reliability and availability of our technology and our underlying network infrastructure are critical to our operations, level of customer service, reputation and ability to attract new customers and retain existing customers. Our system hardware is collocated in a hosting facility located in Somerville, Massachusetts, owned and operated by Internap Network Services Corporation. Internap does not

guarantee that our customers’ access to our products will be uninterrupted, error-free or secure. Our operations depend on Internap’s ability to protect their and our systems in their facilities against damage or interruption from natural disasters, power or telecommunications failures, air quality, temperature, humidity and other environmental concerns, computer viruses or other attempts to harm our systems, criminal acts and similar events. In the event that our arrangement with Internap is terminated, or there is a lapse of service or damage to the Internap facility, we could experience interruptions in our service as well as delays and additional expense in arranging new facilities. In addition our customer support services, which are located at our headquarters, would experience interruptions as a result of any disruption of electrical, phone or any other similar facility support services. Any interruptions or delays in access to our products or customer support, whether as a result of Internap or other third-party error, our own error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with customers and our reputation. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors could damage our brand and reputation, divert our employees’ attention, reduce our revenue, subject us to liability and cause customers to cancel their accounts, any of which could adversely affect our business, financial condition and results of operations.

Our disaster recovery system located at our headquarters in Waltham, Massachusetts does not provide real time backup, has not been tested under actual disaster conditions and may not have sufficient capacity to recover all data and services in the event of an outage at the Internap facility. In the event of a disaster in which the Internap facility is irreparably damaged or destroyed, we would experience interruptions in access to our products. Moreover, our disaster recovery system is located approximately 12 miles from the Internap facility and may be equally or more affected by any regional disaster affecting the Internap facility. Any or all of these events could cause our customers to lose access to our products.

If the security of our customers’ confidential information stored in our systems is breached or otherwise subjected to unauthorized access, our reputation may be harmed, we may be exposed to liability and we may lose the ability to offer our customers a credit card payment option.

Our system stores our customers’ proprietary email distribution lists, credit card information and other critical data. Any accidental or willful security breaches or other unauthorized access could expose us to liability for the loss of such information, time-consuming and expensive litigation and other possible liabilities as well as negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our software are exposed and exploited, and, as a result, a third party obtains unauthorized access to any of our customers’ data, our relationships with our customers will be severely damaged, and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we and our third-party hosting facilities may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, many states have enacted laws requiring companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures regarding a security breach often lead to widespread negative publicity, which may cause our customers to lose confidence in the effectiveness of our data security measures. Any security breach, whether actual or perceived, would harm our reputation, and we could lose customers.

While we believe that we are now in compliance with certain of the data protection policy documentation standards adopted by the major credit card issuers, if we fail to maintain our compliance with such data protection policy documentation standards, we could lose our ability to offer our customers a credit card payment option. Although this has not occurred to date, any loss of our ability to offer our customers a credit card payment option would make our products less attractive to many small organizations by negatively impacting our customer experience and significantly increasing our administrative costs related to customer payment processing.

We rely on third-party computer hardware and software that may be difficult to replace or that could cause errors or failures of our service.

We rely on computer hardware purchased and software licensed from third parties in order to offer our products, including hardware from such large vendors as Oracle Corporation, International Business Machines Corporation, Dell Computer Corporation, Sun Microsystems, Inc. and EMC Corporation. This hardware and software may not continue to be available on commercially reasonable terms, or at all. If we lose the right to use any of this hardware or software or such hardware or software malfunctions, our customers could experience delays or be unable to access our services until we can obtain and integrate equivalent technology or repair the cause of the malfunctioning hardware or software. Any delays or failures associated with our services could upset our customers and harm our business.

If we are unable to protect the confidentiality of our unpatented proprietary information, processes and know-how and our trade secrets, the value of our technology and products could be adversely affected.

We rely upon unpatented proprietary technology, processes and know-how and trade secrets. Although we try to protect this information in part by executing confidentiality agreements with our employees, consultants and third parties, such agreements may be breached. Any unauthorized disclosure or dissemination of our proprietary technology, processes and know-how or our trade secrets, whether by breach of a confidentiality agreement or otherwise, may cause irreparable harm to our business, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise be independently developed by our competitors or other third parties. If we are unable to protect the confidentiality of our proprietary information, processes and know-how or our trade secrets are disclosed, the value of our technology and services could be adversely affected, which could negatively impact our business, financial condition and results of operations.

Our use of open source could impose limitations on our ability to commercialize our products.

We incorporate open source software into our products. Although we monitor our use of open source software closely, the terms of many open source licenses to which we are subject have not been interpreted by United States or foreign courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to commercialize our products. In such event, we could be required to seek licenses from third parties in order to continue offering our products, to re-engineer our products or to discontinue sales of our products, or to release our software code under the terms of an open source license, any of which could materially adversely affect our business.

Given the nature of open source software, there is also a risk that third parties may assert copyright and other intellectual property infringement claims against us based on our use of certain open source software programs. The risks associated with intellectual property infringement claims are discussed immediately below.

If a third party asserts that we are infringing its intellectual property, whether successful or not, it could subject us to costly and time-consuming litigation or require us to obtain expensive licenses, and our business may be adversely affected.

The software and Internet industries are characterized by the existence of a large number of patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. Third parties may assert patent and other intellectual property infringement claims against us in the form of lawsuits, letters or other forms of communication. These claims, whether or not successful, could:


	•	divert management’s attention;

	•	result in costly and time-consuming litigation;

	•	require us to enter into royalty or licensing agreements, which may not be available on acceptable terms, or at all;


	•	in the case of open source software-related claims, require us to release our software code under the terms of an open source license; or

	•	require us to redesign our software and services to avoid infringement.

As a result, any third-party intellectual property claims against us could increase our expenses and adversely affect our business. In addition, many of our agreements with our channel partners require us to indemnify them for third-party intellectual property infringement claims, which would increase the cost to us resulting from an adverse ruling on any such claim. Even if we have not infringed any third parties’ intellectual property rights, we cannot be sure our legal defenses will be successful, and even if we are successful in defending against such claims, our legal defense could require significant financial resources and management time. Finally, if a third party successfully asserts a claim that our products infringe their proprietary rights, royalty or licensing agreements might not be available on terms we find acceptable or at all.

Providing our products to customers outside the United States exposes us to risks inherent in international business.

Customers in more than 110 countries and territories currently use our email marketing product, and we expect to expand our international operations in the future. Accordingly, we are subject to risks and challenges that we would otherwise not face if we conducted our business only in the United States. The risks and challenges associated with providing our products to customers outside the United States include:


	•	localization of our products, including translation into foreign languages and associated expenses;

	•	laws and business practices favoring local competitors;

	•	compliance with multiple, conflicting and changing governmental laws and regulations, including tax, email marketing, privacy and data protection laws and regulations;

	•	foreign currency fluctuations;

	•	different pricing environments;

	•	difficulties in staffing and maintaining foreign operations; and

	•	regional economic and political conditions.

We have incurred net losses in the past and expect to incur net losses in the future.

We have incurred net losses in the past and we expect to incur net losses in the future. As of June 30, 2007, our accumulated deficit was $40.0 million. Our recent net losses were $1.3 million for the year ended December 31, 2005, $7.8 million for the year ended December 31, 2006 and $5.5 million for the six months ended June 30, 2007. Our net losses have increased over recent periods because we have increased our sales and marketing expense to promote the Constant Contact brand and encourage new customers to try our products. We have not been profitable since our inception, and we may not become profitable. In addition, we expect our operating expenses to increase in the future as we expand our operations. If our operating expenses exceed our expectations, our financial performance could be adversely affected. If our revenue does not grow to offset these increased expenses, we may never become profitable. You should not consider recent revenue growth as indicative of our future performance. In future periods, we may not have any revenue growth, or our revenue could decline.

We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, and rules subsequently implemented by the Securities and Exchange Commission, or SEC, and the Nasdaq Stock Market, require public companies to meet certain corporate governance standards. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal

and financial compliance costs and will make some activities more time-consuming and costly. For example, these rules and regulations may make it more expensive for us to obtain director and officer liability insurance coverage and more difficult for us to attract and retain qualified persons to serve as directors or executive officers. We estimate that our direct and incremental public company costs will be between $1.7 million and $2.2 million in 2008.

In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, for the year ending December 31, 2008, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. In order to comply with Section 404, we may incur substantial accounting expense, expend significant management time on compliance-related issues, and hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock would likely decline and we could be subject to sanctions or investigations by the Nasdaq Stock Market, the SEC or other regulatory authorities, which would require additional financial and management resources.

We do not have significant experience with our new accounting system and any errors in using the system or delays in preparing our quarterly or annual financial statements may result in our inability to accurately or timely prepare and file financial reports.

Prior to April 2007, our accounting system was not sufficient to permit compliance with our financial reporting requirements as a public company and the Sarbanes-Oxley Act. As a result, in April 2007, we purchased and migrated to a new accounting system, which we believe provides us with the ability to expand our accounting capabilities as our business grows while providing the necessary accounting controls needed for compliance with the Sarbanes-Oxley Act. As of the date of this prospectus, we have only used the new accounting system to prepare monthly financial reports for four monthly periods, April, May, June and July 2007 and for the quarter ended June 30, 2007. We have not yet used the new accounting system to prepare annual financial reports and our first audited financial statements utilizing our new accounting system will not be until the year ending December 31, 2007. Any errors or delays we experience in using the new system could adversely affect our ability to file our quarterly, annual or other reports with the SEC on a timely and accurate basis.

Our ability to use net operating loss carryforwards in the United States may be limited.

As of December 31, 2006, we had net operating loss carryforwards of $29.1 million for U.S. federal tax purposes and $22.5 million for state tax purposes. These loss carryforwards expire between 2007 and 2026. To the extent available, we intend to use these net operating loss carryforwards to reduce the corporate income tax liability associated with our operations. Section 382 of the Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership. This offering may result in, and prior financings may have resulted in, ownership changes that could limit our ability to utilize net operating loss carryforwards. To the extent our use of net operating loss carryforwards is significantly limited, our income could be subject to corporate income tax earlier than it would if we were able to use net operating loss carryforwards, which could have a negative effect on our financial results.

Our quarterly results may fluctuate and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.

Our quarterly operating results may fluctuate, and if we fail to meet or exceed the expectations of securities analysts or investors, the trading price of our common stock could decline. Some of the important factors that could cause our revenue and operating results to fluctuate from quarter to quarter include:


	•	our ability to retain existing customers, attract new customers and satisfy our customers’ requirements;

	•	changes in our pricing policies;

	•	our ability to expand our business;

	•	the effectiveness of our personnel;

	•	new product and service introductions;

	•	technical difficulties or interruptions in our services;

	•	general economic conditions;

	•	the timing of additional investments in our hardware and software systems;

	•	regulatory compliance costs;

	•	costs associated with future acquisitions of technologies and businesses; and

	•	extraordinary expenses such as litigation or other dispute-related settlement payments.

Some of these factors are not within our control, and the occurrence of one or more of them may cause our operating results to vary widely. As such, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful and should not be relied upon as an indication of future performance.

We may need additional capital in the future, which may not be available to us on favorable terms, or at all, and may dilute your ownership of our common stock.

We have historically relied on outside financing and cash from operations to fund our operations, capital expenditures and expansion. We may require additional capital from equity or debt financing in the future to:


	•	fund our operations;

	•	respond to competitive pressures;

	•	take advantage of strategic opportunities, including more rapid expansion of our business or the acquisition of complementary products, technologies or businesses; and

	•	develop new products or enhancements to existing products.

We may not be able to secure timely additional financing on favorable terms, or at all. The terms of any additional financing may place limits on our financial and operating flexibility. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new securities we issue could have rights, preferences and privileges senior to those of our common stock, including shares of common stock sold in this offering. If we are unable to obtain adequate financing or financing on terms satisfactory to us, if and when we require it, our ability to grow or support our business and to respond to business challenges could be significantly limited.

We may engage in future acquisitions that could disrupt our business, dilute stockholder value and harm our business, operating results or financial condition.

Although we currently do not have any acquisitions pending or planned, we have, from time to time, evaluated acquisition opportunities and may pursue acquisition opportunities in the future. We have not made any

acquisitions to date and, therefore, our ability as an organization to make and integrate acquisitions is unproven. Moreover, acquisitions involve numerous risks, including:


	•	an inability to locate a suitable acquisition candidate or technology or acquire a desirable candidate or technology on favorable terms, if at all;

	•	difficulties in integrating personnel and operations from the acquired business or acquired technology with our existing technology and products and in retaining and motivating key personnel from the business;

	•	disruptions in our ongoing operations and the diversion of our management’s attention from their day-to-day responsibilities associated with operating our business;

	•	increases in our expenses that adversely impact our business, operating results and financial condition;

	•	potential write-offs of acquired assets and increased amortization expense related to identifiable assets acquired; and

	•	potentially dilutive issuances of equity securities or the incurrence of debt.

If we do complete an acquisition, we may not ultimately strengthen our competitive position or achieve our goals, or such an acquisition may be viewed negatively by our customers, stockholders or the financial markets.

RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF OUR COMMON STOCK

As a new investor, you will experience substantial dilution as a result of this offering and future equity issuances.

The initial public offering price per share is substantially higher than the pro forma net tangible book value per share of our common stock outstanding prior to this offering. As a result, investors purchasing common stock in this offering will experience immediate substantial dilution of $ per share. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares of common stock. In addition, we have issued options to acquire common stock at prices significantly below the initial public offering price. To the extent outstanding options are ultimately exercised, there will be further dilution to investors in this offering. In addition, if the underwriters exercise their over-allotment option or if we issue additional equity securities, you will experience additional dilution.

Insiders will continue to have substantial control over us after this offering and will be able to influence corporate matters.

Upon completion of this offering, our directors and executive officers and their affiliates will beneficially own, in the aggregate, approximately % of our outstanding common stock, or %, assuming entities affiliated with Commonwealth Capital Ventures purchase an aggregate of million shares of our common stock in this offering, assuming no exercise of the underwriters’ over-allotment option, compared to % represented by the shares sold in this offering, assuming no exercise of the underwriters’ over-allotment option. As a result, these stockholders will be able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us. For information regarding the beneficial ownership of our outstanding stock by our directors and executive officers, see “Principal and Selling Stockholders.”

Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.

Although we have not allocated the net proceeds we will receive from this offering for any specific purposes other than the repayment of certain debt, we expect to use our net proceeds for general corporate purposes,

including capital expenditures, which may in the future include investments in, or acquisitions of, complementary businesses, services or technologies. Our management will have broad discretion concerning how we use our net proceeds from this offering, and you will not have the opportunity to influence our decisions on how to use our net proceeds from this offering. You will be relying on the judgment of our management regarding the application of these proceeds, and our management may not apply our net proceeds of this offering in ways that increase the value of your investment.

We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We do not expect to pay cash dividends on our common stock, including the common stock issued in this offering. Any future dividend payments are within the absolute discretion of our board of directors and will depend on, among other things, our results of operations, working capital requirements, capital expenditure requirements, financial condition, contractual restrictions, business opportunities, anticipated cash needs, provisions of applicable law and other factors that our board of directors may deem relevant. We may not generate sufficient cash from operations in the future to pay dividends on our common stock. See “Dividend Policy.”

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

The market price of our common stock may be volatile, and you may not be able to resell shares of our common stock at or above the price you paid.

Prior to this offering there has been no public market for shares of our common stock, and an active public market for these shares may not develop or be sustained after this offering. The initial public offering price for our common stock will be determined through negotiations with the representatives of the underwriters. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. In addition, the trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors. Some of the factors that may cause the market price of our common stock to fluctuate include:


	•	fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

	•	changes in estimates of our financial results or recommendations by securities analysts;

	•	failure of any of our products to achieve or maintain market acceptance;

	•	changes in market valuations of similar companies;

	•	success of competitive products;

	•	changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;


	•	announcements by us or our competitors of significant products, contracts, acquisitions or strategic alliances;

	•	regulatory developments in the United States, foreign countries or both;

	•	litigation involving our company, our general industry or both;

	•	additions or departures of key personnel;

	•	investors’ general perception of us; and

	•	changes in general economic, industry and market conditions.

In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to class action lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

Future sales of shares by existing stockholders could cause our stock price to decline.

If our existing stockholders sell, or indicate their intention to sell, substantial amounts of our common stock in the public market after certain contractual lock-up agreements (as described below) expire, and other restrictions on resale lapse, the trading price of our common stock could decline below the initial public offering price. Based on shares outstanding as of , 2007, upon completion of this offering, we will have outstanding shares of common stock. Of these shares, shares of common stock will be subject to a 180-day contractual lock-up with the underwriters. CIBC World Markets Corp. and Thomas Weisel Partners LLC, acting as representatives of the underwriters, may permit our officers, directors and other stockholders who are subject to the contractual lock-up to sell shares prior to the expiration of the lock-up agreements.

If we announce earnings results or other material news or a material event occurs during the last 17 days of the 180-day contractual lock-up period, or if prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period, the 180-day lock-up period will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or event.

In addition, there will also be shares of common stock subject to a 90-day contractual lock-up with us. We may release these shares from these restrictions at our discretion without the prior written consent of CIBC World Markets Corp. and Thomas Weisel Partners LLC.

After each of the lock-up agreements pertaining to this offering expire 180 days from the date of this prospectus, or such longer period described above, up to an additional shares will be eligible for sale in the public market, of which are held by directors, executive officers and other affiliates and will be subject to volume limitations under Rule 144 under the Securities Act and, in certain cases, various vesting agreements. Entities affiliated with Commonwealth Capital Ventures, which are existing stockholders, have indicated an interest in purchasing up to an aggregate of million shares of our common stock in this offering at the initial public offering price. These shares, if purchased, would be subject to the 180-day lock-up agreement and would be eligible for sale in the public market upon expiration of the lock-up period. However, because indications of interest are not binding agreements or commitments to purchase, these stockholders might not purchase any common stock in this offering. In addition, after this offering, we intend to register approximately shares of our common stock that we have issued or may issue under our equity incentive plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to lock-up agreements, applicable vesting schedules and, for directors, executive officers, and other affiliates, volume limitations under Rule 144. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

Some of our existing stockholders have demand and incidental registration rights to require us to register with the SEC up to shares of our common stock. If we register these shares of common stock, the stockholders would be able to sell those shares freely in the public market.

See “Shares Eligible for Future Sale” for a discussion of the lock-up agreements and other transfer restrictions.

Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change of control of our company and may affect the trading price of our common stock.

We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change of control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and second amended and restated bylaws may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. Our restated certificate of incorporation and second amended and restated bylaws, which will be in effect upon the closing of this offering:


	•	authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt;

	•	establish a classified board of directors, as a result of which the successors to the directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following their election;

	•	require that directors only be removed from office for cause and only upon a supermajority stockholder vote;

	•	provide that vacancies on our board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office;

	•	limit who may call special meetings of stockholders;

	•	prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders; and

	•	require supermajority stockholder voting to effect certain amendments to our restated certificate of incorporation and second amended and restated bylaws.

For more information regarding these and other provisions, see “Description of Capital Stock—Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation.”

Forward-Looking Statements

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this prospectus regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:


	•	our ability to attract and retain customers;

	•	our financial performance;

	•	the advantages of our products as compared to those of others;

	•	our ability to retain and hire necessary employees and appropriately staff our operations;

	•	regulatory developments;

	•	our intellectual property; and

	•	our estimates regarding future expenses, revenue, capital requirements and needs for additional financing.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Use of Proceeds

We estimate that the net proceeds from the sale of the shares of common stock we are offering will be approximately $ million, or approximately $ million if the underwriters exercise their over-allotment option in full. “Net proceeds” is what we expect to receive after paying the underwriting discount and other expenses of the offering. For the purpose of estimating net proceeds, we are assuming that the public offering price will be $ per share. A $1.00 increase (decrease) in the assumed initial public offering price of $ would increase (decrease) the net proceeds to us from this offering by $ million, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same. We will not receive any proceeds from the sale of shares by the selling stockholders.

We intend to use our net proceeds from this offering for general corporate purposes, including financing our growth, developing new products, acquiring new customers, funding capital expenditures, and potentially acquisitions and investments. We also intend to use a portion of our net proceeds to repay all of the outstanding debt under our term loan facility with Silicon Valley Bank. As of June 30, 2007, we had $3.1 million outstanding under the term loan facility. Under the terms of the facility, each advance we draw under the facility bears interest at the prime rate plus 2% but may be decreased to the prime rate plus 1.5% upon the occurrence of certain profitability events. Each advance is payable in monthly installments over three years from the date of the advance. The advances may be prepaid in whole or in part at any time without penalty. At June 30, 2007, the interest rate was 10.25%.

In addition, the other principal purposes for this offering are to:


	•	create a public market for our common stock;

	•	facilitate our future access to the public capital markets;

	•	increase our visibility in our markets;

	•	provide liquidity for our existing stockholders;

	•	improve the effectiveness of our equity compensation plans in attracting and retaining key employees; and

	•	enhance our ability to acquire other businesses, products or technologies.

We have not yet determined with any certainty the manner in which we will allocate our net proceeds. Management will retain broad discretion in the allocation and use of our net proceeds from this offering. The amounts and timing of these expenditures will vary depending on a number of factors, including the amount of cash generated by our operations, competitive and technological developments, and the rate of growth, if any, of our business. For example, if we were to expand our operations more rapidly than anticipated by our current plans, a greater portion of our proceeds would likely be used for the construction and expansion of facilities, working capital and other capital expenditures. Alternatively, if we were to engage in an acquisition that contained a significant cash component, some or all of our proceeds might be used for that purpose.

Although we may use a portion of our proceeds for the acquisition of, or investment in, businesses, technologies, products or assets that complement our business, we have no present understandings, commitments or agreements to enter into any acquisitions or make any investments.

Pending specific utilization of our net proceeds as described above, we intend to invest our net proceeds of the offering in short-term investment grade and U.S. government securities.

Dividend Policy

We have never paid or declared any cash dividends on our common stock. We currently intend to retain earnings, if any, to finance the growth and development of our business, and we do not expect to pay any cash dividends on our common stock in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in current or future financing instruments, and other factors our board of directors deems relevant.

Capitalization

The following table sets forth our capitalization as of June 30, 2007:


	•	on an actual basis;


	•	on a pro forma basis to give effect to (i) the automatic conversion of all of our outstanding redeemable convertible preferred stock upon the closing of this offering; (ii) the filing of our certificate of amendment to our existing restated certificate of incorporation to increase the number of authorized shares of common stock and (iii) the assumed exercise of the warrant to purchase 120,000 shares of redeemable convertible preferred stock and subsequent automatic conversion of those preferred shares into 156,000 shares of common stock; and


	•	on a pro forma as adjusted basis to give effect to the issuance and sale by us of shares of common stock at an initial offering price of $ per share, the mid-point of the estimated price range shown on the cover page of this prospectus, after deducting the estimated underwriting discount and offering expenses payable by us, and the payment by us of $3.1 million to repay our outstanding indebtedness as described under “Use of Proceeds.”

You should read the following table together with our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.


	As of June 30, 2007
							Pro Forma as
	Actual			Pro Forma			Adjusted
	(in thousands, except share data)
				(unaudited)

Redeemable convertible preferred stock warrant	$	1,465		$	–		$
Notes payable		3,083			3,083
Redeemable convertible preferred stock		35,840			–
Stockholders’ equity (deficit):
Common stock; $0.01 par value; 20,000,000 shares authorized and 3,952,848 shares issued and outstanding, actual; 40,000,000 shares authorized and 21,255,523 shares issued and outstanding, pro forma; shares authorized and shares issued and outstanding, pro forma as adjusted		40			213
Additional paid-in capital		5,579			42,771
Accumulated other comprehensive loss		(2	)		(2	)
Accumulated deficit		(39,996	)		(39,996	)

Total stockholders’ equity (deficit)		(34,379	)		2,986

Total capitalization	$	6,009		$	6,069		$

The table above does not include:


	•	96,844 shares of common stock issuable upon the exercise of warrants outstanding as of June 30, 2007 at a weighted average exercise price of $1.20 per share;

Dilution

If you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the initial public offering price per share you will pay in this offering and the pro forma as adjusted net tangible book value per share of our common stock after this offering.

Our pro forma net tangible book value on June 30, 2007 was $1.0 million, or $0.05 per share of common stock. “Pro forma net tangible book value” is total assets minus the sum of liabilities and intangible assets and assumes the exercise of the redeemable convertible preferred stock warrant immediately prior to the closing of this offering, which results in an increase to assets of $60,000 and a reduction to liabilities of $1.5 million. “Pro forma net tangible book value per share” is pro forma net tangible book value divided by the total number of shares outstanding and assumes the conversion of all of our outstanding preferred stock into shares of our common stock immediately upon the closing of this offering.

After giving effect to adjustments relating to this offering, our pro forma as adjusted net tangible book value on June 30, 2007 would have been $ , or $ per share. The adjustments made to determine pro forma as adjusted net tangible book value per share are the following:


	•	an increase in total assets to reflect our net proceeds of the offering as described under “Use of Proceeds” (assuming that the initial public offering price will be $ per share); and

	•	the addition of the number of shares offered by us pursuant to this prospectus to the number of shares outstanding.

The initial public offering price per share will significantly exceed the pro forma net tangible book value per share. Accordingly, new investors who purchase shares of common stock in this offering will suffer an immediate dilution of their investment of $ per share. The following table illustrates the pro forma as adjusted increase in pro forma net tangible book value of $ per share and the dilution (the difference between the initial public offering price per share and pro forma net tangible book value per share) to new investors:


Assumed initial public offering price per share			$
Pro forma net tangible book value per share as of June 30, 2007	$	0.05
Increase per share attributable to sale of shares of common stock in this offering

Pro forma as adjusted net tangible book value per share after giving effect to the offering

Dilution per share to new investors in the offering			$

If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value will increase to $ per share, representing an immediate dilution of $ per share to new investors.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the pro forma net tangible book value by $ million, the pro forma net tangible book value per share after this offering by $ per share and the dilution in pro forma net tangible book value per share to investors in this offering by $ per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount and offering expenses payable by us.

If shares are issued in connection with the exercise of all of the outstanding options and warrants for common stock, you will experience further dilution of $ .

The following table summarizes, on a pro forma basis as of June 30, 2007, giving effect to the conversion of all outstanding redeemable convertible preferred stock into shares of common stock, the differences between the number of shares of common stock purchased from us, the total consideration paid to us, and the average price per share paid by existing stockholders and by new investors purchasing shares of common stock in this offering. The calculation below is based on an assumed initial public offering price of $ per share, the mid-point of the estimated price range shown on the cover of this prospectus, before the deduction of the estimated underwriting discount and offering expenses payable by us:


	Shares Purchased				Total Consideration				Average Price
	Number	Percent			Amount	Percent			Per Share

Existing stockholders				%	$			%	$
New investors

Total			100.0	%		$	100.0	%

The tables above assume no exercise of warrants or options to purchase shares of common stock outstanding as of June 30, 2007. At June 30, 2007, there were 1,951,485 shares of common stock issuable upon exercise of outstanding warrants and options with a weighted average exercise price of $2.56 per share. The tables above also exclude 831,124 shares of common stock available for future issuance under our option plans at June 30, 2007.

If the underwriters exercise their over-allotment option in full, the number of shares held by new investors will increase to , or % of the total number of shares of common stock outstanding after this offering.

Selected Financial Data

The selected statement of operations data for the year ended December 31, 2006 and the balance sheet data as of December 31, 2006 have been derived from our audited financial statements, which have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, and are included elsewhere in this prospectus. The selected statements of operations data for each of the years ended December 31, 2004 and 2005, and the balance sheet data as of December 31, 2005 have been derived from our audited financial statements, which have been audited by Vitale, Caturano & Company Ltd., an independent registered public accounting firm, and are included elsewhere in this prospectus. The selected statements of operations data for each of the years ended December 31, 2002 and 2003 and the balance sheet data as of December 31, 2002, 2003 and 2004 have been derived from our audited financial statements, which have been audited by Vitale, Caturano & Company, Ltd., an independent registered public accounting firm, and are not included in this prospectus. The selected statements of operations data for the six months ended June 30, 2006 and 2007 and the balance sheet data as of June 30, 2007 have been derived from our unaudited financial statements and related notes, which are included in this prospectus. These unaudited financial statements include, in the opinion of management, all adjustments (consisting of normal recurring adjustments) that management considers necessary for the fair statement of the financial information set forth in those statements. The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus. The historical results are not necessarily indicative of the results to be expected in any future period and the results for the six months ended June 30, 2007 should not be considered indicative of results expected for the full year.


																Six Months
	Year Ended December 31,															Ended June 30,
	2002			2003			2004			2005			2006			2006			2007
	(in thousands, except per share and customer data)

Statements of Operations Data:
Revenue	$	1,934		$	4,465		$	8,071		$	14,658		$	27,552		$	11,829		$	21,111
Cost of revenue(1)		1,633			1,899			2,211			3,747			7,801			3,354			5,837

Gross profit		301			2,566			5,860			10,911			19,751			8,475			15,274

Operating expenses:(1)
Research and development		1,694			1,653			2,140			3,355			6,172			2,774			4,971
Sales and marketing		1,815			2,549			3,385			7,460			18,592			7,084			12,795
General and administrative		601			640			856			1,326			2,623			1,079			2,371

Total operating expenses		4,110			4,842			6,381			12,141			27,387			10,937			20,137

Loss from operations		(3,809	)		(2,276	)		(521	)		(1,230	)		(7,636	)		(2,462	)		(4,863	)
Interest and other income (expense), net		(43	)		(39	)		(34	)		(24	)		(203	)		(306	)		(631	)

Net loss		(3,852	)		(2,315	)		(555	)		(1,254	)		(7,839	)		(2,768	)		(5,494	)
Accretion of redeemable convertible preferred stock		(220	)		(2,471	)		(3,701	)		(5,743	)		(3,788	)		(3,270	)		(518	)

Net loss attributable to common stockholders	$	(4,072	)	$	(4,786	)	$	(4,256	)	$	(6,997	)	$	(11,627	)	$	(6,038	)	$	(6,012	)

Net loss attributable to common stockholders per share:
Basic and diluted	$	(33.86	)	$	(5.75	)	$	(4.37	)	$	(2.49	)	$	(3.38	)	$	(1.82	)	$	(1.59	)
Weighted average shares outstanding used in computing per share amounts:
Basic and diluted		120			832			974			2,813			3,438			3,312			3,770
Other Operating Data:
End of period number of customers(2)		6,934			14,431			25,229			47,730			89,323			67,061			123,868


(1)		Amounts include stock-based compensation expense, as follows:


											Six Months
	Year Ended December 31,										Ended June 30,
	2002		2003		2004		2005		2006		2006		2007
	(in thousands)

Cost of revenue	$	–	$	–	$	–	$	–	$	25	$	5	$	32
Research and development		–		–		–		–		27		4		50
Sales and marketing		7		6		6		–		19		4		29
General and administrative		22		17		17		17		12		2		92

	$	29	$	23	$	23	$	17	$	83	$	15	$	203


(2)		We define our end of period number of customers as email marketing customers that we billed directly during the last month of the period.


																As of
	As of December 31,															June 30,
	2002			2003			2004			2005			2006			2007
	(in thousands)

Balance Sheet Data:
Cash, cash equivalents and short-term marketable securities	$	3,482		$	2,114		$	2,115		$	2,784		$	12,790		$	11,192
Total assets		4,677			3,236			3,222			5,545			18,481			19,345
Deferred revenue		254			615			1,270			2,827			5,476			8,047
Redeemable convertible preferred stock warrant		–			–			–			–			628			1,465
Notes payable and capital lease obligation		544			612			844			1,326			702			3,083
Redeemable convertible preferred stock		4,742			7,213			10,914			16,657			35,322			35,840
Total stockholders’ deficit		(1,366	)		(6,129	)		(10,287	)		(17,237	)		(28,629	)		(34,379	)

Management’s Discussion and Analysis of
Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Constant Contact is the leading provider of on-demand email marketing solutions for small organizations, including small businesses, associations and non-profits, as determined by the size of our customer base. Our customers use our email marketing product to effectively and efficiently create, send and track professional and affordable permission-based email marketing campaigns. Our customers use these campaigns to build stronger relationships with their customers, clients and members, increase sales and expand membership. Our email marketing product incorporates a wide range of customizable templates to assist in campaign creation, user-friendly tools to import and manage contact lists and intuitive reporting to track campaign effectiveness. In June 2007, we introduced an online survey product that complements our email marketing product and enables small organizations to easily create and send surveys and effectively analyze responses. We provide our customers with a high level of support delivered via phone, chat, email and our website.

We provide our products on an on-demand basis through a standard web browser. This model enables us to deploy and maintain a secure and scalable application that is easy for our customers to implement at compelling prices. Our email marketing customers pay a monthly subscription fee that generally ranges between $15 per month and $150 per month based on the size of the customers’ contact lists and, in some cases, volume of mailings. Our survey product is similarly priced. During the first half of 2007, our average monthly revenue per email marketing customer was approximately $33. We believe that the simplicity of on-demand deployment combined with our affordable subscription fees and functionality facilitate adoption of our products by our target customers while generating significant recurring revenue. From January 2005 through July 2007, at least 97.4% of our customers in a given month have continued to utilize our email marketing product in the following month.

Our success is principally driven by our ability to grow our customer base. Our email marketing customer base has steadily increased from approximately 25,000 at the end of 2004 to over 130,000 as of July 31, 2007. We measure our customer base as the number of email marketing customers that we bill directly in the last month of a period. These customers include all types of small organizations including retailers, restaurants, day spas, law firms, consultants, non-profits, religious organizations, alumni associations and other small businesses and organizations. We add these customers through a variety of paid and unpaid sources. Our paid sources include online marketing through search engines, advertising networks and other sites; offline marketing through radio advertising, local seminars and other marketing efforts; and contractual relationships with over 1,700 active channel partners. Our unpaid sources of customer acquisition include referrals from our growing customer base, general brand awareness and the inclusion of a link to our website in the footer of more than 500 million emails currently sent by our customers each month. In 2006, our cost of customer acquisition, which we define as our total sales and marketing expense divided by the gross number of email marketing customers added in this period, was approximately $300 per email marketing customer, implying payback on a revenue basis in less than a year. This implied payback is calculated by dividing the $300 acquisition cost per email marketing customer by the average monthly revenue per email marketing customer, which implies a 9.1 month payback period.

We were incorporated in Massachusetts in August 1995 under the name Roving Software Incorporated. We reincorporated in Delaware in July 2000 and changed our name to Constant Contact, Inc. in December 2006. Our on-demand product was first offered commercially in 2000. In 2006, our revenue was $27.6 million and our net loss was $7.8 million and, in the six months ended June 30, 2007, our revenue was $21.1 million and our net loss was $5.5 million.

Sources of Revenue

We derive our revenue principally from subscription fees from our email marketing customers. Our revenue is driven primarily by the number of paying customers and the subscription fees for our products and is not concentrated within any one customer or group of customers. In the first half of 2007, our top 50 email marketing customers accounted for approximately 1% of our gross email marketing revenue. We do not require our customers to commit to a contractual term; however, our customers are required to prepay for subscriptions on a monthly, semi-annual, or annual basis by providing a credit card or check for payment. Fees are recorded initially as deferred revenue and then recognized as earned revenue on a daily basis over the prepaid subscription period.

We also generate a small amount of revenue from professional services which primarily consist of the creation of customized templates for our customers. Revenue generated from professional services accounted for less than 3% of gross revenue for each of the years ended December 31, 2004, 2005 and 2006 and the six months ended June 30, 2006 and 2007.

Cost of Revenue and Operating Expenses

We allocate certain overhead expenses, such as rent, utilities, office supplies and depreciation of general office assets to cost of revenue and operating expense categories based on headcount. As a result, an overhead expense allocation is reflected in cost of revenue and each operating expense category.

Cost of Revenue. Cost of revenue consists primarily of wages and benefits for software operations and customer support personnel, credit card processing fees, and depreciation, maintenance and hosting of our software applications underlying our product offerings. We allocate a portion of customer support costs relating to assisting trial customers to sales and marketing expense.

The expenses related to our hosted software applications are affected by the number of customers who subscribe to our products and the complexity and redundancy of our software applications and hosting infrastructure. We expect these expenses to increase in absolute dollars as we continue to increase our number of customers over time.

Research and Development. Research and development expenses consist primarily of wages and benefits for product strategy and development personnel. We have focused our research and development efforts on both improving ease of use and functionality of our existing products as well as developing new offerings. We primarily expense research and development costs. The small percentage of direct development costs related to software enhancements which add functionality are capitalized and depreciated as a component of cost of revenue. We expect that research and development expenses will increase in absolute dollars but decrease as a percentage of revenue as we continue to enhance and expand our product offerings.

Sales and Marketing. Sales and marketing expenses consist primarily of advertising and promotional costs, wages and benefits for sales and marketing personnel, partner referral fees, and the portion of customer support costs that relate to assisting trial customers. Advertising costs consist primarily of pay-per-click payments to search engines, other online and offline advertising media, including radio and print advertisements, as well as the costs to create and produce these advertisements. Advertising costs are expensed as incurred. Promotional costs consist primarily of public relations, memberships, and event costs. Our advertising and promotional expenditures have historically been highest in the fourth quarter of each year as this reflects a period of increased sales and marketing activity for many small organizations. In order to continue to grow our business and brand and category awareness, we expect that we will continue to commit

substantial resources to our sales and marketing efforts. As a result, we expect that sales and marketing expense will increase in absolute dollars but decrease as a percentage of revenue as we continue to grow.

General and Administrative. General and administrative expenses consist primarily of wages and benefits for administrative, human resources, internal information technology support, finance and accounting personnel, professional fees, other taxes and other corporate expenses. We expect that general and administrative expenses will increase as we continue to add personnel in connection with the growth of our business. In addition, we anticipate that we will also incur additional personnel expense, professional service fees, including auditing and legal, and insurance costs related to operating as a public company. Therefore, we expect that our general and administrative expenses, in total, will increase in both absolute dollars and as a percentage of revenue as we continue to grow and operate as a public company.

During the six months ended June 30, 2007, we incurred approximately $700,000 of expenses related to our planned initial public offering, including professional fees and filing fees. We have capitalized most of these expenses. In addition, we have purchased and migrated to a new general ledger system at a capitalized cost of approximately $100,000, which better supports our implementation of the necessary accounting controls needed for compliance with Section 404 of the Sarbanes-Oxley Act. We have also engaged a professional services firm to help us prepare for the 2008 internal controls testing related to Section 404 of the Sarbanes-Oxley Act and we expect to incur approximately $300,000 of expense with this firm between July 2007 and December 2008 relating to the assessment, documentation and testing of our internal controls.

Critical Accounting Policies

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements and, therefore, consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See Note 2 to our financial statements included elsewhere in this prospectus for information about these critical accounting policies, as well as a description of our other significant accounting policies.

Revenue Recognition. We provide access to our products through subscription arrangements whereby a customer is charged a fee to access our solutions. Subscription arrangements include use of our software and access to our customer and support services, such as telephone support. We follow the guidance of the SEC Staff Accounting Bulletin, or SAB, No. 104, Revenue Recognition in Financial Statements, and Emerging Issues Task Force, or EITF, Issue No. 00-03, Application of AICPA Statement of Position 97-2 to Arrangements that Include the Right to Use Software Stored on Another Entity’s Hardware, which applies when customers do not have the right to take possession of the software and use it on another entity’s hardware. When there is evidence of an arrangement, the fee is fixed or determinable and collectibility is deemed probable, we recognize revenue on a daily basis over the subscription period as the services are delivered.

We also offer professional services to our customers primarily for the design of custom email templates and training. Professional services revenue is accounted for separately from subscription revenue based on the guidance of EITF 00-21, Accounting for Revenue Arrangements with Multiple Deliverables, as those services have value on a standalone basis and do not involve a significant degree of risk or unique acceptance criteria and as the fair value of our subscription services is evidenced by their availability on a standalone basis. Professional services revenue is recognized as the services are performed.

Income Taxes. Income taxes are provided for tax effects of transactions reported in the financial statements and consist of income taxes currently due plus deferred income taxes related to timing differences between the basis of certain assets and liabilities for financial statements and income tax reporting. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance

for the net deferred tax assets is provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Software and Website Development Costs. We follow the guidance of the American Institute of Certified Public Accountants Statement of Position No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, in accounting for the development costs of our on-demand products and website development costs whereby costs to develop functionality are capitalized. The costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Costs associated with the development of internal use software capitalized during the year ended December 31, 2006 and the six months ended June 30, 2007 were $516,000 and $224,000, respectively. Development costs eligible for capitalization for the years ended December 31, 2005 and 2004 were not material.

Redeemable Convertible Preferred Stock Warrant. We account for freestanding warrants and other similar instruments related to shares that are redeemable in accordance with Statement of Financial Accounting Standards, or SFAS, No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. Under SFAS No. 150, the freestanding warrant that is related to our redeemable convertible preferred stock is classified as a liability on the balance sheet. The warrant is subject to re-measurement at each balance sheet date and any change in fair value (as determined using the Black-Scholes option-pricing model) is recognized as a component of other income (expense), net. We will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrant. Determining the appropriate fair value model and calculating the fair value of the warrant require the use of subjective estimates and assumptions. The most significant input into the Black-Scholes option pricing model is the fair value of the Series B redeemable convertible preferred stock as of each measurement date. For example, if the estimate of the fair value of the Series B redeemable convertible preferred stock were increased by $1 as of a measurement date there would be a corresponding increase to the liability of $120,000 that would be included in the Statement of Operations as Other Expense.

Stock-Based Compensation. Effective January 1, 2006, we adopted SFAS No. 123R, or SFAS 123R, Share-Based Payment, a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and related interpretations. SFAS 123R supersedes Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. SFAS 123R requires all share-based compensation to employees, including grants of employee stock options, to be valued at fair value on the date of grant, and to be expensed over the applicable service period. We adopted this statement using the “Prospective” transition method which does not result in restatement of our previously issued financial statements and requires only new awards or awards that are modified, repurchased or canceled after the effective date to be accounted for under the provisions of SFAS 123R. Prior to January 1, 2006, we accounted for stock-based compensation arrangements according to the provisions of APB 25 and related interpretations. Pursuant to the income tax provisions included in SFAS 123R, we have elected the “short cut method” of computing the hypothetical pool of additional paid-in capital that is available to absorb future tax benefit shortfalls.

Determining the appropriate fair value model and calculating the fair value of stock-based payment awards require the use of highly subjective estimates and assumptions, including the estimated fair value of common stock, expected life of the stock-based payment awards and stock price volatility. During 2006, we used the Black-Scholes option-pricing model to value our option grants and determine the related compensation expense. The assumptions used in calculating the fair value in 2006 were a weighted average risk free interest rate of 4.82%, expected term of 6.1 years, expected volatility of 64.9% and no expected dividends. The assumptions used in calculating the fair value in the first six months of 2007 were a weighted average risk free interest rate of 4.81%, expected term of 6.1 years, weighted average expected volatility of 63.8% and no expected dividends. The fair value of our common stock was determined by our board of directors, taking into account our most recently available valuations. These assumptions represent management’s best estimates, but the estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different. The most significant input into the Black-Scholes option-pricing model used to value our option grants is the fair

value of common stock. If the estimate of fair value of common stock were increased by $1 as of the date of each stock grant the resulting total fair value of the options granted in 2006 and the first six months of 2007 would have increased by $1.0 million, resulting in an increase to stock based compensation of $66,000 in 2006 and $97,000 for the first six months of 2007.

We have historically been a private company and lack company-specific historical and implied volatility information. Therefore, we estimate our expected volatility based on the historical volatility of our publicly traded peer companies and expect to continue to do so until such time as we have adequate historical data regarding the volatility of our traded stock price. The expected term of options has been determined utilizing the “simplified” method as prescribed by SAB No. 107, Share-Based Payment. The risk-free interest rate used for each grant is based on a U.S. Treasury instrument with a term similar to the expected term of the option. SFAS 123R requires that we recognize compensation expense for only the portion of options that are expected to vest. We have estimated expected forfeitures of stock options with the adoption of SFAS 123R to be zero. In developing a forfeiture rate estimate, we have considered our historical experience and determined our forfeitures to be de minimis. If there are forfeitures of unvested options, additional adjustments to compensation expense may be required in future periods.

The following table summarizes by grant date the number of shares subject to options granted between January 1, 2004 and June 30, 2007, the per share exercise price of the options and the per share estimated fair value of the options:


	Number of Shares		Per Share		Per Share
	Subject to Options		Exercise Price		Estimated Fair
Grant Date	Granted		of Option(1)		Value of Option(2)

Year ended December 31, 2004		203,775	$	0.04	$	0.02
Year ended December 31, 2005		737,091	$	0.06	$	0.02
Three months ended March 31, 2006		230,741	$	1.09	$	0.70
Three months ended June 30, 2006		90,183	$	2.90	$	1.86
Three months ended September 30, 2006		151,941	$	2.68	$	1.70
Three months ended December 31, 2006		276,412	$	3.05	$	1.94
January 18, 2007		39,000	$	3.05	$	1.94
March 2, 2007		168,025	$	4.12	$	2.62
Three months ended June 30, 2007		211,204	$	6.89	$	4.32


(1)		The Per Share Exercise Price of Option represents the determination by our board of directors of the fair market value of our common stock on the date of grant, as determined taking into account our most recently available valuation of common stock.

(2)		As described above, the Per Share Estimated Fair Value of Option was estimated for the date of grant using the Black-Scholes option-pricing model. This model estimates the fair value by applying a series of factors including the exercise price of the option, a risk free interest rate, the expected term of the option, expected share price volatility of the underlying common stock and expected dividends on the underlying common stock. Additional information regarding our valuation of common stock and option awards is set forth in Note 6 to our financial statements included elsewhere in this prospectus.

We have historically granted stock options at exercise prices equivalent to the fair value of our common stock as of the date of grant, as determined taking into account our most recently available valuation of common stock. Prior to 2006, our board of directors had estimated the fair value of our common stock on an annual basis, with input from management, as of the date of grant. Because there has been no public market for our common stock, our board of directors determined the fair value of our common stock by considering a number of objective and subjective factors, including peer group trading multiples, the amount of preferred stock liquidation preferences, the illiquid nature of our common stock and our size and lack of historical profitability. We believe our estimates of the fair value of our common stock were reasonable.

Commencing in 2006, we moved to quarterly contemporaneous common stock valuations so that the fair value of our common stock would reflect the impact of our progressive quarterly revenue growth. In the first quarter of 2006, our board of directors determined the fair value of our common stock by using the “guideline public company” method. The valuation considered numerous factors, including peer group trading multiples, the amount of preferred stock liquidation preferences, the illiquid nature of our common stock, our small size, our

lack of historical profitability, our short-term cash requirements and the redemption rights of our redeemable convertible preferred stockholders. The companies used for comparison under the guideline public company method were selected based on a number of factors, including but not limited to, the similarity of their industry, business models and financial risk to those of ours.

Beginning in the second quarter of 2006, the quarterly common stock valuations were prepared using the “probability-weighted expected return” method. Under this methodology, the fair market value of our common stock is estimated based upon an analysis of future values assuming various outcomes. The share value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available to us as well as the rights of each share class. The possible outcomes considered were a sale of the company, an initial public offering, a dissolution and continued operation as a private company.

The private company scenario and sale scenario analyses utilized averages of the guideline public company method and the discounted future cash flow method. We estimated our enterprise value under the guideline public company method by comparing our company to publicly traded companies in our industry group. The companies used for comparison under the guideline public company method were selected based on a number of factors, including but not limited to, the similarity of their industry, business model, and financial risk to those of ours. We also estimated our enterprise value under the discounted future cash flow method, which involves applying appropriate discount rates to estimated cash flows that are based on forecasts of revenue, costs and capital requirements. Our assumptions underlying the estimates were consistent with the plans and estimates that we use to manage the business. The risks associated with achieving our forecasts were assessed in selecting the appropriate discount rates.

The initial public offering scenario analyses utilized the guideline public company method. We estimated our enterprise value under the guideline public company method by comparing our company to publicly traded companies in our industry group. The companies used for comparison under the guideline public company method were selected based on a number of factors, including, but not limited to, the similarity of their industry, business model, and financial risk to those of ours.

The dissolution scenario analyses assumed that our common stock had no value.

Finally, the present values calculated for our common stock under each scenario were weighted based on our management’s estimates of the probability of each scenario occurring. The resulting values represented the estimated fair market value of our common stock at each valuation date.

As discussed more fully in Note 6 to the financial statements included elsewhere in this prospectus, we granted stock options with a weighted average exercise price of $2.35 per share during 2006 and a weighted average exercise price of $5.42 for the six months ended June 30, 2007. We determined that the fair value of our common stock increased from $1.09 per share in the first quarter of 2006 to $9.60 on July 1, 2007. The following discussion describes the reasons for the difference between the fair value of our common stock during this period and an estimated mid-point of the price range set forth on the front cover of this prospectus of $ per share.

During the quarter ended March 31, 2006, we continued to operate our business in the ordinary course. We experienced increases in our number of customers and subscription revenue as well as increases in our operating expenses in support of growing the business, primarily due to increased marketing expenditures and the hiring of additional personnel. We also commenced development of a second product offering. Our business continued to operate at a loss. During this quarter we had no plans for an initial public offering in the near term because we did not believe that an initial public offering would be beneficial for a company of our small size. In May 2006, we calculated the fair value of our common stock as the per share value of each of the four scenarios multiplied by the estimated probabilities of each of the four scenarios. Based on this calculation the fair value of our common stock increased from $1.09 to $2.90 per share as of April 1, 2006.

During the quarters ended June 30, 2006 and September 30, 2006, we continued to operate our business in the ordinary course. Although we continued to experience increases in our number of customers and subscription revenue, we also increased our operating expenses in support of growing the business, primarily through

increased marketing expenditures and by hiring additional personnel. We continued to focus research and development efforts on developing a second product offering and our business continued to operate at a loss. We raised additional capital with a $14.9 million placement of Series C redeemable convertible preferred stock to existing and new investors at a per share price of $5.95. We continued to believe that our small size, combined with our operating losses, did not put us in a position to complete an initial public offering in the near term. However, based on the successful placement of our preferred stock and our continued month over month revenue growth, we believed that the probability of an initial public offering increased and adjusted the scenario probabilities accordingly. Based on this calculation we determined in September 2006 that the fair value of our common stock decreased from $2.90 to $2.68 per share as of July 1, 2006 and we determined in November 2006 that the fair value of our common stock increased to $3.05 as of October 1, 2006.

During the quarter ended December 31, 2006, we continued to operate our business in the ordinary course. Both our customer and subscription revenue continued to grow while we continued to operate at a loss primarily due to increases in operating expenses to support the business and fund new marketing programs. We continued to expend resources on developing our second product. While reviewing our performance we determined that we may be approaching the size that would permit us to successfully launch an initial public offering. As a result, management and our board of directors began to consider the possibility of a potential initial public offering, although there were not yet discussions with any third parties regarding an offering. In calculating the fair value of our common stock we adjusted the scenario probabilities accordingly. In February 2007, based on this calculation the fair value of our common stock increased to $4.12 as of January 1, 2007 from $3.05 as of October 1, 2006.

During the quarter ended March 31, 2007, we initiated discussions with investment banks about a possible initial public offering. Again we adjusted the scenario probabilities accordingly. In May 2007, based on this calculation, we determined the fair value of our common stock to be $6.89 as of April 1, 2007.

During the quarter ended June 30, 2007, we engaged investment bankers, lawyers and accountants to start the process of preparing for an initial public offering and held our initial organizational meeting as well as launched the initial release of our survey product. We adjusted the scenario probabilities accordingly and, in August 2007, based on this calculation, we determined the fair value of our common stock to be $9.60 as of July 1, 2007.

Since July 1, 2007, we have filed a registration statement with the SEC for an initial public offering of our common stock.

Results of Operations

The following table sets forth selected statements of operations data for each of the periods indicated as a percentage of total revenue.


	Year Ended									Six Months Ended
	December 31,									June 30,
	2004			2005			2006			2006			2007

Revenue		100	%		100	%		100	%		100	%		100	%
Cost of revenue		27			26			28			28			28

Gross profit		73			74			72			72			72

Operating expenses:
Research and development		27			23			22			23			23
Sales and marketing		42			51			67			60			61
General and administrative		11			9			10			9			11

Total operating expenses		80			83			99			92			95

Loss from operations		(7	)		(9	)		(27	)		(20	)		(23	)
Interest and other income (expense), net		(0	)		(0	)		(1	)		(3	)		(3	)

Net loss		(7	)%		(9	)%		(28	)%		(23	)%		(26	)%

Comparison of Six Months Ended June 30, 2007 and 2006

Revenue. Revenue for the six months ended June 30, 2007 was $21.1 million, an increase of $9.3 million, or 78%, over revenue of $11.8 million for the six months ended June 30, 2006. The increase in revenue resulted primarily from an 84% increase in the number of average monthly email marketing customers offset by a slight decrease in average revenue per customer. Average monthly email marketing customers increased to 105,221 in the six months ended June 30, 2007 from 57,216 in the six months ended June 30, 2006, while average revenue per customer in the six months ended June 30, 2007 decreased to $33.44 from $34.46 in the six months ended June 30, 2006. We calculate our monthly average revenue per email marketing customer by first averaging the beginning and ending number of email marketing customers in a given month and then dividing this average customer number into the monthly revenue of that same month. We calculate our average revenue per email marketing customer per fiscal period by first averaging the beginning and ending number of email marketing customers for each month in the applicable fiscal period, then taking an average of these average customers and dividing this average of the averages into our revenue for the applicable fiscal period.

Cost of Revenue. Cost of revenue for the six months ended June 30, 2007 was $5.8 million, an increase of $2.4 million, or 74%, over cost of revenue of $3.4 million for the six months ended June 30, 2006. As a percentage of revenue, cost of revenue was 28% for the six months ended June 30, 2007 and 2006. The increase in absolute dollars primarily resulted from an 84% increase in the number of average monthly email marketing customers which resulted in increased hosting and operations expense and customer support costs. Of the increase in cost of revenue, $1.3 million resulted from increased personnel costs attributable to additional employees in our customer support and operations groups to support customer growth and to increase the quality and range of support options available to customers. Additionally, $550,000 resulted from increased depreciation, hosting and maintenance costs as we scaled and added capacity to our hosting infrastructure, and $390,000 related to increased credit card fees due to a higher volume of billing transactions.

Research and Development Expenses. Research and development expenses for the six months ended June 30, 2007 were $5.0 million, an increase of $2.2 million or 79%, over research and development expenses of $2.8 million for the six months ended June 30, 2006. The increase was primarily due to additional personnel related costs of $1.7 million as we increased the number of research and development employees to further enhance our products. Additional consulting and contractor fees of $370,000 also contributed to the increase due to the use of these resources to supplement our own personnel.

Sales and Marketing Expenses. Sales and marketing expenses for the six months ended June 30, 2007 were $12.8 million, an increase of $5.7 million, or 81%, over sales and marketing expenses of $7.1 million for the six months ended June 30, 2006. The increase was primarily due to increased advertising and promotional expenditures of $2.9 million as we expanded our multi-channel marketing strategy in order to increase awareness of our brand and products and to add new customers. Additional personnel related costs of $1.4 million also contributed to the increase as we added employees to accommodate the growth in sales leads and to staff our expanded marketing efforts.

General and Administrative Expenses. General and administrative expenses for the six months ended June 30, 2007 were $2.4 million, an increase of $1.3 million, or 120%, over general and administrative expenses of $1.1 million for the six months ended June 30, 2006. The increase was due primarily to additional personnel related costs of $655,000 as we increased the number of general and administrative employees to support our overall growth, as well as an increase in legal, insurance, accounting and other administrative costs, which reflected the increased scale and complexity of supporting our business.

Interest and Other Income (Expense), Net. Interest and other income (expense), net for the six months ended June 30, 2007 was $(631,000), an increase of $325,000, or 106%, from interest and other income (expense), net of $(306,000) for the six months ended June 30, 2006. The increase was due to a $471,000 increase in the expense related to the change in the fair value of the redeemable convertible preferred stock warrant primarily offset by a $166,000 increase in interest income from investments in marketable securities and cash equivalents. We account for an outstanding redeemable convertible preferred stock warrant as a liability held

at fair market with changes in value recorded as a component of other expense. The increase in interest income was primarily due to an increase in the balance of investments and cash equivalents as a result of an equity funding which was completed in the second and third quarters of 2006.

Comparison of Years Ended December 31, 2006 and 2005

Revenue. Revenue for 2006 was $27.6 million, an increase of $12.9 million, or 88%, over revenue of $14.7 million for 2005. The increase in revenue resulted primarily from a 93% increase in the number of average monthly email marketing customers partially offset by a slight decrease in average revenue per customer. Average monthly email marketing customers in 2006 increased to 67,336 from 34,909 for 2005, while average revenue per customer for 2006 decreased to $34.10 from $34.99 in 2005.

Cost of Revenue. Cost of revenue in 2006 was $7.8 million, an increase of $4.1 million, or 108%, over cost of revenue of $3.7 million in 2005. As a percentage of total revenue, cost of revenue increased slightly to 28% from 26% in 2005. The increase primarily resulted from a 93% increase in the number of average monthly email marketing customers which resulted in increased hosting and operations expense and customer support costs. Of the increase in cost of revenue, $2.0 million related to increased personnel costs attributable to additional employees in our customer support and operations groups required to support customer growth and to increase the quality and range of support options available to customers. Additionally, $1.0 million resulted from increased depreciation, hosting and maintenance costs as we scaled and added capacity to our hosting infrastructure and $559,000 related to increased credit card fees due to a higher volume of billing transactions.

Research and Development Expenses. Research and development expenses in 2006 were $6.2 million, an increase of $2.8 million, or 84%, over research and development expenses of $3.4 million in 2005. The increase was primarily due to additional personnel related costs of $2.2 million as we increased the number of research and development employees to further enhance our products.

Sales and Marketing Expenses. Sales and marketing expenses in 2006 were $18.6 million, an increase of $11.1 million, or 149%, over sales and marketing expenses of $7.5 million in 2005. The increase was primarily due to increased advertising and promotional expenditures of $7.6 million as we expanded our multi-channel marketing strategy in order to increase awareness of our brand and products and to add new customers. Additional personnel related costs of $2.2 million also contributed to the increase as we added personnel to accommodate the growth in sales leads and to staff our expanded marketing efforts.

General and Administrative Expenses. General and administrative expenses in 2006 were $2.6 million, an increase of $1.3 million, or 98%, over general and administrative expenses of $1.3 million in 2005. The increase was primarily due to additional personnel related costs of $811,000 as we increased the number of general and administrative employees to support our overall growth and an increase in legal, accounting and insurance costs of $261,000, which reflected the increased scale and complexity of our professional service needs.

Interest and Other Income (Expense), Net. Interest and other income (expense), net in 2006 was $(203,000), an increase of $179,000 from interest and other income (expense), net of $(24,000) in 2005. The increase was due to a $588,000 increase in other expense related to the change in value of the redeemable convertible preferred stock warrant primarily offset by a $432,000 increase in interest income from investments in marketable securities and cash equivalents. We account for the redeemable convertible preferred stock warrant as a liability held at fair market value with changes in value recorded as a component of other expense. Interest income increased primarily due to an increase in investments and cash equivalents as a result of an equity funding that took place during the year.

Comparison of Years Ended December 31, 2005 and 2004

Revenue. Revenue for 2005 was $14.7 million, an increase of $6.6 million, or 82%, over revenue of $8.1 million for 2004. The increase in revenue resulted primarily from an 80% increase in the number of average monthly email marketing customers. Average monthly email marketing customers in 2005 increased to

34,909 from 19,345 in 2004. The average revenue per email marketing customer was consistent from period to period.

Cost of Revenue. Cost of revenue in 2005 was $3.7 million, an increase of $1.5 million, or 69%, over cost of revenue of $2.2 million in 2004. As a percentage of total revenue, cost of revenue declined slightly to 26% in 2005 from 27% in 2004. The increase in absolute dollars primarily resulted from an 80% increase in the number of average monthly email marketing customers, which resulted in increased hosting and operations expense and higher customer support costs. Of the increase in cost of revenue, $667,000 related to increased personnel costs related to additional employees in our customer support and operations groups in order to support customer growth and to increase the quality and range of support options available to customers. Additionally, $402,000 resulted from increased depreciation, hosting and maintenance costs as we scaled and added to our hosting infrastructure and $257,000 related to increased credit card fees due to a higher volume of billing transactions.

Research and Development Expenses. Research and development expenses in 2005 were $3.4 million, an increase of $1.3 million, or 57%, over research and development expenses of $2.1 million in 2004. The increase was primarily due to additional personnel related costs of $955,000 as we increased the number of research and development employees to further enhance our products.

Sales and Marketing Expenses. Sales and marketing expenses in 2005 were $7.5 million, an increase of $4.1 million, or 120%, over sales and marketing expenses of $3.4 million in 2004. The increase was primarily due to increased advertising and promotional expenditure of $2.6 million as we introduced a multi-channel marketing program. The marketing program employed radio, online and print advertising concentrated in a few major metropolitan regions of the United States in an effort to increase awareness of email marketing and our brand within our targeted market of small organizations and add new customers. Personnel related costs of $1.1 million also contributed to the increase as we added employees to support the growth in sales leads and to staff our expanded marketing efforts.

General and Administrative Expenses. General and administrative expenses in 2005 were $1.3 million, an increase of $470,000, or 55%, over general and administrative expenses of $856,000 in 2004. The increase was due primarily to additional personnel related costs of $391,000 as we increased the number of general and administrative employees.

Interest and Other Income (Expense), Net. Interest and other income (expense), net in 2005 was $(24,000), a decrease of $10,000 from interest and other income (expense), net of $(34,000) in 2004. The decrease was due to lower interest expense resulting from principal reductions in our debt facility.

Quarterly Results of Operations

The following table sets forth our unaudited operating results for each of the ten quarters in the period ended June 30, 2007. This information is derived from our unaudited financial statements, which in the opinion of management contain all adjustments necessary for a fair statement of such financial data. Historical results are not necessarily indicative of the results to be expected in future periods. You should read this data together with our financial statements and the related notes included elsewhere in this prospectus.


	Three Months Ended
	March 31,			June 30,			Sept. 30,			Dec. 31,			March 31,			June 30,			Sept. 30,			Dec. 31,			March 31,			June 30,
	2005			2005			2005			2005			2006			2006			2006			2006			2007			2007
	(in thousands, except per share and customer data)

Statements of Operations Data:
Revenue	$	2,812		$	3,318		$	3,900		$	4,628		$	5,429		$	6,400		$	7,239		$	8,484		$	9,713		$	11,398
Cost of revenue(1)		781			848			931			1,187			1,543			1,811			2,038			2,409			2,731			3,106

Gross Profit		2,031			2,470			2,969			3,441			3,886			4,589			5,201			6,075			6,982			8,292

Operating Expenses:(1)
Research and development		660			821			741			1,133			1,363			1,411			1,530			1,868			2,169			2,802
Sales and marketing		1,223			1,413			2,079			2,745			2,837			4,247			4,664			6,844			6,121			6,674
General and administrative		263			261			385			417			493			586			633			911			1,082			1,289

Total operating expenses		2,146			2,495			3,205			4,295			4,693			6,244			6,827			9,623			9,372			10,765

Loss from operations		(115	)		(25	)		(236	)		(854	)		(807	)		(1,655	)		(1,626	)		(3,548	)		(2,390	)		(2,473	)
Interest and other income (expense), net		(8	)		(4	)		(5	)		(7	)		(150	)		(156	)		105			(2	)		(291	)		(340	)

Net loss		(123	)		(29	)		(241	)		(861	)		(957	)		(1,811	)		(1,521	)		(3,550	)		(2,681	)		(2,813	)
Accretion of redeemable convertible preferred stock		(1,342	)		(1,357	)		(1,372	)		(1,672	)		(2,136	)		(1,134	)		(259	)		(259	)		(253	)		(265	)

Net loss attributable to common stockholders	$	(1,465	)	$	(1,386	)	$	(1,613	)	$	(2,533	)	$	(3,093	)	$	(2,945	)	$	(1,780	)	$	(3,809	)	$	(2,934	)	$	(3,078	)

Net loss attributable to common stockholders per share:
Basic and diluted(2)	$	(0.52	)	$	(0.50	)	$	(0.57	)	$	(0.89	)	$	(0.94	)	$	(0.88	)	$	(0.51	)	$	(1.06	)	$	(0.79	)	$	(0.81	)

Other Operating Data:
End of period number of customers(3)		29,356			34,179			39,878			47,730			57,195			67,061			76,861			89,323			104,265			123,865


(1)		Amounts include stock-based compensation expense, as follows:


Cost of revenue	$	–	$	–	$	–	$	–	$	2	$	3	$	9	$	11	$	15	$	17
Research and development		–		–		–		–		1		3		6		17		21		29
Sales and marketing		–		–		–		–		1		3		6		9		11		18
General and administrative		7		5		5		–		1		1		2		8		36		56

	$	7	$	5	$	5	$	–	$	5	$	10	$	23	$	45	$	83	$	120


(2)		Quarterly amounts may not add to full year amounts due to rounding.

(3)		We define our end of period customers as email marketing customers that we billed directly during the last month of the period.

As a percentage of revenue:


	Three Months Ended
	March 31,			June 30,			Sept. 30,			Dec. 31,			March 31,			June 30,			Sept. 30,			Dec. 31,			March 31,			June 30,
	2005			2005			2005			2005			2006			2006			2006			2006			2007			2007


Statements of Operations Data:
Revenue		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%
Cost of revenue		28			26			24			26			28			28			28			28			28			28

Gross Profit		72			74			76			74			72			72			72			72			72			72

Operating Expenses:
Research and development		23			25			19			25			25			22			21			22			23			22
Sales and marketing		44			42			53			59			53			67			64			81			63			67
General and administrative		9			8			10			9			9			9			9			11			11			10

Total operating expenses		76			75			82			93			87			98			94			114			97			99

Loss from operations		(4	)		(1	)		(6	)		(19	)		(15	)		(26	)		(22	)		(42	)		(25	)		(27	)
Interest and other income (expense), net		(0	)		(0	)		(0	)		(0	)		(3	)		(2	)		1			(0	)		(3	)		(1	)

Net loss		(4	)%		(1	)%		(6	)%		(19	)%		(18	)%		(28	)%		(21	)%		(42	)%		(28	)%		(28	)%

Revenue increased sequentially in each of the quarters presented primarily due to increases in the number of total customers.

Gross profit, in absolute dollars, also increased sequentially for the quarters presented primarily due to revenue growth.

Total operating expenses, in absolute dollars, increased sequentially for most of the quarters presented primarily due to increased sales and marketing expenses which resulted from increased marketing efforts and increased number of personnel. The decrease in operating expenses for the first quarter of 2007 was due to the decrease in marketing expenses from the fourth quarter of 2006 to the first quarter of 2007. This decrease was the result of the seasonality of our marketing expenses, which have been highest in the fourth quarter.

Liquidity and Capital Resources

Since our inception we have financed our operations primarily through the sale of redeemable convertible preferred stock, issuance of convertible promissory notes, borrowings under credit facilities and, to a lesser extent, cash flow from operations. At June 30, 2007, our principal sources of liquidity were cash and cash equivalents and short term marketable securities totaling $11.2 million and a $5.0 million term loan facility for the acquisition of property and equipment of which $2.2 million remained available for borrowing at June 30, 2007.

In February 2003, we entered into a term loan facility with Silicon Valley Bank that provided for a $350,000 term loan for the acquisition of property and equipment. During the period from August 2003 to September 2005, the facility was amended five times increasing the borrowing availability to $2.2 million. At December 31, 2006, there was no available borrowing capacity under the facility and, in March 2007, the facility was amended to establish additional borrowing availability of $5.0 million and to modify certain terms and covenants. As of June 30, 2007, $2.2 million remained available for borrowing. Each advance under the facility is payable in monthly installments over three years from the date of the advance. The advances bear interest at a rate of prime plus 2% (10.25% at June 30, 2007). The interest rate decreases to prime plus 1.5% upon the occurrence of a profitability event (defined as three consecutive months with a net profit of at least $1.00). The facility requires that we maintain financial covenants with respect to minimum net revenue and a total funded debt ratio. Borrowings are collateralized by substantially all of our assets and the advances may be prepaid in whole or in part at any time without penalty.

Our operating activities used cash of $1.1 million during the six months ended June 30, 2007 and $748,000 during the year ended December 31, 2006. Net cash provided by operating activities was $2.4 million and $189,000 during the years ended December 31, 2005 and 2004, respectively. Net cash outflows for the six

months ended June 30, 2007 and year ended December 31, 2006 resulted primarily from operating losses and increases in current assets partially offset by increases in current liability accounts and non-cash charges for depreciation and amortization, changes in fair value of the warrant for redeemable convertible preferred stock and stock based compensation charges. Net cash inflows during 2005 and 2004 resulted primarily from operating losses offset by increases in current liability accounts and non-cash charges for depreciation and amortization. Operating losses were primarily due to increased sales and marketing efforts and additional employees company wide.

Changes in current assets consisted primarily of the increase in prepaid expenses and other current assets. Prepaid expenses and other current assets increased $588,000 for the six months ended June 30, 2007 primarily due to a prepaid software term license. Prepaid expenses and other current assets increased $255,000 in 2006 primarily due to increased volume of business.

The increases in current liability accounts consisted primarily of the following:

Changes in deferred revenue were as follows:


	•	during the six months ended June 30, 2007, deferred revenue increased $2.5 million from $5.5 million to $8.0 million;

	•	during 2006, deferred revenue increased $2.7 million from $2.8 million to $5.5 million;

	•	during 2005, deferred revenue increased $1.5 million from $1.3 million to $2.8 million; and

	•	during 2004, deferred revenue increased $655,000 from $615,000 to $1.3 million.

The increases in deferred revenue were due to continued growth in unearned prepaid subscriptions. The growth in subscriptions was primarily due to new customer growth.

Changes in accrued expenses and other current liabilities were as follows:


	•	during the six months ended June 30, 2007, accrued expenses increased $266,000 from $2.4 million to $2.7 million;


	•	during 2006, accrued expenses increased $1.9 million from $494,000 to $2.4 million primarily due to increased marketing efforts during the year, increased employee related costs due to personnel additions and increased costs directly attributable to revenue growth partially offset by the receipt of invoices and timing of payments;

	•	during 2005, accrued expenses increased $188,000 from $306,000 to $494,000; and

	•	during 2004, accrued expenses decreased $337,000 from $643,000 to $306,000.

Changes in accounts payable were as follows:


	•	during the six months ended June 30, 2007, accounts payable remained significantly unchanged at $2.6 million as of both December 31, 2006 and June 30, 2007;

	•	during 2006, accounts payable increased $1.1 million from $1.5 million to $2.6 million;

	•	during 2005, accounts payable increased $1.3 million from $176,000 to $1.5 million; and

	•	during 2004, accounts payable decreased $105,000 from $281,000 to $176,000.

The changes in accounts payable were due to increased expense levels, net of the impact of the timing of payments to vendors.

The following non-cash charges are added back as adjustments to reconcile net loss to net cash used in or provided by operating activities:


	•	change in fair value of warrant of $837,000 for the six months ended June 30, 2007 and $588,000 for the year ended December 31, 2006;


	•	depreciation and amortization expense of $1.1 million for the six months ended June 30, 2007 and $1.5 million, $591,000 and $447,000 for the years ended December 31, 2006, 2005 and 2004, respectively; and


	•	stock-based compensation expense of $203,000 for the six months ended June 30, 2007 and $83,000, $17,000 and $23,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

The change in fair value of the warrant to purchase Series B redeemable convertible preferred stock was due to the increase in the value of the underlying common stock into which this warrant is ultimately convertible. The warrant is subject to re-measurement at each balance sheet date and any change in fair value is recognized as a component of other expense until such time as the warrant is exercised or expires unexercised. The warrant expires on the earliest to occur of November 27, 2007 or immediately prior to the closing of a merger, sale of assets, or consolidation of us by another entity, or immediately prior to the closing date of an initial public offering of our common stock.

The increase in depreciation and amortization expense was due to increased purchases of property and equipment required to support the continued growth of the business.

The increase in stock based compensation was due to the adoption of SFAS 123R in January 2006.

As of December 31, 2006, we had federal and state net operating loss carry-forwards of $29.1 million and $22.5 million, respectively, which may be available to offset potential payments of future federal and state income tax liabilities which expire at various dates through 2026 for federal income tax purposes and through 2011 for state income tax purposes.

Net cash used in investing activities was $3.5 million for the six months ended June 30, 2007 and $7.7 million, $2.2 million and $494,000 for the years ended December 31, 2006, 2005 and 2004, respectively. Net cash used in investing activities during the six months ended June 30, 2007 and the year ended December 31, 2006 consisted primarily of net cash paid to purchase marketable securities and property and equipment. Net cash used in investing activities during the years ended December 31, 2005 and 2004 consisted primarily of cash paid for the purchase of property and equipment. Property and equipment purchases consist of infrastructure for our products, capitalization of certain software development costs, computer equipment for our employees and equipment and leasehold improvements related to additional office space.

Net cash provided by financing activities was $1.8 million for the six months ended June 30, 2007. Net cash provided by financing activities was $14.4 million, $512,000 and $306,000 for the years ended December 31, 2006, 2005 and 2004, respectively. Net cash provided by financing activities for the six months ended June 30, 2007 consisted primarily of additional borrowings under the term loan facility partially offset by repayment of outstanding borrowings as well as payments of issuance costs of $630,000 for our contemplated initial public offering of common stock. These issuance costs have been capitalized and are included in prepaid expenses and other current assets as of June 30, 2007. Net cash provided by financing activities for the year ended December 31, 2006 consisted primarily of proceeds from the issuance of our Series C redeemable convertible preferred stock and, to a lesser extent, proceeds from the exercise of stock options and warrants, partially offset by repayment of outstanding borrowings under the term loan facility. Net cash provided by financing activities for the years ended December 31, 2005 and 2004 consisted primarily of new borrowings under the term loan facility partially offset by repayment of the borrowings and other capital lease obligations.

Our future capital requirements may vary materially from those now planned and will depend on many factors, including, but not limited to, development of new products, market acceptance of our products, the levels of advertising and promotion required to launch additional products and improve our competitive position in the marketplace, the expansion of our sales, support and marketing organizations, the establishment of additional offices in the United States and worldwide and the building of infrastructure necessary to support our growth, the response of competitors to our products and our relationships with suppliers and clients. Since the introduction of our on-demand email marketing product in 2000, we have experienced increases in our expenditures consistent with the growth in our operations and personnel, and we anticipate that our expenditures will continue to increase in the future.

We believe that our current cash and cash equivalents, marketable securities and funds available under our term loan facility will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months. Thereafter, we may need to raise additional funds through public or private financings or increased borrowings to develop or enhance products, to fund expansion, to respond to competitive pressures or to acquire complementary products, businesses or technologies. If required, additional

financing may not be available on terms that are favorable to us, if at all. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders will be reduced and these securities might have rights, preferences and privileges senior to those of our current stockholders. No assurance can be given that additional financing will be available or that, if available, such financing can be obtained on terms favorable to our stockholders and us.

During the last three years, inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financing activities. We do not have any interest in entities referred to as variable interest entities, which include special purpose entities and other structured finance entities.

Contractual Obligations

The following table summarizes our contractual obligations at December 31, 2006 and the effect such obligations are expected to have on our liquidity and cash flow in future periods.


	Payments Due by Period
			Less than						More than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
	(in thousands)

Notes payable	$	702	$	449	$	253	$	–	$	–
Operating lease obligations		3,387		836		1,846		705		–
Contractual commitments		900		561		339		–		–

Total	$	4,989	$	1,846	$	2,438	$	705	$	–

In February 2007, we entered into the third amendment to our headquarters office lease to expand our existing premises. As a result, our future operating lease obligations will increase by $183,000, $372,000, $385,000 and $294,000 for 2007, 2008, 2009 and 2010, respectively. In July 2007, we entered into an agreement with a vendor to provide specialized space and related services in a second co-location hosting facility. As a result, our future contractual commitments will increase by approximately $34,000, $311,000, $845,000, $866,000, $888,000 and $755,000 for 2007, 2008, 2009, 2010, 2011 and 2012, respectively.

Changes in Accountants

On or about September 20, 2006, we dismissed Vitale, Caturano & Company Ltd., or Vitale, as our independent registered public accounting firm. Our audit committee participated in and approved the decision to change our independent registered public accounting firm. The reports of Vitale on the financial statements for the years ended December 31, 2004 and 2005 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle. During the years ended December 31, 2004 and 2005 and through September 20, 2006, there were no disagreements with Vitale on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of Vitale would have caused them to make reference thereto in their reports on the financial statements for such years. We requested that Vitale furnish us with a letter addressed to the SEC stating whether or not it agrees with the above statements. A copy of such letter, dated July 6, 2007, is filed as Exhibit 16.1 to the registration statement, of which this prospectus forms a part.

We engaged PricewaterhouseCoopers LLP as our new independent registered public accounting firm as of December 26, 2006.

Business

Overview

We provide our products on an on-demand basis through a standard web browser. This model enables us to deploy and maintain a secure and scalable application that is easy for our customers to implement at compelling prices. Our email marketing customers pay a monthly subscription fee that generally ranges between $15 per month and $150 per month based on the size of their contact lists and, in some cases, volume of mailings. Our survey product is similarly priced. For the first half of 2007, our average monthly revenue per email marketing customer was approximately $33. We believe that the simplicity of on-demand deployment combined with our affordable subscription fees and functionality facilitate adoption of our products by our target customers while generating significant recurring revenue. Since the first quarter of 2002, we have achieved 22 consecutive quarters of growth in customers and revenue.

Our email marketing customer base has grown steadily from approximately 25,000 at the end of 2004 to over 130,000 as of July 31, 2007. These customers include all types of small organizations including retailers, restaurants, day spas, law firms, consultants, non-profits, religious organizations, alumni associations and other small businesses and organizations. Customers in more than 110 countries and territories currently use our email marketing product. We estimate that approximately two-thirds of our customers have fewer than ten employees and in the first half of 2007, our top 50 email marketing customers accounted for approximately 1% of our gross email marketing revenue. Our customers have displayed a high degree of loyalty. From January 2005 through July 2007, at least 97.4% of our customers in a given month have continued to utilize our email marketing product in the following month.

We acquire our customers through a variety of paid and unpaid sources. Our paid sources include online marketing through search engines, advertising networks and other sites; offline marketing through radio advertising, local seminars and other marketing efforts; and contractual relationships with over 1,700 active channel partners, which include national small business service providers such as Network Solutions, American Express and VistaPrint as well as local small business service providers such as local web developers and marketing agencies, who refer customers to us through links on their websites and outbound promotions to their customers. Our unpaid sources of customer acquisition include referrals from our growing customer base, general brand awareness and the inclusion of a link to our website in the footer of more than 500 million emails currently sent by our customers each month. During the first half of 2007, approximately 56% of our new email marketing customers were generated through marketing programs and channel partners or were located in geographies where we do offline marketing. Accordingly, we believe that during the first half of 2007 approximately 44% of our new email marketing customers were generated through unpaid sources.

Industry Background

Benefits of Email Marketing

Organizations are increasingly turning to email marketing as a means to communicate with their customers, clients and members. According to an October 2006 report entitled “The Email Marketing Vendor Landscape” by Forrester, a leading research provider, 94% of marketers currently use or were planning to use email marketing by the end of 2006, with 58% of those marketers outsourcing to a third party provider. Key benefits that drive adoption of email marketing include the following:


	•	Targeted. Email marketing enables organizations to tailor messages to specific audiences and enables recipients to respond through links to websites.

	•	Timely. The cycle from concept through design and execution for email marketing is much shorter than direct mail because there is no need to print and mail. Reducing cycle time allows organizations to rapidly respond to market conditions and opportunities.

	•	Efficient. Email marketing combines low cost with measurable responses leading to an attractive return on investment.

Constant Contact Market Opportunity

We believe email marketing is an excellent fit for small organizations. Small businesses and non-profits tend to rely heavily on repeat sales and referrals to grow their businesses and expand their membership bases, and email marketing is a cost effective way to reach these audiences.

Small organizations also represent a large market opportunity. The U.S. Small Business Administration estimated that there were 25.8 million small businesses in the United States in 2005, and in 2006 the National Center of Charitable Statistics estimated that there were approximately 1.5 million non-profits in the United States. Other small organizations that use email marketing include online auction sellers, independent musicians, community organizations, school districts, parent/teacher associations and sports leagues. Based on these estimates, we believe our email marketing product could potentially address the needs of more than 27.3 million small organizations domestically. We believe that all small organizations could benefit by communicating regularly with their constituents and, further, that email marketing with our product is an effective and affordable method to facilitate this type of communication. As of June 2007, we had customers in at least 856 of the 1,004 of the standard industrial classification, or SIC, codes, which is a method the U.S. government uses to classify industries in the U.S.

At the same time, small organizations have generally been slower than larger organizations to adopt email marketing as part of their marketing mix. We believe they face unique challenges when adopting email marketing including:


	•	Unfamiliar with Email Marketing. Many small organizations are not familiar with the benefits of email marketing and do not understand how to effectively build a permission-based contact list, develop an effective email marketing campaign and measure its effectiveness.

	•	Lack of Technical Expertise. Small organizations often do not have the technical expertise to implement email marketing software or to design and execute effective email marketing campaigns. For example, many small organizations do not have the marketing, graphic design or HTML coding skills to develop professionally formatted emails; may not follow or comprehend the evolving industry standards for sending bulk email; or may not understand how spam filtering technology may impact the delivery of their email communications.

	•	Limited Budgets. Small organizations typically have small marketing budgets. They generally cannot afford to hire in-house staff or engage an outside marketing agency to develop, execute and evaluate an email marketing campaign.

We also believe most existing alternatives for email marketing are poorly suited to meet the needs of small organizations. Some of these existing alternatives include:


	•	General Email Applications. General email applications and services such as Microsoft Outlook, America Online or Hotmail are designed for one-to-one emails. They do not easily incorporate the formatting, graphics, and links necessary to produce professional-looking email marketing campaigns. They also limit the number of recipients per email and do not have the reporting capabilities to allow users to evaluate the effectiveness of their email marketing campaigns. Finally, they do not provide regulatory compliance tools to assist the sender in complying with anti-spam requirements.

	•	Enterprise Service Providers. These service providers, such as Epsilon Data Management LLC (a subsidiary of Alliance Data Systems Corporation), ExactTarget, Inc., Responsys Inc. and Silverpop Systems Inc. focus on large organizations with sizeable marketing budgets. While these providers offer sophisticated, Internet-based marketing services and tools with professional and customized execution and reporting, they deliver services at a price and scale that is far beyond the scope of most small organizations.

As a result, we believe there is an opportunity for an email marketing solution tailored to the needs of small organizations. These users seek an affordable, easy-to-use email marketing solution with a professional appearance and reliable performance.

Our Solution

We provide small organizations with a convenient, effective and affordable way to communicate with their constituents via email. Our email marketing solution delivers the following benefits to small organizations:


	•	Easy. We enable customers to easily create great looking email marketing campaigns without prior expertise in marketing, graphic design or HTML. Our product includes over 200 customizable templates intelligently organized to streamline creation of a professional-looking message. We also provide customers with tools that make it easy for them to import, build and manage contact lists and to monitor delivery and response. We further enhance our product with unlimited free customer support and daily webinars covering topics ranging from a general product tour to email marketing best practices.

	•	Fast. Because our product is accessed through the web, customers only need access to a PC and the Internet to begin using it to create and send their first email campaign. A customer can typically create and send their first campaign in less than one hour. Once a customer has loaded their contact list, created and sent their first campaign, our product becomes even faster to use as this information is stored and can be easily accessed for future use.

	•	Affordable. We offer our email marketing product on a subscription basis, eliminating the significant up-front license fee associated with traditional software. Instead, we encourage potential customers to try our product without charge for a 60-day period. After the free trial, customers can use our product for a subscription fee of as low as $15 per month with the amount of the fee increasing based on the number of unique contacts or email addresses in a customer’s contact list. We provide discounted pricing for both prepayments and non-profits. For the first half of 2007, our average monthly revenue per email marketing customer was approximately $33.

	•	Effective. Our product provides our customers with a highly effective way to reach their customers, clients and members. According to data measured by ReturnPath, Inc. for United States email addresses, approximately 97% of our customers’ emails were delivered past any spam filters or controls to their target email inboxes over the first seven months of 2007. We have made significant investments in systems and processes to reduce the number of our customers’ emails that are blocked as possible spam. In addition, to help ensure that customers’ emails are delivered, we have developed relationships with leading ISPs.


	•	Measurable. Our email marketing campaign reports provide customers with information and data regarding each campaign. In addition to receiving aggregate data on email receipt, open rates and click-through rates per campaign, our customers can identify on an individual basis which contacts received and opened an email and which links in the email they clicked on. We also provide comparable metrics for our overall customer base. This feedback permits customers to alter the content or timing of their campaigns to capitalize on aspects of prior campaigns that were positively received by their constituents.

Business Strengths

We believe that the following business strengths differentiate us from competitors and are key to our success:


	•	Focus on Small Organizations. We have maintained a consistent and exclusive focus on small organizations, which has enabled us to design a full customer experience tuned to their unique needs. Through the website experience, product usability, affordable price point and personal touch of our communications consultants and support representatives, we work to ensure that small organizations feel that we are committed to their success. We continually invest in primary research to understand this market including usability studies, satisfaction surveys, focus groups and other research initiatives.

	•	Efficient Customer Acquisition Model. We believe that we have developed an efficient customer acquisition model that generates an attractive return on our sales and marketing expenditures. We utilize a variety of marketing channels to acquire new customers including online advertising, partner relationships, radio advertising, and online and in-person seminars and brand awareness. A Constant Contact “Try It Free” link is included in the footer of more than 500 million emails currently sent by our customers each month. In 2006, our cost of email marketing customer acquisition, which we define as our total sales and marketing expense divided by the gross number of email marketing customers added in the period, was approximately $300 per email marketing customer. For the first half of 2007, our average monthly revenue per email marketing customer was approximately $33, implying payback on a revenue basis in less than one year. This implied payback is calculated by dividing the $300 acquisition cost per email marketing customer by the $33 average monthly revenue per email marketing customer, which implies a 9.1 month payback period.

	•	High Degree of Recurring Revenue. We benefit from a high level of customer loyalty. From January 2005 through July 2007, at least 97.4% of customers in a given month have continued to use our email marketing product in the following month. We believe this represents a high level of retention, particularly given the transient nature of many small organizations. These customers provide us with a significant base of recurring revenue and generate new customer referrals.

	•	Consistent Commitment to Customer Service. We seek to provide our customers with a high level of support in order to encourage trials and ongoing usage of our product. We conduct online webinars and in-person events to educate potential customers about the benefits of email marketing. In addition, our communications consultants seek to contact all new U.S. and Canadian based customers to help them launch an initial campaign and address any questions or concerns. As a result, we believe we have a highly satisfied customer base. Since August 2003, our customer surveys indicate that more than 80% of our customers rate their overall experience with Constant Contact as above average or excellent.

	•	Software-as-a-Service Delivery. We provide our product on an on-demand basis, meaning that our customers can access and use our product through a standard web browser. This enables our customers to rapidly begin using our product with few up-front costs and limited technical expertise. It also enables us to serve additional customers with little incremental expense and to deploy new applications and upgrades quickly and efficiently to our existing customers.

Growth Strategy

Our objective is to increase our market leadership through the following strategies:


	•	Acquire New Customers. We aggressively seek to continue to attract new customers by promoting the Constant Contact brand and encouraging small organizations to try our products. We have increased the number of customers acquired in each of the past 12 quarters. We acquire new customers through multiple acquisition channels including online advertising, partner relationships, radio advertising online and in person seminars and other marketing efforts as well as through referrals from existing customers and the Constant Contact link included in the footer of customer email campaigns. We consistently monitor the return on our advertising spending in terms of new customers generated and adjust our sales and marketing mix as appropriate.

	•	Increase Revenue Per Customer. As of July 31, 2007, we had an email marketing customer base in excess of 130,000. We seek to increase revenue from each customer through add-on services that enhance our products such as the hosting of our customers’ images and logos on our system. We are currently developing an add-on service that will enable our customers to archive their past email campaigns and make them available to their constituents.

	•	Provide Additional Products. We plan to continue to invest in research and development to maintain our leadership position in email marketing and to develop and provide our customers with complementary products that are easy-to-use, effective and affordable. Based on strong interest from our existing customers, we recently introduced our survey product, which enables customers to create and send online surveys and analyze responses. We believe that we have a significant opportunity to sell our newly launched survey product to our email marketing customers as a means for them to better understand the needs of their constituents. As new customers adopt our survey product, we will also have the opportunity to cross-sell our email marketing product.

	•	Expand Internationally. We currently sell our email marketing product to customers in over 110 countries and territories, despite limited marketing efforts outside of the United States. We believe that opportunities exist to more aggressively market our products in English-speaking countries, including Canada, the United Kingdom, Ireland, Australia and New Zealand. In addition, eventually we intend to offer our products in different languages, which will allow us to market our products in additional countries.

	•	Pursue Complementary Acquisitions. We follow industry developments and technology advancements and intend to evaluate and acquire technologies or businesses to cost-effectively enhance our products, access new customers or markets or both. We have no present understandings or agreements to acquire any of these technologies or businesses.

Our Products and Services

Email Marketing

Our email marketing product allows customers to easily create, send and track professional-looking email campaigns. Our product provides customers with the following features:


	•	Campaign Creation Wizard. This comprehensive, easy-to-use interface enables our customers to create and edit email campaigns. Through intuitive controls, customers can readily change colors, fonts, borders and backgrounds and insert images and logos to help ensure that their emails appear polished and professional. The wizard operates on a “what-you-see-is-what-you-get” basis whereby a customer can move paragraphs and blocks of content within the draft email quickly and view the message from the perspective of intended recipients.

	•	Professionally Developed Templates. These pre-designed email message forms help customers quickly create attractive and professional campaigns. Over 200 templates provide ideas as to the kinds of

emails customers can send, including newsletters, event invitations, business letters, promotions and announcements, and demonstrate, through the use of color and format, the creativity and professionalism of a potential campaign. Our advanced editing functionality enables customers to easily modify the templates. We also provide templates designed to appeal to specific vertical markets. For example, we offer a restaurant template that includes a pre-formatted menu section.


	•	Contact List Management. These tools help customers build and manage their email contact lists. Our contact list building tools include file and spreadsheet import functionality as well as a software plug-in to import contact lists maintained in Microsoft’s Outlook^® and Outlook Express^®. We also provide HTML programming code for a “Join My Mailing List” box that can be included on the customer’s web site and used to gather new contacts. Our list management tools enable a customer to target or segment contacts for all or specific campaigns and monitor email addresses to which previous campaigns could not be delivered. In addition to their constituents’ names and email addresses, several additional customizable fields are available for the purposes of personalizing email messages. Unsubscribe requests are automatically processed to help ensure ongoing compliance with government regulations and email marketing best practices.


	•	Email Tracking and Reporting. These features enable our customers to review and analyze the overall effectiveness of a campaign by tracking and reporting aggregate information including how many emails were delivered, how many were opened, and which links were clicked on. These features also enable our customers to identify on an individual basis which contacts received an email, opened an email and clicked on particular links within the message.

	•	Email Delivery Management. These tools are incorporated throughout our product and are designed to maintain our high deliverability rates. Some of these tools are readily apparent to our customers, such as in-depth delivery tracking. Others are delivered through back-office processes, such as a spam content check and address validation. To further improve the percentage of emails delivered, we work closely with ISPs on spam prevention issues. We also include processes and verifications that greatly increase compliance with anti-spam standards.

	•	Image Hosting. We enable customers to store up to five images for free, view and edit these images and resize them as necessary for use in their email campaigns. Up to approximately 1,200 images (25 megabytes) can be stored for an additional $5.00 per month. By adding images to an email message, a customer can make the campaign more compelling or visually appealing.

	•	Security and Privacy. We protect our customers’ data at a higher level than we believe many of our customers do themselves. We do not use our customers’ confidential information, including their contact lists, except to provide our product, nor do we share, sell or rent this information. In addition, we require that our customers adopt a privacy policy to assist them in complying with government regulations and email marketing best practices.

Survey

Our recently launched online survey product enables customers to survey their customers, clients or members and analyze the responses. By selecting one of our customizable templates and editing or entering their own questions, our customers can easily create a professionally formatted survey. Similar to our email marketing product, our survey product includes a survey creation wizard, over 40 different preformatted and customizable survey templates, list management capabilities and live customer support.

Our survey product incorporates a real-time and comprehensive reporting function that enables our customers to analyze overall survey results and specific answers submitted by individual respondents. The survey product includes powerful analytic features that enable our customers to segment results based on survey responses, easily edit filters for “what if” analysis and view the results in intuitive, easy-to-understand graphical and detailed data formats. Results can be exported to an Excel file for additional analysis. Our customers can identify the respondents associated with filtered results and create a unique contact list of these respondents who can then be targeted with a specific message or follow-up campaign.

Customer Support

We provide extensive free customer support to all customers. Communication consultants seek to contact U.S. and Canadian based trial customers by phone to answer any questions and to help them launch their first campaign. Additional assistance is available via phone, chat or email. Our customer support employees answer approximately 1,300 calls per day with an average wait time of less than two minutes. Our phone and chat support team is located at our headquarters in Waltham, Massachusetts while we outsource our email support to a third party based in Bangalore, India. We complement our customer support with free daily product tours offered via our website, an archive of frequently asked questions (FAQs) and webinars that explain the benefits of email marketing.

Our customer service and support group is responsible for enforcing our permission and prohibited content policies. We work closely with customers who have higher than average spam complaint rates or bounced emails, and with customers whose emails are flagged by our system as possibly including prohibited content or spam, to assist them in complying with our policies. If we cannot resolve outstanding concerns, we terminate our agreement with the customer. From January 2005 through July 2007, involuntary terminations have averaged less than 0.5% of our customer base each month.

As of July 31, 2007, we had 100 employees working in customer service and support.

Professional Services

Although the majority of our customers select the “do-it-yourself” approach, we also offer professional services to customers who would like their email campaigns and surveys prepared for them. Our service offerings range from a low-cost, getting started service to full-service email and survey campaign creation.

Pricing

We price our email marketing product based upon the number of unique email addresses in a customer’s account. Set forth below are the first several pricing tiers:


Number of Unique Email Addresses	Monthly Fixed Pricing

Up to 500	$	15.00
501-2,500	$	30.00
2,501-5,000	$	50.00
5,001-10,000	$	75.00
10,001-25,000	$	150.00

Customers in these pricing tiers may send an unlimited number of emails per month. During the first half of 2007, approximately 80% of our email marketing customers were in our two lowest pricing tiers, $15.00 and $30.00 per month. We offer additional pricing tiers for large list customers. These large list customers are limited as to the number of emails they can send per month for a fixed monthly fee, with overage charges assessed on emails exceeding the monthly limit.

Our survey product is similarly priced based on tiers of unique email addresses with customers allowed an unlimited number of surveys a month. However, if a customer receives survey responses in a given month that exceed the number of unique email addresses in their account, they will incur additional charges. In addition, customers may purchase a bundle of both our email marketing and survey products at a discount of 50% off the list price of the second product.

We offer our premium image hosting services for $5.00 per month for customers with less than 350,000 unique email addresses. We offer discounted rates to non-profits and for six- and twelve-month prepayment options.

The Constant Contact Customer Experience

We are committed to helping small organizations use the power of email marketing to reach their constituencies. When our customers first connect with us, they may be experienced email marketers or, more likely, thinking about using email campaigns for the first time. The Constant Contact customer experience is designed to first make sure that every customer is successful in sending their initial email campaign and then to retain customers and generate referrals. We have designed our email marketing product to be easy to learn and have added a wide variety of tools designed to assist customers in using our product.

Getting Started

Every customer experience starts with a free 60-day trial. The only requirement for the free trial is that the potential customer must enter a valid email address that we verify before they can send their initial campaign. We do not require credit card information during the 60-day trial. The trial is a fully-featured experience that is limited to 100 email contacts. Immediately after signing up, the customer receives a welcome email with helpful information on getting started and an invitation to participate in a free online tour, which we host daily. Within the next few days, one of our communications consultants seeks to call U.S. and Canadian based customers to answer questions and discuss how to use email marketing effectively for the organization. All of our customer support resources are available during the free trial period. At the conclusion of the 60-day trial (or earlier if the customer’s contact list exceeds 100 contacts), we ask the customer to provide credit card information in order to begin billing for their continued use of our product.

Designing an Email Campaign

Our email campaign creation wizard guides our customers through an intuitive workflow process to set up an email campaign. There are more than 200 customizable templates that provide for an assortment of different campaigns, including newsletters, event invitations, promotions, announcements, business letters and more. For a more targeted audience, we provide special template packages for restaurants, associations, religious organizations, retailers and holidays. Our product creates email campaigns in HTML and text formats simultaneously and allows reviewing and editing in each mode. Creation of HTML and text emails is necessary so that recipient is able to display the email message in the best format supported by the recipient’s email program or device.

Our customizable templates assist the customer to define the layout and format of an email campaign. They are designed and tested to appear professional. Default content and intelligent pre-population of content, such as customer name, logo, and website links, start the customer off with a basic email campaign. Within the template, a customer can easily:


	•	edit, delete or format content;

	•	change the color and fonts;

	•	add clickable and trackable links to websites;

	•	upload, resize and store images and logos;

	•	reposition sections of the campaign using a drag and drop interface; and

	•	add additional blocks of content—articles, products and events.

At any time, a customer can preview the email campaign (in both HTML and text formats) and send a test version to themselves and a small group of others for review. We also provide spell check capability and a spam content test to identify content that might reduce deliverability.

Uploading and Building an Email Contact List

The next step in executing an email marketing campaign is to build an email contact list. Our customers can upload a contact list they have in an email program address book or manually enter a contact list directly into our product. Customers are given explicit and easy to follow instructions to get their contact lists into our product. If customers do not have a contact list or if they want to build upon an existing contact list, they can add our “Join My Mailing List” sign-up box to their websites. Customers can keep their contacts in multiple lists for targeting their campaigns. We charge customers only for the number of unique email contacts in their account.

As a customer is adding or uploading a list, they are clearly notified of our permission policies and educated as to the types of lists that are acceptable under our standard terms and conditions.

Sending and Monitoring an Email Campaign

Once a customer designs a campaign and selects the contact list to receive it, they may send the campaign immediately or choose a future date and time for it to be sent automatically. When a campaign is sent, we notify the customer by email. The customer can then track the results of the campaign, including how many of the emails were delivered, how many recipients opened the email and which links in the email were clicked. In the case of undeliverable emails, the customer can review why the email was not delivered and take appropriate steps. Finally, the customer can monitor if any recipients unsubscribed from their mailing list.

Once a customer has sent their first email campaign, our product becomes even easier to use because prior campaigns are available as a starting point for use in future campaigns.

Paying for Constant Contact

Once the free trial is over (after 60 days or earlier if the trial customer enters more than 100 email contacts), trial customers are prompted to enter credit card information and pick a payment plan in order to continue to use our email marketing product. Customers can pay month-to-month, or pre-pay 6 or 12 months to receive a discount of 10% or 15%, respectively. Customers may also choose and pay for add-on services, such as our premium image hosting. Customers may pay by check if they prepay for 6 or 12 months. If a customer is not ready to sign up for a payment plan after the trial period, they may continue to use their account after the trial period to build their contact list; however, they cannot send another email campaign until they select a payment plan.

Customer Service Experience

We are committed to providing a high level of customer service. We offer phone, chat and email support for customers from 9 AM to 9 PM (eastern time) weekdays and email-only support on weekends. We also have an extensive self-service knowledgebase located on our website. The majority of our customers use our toll-free phone number as their preferred support channel. Our goal is to have a live support representative on the phone with the customer in less than 2 minutes, a target we generally achieve. Our customer support representatives are well-trained, knowledgeable and committed to helping our customers.

Customers that want additional assistance in getting started or designing a unique email template can utilize our professional services team for an incremental fee.

In 2006, we launched an online community for both trial and paying customers where they can share their experiences and ask questions of other customers. As of July 31, 2007, we had in excess of 12,000 members of the community with numerous forums that include “members networking with members” and “dos and don’ts for email marketing.”

We offer our customers a variety of ongoing forums to learn more about the benefits of email marketing and Constant Contact. We offer training seminars both online and in-person within eight geographic regions across the United States and distribute a monthly Email Marketing Hints & Tips newsletter.

Customers

We have maintained a consistent and exclusive focus on small organizations. In this market, as of July 31, 2007, we served a large and diverse group of over 130,000 email marketing customers. This customer base is primarily comprised of business-to-business users, business-to-consumer users and non-profits and associations. We serve a wide range of business-to-business customers including law firms, accountants, marketing and public relations firms, recruiters and independent consultants. They typically use our product to illustrate their subject matter knowledge by communicating their recent activities and to educate their audiences by sending informational newsletters and announcements about their company or industry. We also serve a diverse base of business-to-consumer customers including on- and off-line retailers, restaurants, realtors, travel and tourism businesses and day spas. These customers typically use our product to promote their offerings with the goal of generating regular, repeat business from their customers and prospects. Finally, we serve a variety of non-profits and associations, including religious organizations, alumni associations, and other non-profits. They typically use our product to maintain regular communications with their members and inform them about news and events pertaining to their groups, as well as to drive event attendance, volunteer participation and fundraising efforts.

We estimate that approximately two-thirds of our customers have fewer than ten employees. For the first half of 2007, our average monthly revenue per email marketing customer was approximately $33, including email marketing revenue, image hosting revenue, survey revenue, and professional services revenue. We have low customer concentration as our top 50 customers in email marketing revenue in the first half of 2007 accounted for approximately 1% of our gross email marketing revenue.

We measure customer satisfaction on a monthly basis by surveying our customers. Based on these surveys, we believe that our overall customer satisfaction is strong. Another indication of our strong customer satisfaction is our low attrition rate. From January 2005 through July 2007, at least 97.4% of our customers in a given month have continued to utilize our email marketing product in the following month.

Sales and Marketing

Our sales and marketing efforts are designed to attract potential customers to our website, to enroll them in a free trial, to convert them to paying customers and to retain them as ongoing paying customers. We believe there are significant opportunities to increase the number of customers who try our products through additional sales and marketing initiatives. We employ sophisticated strategies to acquire our customers by using a combination of paid and unpaid sources and sales and marketing conversion resources. We also invest in public relations and thought leadership to build our overall brand and visibility. We are constantly seeking new methods to reach and convert more customers.

Paid Sources

Online Advertising. We advertise online through pay-per-click spending with search engines (including Google and Yahoo!) and banner advertising with online advertising networks and other websites likely to be frequented by small organizations. We are able to identify customers generated through these efforts because they click on our advertisements before visiting our site, and we measure effectiveness based on the number of customers acquired. Approximately 31% of our new email marketing customers in the first half of 2007 were generated from online advertising.

Channel Partners. We have contractual relationships with over 1,700 active online channel partners who refer customers to us through links on their websites and outbound promotions to their customers. These channel partners include large companies with broad reach including Network Solutions, LLC, American Express Company and VistaPrint Limited as well as smaller companies with narrow reach but high influence such as

local web designers and marketing agencies. Most of our channel partners either share a percentage of the cash received by us or receive a one-time referral fee. Two website design and hosting companies, Web.com, Inc. and Website Pros, Inc., bundle our services and provide them directly to their customers. These channel partners pay us monthly royalties, which contributed less than one percent of our total revenue during the first half of 2007. Approximately 15% of our new email marketing customers in the first half of 2007 were generated from our channel partners.

Offline Advertising. We advertise offline in print and radio. Our radio advertising is designed to build awareness of the Constant Contact brand and drive market awareness. Our print advertising is comprised of national publications such as Entrepreneur as well as local business publications in our geographically targeted metro regions. We currently advertise offline in eight metro regions and measure our new customer acquisition in these markets by comparing our performance in similar markets where we do not advertise.

Unpaid Sources

Word-of-Mouth Referrals. We frequently hear from new customers that they heard about us from a current customer. In our regular customer surveys, we ask our customers how likely they are to refer Constant Contact to a friend or colleague. Throughout 2006 and in the first half of 2007, 46% or more of our email marketing customers responding to this question gave us a 10 on a 10 point scale. We also offer our paying customers a referral incentive consisting of a $30 credit for them and for the customer they referred. Even though we offer this incentive, the majority of referral customers do not use the incentive program.

Footer Click-Throughs. Customers also come to us by clicking on the Constant Contact link included in the footer of more than 500 million emails currently sent by our customers each month. In the first half of 2007, approximately 4,000, or 8%, of our new email marketing customers came from a footer click-through.

Sales Efforts

Communications Consultants. We employed a team of 38 phone-based sales professionals as of July 31, 2007 who seek to call U.S. and Canadian based trial customers to assist them in their initial use of Constant Contact and encourage conversion.

Local Evangelism. As of July 31, 2007, we employed a team of eight regional development directors who are focused on educating small organizations as to the benefits of email marketing in their local markets. These employees are located across the United States and typically provide free local seminars to chambers of commerce and other small business groups about email marketing and related topics.

Distance Learning. We offer free online webinars to prospects and customers on a wide variety of topics designed to educate them about the benefits of email marketing, teach them how to be great email marketers and guide them in the use of our products.

Other Marketing Initiatives

Press Relations and Thought Leadership. We leverage our broad customer base as a survey panel to assess small business expectations around major press cycles such as Mother’s Day and Valentine’s Day. We publish the results and seek to get print and radio coverage of our results. We also publish email marketing best practices and advice through our Email Marketing Hints & Tips newsletter and a monthly column in Entrepreneur.com. These efforts enhance our brand awareness and industry leadership.

Website Marketing. We continuously measure both website visitor-to-trial conversion and trial-to-paying conversion. We test messaging, graphics and layout alternatives in order to improve website conversion. We also seek to customize the website with vertical or usage-specific messaging whenever possible. We carefully analyze trial customer usage to understand and overcome barriers to conversion.

Vertical Marketing. Our vertical marketing group develops marketing programs for certain markets that have demonstrated an affinity for our products. These programs are currently focused on restaurants and food services, franchises, religious organizations, and travel and tourism.

Community. In August of 2006, we launched a user community with discussion boards, a resource center, member spotlights and other features. As of July 31, 2007, the user community had more than 12,000 participants and more than 5,000 posts on the discussion boards.

In the year ended December 31, 2006, we spent $18.6 million on sales and marketing. Our cost of customer acquisition during this period was approximately $300 per email marketing customer, defined as our total sales and marketing expense divided by the gross number of email marketing customers added in the period.

Technology

Our on-demand products use a central application and a single software code base with unique accounts for each customer. As a result, we are able to spread the cost of providing our products across our entire customer base. In addition, because we have one central application, we believe we can scale our business faster than traditional software vendors. Scalability is achieved through advanced use of application partitioning to allow for horizontal scaling across multiple sets of applications. This enables individual application subsystems to scale independently as required by volume and usage.

Our system hardware is co-located in a hosting facility located in Somerville, Massachusetts, owned and operated by InterNAP Network Services Corporation under an agreement that expires in January 2009. The facility provides around-the-clock security personnel, video surveillance and biometric access screening, and is serviced by onsite electrical generators, fire detection and suppression systems. The facility has multiple Tier 1 interconnects to the Internet. We have entered into an agreement with Sentinel Properties-Bedford, LLC to operate a second co-location hosting facility located in Bedford, Massachusetts. We expect the second hosting facility to be operational in the fourth quarter of 2007.

We own all of the hardware deployed in support of our platform. We continuously monitor the performance and availability of our products. We have a highly available, scalable infrastructure that utilizes load-balanced web server pools, redundant interconnected network switches and firewalls, replicated databases, and fault-tolerant storage devices. Production data is backed up on a daily basis and stored in multiple locations to ensure transactional integrity and restoration capability.

Changes to our production environment are tracked and managed through a formal maintenance request process. Production baseline changes are handled much the same as software product releases and are first tested on a quality system, then verified in the staging environment, and finally deployed to the production system.

Research and Development

We have made substantial investments in research and development, and expect to continue to do so as a part of our strategy to continually improve the ease of use of our existing products as well as develop new offerings. As of July 31, 2007, we had 101 employees working in engineering and product strategy. Our product management and strategy team, which directs our research and development efforts, includes a market analyst, product managers, and website and user interface designers. This group also performs competitive and market analysis as well as systematic product usability testing. Our research and development expense totaled $2.1 million for 2004, $3.4 million for 2005 and $6.2 million for 2006.

Competition

The market for email marketing vendors is fragmented, competitive and evolving. We believe the following are the principal competitive factors in the email marketing market:


	•	product functionality, performance and reliability;

	•	integrated solutions;

	•	customer support and education;

	•	deliverability rates;

	•	product scalability;


	•	ease of use; and

	•	cost.

The email marketing market is divided into two segments—vendors who are focused on the small to medium size business, or SMB, market and vendors who are focused on the enterprise market. We primarily compete with vendors focused on the SMB market and, based on customer count, we are the market leader. Some of the vendors who are focused on the SMB market, together with the customer counts of such vendors as most recently made available by such vendors, include: Vertical Response, Inc. (30,000 customers), Broadwick Corporation (iContact, formerly Intellicontact) (approximately 13,000 customers), CoolerEmail Inc. (10,000 customers), Got Corporation (Campaigner) (10,000 customers), Emma, Inc. (6,000 customers), Lyris Technologies, Inc. (5,000 customers) and Topica Inc. (4,000 customers). These vendors typically charge a low monthly entry fee or a low fee per number of emails sent.

Vendors that are focused on the enterprise market include Acxiom Digital (a division of Acxiom Corporation), Alterian Inc., Epsilon Data Management LLC (a subsidiary of Alliance Data Systems Corporation), ExactTarget, Inc., Responsys Inc., Silverpop Systems Inc. and CheetahMail, Inc. (a subsidiary of Experian Group Limited). We believe enterprise email marketing vendors can charge their customers $25,000 or more per month and provide a full-service model, which generally includes an account executive and creative team who often assist with content development. While we currently do not generally compete with vendors focusing on enterprise customers, we may face competition from them in the future.

We may also face future competition in the email marketing market from new companies entering our market, which may include large, established companies, such as Microsoft Corporation, Google Inc. or Yahoo! Inc. Barriers to entry into our market are relatively low, which allows new entrants to enter the market without significant impediments and large, established companies to develop their own competitive products or acquire or establish cooperative relationships with our competitors.

In addition, these companies may have significantly greater financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their products. These potential competitors may be in a stronger position to respond quickly to new technologies and may be able to undertake more extensive marketing campaigns. These competitors may have more extensive customer bases and broader customer relationships than we do. In addition, these competitors may have longer operating histories and greater name recognition than we do. Moreover, if one or more of our competitors were to merge or partner with another of our competitors or a new market entrant, the change in competitive landscape could adversely affect our ability to compete effectively.

Government Regulation

The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or CAN-SPAM Act, establishes requirements for commercial email and specifies penalties for commercial email that violates the Act. In addition, the CAN-SPAM Act gives consumers the right to require emailers to stop sending them commercial email.

The CAN-SPAM Act, which became effective January 1, 2004, covers email sent for the primary purpose of advertising or promoting a commercial product, service, or Internet web site. The Federal Trade Commission, a federal consumer protection agency, is primarily responsible for enforcing the CAN-SPAM Act, and the Department of Justice, other federal agencies, State Attorneys General, and Internet Service Providers also have authority to enforce certain of its provisions.

The CAN-SPAM Act’s main provisions include:


	•	prohibiting false or misleading email header information;

	•	prohibiting the use of deceptive subject lines;

	•	ensuring that recipients may, for at least 30 days after an email is sent, opt out of receiving future commercial email messages from the sender, with the opt-out effective within 10 days of the request;


	•	requiring that commercial email be identified as a solicitation or advertisement unless the recipient affirmatively permitted the message; and

	•	requiring that the sender include a valid postal address in the email message.

The CAN-SPAM Act also prohibits unlawful acquisition of email addresses, such as through directory harvesting, and transmission of commercial emails by unauthorized means, such as through relaying messages with the intent to deceive recipients as to the origin of such messages.

Violations of the CAN-SPAM Act’s provisions can result in criminal and civil penalties, including statutory penalties that can be based in part upon the number of emails sent, with enhanced penalties for commercial emailers who harvest email addresses, use dictionary attack patterns to generate email addresses, and/or relay emails through a network without permission.

The CAN-SPAM Act acknowledges that the Internet offers unique opportunities for the development and growth of frictionless commerce, and the CAN-SPAM Act was passed, in part, to enhance the likelihood that wanted commercial email messages would be received. We believe we are a leader in developing policies and practices affecting our industry and that our permission-based email marketing model and our anti-spam policy are compatible with current CAN-SPAM Act regulatory requirements. We are a founding member of the Email Sender and Provider Coalition, or ESPC (http://www.espcoalition.org), a cooperative industry organization founded to develop and implement industry-wide improvements in spam protection and solutions to prevent inadvertent blocking of legitimate commercial email. We maintain high standards that apply to all of our customers, including non-profits and political organizations, whether or not they are covered by the CAN-SPAM Act.

The CAN-SPAM Act preempts, or blocks, most state restrictions specific to email, except for rules against falsity or deception in commercial email, fraud and computer crime. The scope of these exceptions, however, is not settled, and some states have adopted email regulations that, if upheld, could impose liabilities and compliance burdens in addition to those imposed by the CAN-SPAM Act.

Moreover, some foreign countries, including the countries of the European Union, have regulated the distribution of commercial email and the online collection and disclosure of personal information. Foreign governments may attempt to apply their laws extraterritorially or through treaties or other arrangements with U.S. governmental entities.

Our customers may be subject to the requirements of the CAN-SPAM Act, and/or other applicable state or foreign laws and regulations affecting email marketing. If our customers’ email campaigns are alleged to violate applicable email laws or regulations and we are deemed to be responsible for such violations, or if we were deemed to be directly subject to and in violation of these requirements, we could be exposed to liability.

Our standard terms and conditions require our customers to comply with laws and regulations applicable to their email marketing campaigns and to implement any required regulatory safeguards. We take additional steps to facilitate our customers’ compliance with the CAN-SPAM Act, including the following:


	•	new customers signing up for our services must agree that they will send email through our service only to persons who have given their permission;

	•	when an email contact list is uploaded, the customer must certify that it has permission to email each of the addressees;

	•	when an individual indicates that they want to be added to a mailing list, they may receive a confirmation email and may be required to confirm their intent to be added to the contact list, through a process called double opt-in;

	•	we electronically inspect all of our customers’ email contact lists to check for spam traps, dictionary attack patterns and lists that fail to meet our permission standards; and

	•	for customers with large email address lists, we conduct list review interviews to verify that the list is properly acquired and permission-based and that the proposed messages meet our content standards.


		Campaigns using such lists are conducted in stages, so that we can terminate the campaign early if the list generates an unusually high number of complaints.

Intellectual Property

Our intellectual property rights are important to our business. We rely on a combination of copyright, trade secret, trademark, patent and other rights in the United States and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect our proprietary technology, processes and other intellectual property. We have filed a patent application and are in the process of filing a second application.

Although the protection afforded by copyright, trade secret, trademark and patent law, written agreements and common law may provide some advantages, we believe that the following factors help us to maintain a competitive advantage:


	•	the technological skills of our research and development personnel;

	•	frequent enhancements to our products;

	•	continued expansion of our proprietary content; and

	•	high levels of customer service.

Others may develop products that are similar to our technology. We enter into confidentiality and other written agreements with our employees, consultants and partners, and through these and other written agreements, we attempt to control access to and distribution of our software, documentation and other proprietary technology and other information. Despite our efforts to protect our proprietary rights, third parties may, in an unauthorized manner, attempt to use, copy or otherwise obtain and market or distribute our intellectual property rights or technology or otherwise develop a product with the same functionality as our product. Policing unauthorized use of our products and intellectual property rights is difficult and nearly impossible on a worldwide basis. Therefore, we cannot be certain that the steps we have taken or will take in the future will prevent misappropriations of our technology or intellectual property rights.

“Constant Contact^®” is a registered trademark in the United States and in the European Union. We also hold trademarks and service marks identifying certain of our products or features of our products.

Employees

As of July 31, 2007, we employed a total of 296 employees. None of our employees is represented by a labor union. We have not experienced any work stoppages and believe that our relations with our employees are good.

Facilities

Our corporate headquarters, including our principal administrative, marketing, technical support and research and development departments, is located in Waltham, Massachusetts. We lease approximately 50,000 square feet under an agreement that expires in September, 2010. As of July 31, 2007, all of our employees were based in this location with the exception of 10 employees who work out of their homes. If we require additional space, we believe that we will be able to obtain such space on acceptable, commercially reasonable terms.

Legal Proceedings

We are not currently subject to any legal proceedings. From time to time, we have been party to litigation matters arising in connection with the normal course of our business, none of which has or is expected to have a material adverse effect on us.

Management

Our executive officers and directors and their ages and positions as of July 31, 2007 are set forth below:


Name	Age		Position(s)

Gail F. Goodman		46	Chairman, President and Chief Executive Officer
Ellen Brezniak		48	Vice President, Product Strategy
Nancie Freitas		46	Vice President and Chief Marketing Officer
Eric S. Groves		44	Senior Vice President, Sales and Business Development
Thomas C. Howd		47	Vice President, Services
Robert P. Nault		43	Vice President and General Counsel
Daniel A. Richards		47	Vice President, Engineering
Steven R. Wasserman		51	Vice President and Chief Financial Officer
Thomas Anderson(3)		44	Director
Robert P. Badavas(1)		54	Director
John Campbell(2)		59	Director
Michael T. Fitzgerald(1)(2)		54	Director
Patrick Gallagher(2)(3)		35	Director
William S. Kaiser(1)(3)		51	Director


(1)		Member of the audit committee.

(2)		Member of the compensation committee.

(3)		Member of the nominating and corporate governance committee.

Gail F. Goodman. Ms. Goodman has served as our Chief Executive Officer since April 1999, as a member of our board of directors since May 1999 and as Chairman of our board of directors since November 1999. Prior to joining us, Ms. Goodman served as Vice President, Commerce Products Group of Open Market, a provider of Internet commerce application software, from 1996 until 1998, as Vice President, Marketing of Progress Software Corporation, a developer and provider of application development tools and database software, from 1994 until 1996, as Director of Product Management of Dun & Bradstreet Software, a provider of enterprise resource planning software, from 1991 until 1994 and as Manager of Bain & Company, a business consulting firm, from 1987 until 1991. She holds a B.A. from the University of Pennsylvania and an M.B.A. from the Amos Tuck School of Dartmouth University.

Ellen Brezniak. Ms. Brezniak has served as Vice President, Product Strategy since September 2006. From September 2004 until September 2006, she served as Senior Vice President of Marketing and Product Management of GetConnected, Inc., a provider of transaction processing platforms for enabling the sale of digital services. From January 2001 until August 2004, Ms. Brezniak served as Vice President of Marketing of OutStart, Inc., an e-learning software company. Ms. Brezniak has also held leadership positions at Be Free, Inc., Open Market, and Progress Software, Inc. Ms. Brezniak holds a B.S. from Rensselaer Polytechnic Institute.

Nancie Freitas. Ms. Freitas joined us in November 2005 and has served as Vice President and Chief Marketing Officer since December 2006. In February 2005, Ms. Freitas founded The Freitas Group, a direct marketing and media firm, which she operated until joining us. From April 2000 until January 2005, she led the direct marketing services of Carat Business & Technology, a worldwide media agency. Ms. Freitas has also held leadership roles at CFO Magazine, Earthwatch Institute and Games Magazine. Ms. Freitas holds a B.A. from the University of Massachusetts.

Eric S. Groves. Mr. Groves has served as Senior Vice President, Sales and Business Development since January 2001. From October 1999 until December 2000, Mr. Groves served as Executive Director of Worldwide Sales & Business Development of Alta Vista Corporation, a provider of search services and technology. Mr. Groves has also held leadership positions at iAtlas Corp., InfoUSA Inc., MFS Communications Company, Inc., SBC Communications Inc. and Citigroup Inc. Mr. Groves holds a B.A. from Grinnell College and an M.B.A. from the University of Iowa.

Thomas C. Howd. Mr. Howd has served as Vice President, Services since 2001. From 1999 until 2000, he served as Director, Production Engineering, of Direct Hit Technologies Inc., a provider of search technologies that was later acquired by Ask Jeeves, Inc. From 1998 until 1999, Mr. Howd served as Director of Support and Quality Assurance of Workgroup Technology Corporation, a product data management software provider. Mr. Howd also held leadership positions in engineering and professional services during his 11 year tenure at Marcam Corporation, a provider of software applications for manufacturing. Mr. Howd holds a B.S. from Williams College.

Robert P. Nault. Mr. Nault has served as Vice President and General Counsel since March 2007. Prior to joining us, Mr. Nault served as Senior Vice President, General Counsel and Secretary of RSA Security Inc., a provider of e-security technology solutions, from November 2005 until November 2006 after it was acquired by EMC Corporation in September 2006. Mr. Nault was Vice President and General Counsel of Med-i-Bank, Inc., a provider of software and services for electronic benefit payments from October 2004 to July 2005; Legal Consultant and Vice President and General Counsel of ON Technology Corporation, an enterprise software company, from March 2001 to May 2004; and Senior Vice President and General Counsel of The Pioneer Group, Inc., a financial services and alternative investments company, from 1995 to 2000. Before joining Pioneer, Mr. Nault was a member of the corporate department of Hale and Dorr LLP (now Wilmer Cutler Pickering Hale and Dorr LLP). Mr. Nault is a director of Vanderbilt Financial, LLC, an institutional investment fund. Mr. Nault holds a B.A. from the University of Rhode Island and a J.D. from Boston University School of Law.

Daniel A. Richards. Mr. Richards joined us in 1999 and has served as Vice President, Engineering since 2000. Prior to joining us, from 1995 to 1999, he served as a principal developer and as Vice President Engineering of Segue Software Inc., a software company specializing in automated testing applications. Mr. Richards has held a variety of developer and leadership positions at Mercury Computer Systems, Hewlett-Packard and Apollo Computer, Inc. Mr. Richards holds a B.S. from the State University of New York at Binghamton.

Steven R. Wasserman. Mr. Wasserman has served as Vice President and Chief Financial Officer since December 2005. Prior to joining us, he served as Vice President and Chief Financial Officer of Med-i-Bank, Inc., a provider of software and services for electronic benefit payments, from March 2004 until it was acquired by Metavante Corp. in July 2005. From January 2001 until March 2004, Mr. Wasserman served as Vice President and Chief Financial Officer of ON Technology Corporation, an enterprise software company that was acquired by Symantec Corporation. Mr. Wasserman has held leadership positions at The Pioneer Group, GTECH Holdings Corporation and EG&G, Inc. Mr. Wasserman holds a B.B.A. from the University of Michigan and an M.B.A. from Babson College.

Thomas Anderson. Mr. Anderson has served as one of our directors since January 2007. Mr. Anderson is the Senior Vice President, Direct to Consumer Channel of SLM Corporation. From January 2005 until January 2007, Mr Anderson was the President, Chief Executive Officer and a member of the board of directors of Upromise, Inc., which was acquired by SLM Corporation. From January 2003 until January 2005, he served as Chief Executive Officer of AmeriFee, LLC, a medical finance company owned by Capital One Financial Corporation. From 2001 until 2003, he served as a Senior Vice President of Capital One. Mr. Anderson holds a B.A. from Dartmouth College and a M.S. from the MIT Sloan School of Management.

Robert P. Badavas. Mr. Badavas has served as one of our directors since May 2007. He is the President and Chief Executive Officer of TAC Worldwide, a technical staffing and workforce solutions company owned by Goodwill Group of Japan. From November 2003 until becoming President and Chief Executive Officer in December 2005, he was the Executive Vice President and Chief Financial Officer of TAC Worldwide. From September 2001 to September 2003, Mr. Badavas served as Senior Principal and Chief Operating Officer of Atlas Venture, a venture capital firm. Mr. Badavas is a member of the board of directors of Hercules Technology Growth Capital, Inc., a publicly-traded specialty finance company, and Airvana, Inc, a provider of network infrastructure products. Mr. Badavas holds a B.S. in Accounting and Finance from Bentley College.

John Campbell. Mr. Campbell has served as one of our directors since March 1999 and is a private investor. From December 2005 until June 2006, he served as interim Chief Operating Officer of DFA Capital Management Inc., a risk management software company. He is a director of WAM Systems and DFA Capital

Management, both privately held software companies. Mr. Campbell co-founded Marcam Corporation, a leading developer of ERP software, in 1980.

Michael T. Fitzgerald. Mr. Fitzgerald has served as one of our directors since July 2000. He is Managing General Partner and Founder of Commonwealth Capital Ventures. Prior to founding Commonwealth in 1995, he was a General Partner at Palmer Partners, the manager of four early stage venture funds, where he served since 1981. Mr. Fitzgerald holds a B.A. from Amherst College and an M.B.A. from the Harvard Business School.

Patrick Gallagher. Mr. Gallagher has served as one of our directors since June 2003. He is a Vice President of Morgan Stanley Venture Partners (MSVP) and Morgan Stanley and joined the firm in 1995. He has spent time in the Debt Capital Markets Group, Technology Corporate Finance Department, and MSVP. Prior to joining Morgan Stanley, Mr. Gallagher spent two years working in Toyota’s Corporate Treasury Department. In 2003, Mr. Gallagher rejoined MSVP after working in various business development roles at RealNames, a former MSVP portfolio company. Mr. Gallagher is a member of the board of directors of Core Security Technologies, a provider of information security software and services. He holds a B.A. in Economics and Literature from Claremont McKenna College.

William S. Kaiser. Mr. Kaiser has served as one of our directors since May 2006. Mr. Kaiser has been employed by Greylock Management Corporation, a venture capital firm, since May 1986 and has been one of the general partners of the Greylock Limited Partnerships since January 1988. Mr. Kaiser is a member of the board of directors of Red Hat, Inc., an open source solutions provider, and several private companies. Mr. Kaiser holds a B.S. from MIT and an M.B.A. from the Harvard Business School.

Board Composition

Our board of directors currently consists of seven members, all of whom were elected as directors pursuant to the terms of an investor rights agreement. The board composition provisions of our investor rights agreements will terminate upon the closing of this offering and there will be no further contractual obligations regarding the election of our directors. There are no family relationships among any of our directors or executive officers.

In accordance with the terms of our restated certificate of incorporation and second amended and restated bylaws that will become effective upon the closing of this offering, our board of directors will be divided into three classes, each of which shall consist, as nearly as possible, of one-third of the total number of directors constituting our entire board of directors and each of whose members will serve for staggered three year terms. As a result, only one class of our board of directors will be elected each year from and after the closing of this offering. Upon the closing of this offering, the members of the classes will be divided as follows:


	•	the class I directors will be Messrs. Anderson and Fitzgerald, and their term will expire at the annual meeting of stockholders to be held in 2008;

	•	the class II directors will be Messrs. Campbell and Gallagher, and their term will expire at the annual meeting of stockholders to be held in 2009; and

	•	the class III directors will be Ms. Goodman and Messrs. Badavas and Kaiser, and their term will expire at the annual meeting of stockholders to be held in 2010.

Our restated certificate of incorporation and second amended and restated bylaws that will become effective upon the closing of this offering provide that our directors may be removed only for cause by the affirmative vote of the holders of at least two-thirds of the votes that all of our stockholders would be entitled to cast in an annual election of directors. Upon the expiration of the term of a class of directors, directors in that class will be eligible to be elected for a new three-year term at the annual meeting of stockholders in the year in which their term expires. This classification of our board of directors may have the effect of delaying or preventing changes in control or management of our company.

Director Independence

Under Rule 4350 of the Nasdaq Marketplace Rules, a majority of a listed company’s board of directors must be comprised of independent directors within one year of listing. In addition, Nasdaq Marketplace Rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent and that audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended. Under Rule 4200(a)(15) of the Nasdaq Marketplace Rules, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered to be independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries.

In May 2007, our board of directors undertook a review of the composition of our board of directors and its committees and the independence of each director. Based upon information requested from and provided by each director concerning their background, employment and affiliations, including family relationships, our board of directors has determined that none of Messrs. Anderson, Badavas, Campbell, Fitzgerald, Gallagher and Kaiser, representing six of our seven directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under Rule 4200(a)(15) of the Nasdaq Marketplace Rules.

Our board of directors also determined that Messrs. Badavas, Fitzgerald and Kaiser, who comprise our audit committee, Messrs. Campbell, Fitzgerald and Gallagher, who comprise our compensation committee, and Messrs. Anderson, Gallagher and Kaiser, who comprise our nominating and governance committee, satisfy the independence standards for those committees established by applicable SEC rules and the Nasdaq Marketplace Rules. In making this determination, our board of directors considered the relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. In particular, our board of directors has determined that, although Mr. Fitzgerald falls outside the safe harbor provisions of Rule 10A-3(e)(1)(ii) under the Securities Exchange Act of 1934, as amended, Mr. Fitzgerald nevertheless meets the independence requirements contemplated by Rule 10A-3 under the Exchange Act. The safe harbor provisions of Rule 10A-3(e)(1)(ii) exempt holders of 10% or less of any class of voting securities of an issuer from being deemed to be in control of, or an affiliate of, that issuer. After this offering, Mr. Fitzgerald will beneficially own approximately %, or % assuming entities affiliated with Commonwealth Capital Ventures purchase an aggregate of million shares of our common stock in this offering, of our outstanding common stock as result of his affiliation with entities affiliated with Commonwealth Capital Ventures. The existence of the safe harbor set forth in Rule 10A-3(e)(1)(ii), however, does not create a presumption in any way that a person exceeding the 10% threshold controls or is otherwise an affiliate of an issuer, and our board of directors, after considering Mr. Fitzgerald’s individual ownership in our outstanding common stock and his service to us solely in the capacity as a director, has determined that Mr. Fitzgerald satisfies the audit committee membership requirements established by the SEC and under the Nasdaq Marketplace Rules.

Board Committees

Our board of directors has an audit committee, a compensation committee and a nominating and corporate governance committee. Each of these committees will operate under a charter that has been approved by our board of directors to be effective upon completion of this offering. The composition and functioning of all of our committees comply with all applicable requirements of the Sarbanes-Oxley Act of 2002, the Nasdaq Marketplace Rules and SEC rules and regulations.

Audit Committee

The members of our audit committee are Messrs. Badavas, Fitzgerald and Kaiser. Our board of directors has determined that each of the members of our audit committee satisfies the requirements for financial literacy under the current requirements of the Nasdaq Marketplace Rules. Mr. Badavas is the chairman of the audit committee and is also an “audit committee financial expert,” as defined by SEC rules and satisfies the financial sophistication requirements of the Nasdaq Global Market. Our audit committee assists our board of directors in its oversight of our accounting and financial reporting process and the audits of our financial statements.

The audit committee’s responsibilities include:


	•	appointing, retaining, approving the compensation of, and assessing the independence of our independent registered public accounting firm;

	•	overseeing the work of our independent registered public accounting firm, including the receipt and consideration of reports from the firm;

	•	overseeing our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;

	•	establishing procedures for the receipt and retention of accounting related complaints and concerns;

	•	reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures;

	•	reviewing our policies and procedures for approving and ratifying related person transactions, including our related person transaction policy;

	•	meeting independently with our independent registered public accounting firm and management; and

	•	preparing the audit committee report required by SEC rules.

All audit services to be provided to us and all non-audit services, other than de minimus non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our audit committee.

Compensation Committee

The members of our compensation committee are Messrs. Campbell, Fitzgerald and Gallagher. Mr. Campbell is the chairman of the committee. Our compensation committee assists our board of directors in the discharge of its responsibilities relating to the compensation of our executive officers. The compensation committee’s responsibilities include:


	•	reviewing and approving, or making recommendations to our board of directors with respect to, our chief executive officer’s compensation;

	•	evaluating the performance of our executive officers and reviewing and approving, or making recommendations to the board of directors with respect to, the compensation of our other executive officers;

	•	overseeing and administering, and making recommendations to our board of directors with respect to, our cash and equity incentive plans;

	•	granting equity awards pursuant to authority delegated by our board of directors;

	•	reviewing, and making recommendations to our board of directors with respect to, director compensation; and

	•	preparing the compensation committee reports required by SEC rules.

Nominating and Corporate Governance Committee

The members of our nominating and corporate governance committee are Messrs. Anderson, Gallagher and Kaiser. Mr. Anderson is the chairman of the committee. The nominating and corporate governance committee’s responsibilities include:


	•	recommending to our board of directors the persons to be nominated for election as directors or to fill vacancies on our board of directors, and to be appointed to each of the board’s committees;

	•	overseeing an annual review by our board of directors with respect to management succession planning;

	•	developing and recommending to our board of directors corporate governance principles and guidelines; and

	•	overseeing periodic evaluations of our board of directors.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves, or served during the year ended December 31, 2006, as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of our board of directors or our compensation committee. None of the members of our compensation committee is an officer or employee of our company, nor have they ever been an officer or employee of our company.

Code of Business Conduct and Ethics

We will adopt a code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. The code of business conduct and ethics will be available on our website at www.constantcontact.com. Any amendments to the code, or any waivers of its requirements, will be disclosed on our website.

Director Compensation

During the year ended December 31, 2006, none of our directors received any compensation for service as a member of our board of directors or board committees. Non-employee directors are reimbursed reasonable travel and other expenses incurred in connection with attending our board and committee meetings.

The following table sets forth information regarding compensation earned by each non-employee director during the year ended December 31, 2006.


	Option Awards			Total
Name	($)			($)

John Campbell		–			–
Michael T. Fitzgerald		–			–
Patrick Gallagher		–			–
William S. Kaiser		–			–
Nataly Kogan(1)		–			–
James Savage(1)		–			–
Paul L. Schaut(2)	$	311	(3)	$	311


(1)		Ms. Kogan and Mr. Savage each resigned from our board of directors on May 12, 2006.


(2)		Mr. Schaut resigned from our board of directors on May 6, 2007. As of December 31, 2006, Mr. Schaut held options to purchase an aggregate of 49,757 shares of our common stock. In January 2007, he exercised options to purchase 49,172 shares of our common stock.


(3)		Valuation of these option awards is based on the dollar amount of share based compensation that would have been recognized for financial statement reporting purposes in 2006 computed in accordance with SFAS 123R, excluding the impact of estimated forfeitures related to service-based vesting conditions (which in our case were none), had we used the modified prospective transition method pursuant to SFAS 123R. Under the modified prospective transition method, a portion of the grant date fair value determined under SFAS 123 of equity awards that are outstanding on January 1, 2006, the date we adopted SFAS 123R, is recognized over the awards’ remaining vesting periods. This amount would have been $311 for Mr. Schaut. The assumptions used by us with respect to the valuation of option awards are the same as those set forth in Note 6 to our financial statements included elsewhere in this prospectus.

In January 2007, in connection with his initial appointment to our board of directors, we granted Mr. Anderson an option to purchase 39,000 shares of our common stock, at an exercise price of $3.05 per share, which was the fair market value of our common stock on the date of grant as determined by our board of directors. These options will vest over a two-year period, with 12.5% of the shares underlying the option vesting on the three-month anniversary of the date of grant and an additional 12.5% of the shares underlying the option vesting each three months thereafter, subject to Mr. Anderson’s continued service as a director and, in the event of a change of control of us, the vesting schedule of these options will accelerate in full.

In June 2007, in connection with his initial appointment to our board of directors, we granted Mr. Badavas an option to purchase 39,000 shares of our common stock, at an exercise price of $6.89 per share, which was the fair market value of our common stock on the date of grant as determined by our board of directors. These options will vest over a two-year period, with 12.5% of the shares underlying the option vesting on the three-month anniversary of the date of grant and an additional 12.5% of the shares underlying the option vesting each three months thereafter, subject to Mr. Badavas’s continued service as a director and, in the event of a change of control of us, the vesting schedule of these options will accelerate in full.

In August 2007, our board of directors approved a compensation program, which will become effective upon the closing of this offering, pursuant to which we will pay each non-employee director an annual retainer of $20,000 for service as a director. Each non-employee director other than committee chairpersons will receive an additional annual fee of $5,000 for service on the audit committee, $3,750 for service on the compensation committee and $2,500 for service on the nominating and corporate governance committee. The chairman of the audit committee will receive an additional annual retainer of $10,000, the chairman of the compensation committee will receive an additional annual retainer of $7,500 and the chairman of the nominating and corporate governance committee will receive an additional annual retainer of $5,000. We will reimburse each non-employee member of our board of directors for out-of-pocket expenses incurred in connection with attending our board and committee meetings.

In addition, pursuant to our 2007 stock incentive plan each non-employee director will receive an option to purchase 25,000 shares of our common stock upon his or her initial appointment to our board of directors. Each non-employee director will also receive an annual option grant to purchase 10,000 shares of our common stock at each annual meeting after which he or she continues to serve as a director, provided each such non-employee director has served on our board of directors for at least six months. All of these options will vest over a three-year period, with 33.33% of the shares underlying the option vesting on the first anniversary of the date of grant, or in the case of annual option grants one business day prior to the next annual meeting, if earlier, and an additional 8.33% of the shares underlying the option vesting each three months thereafter, subject to the non-employee director’s continued service as a director. The exercise price of these options will equal the fair market value of our common stock on the date of grant. In the event of a change of control of us, the vesting schedule of these options will accelerate in full.

Executive Compensation

Compensation Discussion and Analysis

Overview

Our historical executive compensation programs were developed and implemented by our board of directors and compensation committee while we were a private company. Prior to 2005, our compensation programs,

and the process by which they were developed, were less formal than that typically employed by a public company. During this time, our board of directors generally benchmarked our executive compensation on an informal basis by comparing the compensation of our executives to the compensation of executives employed in the portfolio companies of certain of our board members’ venture capital firms. Over the last two years, however, the board of directors and the compensation committee began to formalize their approach to the development of our executive compensation programs. The process became more formalized for three primary reasons. First, our size and the growth and sophistication of our executive team required that the board of directors become more rigorous in its review of executive compensation. Second, as we grew, the compensation of the executives employed in the portfolio companies of some of our board members’ venture capital firms became less meaningful for benchmarking purposes because many of the companies were smaller than us and were in earlier stages of their development. Finally, while in late 2005 we were not yet contemplating a public offering, the board of directors recognized that if we wished to conduct a public offering in the future our executive compensation programs would need to meet the standards typically associated with the compensation programs of public companies.

In establishing executive compensation levels for 2006, the compensation committee reviewed published market surveys to provide current information regarding the competitiveness of our total cash compensation, which included base salaries and target bonuses. The compensation committee used these market surveys to compare the total cash compensation of the survey group in the 50th percentile to total cash compensation of our positions that matched positions in the survey group. Based on these surveys, three of our named executive officers (Mr. Groves (-4%), Mr. Howd (-14%) and Mr. Turcott (-3%)) were below the median, one of our named executive officers (Mr. Richards) was at the median, and two of our named executive officers (Ms. Goodman (3%) and Mr. Wasserman (5%)) were above the median. The compensation committee reviewed this information and determined that the target total cash compensation for the following executive officers be set as follows: Ms. Goodman, $325,000, Mr. Howd, $200,000, Mr. Richards, $200,000, and Mr. Turcott $225,000. These increases represented an increase in target total cash compensation to these officers of 12%. Due to Mr. Wasserman’s recent commencement of employment with us in December of 2005 and Mr. Groves’ high target incentive, the compensation committee decided that no cash compensation increases were warranted for these executive officers.

For 2007 executive compensation determinations, the compensation committee engaged an independent compensation consultant, DolmatConnell & Partners, to review and evaluate the elements of our executive compensation program, including base salaries, target bonus percentages and equity ownership. As part of this evaluation, DolmatConnell developed a specific peer group of private and public software and technology companies with annual revenue less than $60 million to provide a comparative basis for our compensation practices and established base salary, bonus and long-term equity guidelines for our executives. DolmatConnell then compared the total cash compensation of the peer group in the 50th percentile to total cash compensation of our positions that matched positions in the survey group. Based on this analysis, four of our named executive officers (Ms. Goodman (-26%), Mr. Groves (-9%), Mr. Richards (-15%) and Mr. Wasserman (-26%)) were below the median, and one of our named executive officers (Mr. Howd (1%)) was above the median. The compensation committee reviewed this information and determined that the target total cash compensation for the following executive officers be set as follows: Ms. Goodman, $400,000, Mr. Groves, $280,000, Mr. Howd, $230,000, Mr. Richards, $218,750, and Mr. Wasserman $250,000. These increases represented an increase in target total cash compensation to these officers of 16%.

Other than our retention of DolmatConnell in late 2006, we have not retained any other compensation consultant to review our policies and procedures relating to executive compensation. In the future, we expect that our compensation committee will continue to engage a compensation consulting firm to provide advice and resources.

Objectives and Philosophy of Our Executive Compensation Programs

Our compensation committee’s primary objectives with respect to executive compensation are to:


	•	attract, retain and motivate the best possible executive talent;


	•	ensure executive compensation is aligned with our corporate strategies and business objectives;

	•	promote the achievement of key financial and strategic performance measures by linking short- and long-term cash and equity incentives to the achievement of measurable corporate and, in some cases, individual performance goals; and

	•	align the incentives of our executives with the creation of value for our stockholders.

Our compensation committee expects to continue to implement and maintain compensation plans to achieve these objectives. Our compensation plans and policies currently, and we expect will continue to, compensate executive officers with a combination of base salary, quarterly cash incentive bonuses, equity incentives and customary employee benefits. Historically, quarterly cash incentive bonuses have been tied to key financial metrics such as average monthly revenue growth, cash flow and earnings before interest, taxes, depreciation and amortization, or EBITDA, and, in the case of certain of our executive officers, the achievement of individual quarterly performance objectives. We have provided, and expect to continue providing, a portion of our executive compensation in the form of equity incentive awards that vest over time, which we believe helps to retain our executives and aligns their interests with those of our stockholders by allowing them to participate in the longer term success of our company as reflected in stock price appreciation. We intend to implement compensation packages for our executive officers generally in line with the median competitive levels of comparable public companies, with potential upside for better than planned performance.

Components of Our Executive Compensation Program

The primary elements of our executive compensation program are:


	•	base salary;

	•	quarterly cash incentive bonuses;

	•	equity incentive awards; and

	•	benefits and other compensation.

We have not had any formal or informal policy or target for allocating compensation between long-term and short-term compensation, between cash and non-cash compensation or among the different forms of non-cash compensation. Instead, our compensation committee has established these allocations for each executive officer on an annual basis. Our compensation committee establishes cash compensation targets based primarily upon benchmarking data as well as the performance of the individual executive. Our compensation committee establishes non-cash compensation based upon benchmarking data, the performance of the individual executive, the executives’ equity ownership percentage and the amount of their equity ownership that is vested equity. In the future, we expect that our compensation committee will continue to use benchmarking data for cash compensation as well as provide the executives with annual equity grants. We believe that the long-term performance of our business is improved through the grant of stock-based awards so that the interests of our executives are aligned with the creation of value for our stockholders.

Base Salaries. Base salaries are used to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our executive officers. Base salaries for our executives have sometimes been set in our offer letter to the executive at the outset of employment, which is the case with Ms. Goodman and Mr. Wasserman. None of our executives is currently party to an employment agreement that provides for automatic or scheduled increases in base salary. However, from time to time in the discretion of our compensation committee, and consistent with our incentive compensation program objectives, base salaries for our executives, together with other components of compensation, are evaluated for adjustment based on an assessment of an executive’s performance and general compensation trends in our industry.

In establishing base salaries for our named executive officers for 2006, our compensation committee took into account a number of factors, including each named executive’s position and functional role, seniority, job performance and overall level of responsibility and the benchmarking data. In 2006, the base salaries of Mr. Howd and Mr. Turcott were increased by 11% and 6%, respectively. Our compensation committee determined that Mr. Howd had performed well over several years, ran his organization efficiently and

effectively, and that the performance of his organization was contributing to our high level of customer satisfaction. Our compensation committee also determined that the size of Mr. Howd’s organization added significant complexity to his role. Our compensation committee determined to increase Mr. Howd’s base salary to $150,000, which placed him 6% below the median of the benchmarked group. Our compensation committee determined that Mr. Turcott had performed well in his first year and had employed marketing programs that increased our revenue. Our compensation committee determined to increase Mr. Turcott’s base salary to $165,000, which placed him 3% below the median of the benchmarked group. Our compensation committee also reviewed the performance of Ms. Goodman and Mr. Groves. Although our compensation committee determined that Ms. Goodman and Mr. Groves had performed well, it did not increase their base salaries. This decision was made, in part, because each executive’s base salary was above the median of the benchmarked group. Mr. Wasserman’s performance was not reviewed because his employment commenced in December 2005.

In establishing base salaries for our named executive officers for 2007, our compensation committee reviewed a number of factors, including each named executive’s position and functional role, seniority, job performance and overall level of responsibility and the benchmarking data and information provided by DolmatConnell. In 2007, the base salaries of Ms. Goodman, Mr. Howd and Mr. Richards and Mr. Wasserman were increased by 10%, 18%, 17% and 17%, respectively. Our compensation committee determined that Ms. Goodman had performed well as she continued to drive the strategy that expanded the company’s market leadership position. Our compensation committee determined to increase Ms. Goodman’s base salary to $275,900, which placed her 2% below the median of the benchmarked group. Our compensation committee determined that Mr. Howd had performed well in 2006, effectively scaling his organization to serve our large growth in the number of customers and at the same time helping to maintain our high level of customer satisfaction. Our compensation committee determined to increase Mr. Howd’s base salary to $176,900, which placed him 11% above the median of the benchmarked group. Our compensation committee believed that the scope and breadth of Mr. Howd’s role was broader and more strategic than a typical executive in his role and, as a result, increased his base salary substantially close to the 75th percentile of the benchmarked group. Our compensation committee determined that Mr. Richards had performed well in 2006. His organization added significant functionality to our software and kept the availability of our software product at very high levels, while we continued to add a large number of customers. Our compensation committee determined to increase Mr. Richards’ base salary to $175,000, which placed him 6% below the median of the benchmarked group. Our compensation committee determined that Mr. Wasserman had performed well in his first year, building his organization, raising capital on favorable terms and helping to prepare the company, from a systems and processes perspective, for rapid growth and a possible future initial public offering. Our compensation committee increased Mr. Wasserman’s base salary to $192,300, which placed him 6% below the median of the benchmarked group. Our compensation committee also reviewed the performance of Mr. Groves. While our compensation committee determined that Mr. Groves had performed well, it did not increase his base salary, in part, because his base salary was already 1% above the median of the benchmarked group. Our compensation committee, however, increased Mr. Groves’ target incentive percentage from 30% to 40%. The increase in Mr. Groves’ target incentive provided Mr. Groves with cash compensation upside but only if we achieved our financial targets. Our compensation committee felt that this better aligned the interests of Mr. Groves with those of our stockholders.

Cash Incentive Bonuses. Each year, including the years 2006 and 2007, we have established a cash incentive bonus plan for our executives, which provides for quarterly cash incentive bonus payments. The cash incentive bonuses are intended to compensate for the achievement of both company strategic and financial targets and, in the case of some executive officers, individual performance goals. Amounts payable under the cash incentive bonus plan are calculated as a percentage of the applicable executive’s base salary. The corporate financial targets are weighted 70% and the individual objectives are weighted 30% in the bonus analysis, except that the corporate financial targets were weighted 100% for Ms. Goodman and Messrs. Groves and Turcott in 2006, and are weighted 100% for Ms. Goodman in 2007. The corporate financial targets generally conform to the financial metrics contained in the internal business plan adopted by our board of directors. In 2006, the financial metrics were average monthly revenue growth and cash flow. The actual average monthly revenue growth targets for each quarter of 2006 were as follows: $84,487 for the first quarter, $124,595 for

the second quarter, $103,500 for the third quarter and $172,200 for the fourth quarter. The actual quarterly cash flow targets for 2006 were as follows: $(1,191,604) for the first quarter, $(1,355,479) for the second quarter, $(739,200) for the third quarter and $(3,630,300) for the fourth quarter. In 2007, the financial metrics are average monthly revenue growth and EBITDA. In both 2006 and 2007, 90% of the portion of the bonus payout related to corporate financial targets is based on the average monthly revenue growth metric. In 2006, bonus payments based on average monthly revenue growth were paid out based on achieving a minimum target of at least 80% or 90% depending on the quarter with accelerators for achievement beginning at 115% or 120% depending on the quarter. In 2007, the minimum threshold for achievement is identical to 2006 levels with similar accelerators. Bonus payments based on cash flow and EBITDA targets are paid out only if the target metric is achieved. Individual objectives are necessarily tied to the particular area of expertise of the employee and his or her performance in attaining those objectives relative to external forces, internal resources utilized and overall individual effort. The compensation committee approves the corporate financial targets, the weighting of various goals for each executive and the formula for determining potential bonus amounts based on achievement of those goals. Ms. Goodman sets the individual performance goals for the executives. The compensation committee works with the chief executive officer to develop corporate financial targets and individual performance goals. The targets and goals are generally designed to be difficult to fully achieve and, as was the case in 2006, we do not expect that all of the goals will be achieved in all periods.

The target bonus awards, as a percentage of base salary, for 2006 were 30% for Ms. Goodman and Mr. Groves, 33% for Mr. Howd and Mr. Richards, 36% for Mr. Turcott, and 24% for Mr. Wasserman. The target cash incentive bonuses awarded with respect to 2006 and set forth in the 2006 Summary Compensation Table below were split 15%, 25%, 25% and 35% for each of the four quarters respectively.

The table below reflects for each named executive officer (i) the 2006 quarterly target incentive for each performance based compensation element, (ii) the 2006 total quarterly target incentives, (iii) the actual 2006 quarterly incentive payments for each performance based compensation element based on achievement levels, and (iv) the actual 2006 total quarterly incentive payments.


	Target		Target		Target		Total		Actual		Actual		Actual		Total
	AMRG (1)		Cash Flow		MBO (2)		Target		AMRG (1)		Cash Flow		MBO (2)		Actual
	Incentive		Incentive		Incentive		Incentive		Incentive		Incentive		Incentive		Incentive

Ms. Goodman
Q1 2006	$	10,125	$	1,125	$	–	$	11,250	$	10,733	$	1,193	$	–	$	11,926
Q2 2006	$	16,875	$	1,875	$	–	$	18,750	$	14,850	$	–	$	–	$	14,850
Q3 2006	$	16,875	$	1,875	$	–	$	18,750	$	16,538	$	1,838	$	–	$	18,376
Q4 2006	$	23,625	$	2,625	$	–	$	26,250	$	21,971	$	2,625	$	–	$	24,596

Mr. Groves
Q1 2006	$	8,100	$	900	$	–	$	9,000	$	8,586	$	954	$	–	$	9,540
Q2 2006	$	13,500	$	1,500	$	–	$	15,000	$	11,880	$	–	$	–	$	11,880
Q3 2006	$	13,500	$	1,500	$	–	$	15,000	$	13,230	$	1,470	$	–	$	14,700
Q4 2006	$	18,900	$	2,100	$	–	$	21,000	$	17,577	$	2,100	$	–	$	19,677

Mr. Howd
Q1 2006	$	4,725	$	525	$	2,250	$	7,500	$	5,009	$	557	$	2,385	$	7,951
Q2 2006	$	7,875	$	875	$	3,750	$	12,500	$	6,930	$	–	$	3,750	$	10,680
Q3 2006	$	7,875	$	875	$	3,750	$	12,500	$	7,718	$	875	$	3,750	$	12,343
Q4 2006	$	11,025	$	1,225	$	5,250	$	17,500	$	10,253	$	1,225	$	5,250	$	16,728

Mr. Richards
Q1 2006	$	4,725	$	525	$	2,250	$	7,500	$	5,009	$	557	$	2,027	$	7,593
Q2 2006	$	7,875	$	875	$	3,750	$	12,500	$	6,930	$	–	$	3,750	$	10,680
Q3 2006	$	7,875	$	875	$	3,750	$	12,500	$	7,718	$	875	$	2,625	$	11,218
Q4 2006	$	11,025	$	1,225	$	5,250	$	17,500	$	10,253	$	1,225	$	4,594	$	16,072


	Target		Target		Target		Total		Actual		Actual		Actual		Total
	AMRG (1)		Cash Flow		MBO (2)		Target		AMRG (1)		Cash Flow		MBO (2)		Actual
	Incentive		Incentive		Incentive		Incentive		Incentive		Incentive		Incentive		Incentive

Mr. Turcott
Q1 2006	$	8,100	$	900	$	–	$	9,000	$	8,586	$	954	$	–	$	9,540
Q2 2006	$	13,500	$	1,500	$	–	$	15,000	$	11,880	$	–	$	–	$	11,880
Q3 2006	$	13,500	$	1,500	$	–	$	15,000	$	13,230	$	1,470	$	–	$	14,700
Q4 2006	$	18,900	$	2,100	$	–	$	21,000	$	17,577	$	2,100	$	–	$	19,677

Mr. Wasserman
Q1 2006	$	3,780	$	420	$	1,800	$	6,000	$	4,007	$	445	$	1,908	$	6,360
Q2 2006	$	6,300	$	700	$	3,000	$	10,000	$	5,544			$	3,000	$	8,544
Q3 2006	$	6,300	$	700	$	3,000	$	10,000	$	6,174	$	700	$	3,000	$	9,874
Q4 2006	$	8,820	$	980	$	4,200	$	14,000	$	8,203	$	980	$	4,200	$	13,383


(1)		AMRG = Average Monthly Revenue Growth


(2)		MBOs = Individual Performance goals

In 2006, the total annual bonus payment as a percentage of the total annual target bonus and the total annual bonus payment as a percentage of annual salary for each named executive officer were as follows: Ms. Goodman (93% and 28%); Mr. Groves (93% and 28%); Mr. Howd (95% and 32%); Mr. Richards (91% and 30%); Mr. Turcott (93% and 34%); and Mr. Wasserman (95% and 23%).

In December 2006, our compensation committee approved the target bonus awards for 2007 for our named executive officers. The target bonus awards, as a percentage of base salary, for 2007 are 45% for Ms. Goodman, 40% for Mr. Groves, 30% for Mr. Howd, 25% for Mr. Richards and 30% for Mr. Wasserman. As described in the “Overview” section above, the compensation committee determined the target total cash compensation of each named executive officer after reviewing and considering the evaluation prepared by our independent compensation consultant, DolmatConnell. Once the compensation committee established 2007 base salaries for each named executive officer, the target bonus awards, as a percentage of base salary, were set to bring each named executive officer’s total target cash compensation to the approved level. Target bonus awards for 2007 are paid out quarterly at the rate of 15%, 25%, 25% and 35% for each of the four quarters respectively.

Equity Incentive Awards. Our equity award program is the primary vehicle for offering long-term incentives to our executives. Prior to this offering, our employees, including our executives, were eligible to participate in our 1999 Stock Option/Stock Issuance Plan. Following the completion of this offering, we will continue to grant our employees, including our executives, stock-based awards pursuant to the 2007 Stock Incentive Plan, which will become effective upon the completion of this offering. Under the 2007 Stock Incentive Plan, our employees, including our executives, will be eligible to receive grants of stock options, restricted stock awards, and other stock-based equity awards at the discretion of our compensation committee.

Although we do not have any formal equity ownership guidelines for our executives, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and our stockholders. In addition, we believe the vesting feature of our equity grants furthers our goal of executive retention because this feature provides an incentive to our executives to remain in our employment during the vesting period. In determining the size of equity grants to our executives, our compensation committee considers comparative share ownership of executives in our compensation peer group, our company-level performance, the applicable executive’s performance, the amount of equity previously awarded to the executive, the vesting of such awards and the recommendations of management.

We typically make an initial equity award of stock options or restricted stock to new executives in connection with the start of their employment. Grants of equity awards, including those to executives, are all approved by our board of directors or our compensation committee and are granted based on the fair market value of our common stock. Historically, the equity awards we have granted to our executives have vested as to 25% of such

awards at the end of the first year and in equal quarterly installments over the succeeding three years. This vesting schedule is consistent with the vesting of stock options granted to other employees. In 2006, following the recommendation of our compensation committee, our board of directors approved new equity awards to reestablish or bolster incentives to retain employees, including executives who had been with us for a significant time. In determining the equity awards for each of the executives set forth on the 2006 Grants of Plan-Based Awards table below, our board of directors took into account company performance, the applicable executive’s performance and, for the December 2006 grant, the equity guidelines recommended by DolmatConnell. In February 2006, our board of directors determined that overall company performance had been strong in 2005 and that Ms. Goodman, Mr. Groves, Mr. Howd, Mr. Richards and Mr. Turcott had performed well. In making these grants, our board of directors also considered the portion of the prior equity grants that had not yet vested, and their value as a retention tool. In the case of Ms. Goodman, Mr. Groves, Mr. Howd and Mr. Richards, a large portion of their prior option grants had already vested. As a result, in February 2006, our board of directors granted options to Ms. Goodman, Mr. Groves, Mr. Howd and Mr. Richards to purchase 13,000, 13,000, 45,500 and 19,500 shares of common stock, respectively. The exercise price of these options is $1.09 per share, which was the fair market value of our common stock on the date of grant. In December 2006, our board of directors determined that the overall 2006 company performance had been strong. Our board of directors also determined that Mr. Groves, Mr. Howd, Mr. Richards and Mr. Wasserman had performed well and in particular, Ms. Goodman had performed particularly well. While reviewing the equity guidelines recommended by DolmatConnell, our board of directors noted that Mr. Wasserman’s equity ownership position was below the 50th percentile for financial executives at the peer companies. As a result, in December 2006, our board of directors granted options to Ms. Goodman, Mr. Groves, Mr. Howd, Mr. Richards and Mr. Wasserman to purchase 117,000, 19,500, 26,000, 19,500 and 39,000 shares of common stock, respectively. The exercise price of these options is $3.05 per share, which was the fair market value of our common stock on the date of grant. The increase in options granted to Ms. Goodman in December as compared to the grant in February was to reward her for her very strong performance throughout 2006. The 39,000 share grant to Mr. Wasserman was made to reward his performance and bring him closer to the 50th percentile for financial executives at the peer companies. At the discretion of our compensation committee, we expect to continue to approve annually new equity awards to certain of our employees and executives consistent with our overall incentive compensation program objectives.

We do not currently have a program, plan or practice of selecting grant dates for equity compensation to our executive officers in coordination with the release of material non-public information. Equity award grants are made from time to time in the discretion of our board of directors or compensation committee consistent with our incentive compensation program objectives. It is anticipated that following the completion of this offering, our board of directors will consider implementing a grant date policy for our executive officers.

Benefits and Other Compensation. We maintain broad-based benefits that are provided to all employees, including health and dental insurance, life and disability insurance, a 401(k) plan, an employee assistance program, maternity and paternity leave plans and standard company holidays. Our executive officers are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees, except that we pay for parking for our executive officers.

Tax Considerations

Section 162(m) of the Internal Revenue Code of 1986, as amended, generally disallows a tax deduction for compensation in excess of $1.0 million paid to our chief executive officer and our four other most highly paid executive officers. Qualifying performance-based compensation is not subject to the deduction limitation if specified requirements are met. We periodically review the potential consequences of Section 162(m) and we generally intend to structure the performance-based portion of our executive compensation, where feasible, to comply with exemptions in Section 162(m) so that the compensation remains tax deductible to us. However, the compensation committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent.

2006 Summary Compensation Table

The following table sets forth information regarding compensation earned by our president and chief executive officer, our vice president and chief financial officer, each of our three other most highly compensated executive officers and a former executive officer during the year ended December 31, 2006. We refer to these executive officers as our “named executive officers” elsewhere in this prospectus.


					Non-Equity
			Option		Incentive Plan		All Other
	Salary		Awards		Compensation		Compensation			Total
Name and Principal Position	($)		($)(1)		($)(2)		($)(3)			($)

Gail F. Goodman	$	250,000	$	13,352	$	69,748	$	840		$	333,940
President and Chief Executive Officer
Steven R. Wasserman	$	165,000	$	1,295	$	38,161	$	840		$	205,296
Vice President and Chief Financial Officer
Eric S. Groves	$	200,000	$	5,191	$	55,797	$	840		$	261,828
Senior Vice President, Sales and Business Development
Thomas C. Howd	$	150,000	$	9,235	$	47,702	$	840		$	207,777
Vice President, Services
Daniel A. Richards	$	150,000	$	5,256	$	45,563	$	840		$	201,659
Vice President, Engineering
Richard H. Turcott(4)	$	165,000	$	3,297	$	55,797	$	88,310	(5)	$	312,404
Former Chief Marketing Officer


(1)		Valuation of these stock and option awards is based, in part, on the dollar amount of share based compensation recognized for financial statement reporting purposes in 2006 computed in accordance with SFAS 123R, excluding the impact of estimated forfeitures related to service-based vesting conditions (which in our case were none). We arrive at these amounts by taking the compensation cost for these awards calculated under SFAS 123R on the date of grant, and recognize this cost over the period in which the named executive officer must provide services in order to earn the award, typically four years. The reported amounts include additional amounts that were not recognized for financial statement reporting purposes in 2006, resulting from requirements of the SEC to report in this summary compensation table awards made prior to 2006 using the modified prospective transition method pursuant to SFAS 123R. Under the modified prospective transition method, a portion of the grant date fair value determined under SFAS 123R of equity awards that are outstanding on January 1, 2006, the date we adopted SFAS 123R, is recognized over those awards’ remaining vesting periods. This additional amount is $7,445 for Ms. Goodman, $2,522 for Mr. Groves, $1,304 for Mr. Howd, $1,577 for Mr. Richards and $1,275 for Mr. Turcott. The assumptions used by us with respect to the valuation of stock and option awards are the same as those set forth in Note 6 to our financial statements included elsewhere in this prospectus. The individual awards reflected in the summary compensation table are further described below in the table “2006 Grants of Plan-Based Awards.”

(2)		The amounts shown were paid during 2006 and in January 2007 to each of the named executive officers for the achievement in 2006 of specified performance objectives under our 2006 Executive Incentive Plan.

(3)		The amounts shown reflect life insurance premiums and parking costs paid by us in 2006 on behalf of each of the named executive officers.

(4)		Mr. Turcott resigned as our Chief Marketing Officer in December 2006.

(5)		This amount includes a severance payment of $82,500 paid to Mr. Turcott in January 2007 and $4,970 for the costs of providing medical and dental benefits for six months in connection with his resignation.

2006 Grants of Plan-Based Awards

The following table sets forth information regarding grants of awards made to our named executive officers during the year ended December 31, 2006.

All Other

Option

Awards:

Grant Date

Estimated Future Payouts Under

Number of

Exercise or

Fair Value

Non-Equity Incentive Plan Awards

Securities

Base Price of

of Option

Grant

Threshold

Target

Maximum

Underlying

Option Awards

Awards

Name

Date

($)

($)(1)

($)

Options (#)

($/share)(2)

($)(3)

Gail F. Goodman

–

75,000

–

2/9/06

–

13,000

1.09

9,100

12/7/06

–

117,000

3.05

226,880

Steven R. Wasserman

–

40,000

–

12/7/06

–

39,000

3.05

75,600

Eric S. Groves

–

60,000

–

2/9/06

–

13,000

1.09

9,100

12/7/06

–

19,500

3.05

37,800

Thomas C. Howd

–

50,000

–

2/9/06

–

45,500

1.09

31,850

12/7/06

–

26,000

3.05

50,400

Daniel A. Richards

–

50,000

–

2/9/06

–

19,500

1.09

13,650

12/7/06

–

19,500

3.05

37,800

Richard H. Turcott

–

60,000

–

2/9/06

–

13,000

1.09

9,100


(1)		Our 2006 Executive Incentive Plan was approved by the compensation committee of the board of directors on February 9, 2006 (with respect to the first two quarters of 2006) and August 28, 2006 (with respect to the final two quarters of 2006). For 2006, payouts under the 2006 Executive Incentive Plan were contingent upon the achievement of certain quarterly financial performance goals, including average monthly revenue growth targets and cash flow targets, and, with the exception of Ms. Goodman and Messrs. Grove and Turcott, individual objectives. Thirty percent of the potential payouts to Messrs. Howd, Richards and Wasserman were contingent upon their ability to achieve individual quarterly objectives determined in advance by Ms. Goodman. There was no maximum payout under the 2006 Executive Incentive Plan.


(2)		In determining the exercise price for the options granted to each of the named executive officers, for option grants in the first quarter of 2006 our board of directors utilized the guideline public company method and considered a number of factors including peer group trading multiples, the amount of preferred stock liquidation preferences, the illiquid nature of our common stock, our small size, our lack of historical profitability, our short-term cash requirements and the redemption rights of our preferred stockholders. For grants during the remainder of 2006, our board of directors utilized the guideline public company method and the discounted future cash flow method, which involves applying appropriate discount rates to estimated cash flows that are based on our forecasts of revenue, costs and capital. These methodologies are then used to calculate four different valuation outcomes, which were then probability weighted. The possible outcomes considered were a sale of the company, an initial public offering, dissolution and continuing operations as a private company. For additional discussion of our methodology for determining the fair value of our common stock, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies.”


(3)		Valuation of these options is based on the aggregate dollar amount of share based compensation recognized for financial statement reporting purposes computed in accordance with SFAS 123R over the term of these options, excluding the impact of estimated forfeitures related to service-based vesting conditions (which in our case were none). The assumptions used by us with respect to the valuation of stock and option awards are set forth in Note 6 to our financial statements included elsewhere in this prospectus.

2006 Outstanding Equity Awards at Fiscal Year End

The following table sets forth information regarding outstanding option awards held by our named executive officers at December 31, 2006.


	Option Awards										Stock Awards
	Number of			Number of
	Securities			Securities							Number of			Market Value
	Underlying			Underlying							Shares or Units			of Shares or
	Unexercised			Unexercised			Option				of Stock That			Units of Stock
	Options			Options			Exercise		Option		Have Not			That Have Not
	Exercisable			Unexercisable			Price		Expiration		Vested			Vested
Name	(#)			(#)			($)		Date		(#)			($)

Gail F. Goodman		5,200	(1)		–		$	36.15		6/7/2010		–			–
		11,247			22,492	(2)	$	0.04		10/23/2013		–			–
		19,243			86,591	(3)	$	0.06		2/10/2015		–			–
		–			13,000	(4)	$	1.09		2/9/2016		–			–
		–			117,000	(5)	$	3.05		12/7/2016		–			–
Steven R. Wasserman		–			39,000	(6)	$	3.05		12/7/2016		–			–
		–			–			–		–		144,008	(7)	$	438,669	(8)
Eric S. Groves		2,925	(9)		–		$	41.54		12/7/2011		–			–
		11,247			22,492	(10)	$	0.04		10/23/2013		–			–
		6,483			29,171	(11)	$	0.06		2/10/2015		–			–
		–			13,000	(12)	$	1.09		2/9/2016		–			–
		–			19,500	(13)	$	3.05		12/7/2016		–			–
Thomas C. Howd		1,300	(14)		–		$	41.54		6/12/2011		–			–
		4,459	(15)		–		$	1.54		9/7/2011		–			–
		5,623			22,492	(16)	$	0.04		10/23/2013		–			–
		1,688			15,182	(17)	$	0.06		2/10/2015		–			–
		–			45,500	(18)	$	1.09		2/9/2016		–			–
		–			26,000	(19)	$	3.05		12/7/2016		–			–
Daniel A. Richards		650	(20)		–		$	20.77		9/16/2009		–			–
		650	(21)		–		$	20.77		1/12/2010		–			–
		975	(22)		–		$	36.15		6/7/2010		–			–
		9,924	(23)		–		$	1.54		9/7/2011		–			–
		11,246			11,246	(24)	$	0.04		10/23/2013		–			–
		14,759			18,978	(25)	$	0.06		2/10/2015		–			–
		–			19,500	(26)	$	1.09		2/9/2016		–			–
		–			19,500	(27)	$	3.05		12/7/2016		–			–
Richard H. Turcott		56,875			73,125	(28)	$	0.06		2/10/2015		–			–
		–			13,000	(29)	$	1.09		2/9/2016		–			–


(1)		Our board of directors granted this option to Ms. Goodman on December 7, 2000 and the shares underlying such option were fully vested by December 7, 2004.


(2)		Our board of directors granted this option to Ms. Goodman on October 23, 2003. Twenty-five percent of the shares underlying this option vested on October 23, 2004 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on January 23, 2005, subject to continued employment. As of December 31, 2006, Ms. Goodman had exercised a portion of this option to purchase 56,228 shares of common stock.


(3)		Our board of directors granted this option to Ms. Goodman on February 10, 2005. Twenty-five percent of the shares underlying this option vested on February 10, 2006 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on May 10, 2006, subject to continued employment. As of December 31, 2006, Ms. Goodman had exercised a portion of this option to purchase 48,105 shares of common stock.


(4)		Our board of directors granted this option to Ms. Goodman on February 9, 2006. Twenty-five percent of the shares underlying this option vest on February 9, 2007 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on May 9, 2007, subject to continued employment.

(5)		Our board of directors granted this option to Ms. Goodman on December 7, 2006. Twenty-five percent of the shares underlying this option vest on December 7, 2007 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on March 7, 2008, subject to continued employment.


(6)		Our board of directors granted this option to Mr. Wasserman on December 7, 2006. Twenty-five percent of the shares underlying this option vest on December 7, 2007 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on March 7, 2008, subject to continued employment.


(7)		On December 8, 2005, our board of directors granted to Mr. Wasserman the right to purchase 192,010 shares of restricted common stock for a purchase price of $0.06 per share, which shares Mr. Wasserman purchased. The restrictions on the shares lapsed as to 25% of the shares on December 8, 2006 and the restrictions on the remaining 75% of the shares lapse in 12 equal quarterly installments beginning on March 8, 2007, subject to continued employment.


(8)		There was no public market for our common stock on December 31, 2006. This value was determined by multiplying the number of restricted shares for which the restrictions had not lapsed by the fair market value of our common stock on December 31, 2006, or $3.05 per share, as determined by our board of directors. For discussion of our methodology for determining the fair value of our common stock, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies.”


(9)		Our board of directors granted this option to Mr. Groves on December 7, 2001 and the shares underlying such option were fully vested by December 7, 2005.


(10)		Our board of directors granted this option to Mr. Groves on October 23, 2003. Twenty-five percent of the shares underlying this option vested on October 23, 2004 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on January 23, 2005, subject to continued employment. As of December 31, 2006, Mr. Groves had exercised a portion of this option to purchase 56,227 shares of common stock.


(11)		Our board of directors granted this option to Mr. Groves on February 10, 2005. Twenty-five percent of the shares underlying this option vested on February 10, 2006 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on May 10, 2006, subject to continued employment. As of December 31, 2006, Mr. Groves had exercised a portion of this option to purchase 16,203 shares of common stock.


(12)		Our board of directors granted this option to Mr. Groves on February 9, 2006. Twenty-five percent of the shares underlying this option vest on February 9, 2007 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on May 9, 2007, subject to continued employment.

(13)		Our board of directors granted this option to Mr. Groves on December 7, 2006. Twenty-five percent of the shares underlying this option vest on December 7, 2007 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on March 7, 2008, subject to continued employment.

(14)		Our board of directors granted this option to Mr. Howd on June 12, 2001 and the shares underlying such option were fully vested by June 12, 2005.

(15)		Our board of directors granted this option to Mr. Howd on September 7, 2001 and the shares underlying such option were fully vested by September 7, 2005.


(16)		Our board of directors granted this option to Mr. Howd on October 23, 2003. Twenty-five percent of the shares underlying this option vested on October 23, 2004 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on January 23, 2005, subject to continued employment. As of December 31, 2006, Mr. Howd had exercised a portion of this option to purchase 61,851 shares of common stock.


(17)		Our board of directors granted this option to Mr. Howd on February 10, 2005. Twenty-five percent of the shares underlying this option vested on February 10, 2006 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on May 10, 2006, subject to continued employment. As of December 31, 2006, Mr. Howd had exercised a portion of this option to purchase 10,120 shares of common stock.


(18)		Our board of directors granted this option to Mr. Howd on February 9, 2006. Twenty-five percent of the shares underlying this option vest on February 9, 2007 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on May 9, 2007, subject to continued employment.

(19)		Our board of directors granted this option to Mr. Howd on December 7, 2006. Twenty-five percent of the shares underlying this option vest on December 7, 2007 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on March 7, 2008, subject to continued employment.

(20)		Our board of directors granted this option to Mr. Richards on September 16, 1999 and the shares underlying such option were fully vested by September 16, 2003.

(21)		Our board of directors granted this option to Mr. Richards on January 12, 2000 and the shares underlying such option were fully vested by January 12, 2004.

(22)		Our board of directors granted this option to Mr. Richards on June 7, 2000 and the shares underlying such option were fully vested by June 7, 2004.

(23)		Our board of directors granted this option to Mr. Richards on September 7, 2001 and the shares underlying such option were fully vested by September 7, 2005.


(24)		Our board of directors granted this option to Mr. Richards on October 23, 2003. Twenty-five percent of the shares underlying this option vested on October 23, 2004 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on January 23, 2005, subject to continued employment. As of December 31, 2006, Mr. Richards had exercised a portion of this option to purchase 22,491 shares of common stock.


(25)		Our board of directors granted this option to Mr. Richards on February 10, 2005. Twenty-five percent of the shares underlying this option vested on February 10, 2006 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on May 10, 2006, subject to continued employment.

(26)		Our board of directors granted this option to Mr. Richards on February 9, 2006. Twenty-five percent of the shares underlying this option vest on February 9, 2007 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on May 9, 2007, subject to continued employment.

(27)		Our board of directors granted this option to Mr. Richards on December 7, 2006. Twenty-five percent of the shares underlying this option vest on December 7, 2007 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on March 7, 2008, subject to continued employment.

(28)		Our board of directors granted this option to Mr. Turcott on February 10, 2005. Twenty-five percent of the shares underlying this option vested on February 10, 2006 and the remaining 75% of the shares underlying this option vest in 12 equal quarterly installments beginning on May 10, 2006. The unvested shares were forfeited by Mr. Turcott following his resignation from the company.

(29)		Our board of directors granted this option to Mr. Turcott on February 9, 2006. Twenty-five percent of the shares underlying this option were scheduled to vest on February 10, 2006 and the remaining 75% of the shares underlying this option were scheduled to vest in 12 equal quarterly installments beginning on May 10, 2006. This option was forfeited by Mr. Turcott following his resignation from the company.

2006 Option Exercises and Stock Vested

The following table sets forth information regarding options exercised by our named executive officers during the year ended December 31, 2006.

Option Awards

Stock Awards

Number of

Shares

Number of Shares

Acquired on

Value Realized on

Acquired on Vesting

Value Realized on

Name

Exercise (#)

Exercise ($)

(#)

Vesting ($)(1)

Gail F. Goodman

59,350

(2)

168,723

–

Steven R. Wasserman

–

48,002

(3)

146,223(3

)

Eric S. Groves

27,447

(4)

44,576

–

Thomas C. Howd

26,988

(5)

51,377

–

Daniel A. Richards

–

Richard H. Turcott

–


(1)		For a description of our methodology for determining the fair value of our common stock, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies.”


(2)		Ms. Goodman exercised these options, which were granted pursuant to two separate option grants, in June 2006. At that time, there was no public market for our common stock. The value realized has been calculated by taking the fair market value of our common stock in June 2006 as determined by our board of directors, or $2.90 per share, less the per share exercise price of each option multiplied by the number of stock options exercised.


(3)		These shares of restricted stock vested on December 7, 2006. At that time, there was no public market for our common stock. The value realized has been calculated by taking the fair market value of our common stock in December 2006, as determined by our board of directors, or $3.05 per share, multiplied by the number of vested shares.


(4)		Mr. Groves exercised these options, which were granted under two separate option grants, in March 2006 and June 2006. At that time, there was no public market for our common stock. The value realized for the March 2006 exercise date has been calculated by taking the fair market value of our common stock in March 2006 as determined by our board of directors, or $1.09 per share, less the per share exercise price multiplied by the number of stock options exercised. The value realized for the June 2006 exercise date has been calculated by taking the fair market value of our common stock in June 2006 as determined by our board of directors, or $2.90 per share, less the per share exercise price of each option multiplied by the number of stock options exercised.


(5)		Mr. Howd exercised these options, which were granted under two separate option grants, in March 2006 and September 2006. At that time, there was no public market for our common stock. The value realized for the March 2006 exercise date has been calculated by taking the fair market value of our common stock in March 2006 as determined by our board of directors, or $1.09 per share, less the per share exercise price multiplied by the number of stock options exercised. The value realized for the September 2006 exercise date has been calculated by taking the fair market value of our common stock in September 2006 as determined by our board of directors, or $2.68 per share, less the per share exercise price of each option multiplied by the number of stock options exercised.

Employment Agreements

We do not have formal employment agreements with any of our named executive officers. As a condition to their employment, each named executive officer entered into a non-competition, non-disclosure and non-solicitation agreement. Pursuant to these agreements, each named executive officer has agreed not to compete with us or to solicit our employees during their employment and for a period of one year after their termination, to protect our confidential and proprietary information and to assign to us all intellectual property conceived of or developed during the term of their employment.

We entered into an offer letter with Ms. Goodman on April 14, 1999 that sets forth the terms of her employment as our chief executive officer. Ms. Goodman’s initial annual base salary was $100,000 and she was eligible to earn an annual bonus of $30,000. Ms. Goodman’s base salary has been adjusted by our board of directors and is currently $275,900 and she is eligible to earn an annual bonus for 2007 of $124,100. Pursuant to the offer letter, our board of directors granted Ms. Goodman the right to purchase 7,150 shares of restricted common stock at a purchase price of $20.77 per share. The restricted shares vested as to 12.5% on October 5, 1999 and as to 6.25% each quarter thereafter. In the event Ms. Goodman’s employment is terminated by us without cause, the offer letter provides that she will be entitled to receive six months base salary and health insurance benefits.

We entered into an offer letter with Mr. Wasserman on December 1, 2005 that sets forth the terms of his employment as our vice president and chief financial officer. Mr. Wasserman’s initial annual base salary under the offer letter was $165,000. Mr. Wasserman’s base salary has been adjusted by our board of directors and is currently $192,300. Pursuant to the offer letter, our board of directors granted Mr. Wasserman the right to purchase 192,010 shares of restricted common stock at a purchase price of $0.06 per share. The grant was effective on December 8, 2005, with 25% of the restricted shares vesting at the end of Mr. Wasserman’s first year of employment, and 6.25% of the restricted shares vesting each quarter thereafter. In the event of a change of control of our company, 50% of the unvested restricted shares will become vested. In addition, if Mr. Wasserman is terminated within the first year after the change of control, the offer letter provides that the remaining unvested restricted shares will vest. If Mr. Wasserman’s employment is terminated by us without cause, or if there is a significant change in his responsibilities or location that is unacceptable to him, he will be entitled to receive six months salary and medical coverage for himself and his dependents for six months from the date of his termination.

We entered into a letter agreement with Mr. Turcott on December 6, 2006 regarding his resignation from the company. Under the terms of the letter agreement, the final date of Mr. Turcott’s employment with us was January 1, 2007, and he received a lump sum severance payment of $82,500, accrued unused vacation time and a fourth quarter 2006 bonus of $19,677. We agreed to pay the cost of his and his eligible dependent’s health and dental benefits through June 30, 2007 (or until the date he becomes eligible for similar benefits of another employer, if earlier) and he was eligible to receive three months of outplacement services. Mr. Turcott would only be entitled to the severance payment if he agreed to abide by the terms of the non-competition, nondisclosure and non-solicitation agreement.

Potential Payments Upon Termination or Change of Control

In addition to the offer letters with Ms. Goodman and Mr. Wasserman described above, the option agreements with each of our executive officers and the restricted stock agreement with Mr. Wasserman provide that in the event of a change of control, 50% of then unvested shares or options subject to such agreements shall become vested. In addition, under these agreements, if the executive officer’s employment is terminated within 12 months after the change of control, any remaining unvested shares or options subject to these agreements shall become vested. For these purposes, “change of control” generally means the consummation of the following: (a) the sale, transfer or other disposition of substantially all of our assets to a third party entity, (b) a merger or consolidation of our company with a third party entity, or (c) a transfer of more than 50% of the outstanding voting equity of our company to a third party entity (other than in a financing transaction involving the additional issuance of our securities).

The table below shows the benefits potentially payable to each of our named executive officers if he or she was terminated without cause, if there was a change of control of our company, and if he or she was terminated within 12 months after a change of control. These amounts are calculated on the assumption that the employment termination and change of control both took place on December 31, 2006.


							Additional Benefits Payable Upon
	Benefits Payable Upon				Benefits Payable Upon a		Termination Within 12 Months of a
	Termination Without Cause				Change of Control		Change of Control
	Severance		Medical/
Name	Payments		Dental(1)		Equity Benefits(2)		Equity Benefits(2)

Gail F. Goodman	$	137,950	$	5,835	$	175,748	$	175,745
Steven R. Wasserman	$	96,150	$	5,835	$	219,336	$	219,333
Eric S. Groves		–		–	$	90,059	$	90,016
Thomas C. Howd		–		–	$	100,934	$	100,930
Daniel A. Richards		–		–	$	64,285	$	64,281


(1)		Calculated based on the estimated cost to us of providing these benefits.


(2)		This amount is equal to (a) the number of option shares or restricted shares that would vest, assuming a December 31, 2006 change of control and employment termination, multiplied by (b) in the case of options, the excess of $3.05 over the exercise price of the option or, in the case of restricted stock, $3.05. $3.05 represents the fair market value of our common stock in December 2006 as determined by our board of directors.

Stock Option and Other Compensation Plans

1999 Stock Option/Stock Issuance Plan

Our 1999 Stock Option/Stock Issuance Plan, as amended, which we refer to as the 1999 stock plan, was adopted by our board of directors and approved by our stockholders in March 1999. A maximum of 5,604,353 shares of common stock are authorized for issuance under the 1999 stock plan.

The 1999 stock plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock and other stock-based awards. Our employees, officers, directors, consultants and advisors are eligible to receive awards under the 1999 stock plan; however, incentive stock options may only be granted to our employees. In accordance with the terms of the 1999 stock plan, our board of directors, or a committee appointed by our board of directors, administers the 1999 stock plan and, subject to any limitations in the 1999 stock plan, selects the recipients of awards and determines:


	•	the number of shares of common stock covered by options and the dates upon which those options become exercisable;

	•	the exercise price of options;

	•	the duration of options;

	•	the methods of payment of the exercise price of options; and


	•	the number of shares of common stock subject to any restricted stock or other stock-based awards and the terms and conditions of those awards, including the conditions for vesting as repurchase, issue price and repurchase price.

Unless otherwise provided in any individual option agreement, in the event of our merger or consolidation with or into another entity or the sale of all or substantially all of our assets as a result of which our common stock is converted into the right to receive securities, cash or other property, or in the event of our liquidation, our board of directors or the board of directors of any corporation assuming our obligations shall, in its discretion, provide that all outstanding options under the 1999 stock plan be assumed or substituted for by the successor corporation. Alternatively, our board of directors may provide written notice to option holders that all unexercised options will become exercisable in full prior to completion of the reorganization event, and

will terminate if not exercised prior to that time. If under the terms of the reorganization event holders of our common stock receive cash for their surrendered shares, our board of directors may instead provide for a cash-out of the value of any outstanding options based on the surrender value less the applicable exercise price. Our board of directors may also provide that each outstanding option shall terminate in exchange for a cash payment equal to the fair market value of our common stock less the applicable exercise price.

Our board of directors may at any time modify or amend the 1999 stock plan in any respect, except that stockholder approval will be required for any revision that is required to comply with applicable law, and provided further that optionholder approval will be required for any modification that affects the optionholder’s rights under any outstanding options.

As of June 30, 2007, there were options to purchase 1,854,641 shares of common stock outstanding under the 1999 stock plan at a weighted average exercise price of $2.63 per share, and 2,918,534 shares of common stock were issued pursuant to the exercise of options granted under the 1999 stock plan. After the effective date of the 2007 stock incentive plan described below, we will grant no further stock options or other awards under the 1999 stock plan. However, any shares of common stock reserved for issuance under the 1999 stock plan that remain available for issuance at the time of the discontinuance and any shares of common stock subject to awards under the 1999 stock plan that expire, terminate, or are otherwise surrendered, canceled, forfeited or repurchased by us will be added to the number of shares available under the 2007 stock incentive plan up to a specified number of shares.

2007 Stock Incentive Plan

Our 2007 stock incentive plan, which will become effective upon the completion of this offering, was adopted by our board of directors on , 2007 and approved by our stockholders on , 2007. The 2007 stock incentive plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights and other stock-based awards. Upon effectiveness of the plan, the number of shares of common stock reserved for issuance under the 2007 stock incentive plan will be 1,500,000 shares plus the number of shares of common stock then available for issuance under the 1999 stock plan and the number of shares of common stock subject to awards granted under the 1999 stock plan which expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right, up to a maximum of 700,000 shares.

In addition, our 2007 stock incentive plan contains an “evergreen provision” that allows for an annual increase in the number of shares available for issuance under our 2007 stock incentive plan on the first day of each year beginning in 2008 and ending on the second day of 2017. The annual increase in the number of shares shall be equal to the lowest of:


	•	700,000 shares of common stock;


	•	5% of the aggregate number of shares of common stock outstanding on the first day of the applicable year; and


	•	an amount determined by our board of directors.

Our employees, officers, directors, consultants and advisors are eligible to receive awards under our 2007 stock incentive plan; however, incentive stock options may only be granted to our employees. The maximum number of shares of common stock with respect to which awards may be granted to any participant under the plan is 500,000 per fiscal year.

Our 2007 stock incentive plan provides for the automatic grant of options to members of our board of directors who are not our employees. Each non-employee director will receive an option to purchase 25,000 shares of our common stock upon his or her initial appointment to our board of directors. Each non-employee director will also receive an annual option grant to purchase 10,000 shares of our common stock at each annual meeting of stockholders after which he or she continues to serve as a director, provided each such non-employee director has served on our board of directors for at least six months. All of these options will vest over a 3-year period, with 33.33% of the shares underlying the option vesting on the first anniversary of

the date of grant, or in the case of annual option grants one business day prior to the next annual meeting, if earlier, and an additional 8.33% of the shares underlying the option vesting each three months thereafter, subject to the non-employee director’s continued service as a director. The exercise price of these options will equal the fair market value of our common stock on the date of grant. Our board of directors can increase or decrease the number of shares subject to options granted to non-employee directors and can issue restricted stock or other stock-based awards in addition to some or all of the options otherwise issuable. In addition, our board of directors may provide for accelerated vesting of any such options upon death, disability, change in control, attainment of mandatory retirement age or retirement following at least 10 years of service and may include any such other terms and conditions as our board of directors determines.

Our 2007 stock incentive plan is administered by our board of directors. Pursuant to the terms of the 2007 stock incentive plan and to the extent permitted by law, our board of directors may delegate authority under the 2007 stock incentive plan to one or more committees or subcommittees of our board of directors or to our executive officers. Our board of directors or any committee to whom our board of directors delegates authority selects the recipients of awards and determines:


	•	the number of shares of common stock covered by options and the dates upon which the options become exercisable;

	•	the exercise price of options;


	•	the duration of the options;


	•	the methods of payment of the exercise price of options; and


	•	the number of shares of common stock subject to any restricted stock or other stock-based awards and the terms and conditions of such awards, including conditions for vesting or repurchase, issue price and repurchase price.

If our board of directors delegates authority to an executive officer to grant awards under the 2007 stock incentive plan, the executive officer has the power to make awards to all of our employees, except executive officers. Our board of directors will fix the terms of the awards to be granted by such executive officer, including the exercise price of such awards, and the maximum number of shares subject to awards that such executive officer may make.

Upon a merger or other reorganization event, our board of directors may, in its sole discretion, take any one or more of the following actions pursuant to our 2007 stock incentive plan, as to some or all outstanding awards:


•	provide that all outstanding awards shall be assumed or substituted by the acquiring or successor corporation;


•	upon written notice to a participant, provide that the participant’s unexercised options or awards will terminate immediately prior to the consummation of such transaction unless exercised by the participant within a specific period following such notice;


•	provide that outstanding awards will become exercisable, realizable or deliverable, or restrictions applicable to an award will lapse, in whole or in part, prior to or upon the reorganization event;

•	in the event of a reorganization event pursuant to which holders of our common stock will receive a cash payment for each share surrendered in the reorganization event, make or provide for a cash payment to the participants equal to the excess, if any, of the acquisition price times the number of shares of our common stock subject to such outstanding awards (to the extent then exercisable at prices not in excess of the acquisition price), over the aggregate exercise price of all such outstanding awards and any applicable tax withholdings, in exchange for the termination of such awards; and/or


•	provide that, in connection with our liquidation or dissolution, awards convert into the right to receive liquidation proceeds net of the exercise price thereof and any applicable tax withholdings.

Upon the occurrence of a reorganization event other than our liquidation or dissolution, the repurchase and other rights under each outstanding restricted stock award will continue for the benefit of the successor

company and will, unless the board of directors may otherwise determine, apply to the cash, securities or other property into which our common stock is converted pursuant to the reorganization event. Upon the occurrence of a reorganization event involving our liquidation or dissolution, all conditions on each outstanding restricted stock award will automatically be deemed terminated or satisfied, unless otherwise provided in the agreement evidencing the restricted stock award.

No award may be granted under the 2007 stock incentive plan after , 2017, but the vesting and effectiveness of awards granted before that date may extend beyond that date. Our board of directors may amend, suspend or terminate the 2007 stock incentive plan at any time, except that stockholder approval will be required for any revision that would materially increase the number of shares reserved for issuance, expand the types of awards available under the plan, materially modify plan eligibility requirements, extend the term of the plan or materially modify the method of determining the exercise price of options granted under the plan, or otherwise as required to comply with applicable law or stock market requirements.

2007 Employee Stock Purchase Plan

Our 2007 employee stock purchase plan, which we refer to as the purchase plan, was adopted by our board of directors and approved by our stockholders in 2007 and will become effective upon the completion of this offering. We have reserved a total of 350,000 shares of our common stock for issuance to participating employees under the purchase plan. The purchase plan will be administered by our board of directors or by a committee appointed by our board of directors.

All of our employees, including our directors who are employees and all employees of any of our participating subsidiaries, who have been employed by us for at least three months prior to enrolling in the purchase plan, who are employees on the first day of the purchase plan period, and whose customary employment is for more than 30 hours a week and more than five months in any calendar year, will be eligible to participate in the purchase plan. Employees who would, immediately after being granted an option to purchase shares under the purchase plan, own 5% or more of the total combined voting power or value of our common stock will not be eligible to participate in the purchase plan.

We will make one or more offerings to our employees to purchase stock under the purchase plan. Offerings will begin on each of January 1 and July 1, or the first business day thereafter, provided that our first offering commencement date will begin on January 1, 2008. Each offering commencement date will begin a six-month purchase plan period during which payroll deductions will be made and held for the purchase of the common stock at the end of such purchase plan period. Our board of directors or the committee may, at its discretion, choose a different purchase plan period of 12 months or less.

On the first day of a designated payroll deduction period, or offering period, we will grant to each eligible employee who has elected to participate in the purchase plan an option to purchase shares of our common stock. The employee may authorize up to 10% of his or her compensation to be deducted by us during the offering period. On the last day of the offering period, the employee will be deemed to have exercised the option, at the option exercise price, to the extent of accumulated payroll deductions. Under the terms of the purchase plan, the option exercise price shall be determined by our board of directors or the committee, based on the lesser of the closing price of our common stock on the first business day of the plan period or the exercise date, as defined in the purchase plan, or shall be based solely on the closing price of our common stock on the exercise date, provided that the option exercise price shall be at least 85% of the applicable closing price. In the absence of a determination by our board of directors or the committee, the option exercise price will be 85% of the closing price of our common stock on the exercise date. Our board of directors has determined that the current option exercise price will be 85% of the closing price of our common stock on the exercise date.

An employee who is not a participant on the last day of the offering period will not be entitled to exercise any option, and the employee’s accumulated payroll deductions will be refunded. An employee’s rights under the purchase plan will terminate upon voluntary withdrawal from the purchase plan at any time, or when the

employee ceases employment for any reason, except that upon termination of employment because of death, the balance in the employee’s account will be paid to the employee’s beneficiary.

401(k) Retirement Plan

We maintain a 401(k) retirement plan that is intended to be a tax-qualified defined contribution plan under Section 401(k) of the Internal Revenue Code. In general, all of our employees are eligible to participate in the 401(k) plan, subject to a 90-day waiting period. The 401(k) plan includes a salary deferral arrangement pursuant to which participants may elect to reduce their current compensation on a pre-tax basis by up to the statutorily prescribed limit, equal to $15,500 in 2007, and have the amount of the reduction contributed to the 401(k) plan. We are permitted to match employees’ 401(k) plan contributions; however, we do not do so currently.

Limitations on Officers’ and Directors’ Liability and Indemnification Agreements

As permitted by Delaware law, our restated certificate of incorporation, which will become effective upon the closing of this offering, contains provisions that limit or eliminate the personal liability of our directors for breach of fiduciary duty of care as a director. Our restated certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breaches of their fiduciary duties as directors, except liability for:


	•	any breach of the director’s duty of loyalty to us or our stockholders;

	•	any act or omission not in good faith or that involves intentional misconduct or knowing violation of law;


	•	any unlawful payments of dividends or other distributions; or


	•	any transaction from which the director derived an improper personal benefit.

These limitations do not apply to liabilities arising under federal securities laws and do not affect the availability of equitable remedies, including injunctive relief or rescission. If Delaware law is amended to authorize the further elimination or limitation of liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law as so amended.

As permitted by Delaware law, our restated certificate of incorporation also provides that:


	•	we will indemnify our directors and officers to the fullest extent permitted by law;

	•	we may indemnify our other employees and other agents to the same extent that we indemnify our officers and directors, unless otherwise determined by our board of directors; and

	•	we will advance expenses to our directors and officers in connection with a legal proceeding to the fullest extent permitted by law.

The indemnification provisions contained in our restated certificate of incorporation are not exclusive.

In addition to the indemnification provided for in our restated certificate of incorporation prior to completion of this offering we intend to enter into indemnification agreements with each of our directors and officers. Each indemnification agreement will provide that we will indemnify the director or officer to the fullest extent permitted by law for claims arising in his or her capacity as our director, officer, employee or agent, provided that he or she acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful. In the event that we do not assume the defense of a claim against a director or officer, we are required to advance his or her expenses in connection with his or her defense, provided that he or she undertakes to repay all amounts advanced if it is ultimately determined that he or she is not entitled to be indemnified by us.

We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and officers. Insofar as indemnification for liabilities arising under the Securities Act may be permitted for directors, officers or persons controlling our company pursuant to the foregoing provisions, the opinion of the SEC is that such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

In addition, we maintain a general liability insurance policy that covers certain liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in their capacities as directors or officers.

Rule 10b5-1 Sales Plans

Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from them. The director or officer may amend or terminate the plan in some circumstances. Our directors and executive officers may also buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information.

Principal and Selling Stockholders

The following table sets forth information regarding the beneficial ownership of our common stock as of July 31, 2007, by:


	•	each of our directors;

	•	each of our named executive officers;

	•	each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock;

	•	all of our directors and executive officers as a group; and

	•	each selling stockholder.

Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include shares of common stock issuable upon the exercise of stock options that are immediately exercisable or exercisable within 60 days after July 31, 2007. Except as otherwise indicated in the footnotes to the table below, all of the shares reflected in the table are shares of common stock and all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose.

Percentage ownership calculations for beneficial ownership prior to this offering are based on 21,283,452 shares outstanding as of July 31, 2007, assuming the exercise of the warrant for redeemable convertible preferred stock and the conversion of all of our outstanding redeemable convertible preferred stock. Percentage ownership calculations for beneficial ownership after this offering also include the shares we are offering hereby.

In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of July 31, 2007. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Beneficial ownership representing less than 1% is denoted with an asterisk (*). Except as otherwise indicated in the footnotes to the table below, addresses of named beneficial owners are in care of Constant Contact, Inc., Reservoir Place, 1601 Trapelo Road, Suite 329, Waltham, Massachusetts 02451.

Number of

Shares

Being

Shares Beneficially

Offered

Owned Assuming Full

Pursuant to

Exercise of an Option

Shares Beneficially Owned

an Option

Granted to the

Prior to Offering

Shares

After Offering

Granted to the

Underwriters

Name of Beneficial Owner

Number

Percentage

Offered

Number

Percentage

Underwriters

Number

Percentage

Officers and Directors

Gail F. Goodman(1)

1,175,073

5.50

–

Eric S. Groves(2)

391,531

1.84

–

Thomas C. Howd(3)

208,240

–

Daniel A. Richards(4)

250,503

1.17

–

Richard H. Turcott(5)

32,305

14,300

–

Steven R. Wasserman

192,010

–

Thomas Anderson(6)

9,750

–

Robert P. Badavas(7)

2,437

–

John Campbell(8)

306,160

1.44

130,000

–

Michael T. Fitzgerald(9)

3,267,203

15.35

–

Patrick Gallagher(10)

4,653,879

21.87

–

William S. Kaiser(11)

2,189,019

10.28

–

All current executive officers and directors as a group (14 persons)

12,690,070

58.80

130,000

–

Number of

Shares

Being

Shares Beneficially

Offered

Owned Assuming Full

Pursuant to

Exercise of an Option

Shares Beneficially Owned

an Option

Granted to the

Prior to Offering

Shares

After Offering

Granted to the

Underwriters

Name of Beneficial Owner

Number

Percentage

Offered

Number

Percentage

Underwriters

Number

Percentage

5% Stockholders

Entities affiliated with Morgan Stanley Dean Witter Venture Partners(10)

4,653,879

21.87

–

Entities affiliated with Commonwealth Capital Ventures(9)

3,267,203

15.35

–

Hudson Venture Partners II, L.P.(12)

3,013,885

14.16

–

218,208

Entities affiliated with Greylock Partners(11)

2,189,019

10.29

–

Longworth Venture Partners, L.P.(13)

2,083,933

9.79

–

416,786

Other Selling Stockholders

Bantam Group, Inc.(14)

50,964

26,000

–

John Beard

84,064

20,800

–

Matthew Campbell

4,377

1,300

–

Gina Kilby Conaway

19,532

2,600

–

Kathleen DeBlasio

83,097

46,800

–

Devin Golden

17,385

–

David Holbrook

285,038

1.34

143,000

–

Michelle Keegan

17,338

5,200

–

Northstar Global Partners, LLC(15)

156,000

–

S. Margaret Olson

134,685

17,686

–

One & Co.(16)

356,709

1.68

80,141

–

G. Randolph Parker

32,500

8,125

–

Alison and Gerardo Spagnuolo

5,471

2,600

–

Kermit Stofer

57,878

19,500

VeriSign Capital Management, Inc.(17)

152,942

–


(1)		Includes 86,297 shares subject to options exercisable within 60 days of July 31, 2007.


(2)		Includes 52,123 shares subject to options exercisable within 60 days of July 31, 2007.


(3)		Includes 52,061 shares subject to options exercisable within 60 days of July 31, 2007.


(4)		Includes 60,276 shares subject to options exercisable within 60 days of July 31, 2007.


(5)		Mr. Turcott resigned as our Chief Marketing Officer in December 2006.


(6)		Consists of 9,750 shares subject to options exercisable within 60 days of July 31, 2007.


(7)		Consists of 2,437 shares subject to options exercisable within 60 days of July 31, 2007.


(8)		Includes 292,267 shares held jointly with Mr. Campbell’s wife, Mrs. Jean Campbell.


(9)		Consists of 3,113,288 shares held by Commonwealth Capital Ventures II L.P. and 153,915 shares held by CCV II Associates L.P. The information in the table excludes any shares that entities affiliated with Commonwealth Capital Ventures may purchase in this offering. In the event that entities affiliated with Commonwealth Capital Ventures were to purchase an aggregate of million shares in this offering, the number of shares beneficially owned after the offering would be million, or %, and the number of shares beneficially owned assuming full exercise of an option granted to the underwriters would be million, or %. The general partner of Commonwealth Capital Ventures II L.P. and CCV II Associates L.P. is Commonwealth Venture Partners II L.P. Michael T. Fitzgerald, a member of our board of directors, Jeffrey M. Hurst, R. Stephen


		McCormack and Justin J. Perreault are the general partners of Commonwealth Venture Partners II L.P. Accordingly, they may be deemed to share beneficial ownership of the shares beneficially owned by Commonwealth Capital Ventures II L.P. and CCV II Associates L.P., although each of them disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein. The address of Commonwealth Venture Partners II L.P. is 950 Winter Street, Suite 4100, Waltham, Massachusetts 02451.


(10)		Consists of 4,029,230 shares held by Morgan Stanley Dean Witter Venture Partners IV, L.P., 467,454 shares held by Morgan Stanley Dean Witter Venture Investors IV, L.P. and 120,921 shares held by Morgan Stanley Dean Witter Venture Offshore Investors IV, L.P. MSDW Venture Partners IV, LLC is the general partner of each of Morgan Stanley Dean Witter Venture Partners IV, L.P., Morgan Stanley Dean Witter Venture Investors IV, L.P. and Morgan Stanley Dean Witter Venture Offshore Investors IV, L.P. MSDW Venture Partners IV, Inc. is the member of the general partner and a wholly-owned subsidiary of Morgan Stanley. Patrick Gallagher, a member of our board of directors, disclaims beneficial ownership of the securities except to the extent of his pecuniary interest therein. The address of the entities affiliated with Morgan Stanley Dean Witter Venture Partners is 1221 Avenue of the Americas, 39th Floor, New York, New York 10020.


(11)		Consists of 1,871,613 shares held by Greylock XII Limited Partnership, 207,956 shares held by Greylock XII-A Limited Partnership and 109,450 shares held by Greylock XII Principals LLC. The general partner of Greylock XII Limited Partnership and Greylock XII-A Limited Partnership is Greylock XII GP LLC. The members of Greylock XII GP LLC and Greylock XII Principals LLC are: Aneel Bhusri, Thomas Bogan, Asheem Chandna, Charles Chi, Roger Evans, William Helman, William Kaiser, a member of our board of directors, Donald Sullivan and David Sze. Each of these individuals exercises shared voting and investment power over the shares held of record by Greylock XII Limited Partnership, Greylock XII-A Limited Partnership and Greylock XII Principals LLC and disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. The address of the entities affiliated with Greylock Partners is 880 Winter Street, Waltham, Massachusetts 02451.


(12)		The general partner of Hudson Venture Partners II, L.P. is Hudson Ventures II, LLC. The members of Hudson Ventures II, LLC are Glen Lewy, Jay Goldberg, Kim Goh and Dr. Lawrence Howard. Each of these individuals exercises shared voting and investment power over the shares held of record by Hudson Venture Partners II, L.P. and disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. The address of Hudson Venture Partners II, L.P. is 535 Fifth Avenue, 14th Floor, New York, New York 10021.

(13)		The general partner of Longworth Venture Partners, L.P. is Longworth Venture Management, LLC. The members of Longworth Venture Management, LLC are Paul Margolis and James Savage, a former member of our board of directors. Each of these individuals exercises shared voting and investment power over the shares held of record by Longworth Venture Partners, L.P. and disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. The address of Longworth Venture Partners, L.P. is 1050 Winter Street, Suite 2600, Waltham, Massachusetts 02451.


(14)		Joe Caruso, president of Bantam Group, Inc., has voting and dispositive power over the shares held of record by Bantam Group, Inc.


(15)		Consists of warrants to purchase 120,000 shares of redeemable convertible preferred stock exercisable within 60 days of July 31, 2007, which shares are convertible into 156,000 shares of common stock. The manager of Northstar Global Partners, LLC is Joe Bradley. Joe Bradley exercises voting and investment power over the shares held of record by Northstar Global Partners, LLC.


(16)		One & Co is the nominee (or “street”) name used by Welch & Forbes LLC for investments purchased on behalf of its clients. The members of Welch & Forbes LLC sharing voting and investment power over such investments are Richard F. Young, John H. Emmons, Jr., Charles T. Haydock, James E. Russell, Adrienne G. Silbermann, and Benjamin J. Williams, Jr. Each individual disclaims beneficial ownership of such shares except to the extent of his or her pecuniary interest therein.


(17)		VeriSign Capital Management, Inc. is a wholly owned subsidiary of VeriSign, Inc., a publicly traded company.

Certain Transactions

Since January 1, 2004, we have engaged in the following transactions with our directors, executive officers and holders of more than 5% of our voting securities, and affiliates and immediate family members of our directors, executive officers and 5% stockholders. We believe that all of the transactions described below were made on terms no less favorable to us than could have been obtained from unaffiliated third parties:

Logoworks

Mr. Groves, our Senior Vice President, Sales and Business Development, served as a director of Logoworks from December 2003 until Hewlett-Packard Company acquired Logoworks’ corporate parent, Arteis, Inc., in May 2007. Logoworks is one of our channel partners and we pay Logoworks fees based on the volume of paying customers referred to us. We have also used the design services of Logoworks in creating some of the templates used in our email marketing product. In 2006, 2005 and 2004, our aggregate payments to Logoworks were approximately $163,758, $107,483 and $36,798, respectively. During the seven months ended July 31, 2007, our aggregate payments to Logoworks were approximately $18,500.

RightNow Technologies

We utilize customer support software licensed to us by RightNow Technologies, Inc., a publicly traded customer relationship service provider. In 2006, 2005 and 2004 and during the seven months ended July 31, 2007, our aggregate payments to RightNow Technologies were approximately $253,000, $33,000, $123,000 and $496,000, respectively. Investment entities affiliated with Greylock Partners owned, as of March 31, 2007, approximately 13% of the outstanding common stock of RightNow Technologies. Roger L. Evans, a general partner of Greylock Partners, serves on the board of directors of RightNow Technologies. William S. Kaiser, a member of our board of directors, is a general partner of Greylock Partners.

CIBC World Markets Corp.

Mark Goodman, Managing Director, Head of Consumer and Business Services Group of CIBC World Markets Corp., a co-managing underwriter of this offering, is the brother of Gail F. Goodman. Ms. Goodman is our Chairman, President, Chief Executive Officer and the beneficial holder of more than 5% of our voting securities. We have entered into an underwriting agreement with CIBC World Markets Corp. and the other underwriters of this offering. For more information with respect to the terms of the underwriting agreement, see “Underwriting.”

Stock Issuances

In May 2006 and July 2006, we issued and sold an aggregate of 2,521,432 shares of our Series C redeemable convertible preferred stock at a price of $5.949 per share to individual investors for an aggregate purchase price of $14,999,998.98. Upon the closing of this offering, these shares will automatically convert into 3,277,851 shares of common stock. The table below sets forth the number of shares of our Series C redeemable convertible preferred stock sold to our directors and 5% stockholders and their affiliates:


	Number of Shares
	of Series C Redeemable
	Convertible		Aggregate
Name	Preferred Stock		Purchase Price ($)

Entities affiliated with Morgan Stanley Dean Witter Venture Partners		272,532		1,621,292.87
Entities affiliated with Commonwealth Capital Ventures		191,640		1,140,066.36
Hudson Venture Partners II, L.P.		164,107		976,272.54
Entities affiliated with Greylock Partners		1,681,143		10,001,119.71
Longworth Venture Partners, L.P.		122,256		727,300.94
John Campbell		18,263		108,646.59

Purchases of Shares in this Offering

Entities affiliated with Commonwealth Capital Ventures, which are existing stockholders, have indicated an interest in purchasing up to an aggregate of million shares of our common stock in this offering at the initial public offering price. Michael T. Fitzgerald, a member of our board of directors, is a general partner of Commonwealth Capital Ventures II L.P., the general partner of the entities affiliated with Commonwealth Capital Ventures. Assuming an initial public offering price of $ per share, the mid-point of the estimated price range shown on the cover page of this prospectus, the entities affiliated with Commonwealth Capital Ventures would purchase up to $ million of our common stock in this offering. However, because indications of interest are not binding agreements or commitments to purchase, these stockholders might not purchase any common stock in this offering. These shares, if purchased, will be subject to the 180-day lock-up agreement that the entities affiliated with Commonwealth Capital Ventures have signed with the underwriters in connection with this offering.

Registration Rights

The holders of our redeemable convertible preferred stock and certain holders of our common stock have the right to demand that we file a registration statement or request that their shares be covered by a registration statement that we are otherwise filing. These rights are provided under the terms of amended and restated investor rights agreements we entered into in 2001 and 2006 with these holders, which include some of our directors, executive officers and holders of more than 5% of our voting securities and their affiliates. For a more detailed description of these registration rights, see “Description of Capital Stock—Registration Rights.”

Indemnification Agreements

Our restated certificate of incorporation that will be in effect upon the closing of this offering provides that we will indemnify our directors and officers to the fullest extent permitted by Delaware law. In addition, we expect to enter into indemnification agreements with each of our directors and officers that may be broader in scope that the specific indemnification provisions contained in the Delaware General Corporation Law. For more information regarding these agreements, see “Management—Limitations on Officers’ and Directors’ Liability and Indemnification Agreements.”

Policies and Procedures for Related Party Transactions

In August 2007, our board of directors adopted a written related person transaction policy to set forth the policies and procedures for the review and approval or ratification of related person transactions. This policy covers any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, the amount involved exceeds $120,000, and a related person had or will have a direct or indirect material interest, including, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness, and employment by us of a related person.

Any related person transaction proposed to be entered into by us must be reported to our general counsel and will be reviewed and approved by the audit committee in accordance with the terms of the policy, prior to effectiveness or consummation of the transaction, whenever practicable. If our general counsel determines that advance approval of a related person transaction is not practicable under the circumstances, the audit committee will review and, in its discretion, may ratify the related person transaction at the next meeting of the audit committee, or at the next meeting following the date that the related person transaction comes to the attention of our general counsel. Our general counsel, however, may present a related person transaction arising in the time period between meetings of the audit committee to the chairman of the audit committee,

who will review and may approve the related person transaction, subject to ratification by the audit committee at the next meeting of the audit committee.

In addition, any related person transaction previously approved by the audit committee or otherwise already existing that is ongoing in nature will be reviewed by the audit committee annually to ensure that such related person transaction has been conducted in accordance with the previous approval granted by the audit committee, if any, and that all required disclosures regarding the related person transaction are made.

Transactions involving compensation of executive officers will be reviewed and approved by the compensation committee in the manner specified in the charter of the compensation committee.

A related person transaction reviewed under this policy will be considered approved or ratified if it is authorized by the audit committee in accordance with the standards set forth in this policy after full disclosure of the related person’s interests in the transaction. As appropriate for the circumstances, the audit committee will review and consider:


	•	the related person’s interest in the related person transaction;

	•	the approximate dollar value of the amount involved in the related person transaction;

	•	the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;

	•	whether the transaction was undertaken in the ordinary course of business;

	•	whether the transaction with the related person is proposed to be, or was, entered into on terms no less favorable to us than terms that could have been reached with an unrelated third party;

	•	the purpose of, and the potential benefits to us of, the transaction; and

	•	any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

The audit committee will review all relevant information available to it about the related person transaction. The audit committee may approve or ratify the related person transaction only if the audit committee determines that, under all of the circumstances, the transaction is in or is not inconsistent with our best interests. The audit committee may, in its sole discretion, impose conditions as it deems appropriate on us or the related person in connection with approval of the related person transaction.

Description of Capital Stock

General

Following the closing of this offering, our authorized capital stock will consist of 100,000,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share, all of which preferred stock will be undesignated.

The following description of our capital stock and provisions of our restated certificate of incorporation and second amended and restated bylaws are summaries and are qualified by reference to the restated certificate of incorporation and the second amended and restated bylaws that will become effective upon the closing of this offering. Copies of these documents have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part. The descriptions of our common stock and preferred stock reflect changes to our capital structure that will occur upon the closing of this offering.

Common Stock

As of July 31, 2007, there were 21,283,453 shares of our common stock outstanding, held of record by 140 stockholders, assuming the exercise of the warrant for redeemable preferred stock and the conversion of all outstanding shares of our redeemable convertible preferred stock.

Under the terms of our restated certificate of incorporation that will become effective upon the closing of this offering, the holders of our common stock are generally entitled to one vote for each share held on all matters submitted to a vote of the stockholders and do not have any cumulative voting rights. Holders of our common stock are entitled to receive proportionally any dividends declared by our board of directors out of funds legally available therefor, subject to any preferential dividend or other rights of any then outstanding preferred stock.

In the event of our liquidation or dissolution, holders of our common stock are entitled to share ratably in all assets remaining after payment of all debts and other liabilities, subject to the prior rights of any then outstanding preferred stock. Holders of our common stock have no preemptive, subscription, redemption or conversion rights. All outstanding shares of our common stock are validly issued, fully paid and nonassessable. The shares to be issued by us in this offering will be, when issued and paid for, validly issued, fully paid and nonassessable.

The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of preferred stock that we may designate and issue in the future.

Preferred Stock

Under the terms of our restated certificate of incorporation that will become effective upon the closing of this offering, our board of directors is authorized to designate and issue up to 5,000,000 shares of preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock, any or all of which may be greater than or senior to the rights of the common stock. The issuance of preferred stock could adversely affect the voting power of holders of common stock and reduce the likelihood that such holders will receive dividend payments or payments on liquidation. In certain circumstances, an issuance of preferred stock could have the effect of decreasing the market price of our common stock.

Authorizing our board of directors to issue preferred stock and determine its rights and preferences has the effect of eliminating delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or could

discourage a third party from seeking to acquire, a majority of our outstanding voting stock. Upon completion of this offering, there will be no shares of preferred stock outstanding, and we have no present plans to issue any shares of preferred stock.

Options

As of July 31, 2007, options to purchase 1,822,932 shares of common stock at a weighted average exercise price of $2.66 per share were outstanding.

Warrants

As of July 31, 2007, we had outstanding a warrant to purchase 120,000 shares of Series B redeemable convertible preferred stock with an exercise price of $0.50 per share, which shares are convertible into 156,000 shares of common stock. If not exercised, this warrant will expire immediately prior to the closing of this offering, provided that we provide the holder of the warrant with at least 10 days advance notice of the closing. As of July 31, 2007, we also had outstanding a warrant to purchase 96,324 shares of common stock with an exercise price of $1.21 per share, which expires on October 10, 2008, and a warrant to purchase 520 shares of common stock with an exercise price of $0.38 per share, which expires on November 27, 2014.

Registration Rights

We are a party to an amended and restated investors’ rights agreement, or the 2001 investors’ rights agreement, with certain holders of our common stock, an amended and restated preferred investors’ rights agreement, or the 2006 investors’ rights agreement, with certain holders of our redeemable convertible preferred stock, our chief executive officer, chief financial officer and our senior vice president, sales and business development and a registration rights agreement with the holder of a warrant to purchase 520 shares of our common stock. After the completion of this offering and the sale by the selling stockholders of the shares offered by them hereby, holders of a total of shares of our common stock and shares of our common stock issuable upon the exercise of warrants will have the right to require us to register these shares under the Securities Act under specific circumstances. After registration pursuant to these rights, these shares will become freely tradable without restriction under the Securities Act. The following description of the terms of the 2001 investors’ rights agreement and the 2006 investors’ rights agreement is intended as a summary only and is qualified in its entirety by reference to the agreements filed as exhibits to the registration statement of which this prospectus forms a part.

Demand Registration Rights. Beginning 181 days after the effective date of the registration statement of which this prospectus is a part, the holders of at least 50% of our shares of common stock having registration rights under the 2001 investors’ rights agreement may demand that we register under the Securities Act all or a portion of their shares subject to certain limitations. We are required to effect no more than two registration statements pursuant to this agreement. In addition, the holders will have the right to make up to four requests that we register on Form S-3 all or a portion of the registrable shares held by them having an aggregate offering price of at least $1,000,000.

Beginning 181 days after the effective date of the registration statement of which this prospectus is a part, the holders of at least 50% of our shares of common stock having registration rights under the 2006 investors’ rights agreement may demand that we register under the Securities Act all or a portion of their shares subject to certain limitations. We are required to effect no more than two registration statements pursuant to this agreement. In addition, the holders will have the right to make up to four requests that we register on Form S-3 all or a portion of the registrable shares held by them having an aggregate offering price of at least $1,000,000.

Incidental Registration Rights. If at any time we propose to register shares of our common stock under the Securities Act, other than on a registration statement on Form S-4 or S-8, for our own account or for the account of any other holder, the holders of registrable shares under the 2001 investors’ rights agreement, the

2006 investors’ rights agreement or the warrant holder’s registration rights agreement will be entitled to notice of the registration and, subject to certain exceptions, have the right to require us to register all or a portion of the registrable shares then held by them.

Limitations and Exceptions. In the event that any registration in which the holders of registrable shares participate is an underwritten public offering, the number of registrable shares to be included may, in specified circumstances, be limited due to market conditions.

We are required to pay all registration expenses, including the reasonable fees and expenses of one legal counsel to the registering security holders, but excluding underwriting discounts and commissions. We are also required to indemnify each participating holder with respect to each registration of registrable shares that is effected.

Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation

Delaware law, our restated certificate of incorporation and our second amended and restated bylaws contain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors.

Staggered Board; Removal of Directors

Our restated certificate of incorporation and our second amended and restated bylaws divide our board of directors into three classes with staggered three-year terms. In addition, a director may be removed only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of our outstanding common stock. Any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of our directors then in office.

The classification of our board of directors and the limitations on the removal of directors and filling of vacancies could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of our company.

Stockholder Action by Written Consent; Special Meetings

Our restated certificate of incorporation provides that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Our restated certificate of incorporation and our second amended and restated bylaws also provide that, except as otherwise required by law, special meetings of our stockholders can only be called by our chairman of the board of directors, our chief executive officer or our board of directors.

Advance Notice Requirements for Stockholder Proposals

Our second amended and restated bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including proposed nominations of persons for election to the board of directors. Stockholders at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the board of directors or by a stockholder, who is entitled to vote at the meeting, has delivered timely written notice in proper form to our secretary of the stockholder’s intention to bring such business before the meeting and is a stockholder of record on both the date such notice is given to the secretary and on the record date for the meeting. These provisions could have the effect of delaying until the next stockholder meeting stockholder actions that are favored by the holders of a majority of our outstanding voting securities.

Delaware Business Combination Statute

We are subject to Section 203 of the Delaware General Corporation Law. Subject to certain exceptions, Section 203 prevents a publicly held Delaware corporation from engaging in a “business combination” with any “interested stockholder” for three years following the date that the person became an interested stockholder, unless the interested stockholder attained such status with the approval of our board of directors or unless the business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger or consolidation involving us and the “interested stockholder” and the sale of more than 10% of our assets. In general, an “interested stockholder” is any entity or person beneficially owning 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person.

Amendment of Certificate of Incorporation and Bylaws

The Delaware General Corporation Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation or bylaws, unless a corporation’s certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our second amended and restated bylaws may be amended or repealed by a majority vote of our board of directors or by the affirmative vote of the holders of at least two-thirds of the votes which all our stockholders would be entitled to cast in any election of directors. In addition, the affirmative vote of the holders of at least two-thirds of the votes which all our stockholders would be entitled to cast in any election of directors is required to amend or repeal or to adopt any provisions inconsistent with any of the provisions of our restated certificate of incorporation described above under “—Staggered Board; Removal of Directors” and “—Stockholder Action by Written Consent; Special Meetings.”

Limitation of Liability and Indemnification of Officers and Directors

Our restated certificate of incorporation limits the personal liability of directors for breach of fiduciary duty to the maximum extent permitted by the Delaware General Corporation Law. Our restated certificate of incorporation provides that no director will have personal liability to us or to our stockholders for monetary damages for breach of fiduciary duty as a director. However, these provisions do not eliminate or limit the liability of any of our directors:


	•	for any breach of their duty of loyalty to us or our stockholders;

	•	for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

	•	for voting or assenting to unlawful payments of dividends or other distributions; or

	•	for any transaction from which the director derived an improper personal benefit.

Any amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act or failure to act, or any cause of action, suit or claim that would accrue or arise prior to any amendment or repeal or adoption of an inconsistent provision. If the Delaware General Corporation Law is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the Delaware General Corporation Law.

In addition, our restated certificate of incorporation provides that we must indemnify our directors and officers and we must advance expenses, including attorneys’ fees, to our directors and officers in connection with legal proceedings, subject to limited exceptions.

Shares Eligible for Future Sale

Prior to this offering, there has been no public market for our common stock, and a liquid public trading market for our common stock may not develop or be sustained after this offering. Future sales of significant amounts of our common stock, including shares issued upon exercise of outstanding options or in the public market after this offering, or the anticipation of those sales, could adversely affect public market prices prevailing from time to time and could impair our ability to raise capital through sales of our equity securities. We have applied to have our common stock listed on the Nasdaq Global Market under the symbol “CTCT.”

Upon completion of this offering, we will have outstanding shares of common stock, assuming no exercise of the underwriters’ over-allotment option and no exercise of outstanding options after July 30, 2007. Of these shares, the shares of common stock to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act. All remaining shares of common stock held by existing stockholders will be “restricted securities” as that term is defined in Rule 144 under the Securities Act. Substantially all of these restricted securities will be subject to the lock-up agreements described below. After the expiration of the lock-up agreements, these restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144 or 701 under the Securities Act.

Rule 144

In general and subject to the lock-up agreements described below, under Rule 144 of the Securities Act, beginning 90 days after the date of this prospectus, a person who has beneficially owned shares of our common stock for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed:


	•	1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after this offering, and

	•	the average weekly trading volume in our common stock on the Nasdaq Global Market during the four calendar weeks preceding the sale.

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us. Upon expiration of the 180-day lock-up period described below, shares of our common stock will be eligible for sale under Rule 144, excluding shares eligible for resale under Rule 144(k) described below. We cannot estimate the number of shares of common stock that our existing stockholders will elect to sell under Rule 144.

Rule 144(k)

Subject to the lock-up agreements described below, shares of our common stock eligible for sale under Rule 144(k) may be sold immediately upon completion of this offering. In general, under Rule 144(k), a person may sell shares of common stock acquired from us immediately upon completion of this offering, without regard to manner of sale, the availability of public information about us or volume, if:


	•	the person is not our affiliate and has not been our affiliate at any time during the three months preceding the sale; and

	•	the person has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an affiliate.

Upon the expiration of the 180-day lock-up period described below, approximately shares of common stock will be eligible for sale under Rule 144(k).

Rule 701

In general, under Rule 701 of the Securities Act, any of our employees, consultants or advisors who purchased shares from us in connection with a qualified compensatory stock plan or other written agreement is eligible to resell those shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with the various restrictions, including the holding period, contained in Rule 144. Subject to the 180-day lock-up period described below, approximately shares of our common stock will be eligible for sale in accordance with Rule 701.

Lock-up Agreements

Our officers, directors and other stockholders representing shares of our common stock have agreed that, subject to certain exceptions, without the prior written consent of CIBC World Markets Corp. and Thomas Weisel Partners LLC, as representatives of the underwriters, they will not during the period ending 180 days after the date of this prospectus (subject to extension in specified circumstances), directly or indirectly:


	•	offer, pledge, assign, encumber, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, any shares of our common stock or any securities directly or indirectly convertible into or exercisable or exchangeable for shares of our common stock, whether now owned or hereafter acquired; or

	•	enter into any swap or other agreement or arrangement that transfers, in whole or in part, any of the economic consequences of ownership of shares of our common stock.

The 180-day restricted period will be automatically extended in the following circumstances: (1) during the last 17 days of the 180-day restricted period, if we issue an earnings release or material news or a material event occurs, the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event; or (2) prior to the expiration of the 180-day restricted period, if we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release.

CIBC World Markets Corp. and Thomas Weisel Partners LLC currently do not anticipate shortening or waiving any of the lock-up agreements and do not have any pre-established conditions for such modifications or waivers. CIBC World Markets Corp. and Thomas Weisel Partners LLC may, however, release for sale in the public market all or any portion of the shares subject to the lock-up agreements.

Stock Plans

As of June 30, 2007, we had outstanding options to purchase 1,854,641 shares of common stock, of which options to purchase 489,064 shares of common stock were exercisable as of June 30, 2007. Following this offering, we intend to file registration statements on Form S-8 under the Securities Act to register all of the shares of common stock subject to outstanding options and options and other awards issuable pursuant to our equity plans.

Underwriting

We and the selling stockholders have entered into an underwriting agreement with the underwriters named below. CIBC World Markets Corp., Thomas Weisel Partners LLC, William Blair & Company, L.L.C., Cowen and Company, LLC and Needham & Company, LLC are acting as representatives of the underwriters.

The underwriting agreement provides for the purchase of a specific number of shares of our common stock by each of the underwriters. The underwriters’ obligations are several, which means that each underwriter is required to purchase a specified number of shares, but is not responsible for the commitment of any other underwriter to purchase shares. Subject to the terms and conditions of the underwriting agreement, each underwriter has severally agreed to purchase the number of shares of our common stock set forth opposite its name below:


Underwriter		Number of Shares

CIBC World Markets Corp.
Thomas Weisel Partners LLC
William Blair & Company, L.L.C.
Cowen and Company, LLC
Needham & Company, LLC

Total

The underwriters have agreed to purchase all of the shares of our common stock offered by this prospectus (other than those covered by the over-allotment option described below) if any are purchased. Under the underwriting agreement, if an underwriter defaults in its commitment to purchase shares of our common stock, the commitments of non-defaulting underwriters may be increased or the underwriting agreement may be terminated, depending on the circumstances.

Entities affiliated with Commonwealth Capital Ventures, which are existing stockholders, have indicated an interest in purchasing up to an aggregate of million shares of our common stock in this offering at the initial public offering price. Assuming an initial public offering price of $ per share, the mid-point of the estimated price range shown on the cover page of this prospectus, these stockholders would purchase up to $ million of our common stock in this offering. However, because indications of interest are not binding agreements or commitments to purchase, these stockholders might not purchase any common stock in this offering.

The shares of our common stock should be ready for delivery on or about , 2007 against payment in immediately available funds. The underwriters are offering the shares subject to various conditions and may reject all or part of any order. The representatives have advised us and the selling stockholders that the underwriters propose to offer the shares directly to the public at the public offering price that appears on the cover page of this prospectus. In addition, the representatives may offer some of the shares to other securities dealers at such price less a concession of $ per share. The underwriters may also allow, and such dealers may reallow, a concession not in excess of $ per share to other dealers. After the shares are released for sale to the public, the representatives may change the offering price and other selling terms at various times.

We and the selling stockholders have granted the underwriters an over-allotment option. This option, which is exercisable for up to 30 days after the date of this prospectus, permits the underwriters to purchase a maximum of additional shares of our common stock ( from us and from the selling stockholders) to cover over-allotments. If the underwriters exercise all or part of this option, they will purchase shares covered by the option at the initial public offering price that appears on the cover page of this prospectus, less the underwriting discount. If this option is exercised in full, the total price to the public will be $ , the total proceeds to us will be $ and the total proceeds to the selling stockholders will be $ . The underwriters have severally agreed that, to the extent the over-allotment option is exercised, they will each purchase a number of additional shares proportionate to the underwriter’s initial amount reflected in the foregoing table.

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The following table provides information regarding the amount of the discount to be paid to the underwriters by us and the selling stockholders:

Total With Full

Total Without Exercise of

Exercise of

Per Share

Over-Allotment Option

Constant Contact

Selling Stockholders

Total

We estimate that our total expenses of this offering, excluding the underwriting discount, will be approximately $ million.

We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

We, our officers and directors and substantially all other stockholders have agreed to a 180-day “lock up” with respect to shares of our common stock and other of our securities that they beneficially own, including securities that are convertible into shares of common stock and securities that are exchangeable or exercisable for shares of common stock. This means that, without the prior written consent of CIBC World Markets Corp. and Thomas Weisel Partners LLC, for a period of 180 days following the date of this prospectus, we and such persons may not (x) offer, pledge, assign, encumber, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of these securities, or (y) enter into any swap or other agreement or arrangement that transfers, in whole or in part, any of the economic consequences of ownership of shares of common stock, whether any such transaction is to be settled by delivery of shares of our common stock or such other securities. In addition, the lock-up period may be extended in the event that we issue an release earnings or announce certain material news or a material event with respect to us occurs during the last 17 days of the lock-up period, or prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period.

The restrictions in these lock-up agreements will not apply, subject to certain conditions, to transactions relating to: (i) shares of our common stock acquired from the underwriters as part of this offering in connection with any directed share program; (ii) transactions relating to shares of our common stock acquired in open market transactions after the completion of this offering; (iii) the sale of shares of our common stock pursuant to the underwriting agreement; (iv) transfers of shares of our common stock or such other securities as a bona fide gift or in connection with estate planning or by intestacy, provided that the recipient agrees to be bound by such restrictions; or (v) distributions of shares of our common stock or such other securities to their limited partners, members, stockholders or affiliates, provided that the recipient agrees to be bound by such restrictions.

The representatives have informed us that they do not expect discretionary sales by the underwriters to exceed five percent of the shares offered by this prospectus.

While we have applied to have our common stock listed on the Nasdaq Global Market under the symbol CTCT, prior to this offering there has been no established trading market for the shares. The offering price for the shares will be determined by us, the selling stockholders and the representatives, based on the following factors:


	•	the history and prospects for the industry in which we compete;

	•	our past and present operations;

	•	our historical results of operations;

	•	our prospects for future business and earning potential;

	•	our management;

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	•	the general condition of the securities markets at the time of this offering;

	•	the recent market prices of securities of generally comparable companies;

	•	the market capitalization and stages of development of other companies which we and the representatives believe to be comparable to us; and

	•	other factors deemed to be relevant.

Rules of the SEC may limit the ability of the underwriters to bid for or purchase shares before the distribution of the shares is completed. However, the underwriters may engage in the following activities in accordance with the rules:


	•	Stabilizing transactions—The representatives may make bids or purchases for the purpose of pegging, fixing or maintaining the price of the shares, so long as stabilizing bids do not exceed a specified maximum.

	•	Over-allotments and syndicate covering transactions—The underwriters may sell more shares of our common stock in connection with this offering than the number of shares than they have committed to purchase. This over-allotment creates a short position for the underwriters. This short sales position may involve either “covered” short sales or “naked” short sales. Covered short sales are short sales made in an amount not greater than the underwriters’ over-allotment option to purchase additional shares in this offering described above. The underwriters may close out any covered short position either by exercising their over-allotment option or by purchasing shares in the open market. To determine how they will close the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market, as compared to the price at which they may purchase shares through the over-allotment option. Naked short sales are short sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that, in the open market after pricing, there may be downward pressure on the price of the shares that could adversely affect investors who purchase shares in this offering.

	•	Penalty bids—If the representatives purchase shares in the open market in a stabilizing transaction or syndicate covering transaction, they may reclaim a selling concession from the underwriters and selling group members who sold those shares as part of this offering.

Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales or to stabilize the market price of our common stock may have the effect of raising or maintaining the market price of our common stock or preventing or mitigating a decline in the market price of our common stock. As a result, the price of the shares of our common stock may be higher than the price that might otherwise exist in the open market. The imposition of a penalty bid might also have an effect on the price of the shares if it discourages resales of the shares.

Neither we nor the underwriters makes any representation or prediction as to the effect that the transactions described above may have on the price of the shares. These transactions may occur on the Nasdaq Global Market or otherwise. If such transactions are commenced, they may be discontinued without notice at any time.

A prospectus in electronic format may be made available on websites or through other online services maintained by one or more of the underwriters or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter, prospective investors may be allowed to place orders online. The underwriters may agree to allocate a specific number of shares to online brokerage account holders. Any such allocation for online distributions will be made by the representative on the same basis as other allocations.

Other than the prospectus in electronic format, the information on any underwriter’s website and any information on any other website maintained by an underwriter is not part of the prospectus in electronic format or the registration statement of which the prospectus in electronic format forms a part, has not been

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approved and/or endorsed by us or any underwriter or selling stockholder in its capacity as underwriter or selling stockholder and should not be relied upon by investors.

Certain of the underwriters or their affiliates may provide investment and commercial banking and advisory services to us in the ordinary course of business, for which they may receive customary fees and commissions.

Belgium

In Belgium, the offering is exclusively conducted under applicable private placement exemptions of the Belgium securities laws and therefore it has not been and will not be notified to, and this document or any other offering material relating to the securities has not been and will not be approved by, the Belgian Banking, Finance and Insurance Commission (“Commission bancaire, financière et des assurances/Commissie voor het Bank, Financie en Assurantiewezen”). Any representation to the contrary is unlawful.

Each underwriter has undertaken not to offer sell, resell, transfer or deliver directly or indirectly, any securities, or to take any steps relating/ancillary thereto, and not to distribute or publish this document or any other material relating to the securities or to the offering in a manner which would be construed as: (a) a public offering under the Belgian Royal Decree of 7 July 1999 on the public character of financial transactions; or (b) an offering of securities to the public under Directive 2003/71/EC which triggers an obligation to publish a prospectus in Belgium. Any action contrary to these restrictions will cause the recipient and us to be in violation of the Belgian securities laws.

France

Neither this prospectus nor any other offering material relating to the securities has been submitted to the clearance procedures of the Autorité des marchés financiers in France. The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the securities has been or will be: (a) released, issued, distributed or caused to be released, issued or distributed to the public in France; or (b) used in connection with any offer for subscription or sale of the securities to the public in France. Such offers, sales and distributions will be made in France only: (i) to qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint d’investisseurs), in each case investing for their own account, all as defined in and in accordance with Articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier; (ii) to investment services providers authorised to engage in portfolio management on behalf of third parties; or (iii) in a transaction that, in accordance with article L.411-2-II-1°-or-2°-or 3° of the French Code monétaire et financier and article 211-2 of the General Regulations (Règlement Général) of the Autorité des marchés financiers, does not constitute a public offer (appel public à l’épargne). Such securities may be resold only in compliance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.

United Kingdom/Germany/Norway/The Netherlands

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any securities which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State other than the offers contemplated in this prospectus in the United Kingdom, Germany, Norway and the Netherlands where prospectus will be approved or passported for the purposes of a non-exempt offer once this prospectus has been approved by the competent authority in such Member State and published and passported in accordance with the Prospectus Directive as implemented in the United Kingdom, Germany, Norway and the Netherlands

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except that an offer to the public in that Relevant Member State of any securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:


	•	to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;

	•	to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;

	•	by the managers to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of CIBC World Market Corp. and Thomas Weisel Partners LLC for any such offer; or

	•	in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall result in a requirement for the publication by us or any manager of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any securities to be offered so as to enable an investor to decide to purchase any securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

Each underwriter has represented, warranted and agreed that:


	•	it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the FSMA)) received by it in connection with the issue or sale of any securities in circumstances in which Section 21(1) of the FSMA does not apply to us; and

	•	it has complied with and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom.

Israel

In the State of Israel, the securities offered hereby may not be offered to any person or entity other than the following:


	•	a fund for joint investments in trust (i.e., mutual fund), as such term is defined in the Law for Joint Investments in Trust, 5754 1994, or a management company of such a fund;

	•	a provident fund as defined in Section 47(a)(2) of the Income Tax Ordinance of the State of Israel, or a management company of such a fund;

	•	an insurer, as defined in the Law for Oversight of Insurance Transactions, 5741 1981, (d) a banking entity or satellite entity, as such terms are defined in the Banking Law (Licensing), 5741 1981, other than a joint services company, acting for their own account or fro the account of investors of the type listed in Section 15A(b) of the Securities Law 1968;

	•	a company that is licensed as a portfolio manager, as such term is defined in Section 8(b) of the Law for the Regulation of Investment Advisors and Portfolio Managers, 5755-1995, acting on its own account or for the account of investors of the type listed in Section 15A(b) of the Securities Law 1968;

104


	•	a company that is licensed as an investment advisor, as such term is defined in Section 7(c) of the Law for the Regulation of Investment Advisors and Portfolio Managers, 5755-1995, acting on its own account;

	•	a company that is a member of the Tel Aviv Stock Exchange, acting on its own account or for the account of investors of the type listed in Section 15A(b) of the Securities Law 1968;

	•	an underwriter fulfilling the conditions of Section 56(c) of the Securities Law, 5728-1968;

	•	a venture capital fund (defined as an entity primarily involved in investments in companies which, at the time of investment, (i) are primarily engaged in research and development or manufacture of new technological products or processes and (ii) involve above-average risk);

	•	an entity primarily engaged in capital markets activities in which all of the equity owners meet one or more of the above criteria; and

	•	an entity, other than an entity formed for the purpose of purchasing securities in this offering, in which the shareholders equity (including pursuant to foreign accounting rules, international accounting regulations and U.S. generally accepted accounting rules, as defined in the Securities Law Regulations (Preparation of Annual Financial Statements), 1993) is in excess of NIS 250 million.

Any offeree of the securities offered hereby in the State of Israel shall be required to submit written confirmation that it falls within the scope of one of the above criteria. This prospectus will not be distributed or directed to investors in the State of Israel who do not fall within one of the above criteria.

Italy

The offering of the securities offered hereby in Italy has not been registered with the Commissione Nazionale per la Società e la Borsa (“CONSOB”) pursuant to Italian securities legislation and, accordingly, the securities offered hereby cannot be offered, sold or delivered in the Republic of Italy (“Italy”) nor may any copy of this prospectus or any other document relating to the securities offered hereby be distributed in Italy other than to professional investors (operatori qualificati) as defined in Article 31, second paragraph, of CONSOB Regulation No. 11522 of 1 July, 1998 as subsequently amended. Any offer, sale or delivery of the securities offered hereby or distribution of copies of this prospectus or any other document relating to the securities offered hereby in Italy must be made:


	•	by an investment firm, bank or intermediary permitted to conduct such activities in Italy in accordance with Legislative Decree No. 58 of 24 February 1998 and Legislative Decree No. 385 of 1 September 1993 (the “Banking Act”);

	•	in compliance with Article 129 of the Banking Act and the implementing guidelines of the Bank of Italy; and

	•	in compliance with any other applicable laws and regulations and other possible requirements or limitations which may be imposed by Italian authorities.

Sweden

This prospectus has not been nor will it be registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this prospectus may not be made available, nor may the securities offered hereunder be marketed and offered for sale in Sweden, other than under circumstances which are deemed not to require a prospectus under the Financial Instruments Trading Act (1991: 980). This offering will only be made to qualified investors in Sweden. This offering will be made to no more than 100 persons or entities in Sweden.

105

Switzerland

The securities offered pursuant to this prospectus will not be offered, directly or indirectly, to the public in Switzerland and this prospectus does not constitute a public offering prospectus as that term is understood pursuant to art. 652a or art. 1156 of the Swiss Federal Code of Obligations. We have not applied for a listing of the securities being offered pursuant to this prospectus on the SWX Swiss Exchange or on any other regulated securities market, and consequently, the information presented in this prospectus does not necessarily comply with the information standards set out in the relevant listing rules. The securities being offered pursuant to this prospectus have not been registered with the Swiss Federal Banking Commission as foreign investment funds, and the investor protection afforded to acquirers of investment fund certificates does not extend to acquirers of securities.

Investors are advised to contact their legal, financial or tax advisers to obtain an independent assessment of the financial and tax consequences of an investment in securities.

Legal Matters

The validity of the common stock we are offering will be passed upon by Wilmer Cutler Pickering Hale and Dorr LLP, Boston, Massachusetts. Bingham McCutchen LLP, Boston, Massachusetts, is counsel for the underwriters in connection with this offering.

Experts

The financial statements as of December 31, 2006 and for the year ended December 31, 2006 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

The financial statements as of December 31, 2005 and for each of the two years in the two year period ended December 31, 2005 included herein, have been audited by Vitale, Caturano & Company, Ltd., an independent registered public accounting firm, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports.

Where You Can Find More Information

We have filed a registration statement on Form S-1 with the SEC in connection with this offering. In addition, upon completion of the offering, we will be required to file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy the registration statement and any other documents we have filed at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings are also available to the public at the SEC’s Internet site at http://www.sec.gov.

This prospectus is part of the registration statement and does not contain all of the information included in the registration statement and the exhibits, schedules and amendments to the registration statement. Some items are omitted in accordance with the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement and to the exhibits and schedules to the registration statement filed as part of the registration statement. Whenever a reference is made in this prospectus to any of our contracts or other documents, the reference may not be complete and, for a copy of the contract or document, you should refer to the exhibits that are a part of the registration statement.

After the offering, we expect to provide annual reports to our stockholders that include financial information examined and reported on by our independent registered public accounting firm. We also maintain a website at www.constantcontact.com. Our website is not a part of this prospectus.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Constant Contact, Inc.

The stock split described in Note 12 to the financial statements has not been consummated at September 4, 2007. When it has been consummated, we will be in a position to furnish the following report:

“In our opinion, the accompanying balance sheet and the related statements of operations, of changes in redeemable convertible preferred stock and stockholder’s equity (deficit) and comprehensive loss, and of cash flows present fairly, in all material respects, the financial position of Constant Contact, Inc. (the “Company”) at December 31, 2006 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 2 to the financial statements, the Company changed the manner in which it accounts for stock-based compensation in 2006.”

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

July 6, 2007

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Constant Contact, Inc.

The stock split described in Note 12 to the financial statements has not been consummated at September 4, 2007. When it has been consummated, we will be in a position to furnish the following report:

“We have audited the accompanying balance sheet of Constant Contact, Inc. (the Company) as of December 31, 2005 and the related statements of operations, of changes in redeemable convertible preferred stock and stockholders’ equity (deficit) and comprehensive loss, and of cash flows for each of the two years in the two year period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal controls over financial reporting. Our audit included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Constant Contact Inc. as of December 31, 2005 and the results of its operations and of its cash flows for each of the two years in the two year period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America.”

/s/ Vitale, Caturano and Company, Ltd.

VITALE, CATURANO & COMPANY, LTD.

Boston, Massachusetts
March 10, 2006 (except with respect to the
Series C financing discussed in Note 5
as to which the date is May 12, 2006)

F-3

Constant Contact, Inc.

Balance Sheets


										Pro Forma
	December 31,						June 30,			June 30,
(In thousands, except share and per share data)	2005			2006			2007			2007
							(unaudited)			(unaudited)

Assets
Current assets
Cash and cash equivalents	$	2,784		$	8,786		$	6,059		$	6,119
Short-term marketable securities		–			4,004			5,133			5,133
Accounts receivable, net of allowance for doubtful accounts of $18, $3 and $12 as of December 31, 2005 and 2006 and June 30, 2007, respectively		47			41			28			28
Prepaid expenses and other current assets		156			411			1,629			1,629

Total current assets		2,987			13,242			12,849			12,909
Property and equipment, net		2,292			4,957			6,122			6,122
Restricted cash		266			266			358			358
Other assets		–			16			16			16

Total assets	$	5,545		$	18,481		$	19,345		$	19,405

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities
Accounts payable	$	1,478		$	2,576		$	2,617		$	2,617
Accrued expenses		494			2,406			2,672			2,672
Deferred revenue		2,827			5,476			8,047			8,047
Redeemable convertible preferred stock warrant		–			628			1,465			–
Current portion of capital lease obligation		10			–			–			–
Current portion of notes payable		614			449			1,405			1,405

Total current liabilities		5,423			11,535			16,206			14,741
Notes payable, net of current portion		702			253			1,678			1,678

Total liabilities		6,125			11,788			17,884			16,419

Commitments and contingencies (Note 10)
Redeemable convertible preferred stock
Series A redeemable convertible preferred stock, $0.01 par value; 1,026,680 shares authorized, issued and outstanding at December 31, 2005 and 2006 and June 30, 2007 ($17,454 liquidation value as of December 31, 2006); no shares issued or outstanding pro forma		10,835			14,049			14,504			–
Series B redeemable convertible preferred stock, $0.01 par value; 9,761,666 shares authorized; 9,641,666 shares issued and outstanding at December 31, 2005 and 2006 and June 30, 2007, ($6,708 liquidation value as of December 31, 2006); no shares issued or outstanding pro forma		5,822			6,376			6,423			–
Series C redeemable convertible preferred stock, $0.01 par value; 2,521,432 shares authorized, issued and outstanding at December 31, 2006 and June 30, 2007 ($15,000 liquidation value as of December 31, 2006); no shares issued or outstanding pro forma		–			14,897			14,913			–

Total redeemable convertible preferred stock		16,657			35,322			35,840			–

Stockholders’ equity (deficit)
Common stock, 20,000,000 shares authorized, $0.01 par value; 3,464,829, 3,788,944 and 3,952,848 shares issued and outstanding as of December 31, 2005 and 2006 and June 30, 2007, respectively; 40,000,000 shares authorized, $0.01 par value; 21,255,523 shares issued and outstanding pro forma		35			38			40			213
Additional paid-in capital		9,391			5,835			5,579			42,771
Accumulated other comprehensive loss		–			–			(2	)		(2	)
Accumulated deficit		(26,663	)		(34,502	)		(39,996	)		(39,996	)

Total stockholders’ equity (deficit)		(17,237	)		(28,629	)		(34,379	)		2,986

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)	$	5,545		$	18,481		$	19,345		$	19,405

The accompanying notes are an integral part of these financial statements.

F-4

Constant Contact, Inc.

Statements of Operations


										Six Months Ended
	Years Ended December 31,									June 30,
(In thousands, except share and per share data)	2004			2005			2006			2006			2007
										(unaudited)

Revenue	$	8,071		$	14,658		$	27,552		$	11,829		$	21,111
Cost of revenue		2,211			3,747			7,801			3,354			5,837

Gross profit		5,860			10,911			19,751			8,475			15,274

Operating expenses
Research and development		2,140			3,355			6,172			2,774			4,971
Sales and marketing		3,385			7,460			18,592			7,084			12,795
General and administrative		856			1,326			2,623			1,079			2,371

Total operating expenses		6,381			12,141			27,387			10,937			20,137

Loss from operations		(521	)		(1,230	)		(7,636	)		(2,462	)		(4,863	)
Interest income		17			47			479			114			280
Interest expense		(51	)		(71	)		(94	)		(53	)		(73	)
Other expense		–			–			(588	)		(367	)		(838	)

Net loss		(555	)		(1,254	)		(7,839	)		(2,768	)		(5,494	)
Accretion of redeemable convertible preferred stock		(3,701	)		(5,743	)		(3,788	)		(3,270	)		(518	)

Net loss attributable to common stockholders	$	(4,256	)	$	(6,997	)	$	(11,627	)	$	(6,038	)	$	(6,012	)

Net loss attributable to common stockholders per share: basic and diluted	$	(4.37	)	$	(2.49	)	$	(3.38	)	$	(1.82	)	$	(1.59	)
Weighted average shares outstanding used in computing per share amounts: basic and diluted		973,568			2,813,320			3,437,984			3,312,405			3,769,759
Pro forma net loss per share: basic and diluted (unaudited)							$	(0.35	)				$	(0.22	)
Pro forma weighted average common shares outstanding (unaudited)								20,740,659						21,072,434

The accompanying notes are an integral part of these financial statements.

F-5

Constant Contact, Inc.

Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) and Comprehensive Loss


	Series A				Series B				Series C				Total Redeemable														Accumulated
	Redeemable Convertible				Redeemable Convertible				Redeemable Convertible				Convertible								Additional						Other						Total
	Preferred Stock				Preferred Stock				Preferred Stock				Preferred Stock				Common Stock				Paid-in			Deferred			Comprehensive			Accumulated			Stockholders’			Comprehensive
(In thousands, except share data)	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital			Compensation			Loss			Deficit			Equity (Deficit)			Loss
Balance at December 31, 2003		1,026,680	$	3,668		9,641,666	$	3,545		–	$	–		10,668,346	$	7,213		880,965	$	9	$	18,757		$	(40	)				$	(24,854	)	$	(6,128	)
Issuance of common stock in connection with stock option exercises																–		1,918,684		19		55												74
Amortization of deferred compensation expense																–									23									23
Accretion of Series A and B redeemable convertible preferred stock to redemption value				2,636				1,065								3,701						(3,701	)											(3,701	)
Net loss																–															(555	)		(555	)	$	(555	)

Total comprehensive loss																																				$	(555	)

Balance at December 31, 2004		1,026,680		6,304		9,641,666		4,610		–		–		10,668,346		10,914		2,799,649		28		15,111			(17	)					(25,409	)		(10,287	)
Issuance of common stock in connection with stock option exercises																–		473,170		5		13												18
Issuance of restricted stock																–		192,010		2		10												12
Amortization of deferred compensation expense																–									17									17
Accretion of Series A and B redeemable convertible preferred stock to redemption value				4,531				1,212								5,743						(5,743	)											(5,743	)
Net loss																–															(1,254	)		(1,254	)	$	(1,254	)

Total comprehensive loss																																				$	(1,254	)

Balance at December 31, 2005		1,026,680		10,835		9,641,666		5,822		–		–		10,668,346		16,657		3,464,829		35		9,391			–						(26,663	)		(17,237	)
Issuance of common stock in connection with stock option exercises																–		192,076		2		8												10
Issuance of common stock in connection with warrant exercises																–		132,039		1		181												182
Stock-based compensation expense																–						83												83
Reclassification of redeemable convertible preferred stock warrant to liability																–						(40	)											(40	)
Issuance of Series C redeemable convertible preferred stock, net of issuance costs of $123										2,521,432		14,877		2,521,432		14,877
Accretion of Series A, B and C redeemable convertible preferred stock to redemption value				3,214				554				20				3,788						(3,788	)											(3,788	)
Net loss																–															(7,839	)		(7,839	)	$	(7,839	)

Total comprehensive loss																																				$	(7,839	)

Balance at December 31, 2006		1,026,680		14,049		9,641,666		6,376		2,521,432		14,897		13,189,778		35,322		3,788,944		38		5,835			–						(34,502	)		(28,629	)
Issuance of common stock in connection with stock option exercises (unaudited)																–		134,524		1		20												21
Issuance of common stock in connection with warrant exercises (unaudited)																		29,380		1		39												40
Stock-based compensation expense (unaudited)																–						203												203
Unrealized loss on available-for-sale investments (unaudited)																												(2	)					(2	)	$	(2	)
Accretion of Series A, B and C redeemable convertible preferred stock to redemption value (unaudited)				455				47				16				518						(518	)											(518	)
Net loss (unaudited)																–															(5,494	)		(5,494	)		(5,494	)

Total comprehensive loss (unaudited)																																				$	(5,496	)

Balance at June 30, 2007 (unaudited)		1,026,680	$	14,504		9,641,666	$	6,423		2,521,432	$	14,913		13,189,778	$	35,840		3,952,848	$	40	$	5,579		$	–			(2	)	$	(39,996	)	$	(34,379	)

The accompanying notes are an integral part of these financial statements.

F-6

Constant Contact, Inc.

Statements of Cash Flows


										Six Months Ended
	Years Ended December 31,									June 30,
(In thousands)	2004			2005			2006			2006			2007
										(unaudited)

Cash flows from operating activities
Net loss	$	(555	)	$	(1,254	)	$	(7,839	)	$	(2,768	)	$	(5,494	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization		447			591			1,536			666			1,141
Amortization of discount on investments		–			–			(10	)		–			(75	)
Stock-based compensation expense		23			17			83			15			203
Changes in fair value of redeemable convertible preferred stock warrant		–			–			588			367			837
Provision for bad debts		76			21			5			26			8
Changes in operating assets and liabilities
Accounts receivable		(107	)		(31	)		1			(32	)		5
Prepaid expenses and other current assets		94			(26	)		(255	)		(196	)		(588	)
Other assets		–			–			(16	)		(16	)		–
Accounts payable		(107	)		1,304			1,098			(435	)		41
Accrued expenses		(337	)		187			1,412			559			266
Deferred revenue		655			1,557			2,649			1,333			2,571

Net cash provided by (used in) operating activities		189			2,366			(748	)		(481	)		(1,085	)

Cash flows from investing activities
Purchases of short-term marketable securities		–			–			(3,994	)		–			(6,206	)
Proceeds from maturities of short-term marketable securities		–			–			–			–			5,150
Decrease (increase) in restricted cash		95			(112	)		–			–			(92	)
Purchases of property and equipment		(589	)		(2,097	)		(3,701	)		(1,567	)		(2,306	)

Net cash used in investing activities		(494	)		(2,209	)		(7,695	)		(1,567	)		(3,454	)

Cash flows from financing activities
Proceeds from notes payable		718			1,007			–			–			2,785
Proceeds from issuance of Series C redeemable convertible preferred stock, net of issuance costs of $123		–			–			14,877			14,104			–
Proceeds from issuance of common stock pursuant to the exercise of stock options and warrants		74			18			192			101			61
Proceeds from sale of restricted stock		–			12			–			–			–
Repayments of capital lease obligations		(119	)		(19	)		(10	)		(10	)		–
Repayments of notes payable		(367	)		(506	)		(614	)		(317	)		(404	)
Payments of issuance costs for contemplated initial public offering of common stock		—			—			—			—			(630	)

Net cash provided by financing activities		306			512			14,445			13,878			1,812

Net increase (decrease) in cash and cash equivalents		1			669			6,002			11,830			(2,727	)
Cash and cash equivalents, beginning of period		2,114			2,115			2,784			2,784			8,786

Cash and cash equivalents, end of period	$	2,115		$	2,784		$	8,786		$	14,614		$	6,059

Supplemental disclosure of cash flow information
Cash paid for interest	$	47		$	65		$	97		$	54		$	57
Noncash investing and financing activities:
Purchases of property and equipment included in accrued expenses	$	–		$	–		$	500		$	500		$	–

The accompanying notes are an integral part of these financial statements.

F-7

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)


1.	Nature of the Business

Constant Contact, Inc. (the “Company”) was incorporated as a Massachusetts corporation on August 25, 1995. The Company reincorporated in the State of Delaware in 2000. The Company is a provider of on-demand email marketing solutions to small organizations, including small businesses, associations and nonprofits located primarily in the U.S. The Company’s email marketing product allows customers to create, send and track email marketing campaigns. The product is designed and priced for small organizations and is marketed directly by the Company and through a wide variety of channel partners. The Company was originally incorporated under the name Roving Software Incorporated and subsequently began doing business under the trade name Constant Contact in 2004. In 2006, the Company changed its name to Constant Contact, Inc.

Unaudited Interim Financial Information

The accompanying unaudited balance sheet as of June 30, 2007, unaudited statements of operations and of cash flows for the six months ended June 30, 2006 and 2007, and the unaudited statements of changes in redeemable convertible preferred stock and stockholders’ equity (deficit) for the six months ended June 30, 2007 have been prepared in accordance with generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement have been included. The information disclosed in the notes to the financial statements for these periods is unaudited. Operating results for the six months ended June 30, 2007 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2007 or any future period.

Unaudited Pro Forma Financial Information

The unaudited pro forma balance sheet as of June 30, 2007 reflects the automatic conversion of all outstanding shares of Series A, Series B and Series C redeemable convertible preferred stock into 17,146,675 shares of common stock, which automatic conversion will occur upon the closing of the Company’s proposed initial public offering (Note 5), and the assumed exercise of the warrant to purchase 120,000 shares of redeemable convertible preferred stock and subsequent automatic conversion of those preferred shares into 156,000 shares of common stock (Note 5).


2.	Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates these estimates and judgments, including those related to revenue recognition, stock-based compensation and income taxes. The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenue and expenses that are not readily apparent from other sources. Actual results could differ from these estimates.

F-8

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the time of acquisition to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value.

Accounts Receivable

Management reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. The Company reserves for receivables that are determined to be uncollectible, if any, in its allowance for doubtful accounts. After the Company has exhausted all collection efforts, the outstanding receivable is written off against the allowance.

Concentration of Credit Risk and Significant Customers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and short-term marketable securities. At December 31, 2005 and 2006, the Company had cash balances at certain financial institutions in excess of federally insured limits. The Company maintains its cash balances and custody of its marketable securities with accredited financial institutions.

As of and for the years ended December 31, 2005 and 2006 and as of and for the six months ended June 30, 2007 (unaudited), there were no customers that accounted for more than 10% of total accounts receivable or revenue.

Marketable Securities

The Company follows the guidance provided in Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities, in determining the classification and accounting of its marketable securities. The Company’s marketable securities are classified as available-for-sale and are carried at fair value with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive income (loss), a component of stockholders’ equity. Realized gains and losses and declines in value judged to be other than temporary are included as a component of interest income based on the specific identification method. Fair value is determined based on quoted market prices.

At December 31, 2006, marketable securities consisted of corporate notes and obligations with an aggregate fair value of $4.0 million, and $0 unrealized gains and losses. All marketable securities have remaining maturities of less than 180 days as of December 31, 2006.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful life of the assets or, where applicable and if shorter, over the lease term. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is credited or charged to income. Repairs and maintenance costs are expensed as incurred.

Estimated useful lives of assets are as follows:


Computer equipment		3 years
Software		3 years
Furniture and fixtures		5 years
Leasehold improvements		Shorter of life of lease or estimated useful life

F-9

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

Long-Lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstance indicate that the related carrying amount may not be recoverable. Undiscounted cash flows are compared to the carrying value and when required, impairment losses on assets to be held and used are recognized based on the excess of the asset’s carrying amount over the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

Revenue Recognition

The Company provides access to its solution through month-to-month subscription arrangements whereby the customer is charged a fee. Subscription arrangements include access to use the Company’s software via the internet and support services such as telephone support. The Company follows the guidance of Securities and Exchange Commission Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition in Financial Statements, and Emerging Issues Task Force (“EITF”) Issue No. 00-03, Application of AICPA Statement of Position 97-2 to Arrangements that include the Right to Use Software Stored on Another Entity’s Hardware, which applies when customers do not have the right to take possession of the software and use it on another entity’s hardware. When there is evidence of an arrangement, the fee is fixed or determinable and collectibility is deemed probable, the Company recognizes revenue on a daily basis over the subscription term as the services are delivered.

The Company also offers professional services to its customers primarily for the design of custom email templates and training. Professional services revenue is accounted for separate from subscription revenue based on the guidance of EITF 00-21, Accounting for Revenue Arrangements with Multiple Deliverables, as those services have value on a standalone basis and do not involve a significant degree of risk or unique acceptance criteria and as the fair value of the Company’s subscription services is evidenced by their availability on a standalone basis. Professional services revenue is recognized as the services are performed.

Deferred Revenue

Deferred revenue primarily consists of payments received in advance of revenue recognition of the Company’s solution described above and is recognized as the revenue recognition criteria are met. The Company’s customers pay for services in advance on a monthly, semiannual or annual basis.

Software and Web Site Development Costs

The Company follows the guidance of Statement of Position (“SOP”) No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, in accounting for the development costs of its on-demand solution and web site development costs. The costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use.

Costs associated with the development of internal use software that were capitalized during the year ended December 31, 2006 were $516. Capitalized costs were $235 and $224 for the six months ended June 30, 2006 and 2007 (each unaudited), respectively. Development costs eligible for capitalization for the years ended December 31, 2004 and 2005 were not material.

F-10

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

Redeemable Convertible Preferred Stock Warrant (including Change in Accounting Principle)

On June 29, 2005, the Financial Accounting Standards Board (“FASB”) issued Staff Position 150-5, Issuer’s Accounting under FASB Statement No. 150 for Freestanding Warrants and Other Similar Instruments on Shares that are Redeemable (“FSP 150-5”). FSP 150-5 affirms that warrants of this type are subject to the requirements in SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“SFAS 150”), regardless of the redemption price or the timing of the redemption feature. Therefore, under SFAS 150, the freestanding warrants to purchase the Company’s redeemable convertible preferred stock are liabilities that must be recorded at fair value. The Company adopted FSP 150-5 as of July 1, 2005. The effect of this adoption on the financial statements between the date of adoption and January 1, 2006 was immaterial. The warrant is subject to remeasurement at each balance sheet date and any change in fair value (determined using the Black-Scholes option pricing model) is recognized as Other expense. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or the expiration of the warrant.

Comprehensive Income (Loss)

Comprehensive loss includes net loss, as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. The Company’s only element of other comprehensive loss is unrealized gains and losses on available-for-sale securities. The Company had no unrealized gains or losses as of December 31, 2005 and 2006. As of June 30, 2007 (unaudited), the Company had gross unrealized losses of $2. There were no realized gains or losses recorded to net loss for the years ended December 31, 2004, 2005 and 2006 or the six months ended June 30, 2007 (unaudited).

Fair Value of Financial Instruments

The carrying value of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value because of their short-term nature.

Segment Data

The Company manages its operations as a single segment for purposes of assessing performance and making operating decisions. Revenue is generated predominately in the U.S. and all significant assets are held in the U.S.

Net Loss Attributable to Common Stockholders Per Share

Basic and diluted net loss attributable to common stockholders per share is computed by dividing net loss attributable to common stockholders by the weighted average number of nonrestricted common shares outstanding for the period.

F-11

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

The following common stock equivalents were excluded from the computation of diluted net loss per share attributable to common stockholders because they had an antidilutive impact:


	December 31,						June 30,
	2004		2005		2006		2006		2007
							*(unaudited)*

Options to purchase common stock		1,036,305		1,217,766		1,702,007		1,355,649		1,854,641
Warrants to purchase common or redeemable convertible preferred stock		432,002		414,262		282,223		346,623		252,844
Restricted shares		10,394		192,010		144,008		192,010		120,007

Redeemable convertible preferred stock		13,868,824		13,868,824		17,146,675		16,933,088		17,146,675
Total options, warrants, restricted shares and redeemable convertible preferred stock exercisable or convertible into common stock		15,347,525		15,692,862		19,274,913		18,827,370		19,374,167

Unaudited Pro Forma Net Loss per Share

The unaudited pro forma basic and diluted net loss per share have been computed to give effect to the conversion of the Company’s redeemable convertible preferred stock (using the if-converted method) into common stock and the assumed exercise of the redeemable convertible preferred stock warrant and subsequent automatic conversion into common stock (using the if converted method) as though the exercise and conversion had occurred on the original dates of issuance and to adjustments to eliminate accretion of redeemable convertible preferred stock and the expenses that were recorded for the remeasurement to fair value of the redeemable convertible preferred stock warrant.

F-12

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)


				Six
	Year Ended			Months Ended
	December 31,			June 30,
	2006			2007

Numerator
Net loss attributable to common stockholders	$	(11,627	)	$	(6,012	)
Add: Accretion of redeemable convertible preferred stock		3,788			518
Add: Changes in fair value associated with redeemable convertible preferred stock warrant		588			837

Pro forma net loss	$	(7,251	)	$	(4,657	)

Denominator
Weighted average shares outstanding used in computing per share amounts: basic and diluted		3,437,984			3,769,759
Add: Adjustments to reflect assumed weighted effect of exercise and subsequent conversion of warrant for redeemable convertible preferred stock		156,000			156,000
Add: Adjustments to reflect assumed weighted effect of conversion of redeemable convertible preferred stock		17,146,675			17,146,675

Pro forma weighted average shares outstanding used in computing per share amounts: basic and diluted		20,740,659			21,072,434

Pro forma net loss per share: basic and diluted	$	(0.35	)	$	(0.22	)

Advertising Expense

The Company expenses advertising as incurred. Advertising expense was $485, $2,618 and $9,778 during the years ended December 31, 2004, 2005 and 2006, respectively.

Accounting for Stock-Based Compensation (including Change in Accounting Principle)

Effective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment (“SFAS 123R”), a revision of SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), and related interpretations. SFAS 123R supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related interpretations. SFAS 123R requires all share-based compensation to employees, including grants of employee stock options, to be valued at fair value on the date of grant, and to be expensed over the applicable service period. The Company adopted the prospective transition method which does not result in restatement of previously issued financial statements and requires only new awards or awards that are modified, repurchased or canceled after the effective date to be accounted for under the provisions of SFAS 123R. Prior to January 1, 2006, the Company accounted for stock-based compensation arrangements according to the provisions of APB 25 and related interpretations. Pursuant to the income tax provisions included in SFAS 123R, the Company has elected the “short-cut method” of computing its hypothetical pool of additional paid-in capital that is available to absorb future tax benefit shortfalls.

Income Taxes

Income taxes are provided for tax effects of transactions reported in the financial statements and consist of income taxes currently due plus deferred income taxes related to timing differences between the basis of certain assets and liabilities for financial and income tax reporting. Deferred taxes are determined based on

F-13

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance is provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no impact on the reported net loss.

Recent Accounting Pronouncements

In September 2006, the Securities and Exchange Commission issued SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), to address diversity in practice in quantifying financial statement misstatements. SAB 108 requires that the Company quantify misstatements based on their impact on financial statements and related disclosures. SAB 108 is effective for the first fiscal year ending after November 15, 2006. The Company has adopted SAB 108 in 2006. The adoption of SAB 108 did not have a material effect on the Company’s financial statements.

On February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115 (“SFAS 159”), which permits companies to choose to measure many financial instruments and certain other items at fair value. The objective of SFAS 159 is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is effective for fiscal years beginning after November 15, 2007. Management is currently evaluating the effect that SFAS 159 may have on the Company’s financial statements taken as a whole.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This statement does not require any new fair value measurements; rather, it applies under other accounting pronouncements that require or permit fair value measurements. The provisions of SFAS 157 are effective for fiscal years beginning after November 15, 2007. The Company is currently assessing SFAS 157 and has not yet determined the impact, if any, that its adoption will have on its result of operations or financial condition.

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company adopted FIN 48 on January 1, 2007 and the adoption did not have an effect on its results of operations and financial condition.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections (“SFAS 154”), which replaces APB No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, An Amendment of APB Opinion No. 28. SFAS 154 provides guidance on the accounting

F-14

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company adopted SFAS 154 effective January 1, 2006 and the adoption did not have an effect on its results of operations and financial condition.


3.	Property and Equipment

Property and equipment consisted of the following:


	December 31,				June 30,
	2005		2006		2007
					(unaudited)

Computer equipment	$	2,821	$	5,137	$	6,311
Software		947		2,754		3,244
Equipment under capital lease		398		–
Furniture and fixtures		699		1,015		1,305
Leasehold improvements		32		160		512

Total property and equipment		4,897		9,066		11,372
Less: Accumulated depreciation and amortization		2,605		4,109		5,250

Property and equipment, net	$	2,292	$	4,957	$	6,122

Depreciation and amortization expense was $447, $591 and $1,536 for the years ended December 31, 2004, 2005 and 2006, respectively and $1,141 for the six months ended June 30, 2007 (unaudited).


4.	Notes Payable

The following is a summary of notes payable:


	December 31,				June 30,
	2005		2006		2007
					(unaudited)

Notes payable to a financial institution in monthly installments plus interest through June 2010	$	1,316	$	702	$	3,083
Less: Current portion		614		449		1,405

Long-term portion	$	702	$	253	$	1,678

As of December 31, 2006 and June 30, 2007 (unaudited) aggregate maturities of long-term debt are as follows:


	December 31,		June 30,
	2006		2007
			(unaudited)
2007	$	449	$	703
2008		253		1,337
2009		–		938
2010		–		105

	$	702	$	3,083

In February 2003, the Company entered into a Loan and Security Agreement (the “Agreement”) with a financial institution, which provided for a $350 term loan for the acquisition of property and equipment. From the period of August 2003 through September 2005, the Company amended the Agreement five times in order to increase the amount available to borrow to $2,175 and to add and amend various terms and covenants. Each advance under the Agreement is payable in monthly installments and is due three years from the date of the advance. The advances bear interest at a rate of prime plus 2% (10.25% at December 31, 2006).

F-15

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

The interest rate decreases to prime plus 1.5% upon the occurrence of a profitability event (defined as three consecutive months with a net profit of at least $1.00). Borrowings under the Agreement are collateralized by substantially all of the assets of the Company. The Agreement requires the Company to maintain certain financial covenants with which the Company was in compliance at December 31, 2005 and 2006. As of December 31, 2006, no amounts remained available for borrowing under the Agreement.

In connection with the Agreement, the Company issued a warrant to purchase 400 shares of the Company’s common stock at an exercise price of $0.50. The warrant was due to expire in November 2007. The value of the warrant, estimated using the Black-Scholes pricing model, was not material.

In March 2007, the Company entered into the Sixth Loan Modification Agreement (the “Loan Modification Agreement”). The Loan Modification Agreement established additional borrowing availability of $5,000 for the acquisition of property and equipment and modified certain terms and covenants. The new financial covenants are minimum net revenue requirements and a funded debt ratio requirement. The Company was in compliance with the covenants as of June 30, 2007 (unaudited). In connection with this Loan Modification Agreement, the Company also agreed to extend the term of the warrants held by the financial institution for a period of seven years from the date of the modification. The Company estimated the incremental fair value related to the modification of the warrants using the Black-Scholes pricing model and determined it to be immaterial.


5.	Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Preferred Stock

During 2002, the Company authorized 1,026,680 shares and 9,761,666 shares of Series A redeemable convertible preferred stock (“Series A”) and Series B redeemable convertible preferred stock (“Series B”), respectively. Also during 2002, the Company issued 1,026,680 and 9,641,666 shares of Series A and Series B, respectively, in exchange for the conversion of bridge notes and accrued interest totaling $739 and cash proceeds of $3,823, net of $259 of issuance costs. The proceeds of the issuance were allocated between the Series A and Series B based on their relative fair values at the time of the transaction. Accordingly, the Company allocated $2,000 of net proceeds to the Series A and the remaining $2,561 to the Series B. The difference between the amount initially recorded for each series and their respective redemption values is being accreted to the redemption value over the period from issuance to the earliest redemption date.

During 2006, the Company authorized 2,521,432 shares of Series C redeemable convertible preferred stock (“Series C”). In May and July 2006, the Company issued 2,357,130 and 164,302 shares, respectively, of Series C for an aggregate purchase price of $15,000 or $5.949 per share.

The holders of preferred stock have the following rights:

Voting

The holders of the preferred stock are entitled to vote, together with the holders of common stock, on all matters submitted to stockholders for a vote. Each preferred stockholder is entitled to the number of votes equal to the number of shares of common stock into which each preferred share is convertible at the time of such vote. The holders of Series B and Series C are entitled to other specific voting rights with respect to the election of directors, as defined.

F-16

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

Dividends

The holders of Series B shares were entitled to receive cumulative dividends at the rate of 10% per annum through May 12, 2006, payable in preference and priority to any payment of any dividend on common stock, Series A or Series C shares. No dividends shall accrue after May 12, 2006. No dividends shall be made with respect to the common stock unless the holders of Series B and Series C first receive, or simultaneously receive, a dividend in an amount equivalent to that of common stock on an as converted basis. The holders of Series A shares are not entitled to receive dividends.

Liquidation Preference

In the event of any liquidation, dissolution or winding-up of the affairs of the Company, the holders of Series C are entitled to receive an amount, to be paid first out of the assets of the Company available for distribution to holders of all classes of capital stock, equal to $11.898 per share (subject to adjustment), plus any declared but unpaid dividends, in the case of a specified liquidation event (defined as an event in which the proceeds legally available for distribution to the stockholders have value equal to or less than $100,000), or $5.949 per share (subject to adjustment) plus any declared but unpaid dividends in the case of other than a specified liquidation event. If the assets of the Company are insufficient to pay the full amount entitled to the holders of Series C, then the entire assets of the Company shall be distributed ratably among the holders of Series C.

After such payments have been made in full to the holders of Series C, the holders of Series B are entitled to receive an amount equal to $0.50 per share (subject to adjustment), plus any accrued but unpaid dividends. If the assets of the Company are insufficient to pay the full amount entitled to the holders of Series B, then the remaining assets of the Company shall be distributed ratably among the holders of Series B.

After such payments have been made in full to the holders of Series C and Series B, the holders of Series A are entitled to receive an amount equal to approximately $17.00 per share (subject to adjustment). If the assets of the Company are insufficient to pay the full amount entitled to the holders of Series A, then the remaining assets available for such distribution shall be distributed ratably among the holders of Series A.

Upon completion of the distribution as described above, all of the remaining proceeds available for distribution to stockholders shall be distributed among the holders of Series B and Series C and Common stock pro rata based on number of shares of Common stock held by each (assuming full conversion of all such preferred stock) provided that holders of Series C shall receive no further distribution if such holders are entitled to a distribution equal to twice the original price as stated above.

Conversion

Each share of preferred stock, at the option of the holder, is convertible into the number of fully paid shares of common stock as determined by dividing the respective preferred stock issue price by the conversion price in effect at the time. The initial conversion prices of Series A, B and C shares are $17.00, $0.50 and $5.949, respectively, and are subject to adjustment in accordance with the antidilution provisions contained in the Company’s Certificate of Incorporation, as amended. After giving effect to the stock split described in Note 12 (unaudited) the conversion ratio of all outstanding preferred stock will be 1.3 shares of common stock for each share of preferred stock. Conversion is automatic immediately upon the closing of the first underwritten public offering in which the aggregate proceeds raised exceed $25,000 and pursuant to which the initial price to the public was at least $9.152 per share (after giving

F-17

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

effect to the stock split). At December 31, 2006, 17,302,675 shares of the Company’s common stock have been reserved for conversion of the preferred stock.

Redemption

The holders of at least a majority of the voting power of the then outstanding Series B and Series C shares (voting together as a single class), by written request at any time after May 12, 2010 (the “Redemption Date”), may require the Company to redeem the preferred stock by paying in cash a sum equal to 100% of the original purchase price of the Series A, Series B and Series C preferred stock plus accrued but unpaid dividends on Series B and declared but unpaid dividends on Series C, in three (3) annual installments. If the Company does not have sufficient funds legally available to redeem all shares of preferred stock to be redeemed at the Redemption Date, then the Company shall redeem first the maximum possible shares of Series C ratably among the holders of Series C. Only after all Series C shares to be redeemed at the Redemption Date have been redeemed, the Company shall redeem the maximum number of Series B shares ratably among the holders of Series B. Only after all Series C and B shares to be redeemed at the Redemption Date have been redeemed, the Company shall redeem the maximum number of Series A shares ratably among the holders of Series A. The Company recorded dividends and accretion through a charge to stockholders’ equity (deficit) of $3,701, $5,743 and $3,788 in 2004, 2005 and 2006, respectively and $518 in the six months ended June 30, 2007 (unaudited), in connection with these redemption rights.

Warrants

In connection with certain equity financings, the Company granted warrants to purchase 257,742 shares of common stock at exercise prices ranging from $1.21-$1.38 per share. The common stock warrants expire on varying dates through October 2008, or the effective date of a merger or consolidation of the Company with another entity or the sale of all or substantially all of the Company’s assets. Warrants to purchase 132,039 shares of common stock were exercised during 2006 and warrants to purchase 125,703 shares of common stock were outstanding at December 31, 2006.

In connection with the Series B financing, the Company granted to a consultant a warrant to purchase 120,000 shares of Series B at a price of $0.50 per share. The warrant expires on the earliest to occur of November 27, 2007, or immediately prior to the closing of a merger, sale of assets, or consolidation of the Company by another entity, or immediately prior to the closing date of an initial public offering of the Company’s common stock. The Company accounts for the Series B warrant in accordance with the guidance in FSP 150-5. The guidance provides that warrants for shares that are redeemable are within the scope of SFAS 150 and should be accounted for as a liability and reported at fair value each reporting period until exercised. At December 31, 2006, the Company used the Black-Scholes option-pricing model to estimate the fair value of the Series B warrant to be $628. During 2005 and 2006, the Company recorded a charge to other expense of $0 and $588 relating to the change in carrying value of the Series B warrant. During the six months ended June 30, 2007 (unaudited), the Company recorded a charge to other expense of $837 relating to the change in carrying value of the Series B warrant. At June 30, 2007 (unaudited), the entire warrant remained outstanding.

Common Stock

Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors, subject to the prior rights of holders of all classes of preferred stock outstanding.

F-18

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)


6.	Stock-Based Awards

In 1999, the Company’s Board of Directors adopted the 1999 Stock Option/Stock Issuance Plan (the “Plan”). The Plan provides for the granting of incentive and nonqualified stock options with a maximum term of ten years, restricted stock and other equity awards to employees, officers, directors, consultants and advisors of the Company. Provisions such as vesting, repurchase and exercise conditions and limitations are determined by the Board of Directors on the grant date. The maximum number of shares of common stock that may be issued pursuant to the 1999 Stock Plan is 5,604,353. As of December 31, 2006, 1,118,295 shares of common stock are available for issuance under the Plan. As of June 30, 2007 (unaudited), 831,124 shares of common stock are available for issuance under the Plan.

Prior to January 1, 2006, the Company accounted its stock-based compensation plans under the intrinsic value recognition and measurement provisions of APB 25 and related interpretations, and adopted the disclosure-only provisions of SFAS 123, as amended by SFAS No. 148.

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123R. SFAS 123R requires nonpublic companies that used the minimum value method in SFAS 123 for either recognition or pro forma disclosures to apply SFAS 123R using the prospective transition method. Under the prospective transition method, compensation cost recognized in the year ended December 31, 2006 included the pro rata compensation cost for all share-based payments granted on or subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. The Company recognizes the compensation cost of employee stock-based awards in the statement of operations using the straight-line method over the requisite service period of the award. The Company will continue to apply APB 25 in future periods to equity awards outstanding at the date of SFAS 123R’s adoption that were measured using the minimum value method. In accordance with the requirements of SFAS 123R, the Company will not present pro forma disclosures for periods prior to the adoption of SFAS 123R, as the estimated fair value of the Company’s stock options granted through December 31, 2005 was determined using the minimum value method.

Stock Options

During the years ended December 31, 2004, 2005 and 2006, the Company granted 203,775, 737,091 and 749,277 stock options, respectively, to certain employees. During the six months ended June 30, 2007 (unaudited), the Company granted 418,229 stock options to certain employees. The vesting of these awards is time-based and the restrictions typically lapse 25% after one year and quarterly thereafter for the next 36 months.

Stock options have historically been granted with exercise price equal to the estimated fair value of the Company’s common stock on the date of grant, taking into account our most recently available valuation of common stock.

For the years ended December 31, 2004 and 2005 the fair value of common stock was estimated by the Company on an annual basis. Because there has been no public market for the Company’s common stock, the fair value was estimated by considering a number of objective and subjective factors, including peer group trading multiples, the amount of preferred stock liquidation preferences, the illiquid nature of common stock and the size of the Company and its lack of historical profitability.

Commencing in 2006, the Company began the process of quarterly contemporaneous common stock valuations. In the first quarter of 2006, the fair value of common stock was estimated using the guideline public company method. The valuation considered numerous factors, including peer group trading multiples, the amount of preferred stock liquidation preferences, the illiquid nature of the Company’s common stock, the Company’s small size, lack of historical profitability, short-term cash requirements and the redemption rights of preferred stockholders. The companies used for comparison under the guideline public company method

F-19

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

were selected based on a number of factors, including but not limited to, the similarity of their industry, business models and financial risk to those of the Company.

Beginning in the second quarter of 2006, the quarterly common stock valuations were prepared using the probability-weighted expected return method. Under this methodology, the fair market value of common stock was estimated based upon an analysis of future values for the Company assuming various outcomes. The share value was based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available to the Company as well as the rights of each share class. The possible outcomes considered were a sale of the Company, an exit through an initial public offering, a dissolution and continued operations as a private company. The resulting values represent the Company’s estimate of fair market value of common stock at each valuation date.

The following table summarizes by grant date the number of shares of common stock subject to options granted between January 1, 2006 and June 30, 2007, the per share exercise price of the options and the per share estimated fair value of the options:


	Number of Shares		Per Share		Per Share
	Subject to Options		Exercise Price		Estimated Fair
	Granted		of Option(1)		Value of Option(2)

Three months ended March 31, 2006		230,741	$	1.09	$	0.70
Three months ended June 30, 2006		90,183	$	2.80	$	1.86
Three months ended September 30, 2006		151,941	$	2.68	$	1.70
Three months ended December 31, 2006		276,412	$	3.05	$	1.94
January 18, 2007 (unaudited)		39,000	$	3.05	$	1.94
March 2, 2007 (unaudited)		168,025	$	4.12	$	2.62
Three months ended June 30, 2007 (unaudited)		211,204	$	6.89	$	4.32


(1)		The Per Share Exercise Price of Option represents the determination by our board of directors of the fair market value of our common stock on the date of grant, taking into account our most recently available valuation of common stock.

(2)		The Per Share Estimated Fair Value of Option was estimated for the date of grant using the Black-Scholes option-pricing model.

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The expected term assumption is based on the simplified method for estimating expected term for awards that qualify as “plain-vanilla” options under SAB 107, Share Based Payment. Expected volatility is based on historical volatility of the publicly traded stock of a peer group of companies analyzed by the Company. The risk-free interest rate is determined by reference to U.S. Treasury yields at or near the time of grant for time periods similar to the expected term of the award. The relevant data used to determine the value of the stock option grants is as follows:


				Six Months
	Year Ended			Ended
	December 31,			June 30,
	2006			2007
				(unaudited)

Weighted average risk-free interest rate		4.82	%		4.81	%
Expected term (in years)		6.1			6.1
Weighted average expected volatility		64.9	%		63.8	%
Expected dividends		0	%		0	%

F-20

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

A summary of stock option activity is as follows:


						Weighted
						Average
				Weighted		Remaining
				Average		Contractual		Aggregate
	Number of			Exercise		Term		Intrinsic
	Options			Price		(in years)		Value

Outstanding
Balance at December 31, 2003		2,790,828		$	0.40
Granted		203,775			0.04
Exercised		(1,918,684	)		0.04
Forfeited		(39,614	)		0.94

Balance at December 31, 2004		1,036,305			0.99
Granted		737,091			0.06
Exercised		(473,170	)		0.04
Forfeited		(82,460	)		1.03

Balance at December 31, 2005		1,217,766			0.79
Granted		749,277			2.35
Exercised		(192,076	)		0.05
Forfeited		(72,960	)		0.47

Balance at December 31, 2006		1,702,007			1.57		8.4	$	2,505
Granted (unaudited)		418,229			5.42
Exercised (unaudited)		(134,524	)		0.16
Forfeited (unaudited)		(131,071	)		0.37

Balance at June 30, 2007 (unaudited)		1,854,641			2.63

Exercisable at December 31, 2006		408,582		$	2.22		6.9	$	338
Exercisable at June 30, 2007 (unaudited)		489,064		$	2.12		6.9	$	2,331

The aggregate intrinsic value was calculated based on the positive difference between the estimated fair value of the Company’s common stock on December 31, 2006 and June 30, 2007 (unaudited) of $3.05 and $6.89 per share, respectively, and the exercise price of the options.

The weighted average grant-date fair value of grants of stock options was $1.50 per share for the year ended December 31, 2006, and $3.42 for the six months ended June 30, 2007 (unaudited).

The total intrinsic value of stock options exercised was $0, $11 and $430 for the years ended December 31, 2004, 2005 and 2006, respectively, and $415 for the six months ended June 30, 2007 (unaudited).

Compensation cost of $23, $17 and $83 was recognized for employee stock-based compensation for the years December 31, 2004, 2005 and 2006, respectively. Compensation cost of $203 was recognized for employee stock-based compensation for the six months ended June, 2007 (unaudited).

F-21

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

Under the provisions of SFAS 123R, the Company recognized stock-based compensation expense on all employee awards in the following categories:


			Six
	Year Ended		Months Ended
	December 31,		June 30,
	2006		2007
			(unaudited)

Cost of revenue	$	25	$	32
Research and development		27		50
Sales and marketing		19		29
General and administrative		12		92

	$	83	$	203

No stock based compensation expense was capitalized during the years ended December 31, 2004, 2005 or 2006 or for the six months ended June 30, 2007 (unaudited). The unrecognized compensation expense associated with outstanding stock options at December 31, 2006 and June 30, 2007 (unaudited) was $1,030 and $2,230, respectively, which is expected to be recognized over a weighted-average period of 3.7 years and 3.5 years as of December 31, 2006 and June 30, 2007 (unaudited), respectively.

Restricted Stock

During the year ended December 31, 2005, the Company sold 192,010 shares of restricted stock to a certain employee. The vesting of this award is time-based and restrictions lapse over four years. The Company did not record compensation expense as the shares were sold at fair value. At December 31, 2006, 144,008 shares remained unvested and no shares had been forfeited during 2006. At June 30, 2007 (unaudited), 120,007 shares remained unvested.


7.	Income Taxes

As a result of losses incurred, the Company did not provide for any income taxes in the years ended December 31, 2004, 2005 and 2006. A reconciliation of the Company’s effective tax rate to the statutory federal income tax rate is as follows:


	Years Ended December 31,
	2004			2005			2006

Statutory rate		34	%		34	%		34	%
Increase in valuation allowance		(38	)		(55	)		(40	)
State taxes, net of federal benefit		6			6			6
Impact of permanent differences		(2	)		–			(1	)
Expiration of state net operation losses		–			–			(5	)
Tax credits		9			14			7
Other		(9	)		1			(1	)

		0	%		0	%		0	%

F-22

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

The Company has deferred tax assets related to temporary differences and operating loss carryforwards as follows:


	December 31,
	2005			2006

Deferred tax assets
Net operating loss carryforwards	$	7,358		$	10,778
Capitalized research and development		70			41
Research and development credit carryforwards		660			1,584
Accrued expenses		1,208			176
Depreciation		257			–
Redeemable convertible preferred stock warrant		–			237

Total deferred tax assets		9,553			12,816
Deferred tax asset valuation allowance		(9,553	)		(12,688	)

Net deferred tax assets		–			128

Deferred tax liabilities
Depreciation		–			(128	)

Total deferred tax liabilities		–			(128	)

Net deferred tax assets	$	–		$	–

The Company has provided a valuation allowance for the full amount of its net deferred tax assets since at December 31, 2005 and 2006 it is not more likely than not that any future benefit from deductible temporary differences and net operating loss and tax credit carryforwards would be realized. The change in valuation allowance for the year ended December 31, 2006 of $3,135 is attributable primarily to the increase in the net operating loss and research and development credit carryforwards.

At December 31, 2006, the Company has federal and state net operating loss carryforwards of approximately $29,100 and $22,500, respectively, which expire at varying dates through 2026 for federal income tax purposes and through 2011 for state income tax purposes. At December 31, 2006, $430 of federal and state net operating loss carryforwards relate to deductions for stock option compensation for which the associated tax benefit will be credited to additional paid-in capital when realized.

At December 31, 2006, the Company has federal and state research and development credit carryforwards of $979 and $605, respectively, which will expire at varying dates through 2026 for federal income tax purposes and through 2021 for state income tax purposes.

Adoption of FIN 48 (unaudited)

In June 2006, The FASB published FASB Interpretation No. 48, Accounting for Uncertain Tax Positions, (“FIN 48”). This interpretation seeks to reduce the significant diversity in practice associated with recognition and measurement in the accounting for income taxes. It applies to all tax positions accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 requires that a tax position meet “a more likely than not” threshold for the benefit of the uncertain tax position to be recognized in the financial statements. This threshold is to be met assuming that the tax authorities will examine the uncertain tax position. FIN 48 contains guidance with respect to the measurement of the benefit that is recognized for an uncertain tax position, when that benefit should be derecognized, and other matters.

On January 1, 2007, the Company adopted the provisions of FIN 48. The Company has no amounts recorded for any unrecognized tax benefits as of January 1, 2007 or June 30, 2007 (unaudited). In addition, the

F-23

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

Company did not record any amount for the implementation of FIN 48. The Company’s policy is to record estimated interest and penalties related to the underpayment of income taxes as a component of its income tax provision. As of January 1, 2007 and June 30, 2007 (unaudited), the Company had no accrued interest or tax penalties recorded. The Company’s income tax return reporting periods since December 31, 2003 are open to income tax audit examination by the federal and state tax authorities. In addition, as the Company has net operating loss carryforwards, the Internal Revenue Service is permitted to audit earlier years and propose adjustments up to the amount of net operating loss generated in those years.

Utilization of net operating loss and research and development credit carryforwards may be subject to a substantial annual limitation due to ownership changes that have occurred previously or that could occur in the future, as provided by Section 382 of the Internal Revenue Code of 1986, as well as similar state provisions. These ownership changes may limit the amount of net operating loss and research and development credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. Any limitation may result in expiration of a portion of the net operating loss or research and development credit carryforwards before utilization. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. Since the Company’s formation, the Company has raised capital through the issuance of common stock and preferred stock, which, combined with the purchasing shareholders’ subsequent disposition of those shares, may have resulted in a change of control, as defined by Section 382, or could result in a change of control in the future upon subsequent disposition. The Company is in the process of conducting a Section 382 study to determine whether such an ownership change has occurred. Until the study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position under FIN 48. However, changes in the unrecognized tax position, if any, will have no impact on the effective tax rate due to the existence of the full valuation allowance.


8.	Accrued Expenses


	December 31,				June 30,
	2005		2006		2007
					(Unaudited)

Payroll and payroll related	$	381	$	694	$	1,107
Licensed software and maintenance		–		562		600
Marketing programs		8		509		67
Other accrued expenses		105		641		898

	$	494	$	2,406	$	2,672


9.	401(k) Savings Plan

The Company has a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the plan may be made at the discretion of the Board of Directors. There were no contributions made to the plan by the Company during the years ended December 31, 2004, 2005 and 2006 or the six months ended June 30, 2007 (unaudited).

F-24

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)


10.	Commitments and Contingencies

Capital Leases

The Company leased equipment under capital leases that expired in 2006 (Note 3). Accumulated amortization for assets under capital leases was $374 and $398 at December 31, 2004 and 2005, respectively. Amortization of assets under capital leases was $101, $19 and $0 for the years ended December 31, 2004, 2005 and 2006, respectively.

Operating Leases

The Company leased its office space under a noncancelable operating lease expiring in July 2005. In June 2005, the Company and the landlord entered into the First Amendment to the original lease agreement which effectively terminated the original lease related to the existing office space and entered into a new lease agreement for new office space with a lease term of five years from the commencement of the First Amendment in October 2005. In July 2006, the Company subleased an adjacent office space within the same building. Simultaneous with the execution of the sublease, the Company entered into the Second Amendment of its primary office lease to incorporate the additional space, upon the expiration of the sublease, into the primary office lease for the period from May 1, 2008 to September 2010. Total rent expense under operating leases was $214, $351 and $745 for the years ended December 31, 2004, 2005 and 2006, respectively.

As of December 31, 2006, future minimum lease payments under noncancelable operating leases for the years ending December 31 are as follows:


2007	$	836
2008		907
2009		939
2010		705

	$	3,387

In February 2007, the Company entered into the third amendment of its office lease in order to expand its existing premises. The modified lease arrangement required a $92 increase in the security deposit. To satisfy the increased security deposit requirement, the Company increased the letter of credit issued for the benefit of the holder of the lease and the related restricted cash arrangement securing the letter of credit. As a result, the future lease commitments increased by $183, $372, $385, and $294 for 2007, 2008, 2009 and 2010, respectively.

Hosting Services

The Company has an agreement with a vendor to provide specialized space and related services from which the Company hosts its software application. As of December 31, 2006, the agreement requires future minimum payments of $561 and $339 in 2007 and 2008, respectively.

In July 2007, the Company entered into an agreement with a second vendor to provide space and related services in a second co-location hosting facility. As a result, the future lease commitments increased by $311, $845, $866, $888 and $755 for 2008, 2009, 2010, 2011, and 2012, respectively.

F-25

Constant Contact, Inc.

Notes to Financial Statements

(in thousands, except share and per share amounts)

Letters of Credit

As of December 31, 2005, 2006, and June 30, 2007 (unaudited), the Company maintained a letter of credit totaling $216, $216 and $308, respectively, for the benefit of the holder of the Company’s facilities lease. The holder can draw against the letter of credit in the event of default by the Company. The Company is required to maintain a cash balance of at least $266 as of December 31, 2005 and 2006 and $358 as of June 30, 2007 (unaudited) to secure the letter of credit and as collateral on customer credit card deposits. This amount was classified as restricted cash in the balance sheet at December 31, 2005 and 2006 and June 30, 2007 (unaudited).

Indemnification Obligations

The Company enters into standard indemnification agreements with the Company’s channel partners and certain other third parties in the ordinary course of business. Pursuant to these agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses incurred by the indemnified party in connection with certain intellectual property infringement claims by any third party with respect to the Company’s business and technology. Based on historical information and information known as of December 31, 2006, the Company does not expect it will incur any significant liabilities under these indemnification agreements.


11.	Related Party

An executive of the Company served as a director of a channel partner and vendor to the Company from December 2003 through May 2007. In the years ended December 31, 2004, 2005 and 2006, the Company’s aggregate payments to this channel partner and vendor for customer referrals and template design services were $37, $107 and $164, respectively. During the six months end June 30, 2007 (unaudited), the Company’s aggregate payments to this channel partner and vendor were $14.

One of the Company’s directors is a general partner of a venture capital firm that owns, through affiliated investment entities, approximately 13% of the outstanding common stock of one of the Company’s vendors. Another of the general partners of that venture capital firm is a member of the board of directors of that same vendor. In the years ended December 31, 2004, 2005 and 2006, the Company’s aggregate payments to this vendor were $123, $33 and $253, respectively. During the six months ended June 30, 2007 (unaudited), the Company’s aggregate payments to this vendor were $97. The Company also made a payment to this vendor of $398 in July 2007 (unaudited).


12.	Stock Split (unaudited)

In August 2007, the pricing committee of the Company’s board of directors, pursuant to delegated authority, approved a 1.3-for-1 stock split of the Company’s common stock (the “stock split”), which will become effective in September 2007. All references to shares in the financial statements and the accompanying notes, including but not limited to the number of shares and per share amounts, unless otherwise noted, have been adjusted to reflect the stock split retroactively. Previously awarded options and warrants to purchase shares of the Company’s common stock and the shares of common stock issuable upon the conversion of the redeemable convertible preferred stock have also been retroactively adjusted to reflect the stock split.

F-26

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS


Item 13.	*Other Expenses of Issuance and Distribution*

The following table indicates the expenses to be incurred in connection with the offering described in this Registration Statement, other than underwriting discounts and commissions, all of which will be paid by the Registrant. All amounts are estimated except the Securities and Exchange Commission registration fee and the National Association of Securities Dealers, Inc. filing fee.


	Amount

Securities and Exchange Commission registration fee	$	2,648
National Association of Securities Dealers, Inc. fee		9,125
Nasdaq Global Market listing fee		*
Accountants’ fees and expenses		*
Legal fees and expenses		*
Blue Sky fees and expenses		*
Transfer Agent’s fees and expenses		*
Printing and engraving expenses		*
Miscellaneous		*

Total Expenses	$


*		To be filed by Amendment.


Item 14.	*Indemnification of Directors and Officers*

Section 102 of the General Corporation Law of the State of Delaware permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our restated certificate of incorporation provides that no director of the Registrant shall be personally liable to it or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the General Corporation Law of the State of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.

Section 145 of the General Corporation Law of the State of Delaware provides that a corporation has the power to indemnify a director, officer, employee, or agent of the corporation, or a person serving at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and

II-1

reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Our restated certificate of incorporation provides that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of Constant Contact) by reason of the fact that he or she is or was, or has agreed to become, a director or officer of Constant Contact, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. Our restated certificate of incorporation provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of Constant Contact to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, a director or officer of Constant Contact, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of Constant Contact, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys’ fees) actually and reasonably incurred in connection therewith. Expenses must be advanced to an Indemnitee under certain circumstances.

We intend to enter into indemnification agreements with each of our directors and officers. These indemnification agreements may require us, among other things, to indemnify our directors and officers for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of his or her service as one of our directors or officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request.

We maintain a general liability insurance policy that covers certain liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in their capacities as directors or officers.

In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act of 1933, as amended, against certain liabilities.


Item 15.	*Recent Sales of Unregistered Securities*

Set forth below is information regarding shares of common stock issued, and options granted, by us within the past three years. Also included is the consideration, if any, received by us for such shares and options and

II-2

information relating to the section of the Securities Act, or rule of the Securities and Exchange Commission, under which exemption from registration was claimed.

(a) Issuances of Capital Stock

On May 12, 2006 and July 20, 2006, we issued and sold an aggregate of 2,521,432 shares of our Series C Convertible Preferred Stock to 10 venture capital funds and 15 other existing stockholders for an aggregate purchase price of $14,999,998.98. Upon the closing of this offering, these shares will automatically convert into 3,277,851 shares of common stock.

On June 20, 2006, a holder of two warrants to purchase shares of our common stock exercised its warrants for an aggregate of 7,921 shares for an aggregate purchase price of $10,909.17.

On June 19, 2006, a holder of a warrant to purchase shares of our common stock exercised its warrant for an aggregate of 59,718 shares for an aggregate purchase price of $82,230.21.

On August 8, 2006, a holder of a warrant to purchase shares of our common stock exercised its warrant for an aggregate of 64,400 shares for an aggregate purchase price of $88,676.27.

In April 2007, a holder of warrants to purchase shares of our common stock exercised its warrant for 29,379 shares for an aggregate purchase price of $42,454.

No underwriters were involved in the foregoing sales of securities. The securities described in this paragraph (a) of Item 15 were sold in reliance on the exemption from the registration requirements of the Securities Act, as set forth in Section 4(2) under the Securities Act and Rule 506 of Regulation D promulgated thereunder relative to sales by an issuer not involving any public offering, to the extent an exemption from such registration was required.

(b) Stock Options and Restricted Stock

Since January 1, 2004, we have granted stock options to purchase an aggregate of 2,108,372 shares of our common stock with exercise prices ranging from $0.04 to $6.89 per share, to employees, directors, and consultants pursuant to our 1999 Stock Option/Stock Issuance Plan. Since January 1, 2004, an aggregate of 2,718,508 shares have been issued upon the exercise of stock options for an aggregate consideration of $149,835. The shares of common stock issued upon exercise of options are deemed restricted securities for the purposes of the Securities Act.

On December 12, 2005, we issued 192,010 shares of our common stock to Mr. Wasserman pursuant to a restricted stock agreement for an aggregate purchase price of $11,816.

The issuances of stock options and the shares of common stock issuable upon the exercise of the options and the shares of restricted stock as described in this paragraph (b) of Item 15 were issued pursuant to written compensatory plans or arrangements with our employees, directors and consultants, in reliance on the exemption provided by Section 3(b) of the Securities Act and Rule 701 promulgated thereunder. All recipients either received adequate information about us or had access, through employment or other relationships, to such information.


Item 16.	*Exhibits*

The exhibits to the registration statement are listed in the Exhibit Index to this registration statement and are incorporated by reference herein.


Item 17.	*Undertakings*

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

II-3

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective.

(2) For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) For the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(4) For the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Amendment No. 2 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Waltham, Commonwealth of Massachusetts on the 4th day of September, 2007.

CONSTANT CONTACT, INC.


	By:	/s/ Gail F. Goodman

Gail F. Goodman

President and Chief Executive Officer

Pursuant to the requirements of the Securities Act, this Amendment No. 1 to Registration Statement has been signed by the following persons in the capacities and on the dates indicated.


	Signature	Title	Date

/s/ Gail F. Goodman Gail F. Goodman		Chairman, President and Chief Executive Officer (Principal Executive Officer)	September 4, 2007

/s/ Steven R. Wasserman Steven R. Wasserman		Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	September 4, 2007

* Thomas Anderson		Director	September 4, 2007

* Robert P. Badavas		Director	September 4, 2007

* John Campbell		Director	September 4, 2007

* Michael T. Fitzgerald		Director	September 4, 2007

* Patrick Gallagher		Director	September 4, 2007

* William S. Kaiser		Director	September 4, 2007

*By:	/s/ Gail F. Goodman Gail F. Goodman Attorney-in-Fact

II-5

Exhibit Index


Exhibit
Number			Description

	1	.1*	Form of Underwriting Agreement
	3	.1**	Second Amended and Restated Certificate of Incorporation of the Registrant, as amended, as currently in effect
	3	.2	Form of Restated Certificate of Incorporation of the Registrant, to be effective upon the closing of the offering
	3	.3**	Amended and Restated Bylaws of the Registrant, as currently in effect
	3	.4	Form of Second Amended and Restated Bylaws of the Registrant, to be effective upon the closing of the offering
	3	.5	Amendment to Second Amended and Restated Certificate of Incorporation of the Registrant, effective on August 29, 2007
	4	.1	Specimen Certificate evidencing shares of common stock
	5	.1*	Opinion of Wilmer Cutler Pickering Hale and Dorr LLP
	10	.1**	1999 Stock Option/Stock Issuance Plan, as amended
	10	.2**	Form of Non-Qualified Stock Option Agreement with Executive Officers under the 1999 Stock Option/Stock Issuance Plan
	10	.3**	Form of Non-Qualified Stock Option Agreement under the 1999 Stock Option/Stock Issuance Plan
	10	.4**	Restricted Stock Agreement, dated December 12, 2005, between the Registrant and Steven R. Wasserman
	10	.5	2007 Stock Incentive Plan
	10	.6	Forms of Incentive Stock Option Agreement under the 2007 Stock Incentive Plan
	10	.7	Forms of Non-Qualified Stock Option Agreement under the 2007 Stock Incentive Plan
	10	.8	2007 Employee Stock Purchase Plan
	10	.9**	Letter Agreement, dated April 14, 1999, between the Registrant and Gail F. Goodman
	10	.10**	Letter Agreement, dated December 1, 2005, between the Registrant and Steven R. Wasserman
	10	.11**	Letter Agreement, dated December 6, 2006, between the Registrant and Richard H. Turcott
	10	.12**	2007 Executive Team Bonus Plan
	10	.13	Form of Director and Executive Officer Indemnification Agreement
	10	.14**	Amended and Restated Investors’ Rights Agreement, dated as of August 9, 2001, among the Registrant and the investors listed therein
	10	.15**	Amended and Restated Preferred Investors’ Rights Agreement, dated as of May 12, 2006, among the Registrant and the parties listed therein
	10	.16**	Lease Agreement, dated as of July 9, 2002, as amended, between the Registrant and Boston Properties Limited Partnership
	10	.17	Loan and Security Agreement, dated February 27, 2003, as amended, between the Registrant and Silicon Valley Bank
	16	.1**	Letter from Vitale, Caturano & Company, Ltd. to the Securities and Exchange Commission, dated July 6, 2007
	23	.1	Consent of PricewaterhouseCoopers LLP
	23	.2	Consent of Vitale, Caturano & Company, Ltd.
	23	.3*	Consent of Wilmer Cutler Pickering Hale and Dorr LLP (included in Exhibit 5.1)
	24	.1**	Powers of Attorney (included on signature page)


*		To be filed by amendment.

**		Previously filed.

Financial Statement Schedules — No financial statement schedules have been submitted because they are not required or applicable or because the information required is included in the financial statements or the notes thereto.


Prospectus Summary			1
Risk Factors			7
Forward-Looking Statements			23
Use of Proceeds			24
Dividend Policy			24
Capitalization			25
Dilution			27
Selected Financial Data			29
Management’s Discussion and Analysis of Financial Condition and Results of Operations			31
Business			47
Management			62
Principal and Selling Stockholders			87
Certain Transactions			90
Description of Capital Stock			93
Shares Eligible for Future Sale			98
Underwriting			100
Legal Matters			106
Experts			106
Where You Can Find More Information			106
Index to Financial Statements			F-1
Ex-3.2 Form of Restated Certificate of Incorporation
Ex-3.4 Form of Second Amended and Restated Bylaws
Ex-3.5 Amendment to Second Amended and Restated Certificate of Incorporation
Ex-4.1 Specimen Certificate evidencing shares of common stock
Ex-10.5 2007 Stock Incentive Plan
Ex-10.6 Forms of Incentive Stock Option Agreement under the 2007 Stock Incentive Plan
Ex-10.7 Forms of Non-Qualified Stock Option Agreement under the 2007 Stock Incentive Plan
Ex-10.8 2007 Employee Stock Purchase Plan
Ex-10.13 Form of Director and Executive Officer Indemnification Agreement
EX-10.17 Loan and Security Agreement, dated February 27, 2003
Ex-23.1 Consent of PricewaterhouseCoopers LLP
Ex-23.2 Consent of Vitale, Caturano & Company, Ltd.


	•	1,854,641 shares of common stock issuable upon the exercise of stock options outstanding as of June 30, 2007 at a weighted average exercise price of $2.63 per share, of which options to purchase 489,064 shares were exercisable as of June 30, 2007 at a weighted average exercise price of $2.12 per share; and


	Page(s)

Reports of Independent Registered Public Accounting Firms		F-2
Balance Sheets		F-4
Statements of Operations		F-5
Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) and Comprehensive Loss		F-6
Statements of Cash Flows		F-7
Notes to Financial Statements		F-8