<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1999
REGISTRATION NO. 333-73449
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
JUNO ONLINE SERVICES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7370 13-3914547
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
--------------------------
1540 BROADWAY
NEW YORK, NEW YORK 10036
(212) 597-9000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
----------------------------------
MR. CHARLES E. ARDAI
PRESIDENT
JUNO ONLINE SERVICES, INC.
1540 BROADWAY
NEW YORK, NEW YORK 10036
(212) 597-9000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
----------------------------------
COPIES TO:
<TABLE>
<S> <C>
ALEXANDER D. LYNCH, ESQ. JOHN W. WHITE, ESQ.
BRIAN B. MARGOLIS, ESQ. CRAVATH, SWAINE & MOORE
BROBECK, PHLEGER & HARRISON LLP WORLDWIDE PLAZA
1633 BROADWAY, 47(TH) FLOOR 825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10019
(212) 581-1600 (212) 474-1000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED PRICE(1)(2) FEE(2)(3)
<S> <C> <C>
Common Stock, par value $.01 per share............................................... $97,175,000 $27,015
</TABLE>
(1) Includes shares that the Underwriters have the option to purchase from the
Company solely to cover over-allotments, if any.
(2) Estimated pursuant to Rule 457(a) under the Securities Act of 1933, as
amended, solely for the purpose of computing the amount of the registration
fee.
(3) $23,978 has been previously paid.
--------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 23, 1999
PROSPECTUS
[LOGO]
6,500,000 SHARES
JUNO ONLINE SERVICES, INC.
COMMON STOCK
---------------
We are selling 6,500,000 shares of our common stock. The underwriters named
in this prospectus may purchase up to 975,000 additional shares of our common
stock to cover over-allotments.
This is an initial public offering of common stock. Juno Online Services,
Inc. currently expects the initial public offering price to be between $11.00
and $13.00 per share, and will apply to have the common stock included for
quotation on the Nasdaq National Market under the symbol "JWEB".
------------------------
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 9.
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.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------- --------------
<S> <C> <C>
Initial Public Offering Price.................................................... $ $
Underwriting Discount............................................................ $ $
Proceeds to Juno Online Services, Inc............................................ $ $
</TABLE>
The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about
, 1999.
------------------------
SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.
PAINEWEBBER INCORPORATED
, 1999
<PAGE>
Description of graphics on inside front, gatefold and back cover pages of
prospectus:
Inside Front Cover:
[JUNO] [Juno Logo]
The caption at the top of the page reads:
"Our multiple service levels and easy-to-use, intuitive software are designed to
attract a broad spectrum of users by offering a gradual migration path onto the
Internet."
The picture in the upper right corner depicts the "Juno Web" portion of the Juno
Web site. The sidebar text reads:
"Juno Web
Full Internet access through either of the two most popular Web browsers."
The picture in the middle depicts the "Juno Gold" portion of the Juno Web site.
The sidebar text reads:
"Juno Gold
Enhanced e-mail: send pictures, spreadsheets, word processor files, and more."
The picture in the lower left corner depicts the "Basic Free E-mail" portion of
the Juno Web site. The sidebar text reads:
"Juno's Basic Service
Basic dial-up Internet e-mail, provided to the end user for free."
The caption at the bottom of the page reads:
"Juno Online Services, Inc. is a leading provider of Internet-related services
to millions of computer users throughout the United States. Our services and
software have been designed with special attention to the needs of consumers who
are just now beginning to explore the Internet. Subscribers who are not yet
ready to use or pay for the full capabilities of the Internet can begin with out
basic e-mail service or with Juno Gold, then migrate to Juno Web once they are
ready to do so."
<PAGE>
Gatefold:
[JUNO Online Services]
The picture on these pages depicts a Juno user's inbox as it appears on that
user's computer screen. Across the top of the screen is an ad banner for Qwest,
as well as three icons representing three features of Juno Online Services:
Read, Write and Web. The numbered sidebar text points to each of the icons, and
reads:
"[1]
Click to read.
Read and organize your incoming e-mail on Juno's "Read" screen."
"[2]
Click to write.
Send messages to anyone with an Internet e-mail address -- along with pictures
and more, if you are a Juno Gold or Juno Web subscriber."
"[3]
Click to go to the Web.
As a Juno Web subscriber, you can click here to connect to the Web, starting
each session at Juno's "portal" site.
Below the ad banner and icons is the Juno user's inbox, which lists various
e-mail messages received, and below that list is the text of an e-mail message
to the Juno user, including two attachments.
Below and to the right of the picture of the computer screen is text that reads:
"Above: Version 2.0 of Juno's software."
To the right of the screen picture is a depiction of the Juno home page,
entitled "Juno Web," including a search window, as well as various hyperlinks to
other spots on the Juno Web site. The caption below it reads:
"home.juno.com
When Juno Web subscribers begin a Web session, the first pages they see provide
them with a broad set of tools and content to help them understand, navigate,
and use the Web."
[Juno Logo]
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. JUNO
ONLINE SERVICES HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. JUNO ONLINE SERVICES IS NOT MAKING AN OFFER OF THESE SECURITIES IN
ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION PROVIDED BY THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary........................................................................................ 4
Risk Factors.............................................................................................. 9
Forward-Looking Statements................................................................................ 25
Use of Proceeds........................................................................................... 26
Dividend Policy........................................................................................... 26
Capitalization............................................................................................ 27
Dilution.................................................................................................. 28
Selected Consolidated Financial Data...................................................................... 29
Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 31
Business.................................................................................................. 49
Management................................................................................................ 62
Certain Transactions...................................................................................... 73
Principal Stockholders.................................................................................... 76
Description of Capital Stock.............................................................................. 78
Shares Eligible for Future Sale........................................................................... 82
United States Tax Consequences to Non-United States Holders............................................... 84
Underwriting.............................................................................................. 87
Legal Matters............................................................................................. 90
Experts................................................................................................... 90
Where You Can Find Additional Information................................................................. 90
Index to Consolidated Financial Statements................................................................ F-1
</TABLE>
------------------------
Until , 1999 (25 days after the date of this prospectus), all dealers
that buy, sell or trade the common stock, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
3
<PAGE>
PROSPECTUS SUMMARY
BECAUSE THIS IS ONLY A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION
THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING
"RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO,
BEFORE DECIDING TO INVEST IN OUR COMMON STOCK.
OUR COMPANY
Juno Online Services, Inc. is a leading provider of Internet-related
services to millions of computer users throughout the United States. We offer
several levels of service, ranging from basic dial-up Internet e-mail--which is
provided to the end user for free--to full, competitively priced access to the
World Wide Web. Our strategy of offering several different service levels and
our easy-to-use, intuitive software are designed to attract a broad spectrum of
users, including those who are interested only in e-mail, those who initially
begin with e-mail but over time develop a need for Web access, and those who
seek full Web access from the outset.
Our services are provided nationwide through over 1,900 local telephone
numbers, which we lease from several providers. These phone numbers can be
reached by the vast majority of the U.S. population without having to place a
long distance telephone call. Our revenues are derived primarily from the
subscription fees we charge for the use of our more advanced service levels,
from the sale of advertising, and from the direct sale of products to our
subscribers.
From the time of our inception, we have pursued a two-phase business
strategy. During the first phase, we focused on building computer systems and
related infrastructure that could be rapidly expanded to accommodate increasing
numbers of users and on maximizing the number of subscribers to our free basic
e-mail service. We believed that offering this service for free would allow us
to rapidly and cost-effectively build a large user base from which we might
ultimately expect to derive various forms of revenue. We planned to draw on our
ability to communicate inexpensively with our user base in order to display
advertising and market products to our subscribers. We believed the economics of
these activities would be enhanced by technology we had developed that allowed
us to take advantage of a substantial number of hours of customer contact while
paying for a much smaller number of hours during which customers were actually
connected by telephone to our central computers. In addition, we planned to
offer our basic e-mail users the opportunity to purchase more advanced services
including full Web access for which we would charge subscription fees. We
believed that our basic e-mail users would be more likely to purchase these
advanced services from us than from a competing service provider due to their
expected reluctance to switch e-mail addresses.
In July 1998, we commenced the second phase of our business strategy by
introducing two additional service levels, for which we receive subscription
fees. JUNO GOLD supplements our basic e-mail service by allowing users to send
and receive non-text files such as pictures, spreadsheets, and word processor
documents. JUNO WEB provides full Internet access using either of the two most
popular Web browsers.
More than 6.8 million Juno accounts have been created since the launch of
our basic e-mail service in April 1996. During the month of March 1999, an
average of 912,000 user accounts dialed into our service on any given day, with
a total of 2.4 million user accounts connecting during the full month of March,
and 3.1 million during the three-month period ending March 31, 1999. We launched
Juno Gold and Juno Web, our billable subscription services, on July 22, 1998,
and as of March 31, 1999, we had approximately 207,000 subscribers to these
services, consisting of approximately 86,000 subscribers to Juno Gold and
approximately 121,000 to Juno Web. We have initially marketed Juno Gold and Juno
Web only to our own free e-mail subscribers. We intend, however, to begin
marketing these services beyond the existing Juno user base through a
substantial external marketing campaign beginning in the second quarter of 1999.
4
<PAGE>
As of March 31, 1999, approximately 200 firms had advertised on the Juno
service. We have also entered into a number of major strategic marketing
alliances, including several that involve multi-million-dollar guaranteed
minimum payments to Juno. Our strategic marketing alliances include multi-year
agreements with First USA, Qwest, and The Hartford, as well as a one-year
agreement with AT&T Wireless Services. These advertising and strategic marketing
activities benefit from our ability to target advertising to selected segments
of the Juno subscriber base on the basis of a wide variety of information
obtained from a detailed electronic questionnaire that must be completed in
order to sign up for Juno's basic e-mail service.
MARKET OPPORTUNITY
The Internet is becoming an increasingly significant global medium for
communications, advertising, and commerce. International Data Corporation
estimates that more than 56 million individuals in the United States used the
Internet in 1998, and projects that this figure will reach 136 million by the
year 2002. IDC also projects that consumer-targeted dial-up Internet access
revenues in the U.S. will grow from $4.7 billion in 1998 to $10.6 billion in
2002. In addition, Jupiter Communications has projected that online advertising
expenditures will grow from an estimated $1.9 billion in 1998 to $7.7 billion in
2002.
OUR STRATEGY
We seek to strengthen our position as a leading provider of consumer
Internet-related services. In particular, we plan to:
- Rapidly expand our overall subscriber base
- Migrate subscribers to higher levels of service
- Leverage and expand our strategic marketing alliances and advertising
sales
- Embrace new technologies while maintaining technology independence
RECENT DEVELOPMENTS
In March 1999, Juno completed a private placement of redeemable convertible
preferred stock with a group of investors including Intel Corporation, News
Corporation, Prospect Street Ventures and Sycamore Ventures. We received net
proceeds of $61.8 million from this private placement. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
5
<PAGE>
THE OFFERING
The following information excludes 3,187,305 shares of common stock issuable
upon the exercise of stock options outstanding as of April 22, 1999, with a
weighted average exercise price of $3.99 per share.
<TABLE>
<S> <C>
Common Stock Offered................ 6,500,000 shares
Common Stock Outstanding
After this Offering............... 34,580,467 shares
Use of Proceeds..................... We intend to use the net proceeds of this offering
for subscriber acquisition, advertising, brand
marketing, continued investment in the development of
our Internet services, enhancements of our network
infrastructure, repayment of approximately $8.8
million of debt to an affiliated entity and other
general corporate purposes. We may also use a portion
of the proceeds for acquisitions, strategic
alliances, or joint ventures. See "Use of Proceeds."
Proposed Nasdaq National Market
Symbol............................ "JWEB"
</TABLE>
------------------------
"Juno Web" and "Juno Gold" are trademarks, and "Juno" and Juno Online
Services, Inc.'s logo are registered trademarks, of Juno Online Services, Inc.
Each trademark, trade name or service mark of any other company appearing in
this prospectus belongs to its holder.
Juno Online Services, Inc. was incorporated in Delaware on July 2, 1996 and
is the successor by merger to Juno Online Services, L.P., which was formed on
June 30, 1995 as a Delaware limited partnership. Our principal executive offices
are located at 1540 Broadway, New York, New York 10036. Our telephone number at
that location is (212) 597-9000. INFORMATION CONTAINED ON OUR WEB SITES DOES NOT
CONSTITUTE PART OF THIS PROSPECTUS. References in this prospectus to "Juno,"
"we," "our," and "us" refer to Juno Online Services, Inc., a Delaware
corporation, and its predecessor prior to the merger, Juno Online Services,
L.P., a Delaware limited partnership.
------------------------
UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS:
- REFLECTS THE STATUTORY MERGER OF JUNO ONLINE SERVICES, L.P. WITH AND INTO
JUNO ONLINE SERVICES, INC. ON MARCH 1, 1999;
- REFLECTS A 1 FOR 4.5 REVERSE STOCK SPLIT OF EACH CLASS OF OUR CAPITAL
STOCK TO BE EFFECTED PRIOR TO THE CLOSING OF THIS OFFERING;
- REFLECTS THE AUTOMATIC CONVERSION OF ALL SHARES OF REDEEMABLE CONVERTIBLE
PREFERRED STOCK INTO 27,822,751 SHARES OF OUR COMMON STOCK UPON THE
CLOSING OF THIS OFFERING; AND
- ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth summary consolidated financial and operating
data for Juno. You should read this information together with the consolidated
financial statements and the notes to those statements appearing elsewhere in
this prospectus. See "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JUNE 30, THREE MONTHS
1995) TO YEAR ENDED DECEMBER 31, ENDED MARCH 31,
DECEMBER 31, ---------------------------------- ----------------------
1995 1996 1997 1998 1998 1999
------------ ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Billable services............... $ -- $ 6 $ 1,371 $ 6,645 $ 465 $ 5,806
Advertising and transaction
fees.......................... -- 127 1,875 6,454 1,228 2,265
Direct product sales............ -- 3 5,845 8,595 2,577 1,649
------------ ---------- ---------- ---------- ---------- ----------
Total revenues................ -- 136 9,091 21,694 4,270 9,720
------------ ---------- ---------- ---------- ---------- ----------
Cost of revenues:
Billable services............... -- -- 1,053 5,606 387 4,678
Advertising and transaction
fees.......................... -- 278 1,659 3,725 825 1,080
Direct product sales............ -- 3 5,796 7,627 2,426 1,424
------------ ---------- ---------- ---------- ---------- ----------
Total cost of revenues........ -- 281 8,508 16,958 3,638 7,182
------------ ---------- ---------- ---------- ---------- ----------
Operating expenses:
Operations, free service........ -- 5,803 11,075 9,383 2,824 1,846
Subscriber acquisition.......... 592 6,993 3,140 5,334 1,453 2,700
Sales and marketing............. 389 4,276 12,593 11,584 4,270 2,312
Product development............. 2,577 3,741 4,860 7,345 1,835 1,854
General and administrative...... 275 2,172 2,897 2,760 914 704
------------ ---------- ---------- ---------- ---------- ----------
Total operating expenses...... 3,833 22,985 34,565 36,406 11,296 9,416
------------ ---------- ---------- ---------- ---------- ----------
Loss from operations.......... (3,833) (23,130) (33,982) (31,670) (10,664) (6,878)
Interest income, net.............. -- 128 243 44 74 111
------------ ---------- ---------- ---------- ---------- ----------
Net loss...................... $ (3,833) $ (23,002) $ (33,739) $ (31,626) $ (10,590) $ (6,767)
------------ ---------- ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ---------- ----------
Pro forma basic and diluted net
loss per share (1).............. $ (0.14) $ (0.83) $ (1.21) $ (1.14) $ (0.38) $ (0.24)
------------ ---------- ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ---------- ----------
Weighted average shares
outstanding used in pro forma
basic and diluted per share
calculation (1)................. 27,823 27,823 27,823 27,823 27,823 27,897
------------ ---------- ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------------------ ----------------------
<S> <C> <C> <C> <C> <C> <C>
1995 1996 1997 1998 1998 1999
------------ ---------- ---------- ---------- ---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED SUBSCRIBER DATA:
Total subscriber accounts as of
(2)............................. -- 1,042 3,887 6,336 4,699 6,817
Subscriber accounts that
connected in the three-month
period ended.................. -- 1,002 2,512 3,108 2,924 3,108
Subscriber accounts that
connected in the month
ended......................... -- 823 1,986 2,434 2,340 2,438
Average subscriber accounts that
connected per day in the month
ended......................... -- 280 644 887 889 912
Billable subscription service
accounts as of (3).............. -- -- -- 144 -- 207
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1999
-------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(4)
--------- --------------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................. $ 53,165 $ 115,893
Working capital....................................................................... 48,000 112,288
Total assets.......................................................................... 71,660 134,388
Total indebtedness, including current maturities...................................... 9,930 1,118
Redeemable convertible preferred stock................................................ 141,431 --
Total stockholders' equity (deficit).................................................. (98,829) 114,142
</TABLE>
- ------------------------
(1) Gives pro forma effect for all periods presented to (a) Juno's March 1999
statutory merger and the associated conversion of the partnership Class A
units into 17,684,035 shares of Series A redeemable convertible preferred
stock and (b) the issuance of 10,138,716 shares of Series B redeemable
convertible preferred stock in March 1999 in consideration of net proceeds
of $61.8 million. See the consolidated financial statements and the notes to
these statements appearing elsewhere in this prospectus for the
determination of the number of shares used in computing pro forma basic and
diluted loss per share.
(2) Includes all user accounts created since Juno's inception, regardless of
activity level, if any, net of accounts that have been cancelled.
(3) Billable subscription service accounts are a subset of total subscriber
accounts and, to the extent applicable, are also included in the number of
subscriber accounts shown as having connected during the periods described.
(4) As adjusted to reflect (a) the sale of 6,500,000 shares of common stock
offered hereby at an assumed initial public offering price of $12.00 per
share after deducting the estimated underwriting discount and estimated
offering expenses payable by Juno and the repayment of approximately $8.8
million of debt and (b) the automatic conversion of all outstanding shares
of redeemable convertible preferred stock into 27,822,751 shares of common
stock upon the closing of this offering. See "Use of Proceeds" and
"Capitalization."
8
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS
AND FINANCIAL RESULTS MAY SUFFER. IN THAT CASE, THE TRADING PRICE OF OUR COMMON
STOCK COULD DECLINE AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.
BECAUSE WE HAVE OFFERED OUR BASIC E-MAIL SERVICE FOR ONLY THREE YEARS AND OUR
BILLABLE SUBSCRIPTION SERVICES FOR LESS THAN ONE YEAR, THERE IS LIMITED
INFORMATION UPON WHICH YOU CAN EVALUATE OUR BUSINESS
We have a limited operating history upon which you can evaluate our business
and our services. We began offering our free basic e-mail service to the public
in April 1996 and first offered our initial billable subscription services to
the public in July 1998. As a company in the new and rapidly evolving market for
Internet services, we face numerous risks and uncertainties. Some of these risks
relate to our ability to:
- attract and retain subscribers to our free basic e-mail service and to
Juno Gold and Juno Web, our billable subscription services;
- anticipate and adapt to the changing Internet market;
- generate advertising revenues and direct product sales;
- maintain and develop strategic relationships with business partners to
market their products over our services;
- implement an effective marketing strategy to promote awareness of the Juno
services;
- respond to actions taken by our competitors;
- develop and deploy successive versions of the Juno software necessary to
use our services;
- operate computer systems and related infrastructure adequate to
effectively manage our growth and provide our basic e-mail service and our
billable subscription services;
- manage the billing systems used to invoice subscribers to Juno Gold and
Juno Web; and
- attract, retain and motivate qualified personnel.
Our business and financial results will depend heavily on the commercial
acceptance and profitability of our billable subscription services. If we are
unsuccessful in addressing these risks or in executing our business strategy,
our business and financial results may suffer. Please see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
detailed information on our limited operating history.
WE HAVE A HISTORY OF LOSSES SINCE OUR INCEPTION IN 1995 AND EXPECT CONTINUED
LOSSES FOR THE FORESEEABLE FUTURE
Since our inception in 1995, we have not been profitable. We have incurred
substantial costs to create and introduce our various services, to operate these
services, to promote awareness of these services and to grow our business. We
incurred net losses of approximately $3.8 million from inception through
December 31, 1995, $23.0 million for the year ended December 31, 1996, $33.7
million for the year ended December 31, 1997, $31.6 million for the year ended
December 31, 1998 and $6.8 million for the three months ended March 31, 1999. As
of March 31, 1999, our accumulated net losses totaled $99.0 million. We incurred
negative cash flows from operations of approximately $16.4 million for the year
ended December 31, 1996, $33.6 million for the year ended December 31, 1997 and
$20.9 million for the year ended December 31, 1998. For the three months ended
March 31, 1999, we used $6.2 million in cash for working capital purposes and to
fund losses from operations. In addition, we paid $10.0 million for advertising
that may be used at any time prior to March 2001, bringing total net cash used
in operating activities to $16.2 million.
9
<PAGE>
Since we operated as a limited partnership prior to the merger of Juno
Online Services, L.P. into Juno Online Services, Inc. in March 1999, taxable
losses incurred prior to the merger were allocated to the partners of Juno
Online Services, L.P. for reporting on their income tax returns. As a result, we
will not be able to offset future taxable income, if any, against losses
incurred prior to the merger.
We expect operating losses and negative cash flows to continue for the
foreseeable future as we continue to incur significant expenses. We cannot
assure you that we will ever be successful in implementing our business
strategies or in addressing the risks and uncertainties facing our company. Even
if we do address these risks successfully, we may not be profitable in the
future. Were we to achieve profitability, we cannot assure you that we would be
able to sustain or increase profitability on a quarterly or annual basis in the
future. Please see "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
more detailed information.
JUNO'S BUSINESS IS SUBJECT TO FLUCTUATIONS IN OPERATING RESULTS WHICH MAY
NEGATIVELY IMPACT THE PRICE OF OUR STOCK
Our revenues, expenses and operating results have varied in the past and may
fluctuate significantly in the future due to a variety of factors, many of which
are outside of our control. These factors include, among others:
- the rate of new subscriber acquisitions and seasonal trends relating to
subscriber usage of our services;
- the timing and effectiveness of our marketing efforts to acquire
subscribers and promote the Juno brand;
- the timing and effectiveness of any revenue sharing arrangements or other
strategic alliances into which we enter;
- the demand for Internet advertising and seasonal trends relating to
Internet advertising spending;
- seasonal trends relating to the demand for products sold over the
Internet;
- capital expenses related to upgrading our computer systems and related
infrastructure;
- our ability to protect our systems from any telecommunications failures,
power loss, or software-related system failures;
- our ability to integrate operations and technologies from any acquisitions
or other business combinations or relationships into which we enter;
- the extent to which we experience increased competition in the markets for
Internet services, Internet advertising and direct product sales;
- changes in operating expenses including, in particular, telecommunications
expenses and the cost of providing various types of technical and
non-technical customer support to our subscribers; and
- economic conditions specific to the Internet as well as general economic
and market conditions.
Since we expect to be heavily dependent on revenues from our billable
subscription services in the foreseeable future, our revenues are likely to be
particularly affected by our ability to recruit new subscribers directly for our
billable subscription services, upgrade users of our free basic e-mail service
to our billable subscription services, and retain subscribers to our billable
subscription services. In addition, our operating expenses are based on our
expectations of our future revenues and are relatively fixed in the short term.
We may be unable to adjust spending quickly enough to offset any unexpected
revenue shortfall, which may cause our business and financial results to suffer.
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Due to all of the foregoing factors and the other risks discussed in this
section, you should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance. It is possible that in some
future periods our results of operations may be below the expectations of public
market analysts and investors. In this event, the price of our common stock is
likely to fall. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for detailed information on our operating
results.
OUR BUSINESS MAY SUFFER IF WE HAVE DIFFICULTY ACQUIRING SUBSCRIBERS TO OUR FREE
BASIC E-MAIL SERVICE, JUNO GOLD OR JUNO WEB
We may not succeed in acquiring a sufficiently large subscriber base for our
free basic e-mail service and our billable subscription services, or in
persuading a significant number of our free basic e-mail subscribers to upgrade
to Juno Gold and Juno Web.
To acquire new members, we currently rely on multiple distribution channels
for our free proprietary software that enables subscribers to use our services.
Our ability to recruit new subscribers may depend on our ability to enter into
additional distribution agreements and to retain our current distribution
partners. We cannot be sure that we will be able to enter into additional, or
maintain or replace our current, distribution agreements on favorable terms, or
that any of our distribution partners will be able to market our services
effectively. Many of our distribution partners also distribute competing
products, and are free to terminate our distribution arrangements at their
convenience. Our inability to recruit, manage or retain distribution partners,
or the inability of these distribution partners to effectively promote and
distribute our software, may cause our business and financial results to suffer.
Our business strategy contemplates that a significant percentage of the
subscribers to our free basic e-mail service will decide over time to upgrade to
Juno Gold and Juno Web. We are relying on this migration as a major source of
subscribers to these billable subscription services and, since July 1998, we
have conducted advertising to our free e-mail subscribers to encourage them to
upgrade. Over time, repeated exposure to these advertisements may cause their
effectiveness to decline. As a result, we expect that we will need to rely on
more expensive forms of external marketing and promotion to attract additional
users directly to our billable subscription services, as well as to attract new
users to our free basic e-mail service. If our marketing techniques fail to
generate the anticipated conversion rate from free to billable subscription
services, if the acquisition cost for subscribers acquired directly into our
billable subscription services is greater than expected, or if technical
limitations make the conversion process more difficult or time-consuming than
anticipated, our business and financial results may suffer. Please see "--Our
marketing program may not succeed in generating new subscribers or in persuading
subscribers to upgrade to Juno Gold or Juno Web" for more information on our
marketing activities.
OUR BUSINESS MAY SUFFER IF WE HAVE DIFFICULTY RETAINING SUBSCRIBERS TO OUR FREE
BASIC E-MAIL SERVICE, JUNO GOLD OR JUNO WEB
Our business and financial results are also dependent on our ability to
retain subscribers to our services. Each month, a significant number of
subscribers to our billable subscription services choose to cancel the service.
In addition, a significant number of subscribers to our free basic e-mail
service become inactive each month. As a result, the total number of subscribers
using our free basic e-mail service in a given month has remained substantially
the same over the last six months, even though we have added new subscribers
during that period. We believe that intense competition has caused, and may
continue to cause, some of our subscribers to switch to other services. It is
relatively easy for Internet users to switch to competing providers and we
cannot be certain that any steps we take will maintain or improve subscriber
retention. In addition, some new subscribers may decide to use our services out
of curiosity regarding the Internet, or to take advantage of low-cost
introductory offers for Juno Gold and Juno Web, and may later discontinue using
our services. Furthermore, we may in the
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future charge a fee for our basic e-mail service or limit the amount a
subscriber may use this service in a given period. In the event we were to
implement these kinds of charges and/or restrictions, we may lose a significant
number of our basic e-mail subscribers. If we are unable to retain subscribers
to both our basic e-mail service and our billable subscription services, or if
we experience an increase in the rate of cancellations by subscribers to our
billable subscription services, our business and financial results may suffer.
Please see "--Competition in the markets for Internet services, Internet
advertising and direct product sales is likely to increase in the future and may
harm our business" for more information concerning the competition facing our
business.
OUR MARKETING PROGRAM MAY NOT SUCCEED IN GENERATING NEW SUBSCRIBERS OR IN
PERSUADING SUBSCRIBERS TO UPGRADE TO JUNO GOLD OR JUNO WEB
We expect to use a significant portion of the proceeds from this offering
for an extensive marketing campaign. This campaign will be directed at
encouraging users to sign up directly for our billable subscription services and
persuading users of our free basic e-mail service to upgrade to our billable
subscription services. This marketing program may include forms of advertising,
such as television and radio advertising, with which we have limited experience.
There are risks that this campaign may not be effective in accomplishing one or
both of these goals. In addition, it is possible that, over time, it will become
more difficult and expensive to effectively market Juno Gold and Juno Web to
users of our free basic e-mail service and that the rate at which users of the
free basic e-mail service upgrade to our billable subscription services will
decline. We also do not know what kind of advertising our competitors will
undertake, the timing and extent of advertising by our competitors, or whether
this will impact our marketing plans or expenses. If we incur significant costs
in implementing our marketing program without generating sufficient new
subscribers to our services, our business and financial results will suffer.
COMPETITION IN THE MARKETS FOR INTERNET SERVICES, INTERNET ADVERTISING AND
DIRECT PRODUCT SALES IS LIKELY TO INCREASE IN THE FUTURE AND MAY HARM OUR
BUSINESS
The market for Internet services is extremely competitive and includes a
number of substantial participants, including America Online, Microsoft and
AT&T. The markets for Internet-based advertising and direct product sales are
also very competitive.
INTENSE COMPETITION EXISTS IN THE MARKET FOR INTERNET SERVICES
We may not be able to compete successfully against current or future
competitors, and the competitive pressures that we face may cause our business
and financial results to suffer. We believe that the primary competitive factors
determining success in these markets include a reputation for reliability and
service, effective customer support, pricing, easy-to-use software and
geographic coverage. Other important factors include the timing and introduction
of new products and services and industry and general economic trends. Our
ability to compete depends upon many factors, many of which are outside of our
control. We expect this competition to continue to increase because the markets
in which we operate face few substantial barriers to entry. Competition may also
intensify as a result of industry consolidation and the ability of some of our
competitors to bundle Internet services with other products and services. Our
current and potential competitors include many large national companies that
have substantially greater market presence and financial, technical,
distribution, marketing and other resources than we have. This may allow them to
devote greater resources than we can to the development, promotion and
distribution and sale of products and services.
In recruiting subscribers for our billable subscription services, we
currently compete, or expect to compete, with the following types of companies,
among others:
- Established online service providers such as America Online, CompuServe,
and The Microsoft Network;
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- Independent national Internet service providers such as EarthLink,
MindSpring, and Prodigy;
- Numerous independent regional and local Internet service providers which
may offer lower prices than a national Internet service provider;
- Various national and local telephone companies such as AT&T, MCI WorldCom
and Pacific Bell; and
- Companies providing Internet access through "set-top boxes" connected to a
user's television, such as WebTV, or through a "cable modem" connected to
a user's personal computer, such as @Home.
In addition, Microsoft and Netscape, publishers of the Web browsers utilized
by most Internet users, including subscribers to Juno Web, each own or are owned
by online or Internet service providers that compete with Juno Web.
In providing e-mail-related services, we compete with Web-based e-mail
services such as Microsoft's Hotmail and USA.net's Net@ddress.
In addition, we do not currently compete internationally. If the ability to
provide Internet services internationally becomes a competitive advantage in our
markets and we do not begin to provide services internationally, we will be at a
disadvantage relative to our competitors.
WE RELY ON REVENUES FROM ADVERTISING AND DIRECT PRODUCT SALES
With respect to the generation of advertising revenue, we compete with many
of the market participants listed above as well as with various
advertising-supported Web sites, including "portal" sites such as Yahoo! and
Excite, "content" sites such as CNET and CNN.com, and interactive advertising
networks and agencies such as DoubleClick and 24/7 Media. We also compete with
traditional media such as print and television for a share of advertisers' total
advertising budgets. If advertisers perceive the Internet to be a limited or
ineffective advertising medium or perceive us to be less effective or less
desirable than other Internet advertising vehicles, advertisers may be reluctant
to advertise on our services. In selling products directly to our subscribers,
we compete with other Internet-based sellers as well as with stores and other
companies that do not distribute their products through the Internet. Many of
these competitors are larger than we are, enjoy greater economies of scale than
are available to us, have substantially greater resources than we have, and may
be able to offer more products or more attractive prices than we can. We believe
that this competition is likely to increase in the future. Please see "--Our
business may be adversely affected if the market for Internet advertising fails
to develop" and "--We rely on a single external marketing partner to fulfill
most of our direct product sales" for more information regarding our advertising
and direct products sales activities.
OUR COMPETITION IS LIKELY TO INCREASE IN THE FUTURE
Our competition is likely to increase. We believe this will probably happen
as Internet service providers and online service providers consolidate and
become larger, more competitive companies, and as large diversified
telecommunications and media companies acquire Internet service providers. The
larger Internet service providers and online service providers, including
America Online, offer their subscribers services such as instant messaging,
community message boards, and personal Web page hosting that we do not currently
provide. Some diversified telecommunications and media companies, such as AT&T,
have begun to bundle other services and products with Internet access services,
potentially placing us at a significant competitive disadvantage. These
competitors may be able to charge less than we do for Internet services, causing
us to reduce, or preventing us from raising, fees for our billable subscription
services. The ability of our competitors to enter into strategic alliances or
joint ventures could also put us at a serious competitive disadvantage.
Competition could require us to increase our spending for sales and marketing as
well as for subscriber acquisition in order to maintain our position in the
marketplace, and could also result in increased subscriber attrition. Any of
these
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scenarios could harm our business and financial results, and we may not have the
resources to continue to compete successfully.
WE ARE DEPENDENT ON STRATEGIC MARKETING ALLIANCES AS A SOURCE OF REVENUES AND
OUR BUSINESS COULD SUFFER IF ANY OF THESE ALLIANCES ARE TERMINATED
Most of our strategic marketing partners have the right to terminate their
agreements with us on short notice. In February 1999, Bank of America notified
us that it will terminate an agreement with us concerning the marketing of
credit cards to our subscribers, effective May 1, 1999. We have strategic
marketing alliances with a number of third parties, including AT&T Wireless,
Qwest, and The Hartford. We have also entered into a strategic marketing
alliance with First USA which will be effective May 2, 1999. If any of our
strategic marketing agreements are terminated, we cannot assure you that we will
be able to replace the terminated agreement with an equally beneficial
arrangement. We also cannot assure you that we will be able to renew any of our
current agreements when they expire or, if we are, that we will be able to do so
on acceptable terms. We also do not know whether we will be successful in
entering into additional strategic marketing alliances, or that any additional
relationships, if entered into, will be on terms favorable to us. Our receipt of
revenues from our strategic marketing alliances may also be dependent on factors
which are beyond our control, such as the quality of the products or services
offered by our strategic marketing partners.
WE MUST ADAPT TO TECHNOLOGY TRENDS AND EVOLVING INDUSTRY STANDARDS OR WE WILL
NOT BE COMPETITIVE
Our failure to respond in a timely and effective manner to new and evolving
technologies, including cable modem and other broadband technology, could harm
our business and financial results. The Internet services market is
characterized by rapidly changing technology, evolving industry standards,
changes in member needs and frequent new service and product introductions. Our
business and financial results depend, in part, on our ability to use leading
technologies effectively, to develop our technical expertise, to enhance our
existing services and to develop new services that meet changing member needs on
a timely and cost-effective basis. In particular, we must provide subscribers
with the appropriate products, services and guidance required to best take
advantage of the rapidly evolving Internet. If the market for our billable
subscription services should fail to develop, develop more slowly than we
expect, become saturated with competitors, or develop in a fashion that renders
our services uncompetitive or otherwise unappealing to consumers, our business
and financial results may suffer.
We are also at risk due to fundamental changes in the way that Internet
access may be provided in the future. Currently, consumers access Internet
services primarily through computers connected by telephone lines. Broadband
connections, however, allow significantly faster access to the Internet than is
possible using the telephone-based modems currently used by all of our
subscribers. The companies currently providing or expecting to begin providing
broadband connections to consumers' homes, including cable television companies,
local and long distance telephone companies, electric utility companies and
wireless communications companies, have decided or may decide to provide
Internet access as well. For example, competitors have developed technologies
that enable cable television operators to offer high-speed Internet access
through their cable facilities. These cable television operators, as well as
other competitors, may include Internet access in their basic bundle of services
or may offer Internet access for a nominal additional charge. Moreover, these
companies could prevent us in the future from delivering Internet access through
the wire and cable connections that they own, or from doing so on a
cost-effective basis. Even if we are not prevented from delivering our Internet
services through the broadband connections owned by others, we will likely need
to develop new technology or modify our services and the technology they use to
accommodate these developments. We may also have to modify the means by which we
deliver our Internet services, in which case we would incur significant costs.
If consumers adopt alternative forms of Internet access that provide a
continuous connection to the Internet rather than relying on a series of
separate dial-up connections, then any competitive advantage that we currently
realize because our technology minimizes connect
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time may diminish. If other companies are able to prevent us from delivering our
Internet services through the wire and cable connections that they own, if we
are unable to adapt to the challenges posed by broadband technologies or if we
incur significant costs without generating sufficient revenues, our business and
financial results may suffer.
OUR BUSINESS MAY BE ADVERSELY AFFECTED IF THE MARKET FOR INTERNET ADVERTISING
FAILS TO DEVELOP
Our business and financial results are dependent on the use of the Internet
as an advertising medium. Internet-based advertising accounts for only a small
fraction of all advertising expenditures, and we cannot be sure that
Internet-based advertising will ever grow to account for a substantial
percentage of total advertising spending or when an increase might occur. Our
business may suffer if the market for Internet-based advertising fails to
develop or develops more slowly than expected. In addition, no standards have
been widely accepted to measure the effectiveness of Internet-based advertising.
If measurement standards do not develop, many advertisers may choose not to
advertise on the Internet. Different pricing models are used to sell
Internet-based advertising. Our revenues could suffer if we are unable to adapt
to new forms of, and new pricing models for, Internet-based advertising. It is
difficult to predict which, if any, forms of Internet-based advertising will
emerge as the industry standard. This makes it difficult to project our future
advertising rates and revenues. Moreover, "filter" software programs that limit
or prevent advertising from being delivered to an Internet user's computer are
available. Widespread adoption of this type of software could harm the
commercial viability of Internet-based advertising.
Sales of advertising space on our services represents an important revenue
source for us. Competition for Internet-based advertising revenues is intense,
and this competition could result in significant price erosion over time. We
cannot assure you that we will be successful in selling advertising or capturing
a significant share of the market for Internet-based advertising. We also cannot
assure you that we will be able to sell advertising at the rates we currently
project. It is also possible that we will find it necessary to lower the rates
for advertising space on our services.
We currently rely on our internal sales and marketing personnel for
generating sales leads and promoting our services to the advertising community.
In 1998, we closed some of the regional sales offices that we had previously
established. Since substantially all of our sales and marketing personnel are
now based in New York City, we may not be able to effectively market our
services to regional advertisers outside of New York. We also rely on the sales
and marketing personnel of Lycos, our Web site partner, for the sale of
advertising space on the default "portal" site used by Juno Web subscribers.
Although we have not done so in the past, we might also retain the services of
one or more external sales organizations to sell advertising space on our
network. We cannot be sure that our internal sales organization, Lycos or any
other independent sales organization will achieve our advertising sales
objectives in a cost-effective manner.
If Internet-based advertising does not continue to grow, if we are unable to
capture a sufficient share of Internet-based advertising, or if Lycos or other
independent sales organizations do not perform as we anticipate, our business
and financial results may suffer.
OUR ADVERTISING SYSTEM REQUIRES LABOR AND IMPOSES COSTS ON US BEYOND THOSE
ASSOCIATED WITH STANDARD WEB ADVERTISING
Elements of advertising on Juno's services are non-standard when compared to
advertising on the Web and may put Juno at a competitive disadvantage. The
advertisements displayed on our services require customization that would not be
required by a Web site capable of displaying previously prepared standard
advertisements. This customization work increases the time necessary to prepare
an advertisement to be displayed on our services and the costs associated with
running these ads. We must also absorb the telecommunications cost associated
with initially downloading these ads to our subscribers, which is an expense
that advertising-supported Web sites do not incur. As ads become more complex,
our telecommunications expenses may increase. Furthermore, the costs associated
with
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selling or attempting to sell advertising space on our services are significant.
These costs may be greater than the costs associated with selling advertising
space on Web sites that utilize standard Web advertising formats. Additionally,
our use of a proprietary advertising format could prevent us from packaging our
advertising space for sale by an advertising network such as DoubleClick. We
also rely on detailed data provided by our subscribers for purposes of targeting
some ads. We do not currently verify the accuracy of this data at the time it is
provided or require subscribers to update their information thereafter.
Furthermore, individuals who subscribe directly to one of our billable
subscription services are not currently required to provide this data. Any of
the above factors could discourage advertising on our network by some
advertisers.
SEASONAL TRENDS IN INTERNET USAGE AND ADVERTISING SALES MAY NEGATIVELY AFFECT
OUR BUSINESS
Seasonal trends are likely to affect the revenues we generate from operating
our Internet services. Subscribers typically use our Internet services less
during the summer months and year-end holiday periods. To the extent that our
revenues depend on the amount of usage by our subscribers, our revenues may be
lower during these periods. For example, some of the subscribers to Juno Web pay
us based on the number of hours they spend using our services in a given month.
In addition, the rate at which new subscribers sign up for our billable
subscription services, which were introduced in July 1998, may be lower during
the summer months and year-end holiday periods.
We believe that advertising sales generally are lower in the first and third
calendar quarters of each year. We have recently seen this pattern reflected in
our results of operations and believe that this seasonal trend may continue.
Since our operating expenses are based on our expectations of future
revenues, including seasonal fluctuations, it is possible that operating results
will suffer if these seasonal trends do not continue in the future or if
different seasonal trends develop in the future. Please see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
more information on our operating results.
WE ARE DEPENDENT ON A SMALL NUMBER OF TELECOMMUNICATIONS CARRIERS AND MAY BE
UNABLE TO FIND ADEQUATE REPLACEMENTS IF THEIR RATES INCREASE, SERVICE QUALITY
DECLINES, OR IF THEY DISCONTINUE DOING BUSINESS WITH US
Our business and financial results depend in significant part on the
capacity, affordability, reliability and security of our telephone company data
networks. To use our services, subscribers must initiate telephone connections
between their personal computers and computer hardware in local or regional
facilities known as "points of presence." We contract for the use of points of
presence around the country from various telecommunications carriers. These
carriers currently include UUNET Technologies and WorldCom Advanced Networks,
both of which are operated by MCI WorldCom; Concentric Network Corporation; and
Sprint Communications Company. These telecommunications companies also carry the
data between their points of presence and our central computers located in
Cambridge, Massachusetts and Jersey City, New Jersey.
As of March 31, 1999, we had contracted for the use of over 1,900 local
telephone numbers associated with points of presence throughout the United
States. Some points of presence carry data both for our e-mail services and for
Juno Web, while others carry data only for our e-mail services or only for Juno
Web. The points of presence supporting Juno Web are not as broadly distributed
geographically as those supporting our e-mail services. As a result, a
significant minority of our subscriber base is unable to access Juno Web through
a point of presence that is within their local calling area. The inability of
some of our subscribers to easily upgrade to Juno Web or our inability to
recruit new members in some areas could harm our business. We cannot be sure if
or when additional infrastructure developments by our telecommunications
providers will result in points of presence that cover these areas.
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At various times in the past, network capacity constraints at particular
points of presence have prevented or delayed access by subscribers attempting to
connect to our services. This could happen in the future, especially during
times of peak usage. Difficulties accessing our services due to poor network
performance could cause our subscribers to terminate their membership with us.
Because we depend on third-party telecommunications carriers for crucial
portions of our network infrastructure, we do not have direct control over
network reliability and some aspects of service quality. A natural disaster or
other unanticipated problem that affects the points of presence or the
telecommunications lines we use, or that affects the nation's telecommunications
network in general, could cause interruptions in our services.
Only a small number of telecommunications companies can provide the network
services we require. This number has been reduced through consolidation in the
telecommunications industry, and there is a significant risk that further
consolidation could make us reliant on an even smaller number of providers.
Currently, we are particularly dependent on companies controlled by MCI
WorldCom, which provide more than 1,300 of the approximately 1,900 points of
presence for which we contract in the United States. Furthermore, MCI WorldCom
has recently announced that it will begin to offer consumer Internet access,
making it a direct competitor of ours. Our business could be harmed if we are
unable to maintain a favorable relationship with MCI WorldCom. We cannot assure
you that we would be able to replace the services provided to us by MCI WorldCom
were our relationship with them to be terminated.
Our financial results are highly sensitive to variations in prices for the
telecommunications services described above. We cannot assure you that
telecommunications prices will decline, or that there will not be
telecommunications price increases due to factors beyond our control. Some of
our telecommunications carriers impose minimum connection charges. Our business
could be harmed if minimum connection charges increase or become more prevalent.
We cannot assure you that our telecommunications carriers will continue to
provide us access to their points of presence on adequate price terms, or that
alternative services will be available in the event that their quality of
service declines or that our relationship with any of our current carriers is
terminated.
Most of the telecommunications services we purchase are provided to us under
short-term agreements that the providers can terminate or elect not to renew. As
a result, there is a significant risk that any or all of UUNET Technologies,
WorldCom Advanced Networks, Concentric or Sprint could end their relationship
with us. In addition, each of our telecommunications carriers provides network
access to some of our competitors, and could choose to grant those competitors
preferential network access, potentially limiting our members' ability to access
the Internet or connect to our central computers. Furthermore, each of our
telecommunications providers competes, or has announced an intention to compete,
with us in the market to provide consumer Internet access. If our
telecommunications service providers were to decrease the levels of service or
access provided to us, or if they were to terminate their relationships with us
for competitive or other reasons, our business and financial results would
suffer.
WE ARE DEPENDENT ON THIRD PARTIES FOR TECHNICAL AND CUSTOMER SERVICE SUPPORT AND
OUR BUSINESS MAY SUFFER IF THEY ARE UNABLE TO PROVIDE THESE SERVICES OR CANNOT
EXPAND TO MEET OUR NEEDS
Our business and financial results depend, in part, on the availability of
live technical and customer service support, and of inbound telemarketing and
disk distribution services. Should our ability to provide these services be
hampered, our business may suffer. Although many Internet service providers have
developed internal customer service operations designed to meet these needs, we
have elected to outsource these functions to third-party vendors. We currently
use ClientLogic Corporation for technical and customer service support and Call
Center Services, Inc. for telemarketing and disk fulfillment functions. As a
result, we maintain only a small number of internal customer service personnel.
We are thus not equipped to provide the necessary range of customer service and
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telemarketing services in the event that either of our existing external
providers becomes unable or unwilling to offer these services to us.
Our most important relationship is with ClientLogic, which, at March 31,
1999, provided us with approximately 315 full-time or part-time employees at its
facilities to service our account. The availability of call-in technical support
and customer service is especially important to acquire and retain subscribers
to Juno Gold and Juno Web, and we rely almost entirely on ClientLogic to provide
this function. At times, our subscribers have experienced lengthy waiting
periods to reach representatives trained to provide the technical or customer
support they require. As our services grow, we will need significantly more
support personnel in order to maintain current levels of technical and customer
support. If we elect to offer customer service features that we do not currently
support, such as 24-hour live support, or to enhance the overall quality of our
customer support for competitive reasons, we will require even greater
resources. We may have significantly expanded customer service requirements in
the future and it could become necessary to identify supplemental or replacement
vendors for these services. Our agreement with ClientLogic converts to a
month-to-month contract on August 1, 2000, providing either party the right to
terminate the relationship at any time upon one month's notice. Prior to that
date, ClientLogic can terminate the contract without cause upon 90 days notice.
In addition, ClientLogic may terminate the contract upon 60 days notice at any
time after August 1, 1999 if we do not reach agreement with ClientLogic with
regard to modifications ClientLogic proposes to the pricing terms of the
contract within 60 days of the modifications being proposed. If our relationship
with ClientLogic terminates and we are unable to enter into a comparable
arrangement with a replacement vendor, if ClientLogic is unable to provide
enough personnel to provide the quality and quantity of service we desire, or if
system failures, outages or other technical problems make it difficult for our
subscribers to reach customer service representatives at ClientLogic, our
business and financial results may suffer.
WE RELY ON A SINGLE EXTERNAL MARKETING PARTNER TO FULFILL MOST OF OUR DIRECT
PRODUCT SALES
If we fail to manage our direct product sales efforts in a cost-effective
manner, or if we fail to maintain the relationship with our external marketing
partner, our business may suffer. We rely primarily on Direct Alliance
Corporation, a subsidiary of Insight Enterprises, for the procurement,
warehousing, fulfillment, billing and customer service aspects of our direct
product sales. Should our relationship with this vendor be disrupted, our
ability to engage in direct product sales will be severely curtailed. In the
past, a substantial portion of our revenue has come from the sale of products
directly to our subscribers. Our ability to sell products directly to our
subscribers is dependent in part upon:
- the willingness of subscribers to overcome concerns regarding the security
of online financial transactions;
- our ability to select and profitably acquire and provide merchandise that
is interesting to our subscriber base;
- our ability to compete with established retail business and other online
sellers; and
- other factors that may be outside of our control.
In addition, if we were to experience unusually high rates of returns for the
products we sell to our subscribers or if we were unable to sell all the
products in our inventory, the net revenues we generate from our direct sales
activities would be harmed. In addition, our revenues may suffer if we face
increased competition in our direct product sales activities.
DISRUPTION OF OUR INTERNET SERVICES DUE TO SECURITY BREACHES AND SYSTEM FAILURES
COULD RESULT IN SUBSCRIBER CANCELLATIONS
Both our infrastructure and the infrastructure of our network providers are
vulnerable to security breaches or similar disruptive problems and system
failures. Our systems are also subject to telecommunications failures, power
loss, software-related system failures and various other events. Any
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of these events, whether intentional or accidental, could lead to interruptions,
delays or cessation of service to our subscribers. This could cause some of our
subscribers to stop using our Internet services. Third parties could also
potentially jeopardize the security of confidential information stored in our
computer systems or our subscribers' computer systems through their
inappropriate use of the Internet, which could cause losses to us or our
subscribers or deter some people from subscribing to our services. People may be
able to circumvent our security measures or the security measures of our third
party network providers.
We may have to interrupt, delay or cease service to our subscribers to
alleviate problems caused by computer viruses, security breaches or other
failures of network security. Any damage or failure that interrupts or delays
our operations could result in subscriber cancellations, could harm our
reputation, and could affect our business and financial results. In addition, we
expect that our subscribers will increasingly use the Internet for commercial
transactions in the future. Any network malfunction or security breach could
cause these transactions to be delayed, not completed at all or completed with
compromised security. Our subscribers or others may assert claims of liability
against us as a result of this type of failure. Furthermore, until more
comprehensive security technologies are developed, the security and privacy
concerns of existing and potential subscribers may inhibit the growth of the
Internet service industry in general and our subscriber base and revenue in
particular.
Our insurance policies may not adequately compensate us for any losses that
may occur due to any failures in our systems or interruptions in our services.
RAPID GROWTH IN OUR BUSINESS COULD STRAIN OUR MANAGERIAL, OPERATIONAL,
FINANCIAL, AND INFORMATION SYSTEMS RESOURCES
The anticipated future growth necessary to expand our operations will place
a significant strain on our managerial, operational, financial and information
systems resources. If we are unable to manage our growth effectively, our
business and financial results will suffer. In order to achieve growth in
revenues from Internet advertising, we will need to expand our sales efforts and
continue to improve and develop our software. In order to achieve growth in
revenues from Juno Gold and Juno Web, we will need to expand our marketing
efforts, promote the Juno brand, expand the computer systems and related
infrastructure we use to provide our Internet services, and increase both our
internal and outsourced customer service capabilities. We expect that we will
need to continually improve our financial and managerial controls, billing
systems, reporting systems and procedures, and we will also need to continue to
expand, train and manage our workforce. We had 65 employees at December 31,
1996, 152 employees at December 31, 1997, 144 employees at December 31, 1998 and
147 employees at March 31, 1999. In addition, as of March 31, 1999, we also
retained the services of 47 individuals in India who are employed by an
affiliate of Juno. We have significantly increased our reliance on outsourced
support for customer service, technical, and back-office functions. We expect
the size of our own workforce and our reliance on outsourced services will
continue to increase for the foreseeable future.
The demand on our network infrastructure, technical staff and technical
resources has grown rapidly with our expanding subscriber base. We cannot be
certain that our infrastructure, technical staff and technical resources will
adequately accommodate or facilitate the anticipated growth of our subscriber
base. In particular, if we were to experience repeated and/or prolonged
system-wide service outages, our business and financial results would suffer.
WE FACE POTENTIAL LIABILITY FOR INFORMATION TRANSMITTED OR RETRIEVED THROUGH OUR
INTERNET SERVICES
Our business and financial results may suffer if we incur liability as a
result of information transmitted or retrieved through our services. The
liability of Internet service providers and online services companies for
information transmitted or retrieved through their services is uncertain. It is
possible that claims may be filed against us based on a variety of theories,
including defamation, obscenity, negligence, copyright or trademark
infringement, or other theories based on the nature,
19
<PAGE>
publication or distribution of this information. These types of claims have been
brought, sometimes successfully, against providers of Internet services in the
past. Such claims, with or without merit, would likely divert management time
and attention and result in significant costs to investigate and defend. In
addition, if we become subject to these types of claims and we are not
successful in our defense, we may be forced to pay substantial damages. We may
also be forced to implement expensive measures to alter the way our services are
provided to avoid any potential liability.
CHANGES IN GOVERNMENT REGULATION COULD DECREASE OUR REVENUES AND INCREASE OUR
COSTS
Changes in the regulatory environment could decrease our revenues and
increase our costs. As a provider of Internet access and e-mail services, we are
not currently subject to direct regulation by the Federal Communications
Commission. However, several telecommunications carriers are seeking to have
communications over the Internet regulated by the FCC in the same manner as
other more traditional telecommunications services. Local telephone carriers
have also petitioned the FCC to regulate Internet access providers in a manner
similar to long distance telephone carriers and to impose access fees on these
providers, and recent events suggest that they may be successful in obtaining
the treatment they seek. In addition, we operate our services throughout the
United States, and we cannot assure you that regulatory authorities at the state
level will not seek to regulate aspects of our activities as telecommunications
services. As a result, we could become subject to FCC and state regulation as
Internet services and telecommunications services converge.
We remain subject to numerous additional laws and regulations that could
affect our business. Because of the Internet's popularity and increasing use,
new laws and regulations with respect to the Internet are becoming more
prevalent. These laws and regulations have covered, or may cover in the future,
issues such as:
- user privacy;
- pricing;
- intellectual property;
- federal, state and local taxation;
- distribution; and
- characteristics and quality of products and services.
Legislation in these areas could slow the growth in use of the Internet
generally and decrease the acceptance of the Internet as a communications and
commercial medium. Additionally, because we rely on the collection and use of
personal data from our members for targeting advertisements shown on our
services, we may be harmed by any laws or regulations that restrict our ability
to collect or use this data. The Federal Trade Commission has begun
investigations into the privacy practices of companies that collect information
about individuals on the Internet. Although we are not currently subject to
direct regulation by the FTC, there can be no assurance that we will not become
subject to direct regulation in the future. It may take years to determine how
existing laws such as those governing intellectual property, privacy, libel and
taxation apply to the Internet. Any new legislation or regulation regarding the
Internet, or the application of existing laws and regulations to the Internet,
could harm us. Additionally, while we do not currently operate outside of the
United States, the international regulatory environment relating to the Internet
market could have an adverse effect on our business, especially if we should
expand internationally.
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<PAGE>
The growth of the Internet, coupled with publicity regarding Internet fraud,
may also lead to the enactment of more stringent consumer protection laws. For
example, numerous bills have been presented to Congress and various state
legislatures designed to address the prevalence of unsolicited commercial bulk
e-mail on the Internet. These laws may impose additional burdens on our
business. The enactment of any additional laws or regulations in this area may
impede the growth of the Internet, which could decrease our potential revenues
or otherwise cause our business to suffer. Please see "Business--Government
Regulation."
IF INTERNET USAGE DOES NOT CONTINUE TO GROW, OUR BUSINESS WILL SUFFER
Our business and financial results depend on continued growth in the use of
the Internet. We cannot be certain that this growth will continue or that it
will continue in its present form. If Internet usage declines or evolves away
from our business, our growth will slow or stop and our business and financial
results will suffer.
UNANTICIPATED DELAYS OR PROBLEMS IN THE INTRODUCTION OF NEW FEATURES OR SERVICES
MAY CAUSE CUSTOMER DISSATISFACTION
If we experience problems related to the reliability and quality of our
services or delays in the introduction of new versions of or enhancements to our
services, we could experience increased subscriber cancellations, adverse
publicity and reduced sales of advertising and products. Our services are very
complex and are likely to contain a number of undetected errors and defects,
especially when new features or enhancements are first released. These errors or
defects, if significant, could harm the performance of these services, result in
ongoing redevelopment and maintenance costs and/or cause dissatisfaction on the
part of subscribers and advertisers. These costs, delays or dissatisfaction
could negatively affect our business.
WE HAVE LIMITED EXPERIENCE WITH THE SOFTWARE WE USE TO BILL SUBSCRIBERS TO JUNO
GOLD AND JUNO WEB
The operation of Juno Gold and Juno Web requires the accurate operation of
billing system software as well as our development of policies designed to
reduce the incidence of credit card fraud and other forms of uncollectable
"chargebacks." We have only limited experience with the operation of these
billing and fraud detection systems. If we encounter difficulty with the
operation of these systems, or if errors, defects or malfunctions occur in the
operation of these systems, this could result in erroneous overcharges to
customers or in the under-collection of revenue, either of which could hurt our
business and financial results.
OUR RELATIONSHIP WITH D. E. SHAW & CO., L.P. MAY PRESENT POTENTIAL CONFLICTS OF
INTEREST
The Chairman of our board of directors and our controlling stockholder, Dr.
David E. Shaw, is the Chairman and Chief Executive Officer of D. E. Shaw & Co.,
Inc., which is the general partner of D. E. Shaw & Co., L.P., a global
securities firm whose activities focus on various aspects of the intersection
between technology and finance. Dr. Shaw devotes only a portion of his time to
our company, and spends most of his time and energy engaged in business
activities unrelated to us. Dr. Shaw indirectly owns a controlling interest in
DESCO, L.P. and in some of its affiliated entities. Transactions between us and
these parties may occur in the future and could potentially result in conflicts
of interest that prove harmful to us.
We have historically contracted with DESCO, L.P. to provide accounting, tax,
payroll, insurance, employee benefits and information technology services, and
we continue to obtain some services from DESCO, L.P. These services are provided
to us on a fixed-fee basis under shared services agreements that can be
terminated by any of the parties without cause upon 90 days notice. We have also
entered into an agreement with DESCO, L.P. under which its affiliates located in
India provide consulting
21
<PAGE>
services to us. If we were no longer able to obtain these services through
DESCO, L.P. or its affiliates, we would be required to obtain these services
internally or through third-party providers, and we cannot be sure that we could
do so on acceptable terms. In addition, we sublease the space for our corporate
headquarters in New York City from DESCO, L.P. We cannot be sure that we would
be able to lease other space on favorable terms in the event the lease were to
be terminated by either DESCO, L.P. or the landlord.
Dr. Shaw and entities affiliated with him are likely to manage, invest in or
otherwise be involved with other technology-related business ventures apart from
our company. These relationships could also restrict our ability to transact
business with non-affiliated parties, and could negatively affect us. For a more
detailed discussion of related-party transactions and our relationship with
entities affiliated with Dr. Shaw, please see "Certain Transactions."
OUR DIRECTORS AND OFFICERS WILL EXERCISE SIGNIFICANT CONTROL OVER US FOLLOWING
THIS OFFERING
We anticipate that the executive officers, directors and persons and
entities affiliated with executive officers and/or directors will, in the
aggregate, beneficially own approximately 53.3% of our outstanding common stock
following the completion of this offering. The Chairman of our board of
directors is Dr. David E. Shaw. Dr. Shaw continues to serve as the Chairman and
Chief Executive Officer of D. E. Shaw & Co., Inc., which is the general partner
of DESCO, L.P. Dr. Shaw and persons or entities affiliated with him, including
DESCO, L.P., will, in the aggregate, beneficially own approximately 50.1% of our
outstanding common stock following the completion of this offering. Following
the completion of this offering, Dr. Shaw will be able to exercise control over
all matters requiring approval by our stockholders, including the election of
directors and approval of significant corporate transactions. This concentration
of ownership could also have the effect of delaying or preventing a change in
control of Juno. Please see "Management" and "Principal Stockholders."
IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY OR FACE A CLAIM OF
INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, WE COULD LOSE OUR
INTELLECTUAL PROPERTY RIGHTS OR BE LIABLE FOR SIGNIFICANT DAMAGES
We have taken steps to protect our intellectual property rights, but we
cannot be certain that our efforts will be adequate to safeguard our rights to
technology we have developed. Disputes concerning the ownership or rights to use
intellectual property could be costly and time consuming to litigate, may
distract management from other tasks of operating the business, and may result
in our loss of significant rights and the loss of our ability to operate our
business.
We have been granted three U.S. patents covering aspects of our technology
for the offline display of advertisements and aspects of our technology for the
authentication and dynamic scheduling of advertisements and other messages to be
delivered to computer users. We have also filed other U.S. patent applications
covering additional aspects of our business. We cannot assure you, however, that
these applications will result in the issuance of patents; that any patents that
have been granted or that might be granted in the future will provide us with
any competitive advantages or will be exploited profitably by us; or that any of
these patents will withstand any challenges by third parties. We also cannot
assure you that others will not obtain and assert patents against us which are
essential for our business. If patents are asserted against us, we cannot assure
you that we will be able to obtain license rights to those patents on reasonable
terms or at all. If we are unable to obtain licenses, we may be prevented from
operating our business and our financial results may therefore be harmed.
Except as described above, we rely solely upon copyright and trademark law,
trade secret protection, and/or confidentiality agreements with our employees
and with some third parties to protect our proprietary technology, processes,
and other intellectual property, to the extent that protection is sought or
secured at all. We cannot assure you that any steps we might take will be
adequate to protect
22
<PAGE>
against infringement and misappropriation of our intellectual property by third
parties. Similarly, we cannot assure you that third parties will not be able to
independently develop similar or superior technology, processes, or other
intellectual property. Furthermore, we cannot assure you that third parties will
not assert claims against us for infringement and misappropriation of their
intellectual property rights nor that others will not infringe or misappropriate
our intellectual property rights, for which we may wish to assert claims.
Rights to all intellectual property that was developed for our business at
our expense by personnel assigned to Juno by DESCO, L.P. were originally held by
DESCO, L.P. Through a series of assignments, DESCO, L.P. subsequently
transferred to us its right, title and interest in this intellectual property.
In connection with these assignments, we agreed to indemnify DESCO, L.P. against
any claims relating to the assignment of, or the use of, this intellectual
property. We do not have any right, title, or interest in any other intellectual
property created, developed, produced, or used by DESCO, L.P.
PROBLEMS RESULTING FROM THE YEAR 2000 PROBLEM COULD REQUIRE US TO INCUR
UNANTICIPATED EXPENSE AND COULD DIVERT MANAGEMENT'S TIME AND ATTENTION
The Year 2000 problem could harm our business and financial results. Many
currently installed computer systems and software products are coded to accept
or recognize only two-digit entries in the date code field. These systems may
interpret the date code "00" as the year 1900 rather than the year 2000. As a
result, computer systems and/or software used by many companies and governmental
agencies may need to be upgraded or replaced to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities. We have established procedures for evaluating and
managing the risks associated with the Year 2000 problem and we are in the
process of assessing our Year 2000 readiness. We are also in the process of
communicating with third-party vendors who provide us with both network services
and equipment in order to assess their plans and progress in addressing the Year
2000 problem. Our failure to correct a material Year 2000 problem could result
in an interruption in, or a failure of, aspects of our normal business
activities or operations. In addition, a significant Year 2000 problem involving
our network services or equipment provided to us by third-party vendors could
cause our customers to consider seeking alternate providers or cause an
unmanageable burden on our customer service and technical support capabilities.
Any significant Year 2000 problem could require us to incur significant
unanticipated expenses to remedy these problems and could divert management's
time and attention. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Impact of the Year 2000" for
detailed information on our state of readiness, potential risks and contingency
plans regarding the Year 2000 issue.
WE ARE DEPENDENT ON KEY MANAGEMENT PERSONNEL FOR OUR FUTURE SUCCESS
Our business and financial results depend in part on the continued service
of our key personnel. We do not carry key person life insurance on any of our
personnel. The loss of the services of any of our executive officers or the loss
of the services of other key employees could harm our business and financial
results. Mark A. Moraes, our Executive Vice President, Technology, is working at
Juno pursuant to an employment agreement with DESCO, L.P., under which he
performs services for Juno. In addition, Mr. Moraes is a citizen of India and
has been granted a waiver by the U.S. Immigration and Naturalization Service
which allows Mr. Moraes to obtain a "green card" for permanent residence status.
Since additional processing is required before the green card is issued, we
cannot assure you that Mr. Moraes will be issued a green card. Until Mr. Moraes
receives a green card, his ability to work in our U.S. offices is limited and,
in the event that he does not ultimately obtain a green card, it is likely that
he would be unable to work in our U.S. offices thereafter.
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<PAGE>
WE MAY NOT BE ABLE TO HIRE AND RETAIN QUALIFIED EMPLOYEES
Our business and financial results depend in part on our ability to attract,
retain and motivate highly skilled employees. Competition for employees in our
industry is intense. We may be unable to retain our key employees or attract,
assimilate or retain other highly qualified employees. We have, from time to
time, in the past experienced, and we expect to continue to experience,
difficulty in hiring and retaining highly skilled employees with appropriate
qualifications.
WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS AND WE MAY NOT BE ABLE TO SECURE
ADDITIONAL FINANCING
We currently anticipate that the net proceeds of this offering, together
with available funds, will be sufficient to meet our anticipated needs for at
least the next 12 months. We may need to raise additional funds in the future to
fund our operations, to finance subscriber acquisition costs, to enhance and/or
expand the range of Internet services we offer or to respond to competitive
pressures and/or perceived opportunities. We cannot be sure that additional
financing will be available on terms favorable to us, or at all. If adequate
funds are not available or not available when required or on acceptable terms,
we may be forced to cease our operations, and even if we are able to continue
our operations, our business and financial results may suffer.
WE MAY NOT BE ABLE TO SUCCESSFULLY MAKE ACQUISITIONS OF OR INVESTMENTS IN OTHER
COMPANIES
We have no experience in acquiring or making investments in companies,
technologies or services. From time to time we have had discussions with
companies regarding our acquiring, or investing in, their businesses, products
or services, or customers. We have no present understanding or agreement
relating to any acquisition or investment. If we buy a company, we could have
difficulty in assimilating that company's personnel and operations. In addition,
the key personnel of the acquired company may decide not to work for us. If we
make other types of acquisitions, we could have difficulty in assimilating the
acquired services, technologies or customers into our operations. These
difficulties could disrupt our ongoing business, distract our management and
employees, increase our expenses and adversely affect our results of operations
due to accounting requirements such as the amortization of goodwill.
Furthermore, we may incur debt or issue equity securities to pay for any future
acquisitions. The issuance of equity securities could be dilutive to our
existing stockholders.
WE COULD FACE ADDITIONAL REGULATORY REQUIREMENTS, TAX LIABILITIES AND OTHER
RISKS IF WE DECIDE TO EXPAND INTERNATIONALLY
We may decide to expand internationally, and believe that any international
operations would be subject to most of the risks of our business generally. In
addition, there are risks inherent in doing business in international markets,
such as changes in regulatory requirements, tariffs and other trade barriers,
fluctuations in currency exchange rates, and adverse tax consequences, and there
are likely to be different consumer preferences and requirements in such
markets. We cannot assure you that one or more of these factors would not harm
any future international operations.
FUTURE SALES OF OUR COMMON STOCK MAY NEGATIVELY AFFECT OUR STOCK PRICE
Following this offering, we will have a large number of shares of common
stock outstanding and available for resale beginning at various points in time
in the future. The market price of our common stock could decline as a result of
sales of a large number of shares of our common stock in the market following
this offering, or the perception that such sales could occur. These sales also
might make it more difficult for us to sell equity securities in the future at a
price that we think is appropriate, or at all. Please see "Shares Eligible for
Future Sale."
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<PAGE>
THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK AND OUR STOCK PRICE MAY
EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS
The stock market has experienced extreme price and volume fluctuations. The
market prices of the securities of Internet-related companies have been
especially volatile. Prior to the offering, there has been no public market for
our common stock. We cannot predict the extent to which investor interest in
Juno will lead to the development of an active trading market or how liquid that
market might become. The market price of the common stock may decline below the
initial public offering price. The initial public offering price for the shares
will be determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in the
trading market. Please see "Underwriting."
In the past, companies that have experienced volatility in the market price
of their stock have been the object of securities class action litigation. If we
were the object of securities class action litigation, it could result in
substantial costs and a diversion of our management's attention and resources.
WE MAY SPEND A SUBSTANTIAL PORTION OF THE NET PROCEEDS OF THIS OFFERING IN WAYS
WITH WHICH YOU MAY NOT AGREE
We intend to spend a significant portion of the net proceeds of this
offering on a marketing campaign and for the repayment of debt. Our management
will have broad discretion, however, over the allocation of a substantial
portion of the net proceeds from this offering as well as over the timing of our
expenditures. Investors may not agree with the way our management decides to
spend these proceeds. Please see "Use of Proceeds."
WE HAVE ANTI-TAKEOVER PROVISIONS WHICH MAY MAKE IT DIFFICULT FOR A THIRD PARTY
TO ACQUIRE US
Provisions of our certificate of incorporation, our bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
might be beneficial to our stockholders. Please see "Description of Capital
Stock."
INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION
Investors purchasing shares in the offering will incur immediate and
substantial dilution in net tangible book value per share. To the extent
outstanding options to purchase common stock are exercised, there will be
further dilution. Please see "Dilution."
WE DO NOT PLAN TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE AND, AS A RESULT,
STOCKHOLDERS WILL NEED TO SELL SHARES TO REALIZE A RETURN ON THEIR INVESTMENT
We have not declared or paid any cash dividends on our capital stock since
inception. We intend to retain any future earnings to finance the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. Consequently, stockholders will need to sell shares of
common stock in order to realize a return on their investment, if any.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements which involve risks and
uncertainties. These forward-looking statements are usually accompanied by words
such as "believes," "anticipates," "plans," "expects" and similar expressions.
Our actual results could differ materially from those expressed or implied by
these forward-looking statements as a result of various factors, including the
risk factors described above and elsewhere in this prospectus.
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<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of the 6,500,000 shares offered hereby,
after deducting the underwriting discounts and estimated offering expenses
payable by us, are estimated to be approximately $71.5 million, or $82.4 million
if the underwriters' over-allotment option is exercised in full, assuming an
initial public offering price of $12.00 per share.
We intend to use the net proceeds of this offering for subscriber
acquisition, advertising, brand marketing, continued investment in the
development of our Internet services, enhancements of our network infrastructure
and other general corporate purposes. We also intend to use the net proceeds of
this offering to repay all indebtedness to D. E. Shaw Securities Group, L.P., an
affiliated party, which totalled $8.8 million as of March 31, 1999. This
indebtedness bears interest at the Federal Funds rate plus 0.375%, which
totalled 5.355% as of March 31, 1999, and matures upon the earlier of December
31, 2000 or the date of completion of an initial public offering. Juno
originally borrowed this money for working capital and other general corporate
purposes. We may also use a portion of the proceeds of this offering for
acquisitions, strategic alliances, or joint ventures. At present, we have no
plans, arrangements or understandings related to any specific acquisitions.
Other than the repayment of debt, we have not yet determined the amount of
net proceeds to be used specifically for each of the foregoing purposes.
Accordingly, management will have significant flexibility in applying a
substantial portion of the net proceeds of the offering. Until this money is
used, we intend to invest the net proceeds in interest-bearing instruments.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our capital stock since
inception. We intend to retain any future earnings to finance the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. Consequently, stockholders will need to sell shares of
common stock in order to realize a return on their investment, if any.
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<PAGE>
CAPITALIZATION
The following table sets forth, as of March 31, 1999, the capitalization of
Juno on an actual basis and on a basis which assumes the completion of this
offering by giving effect to the following:
- the sale of the 6,500,000 shares offered hereby at an assumed initial
public offering price of $12.00 per share, after deducting the
underwriting discounts and estimated offering expenses payable by Juno,
and the application of the net proceeds from this offering; and
- the automatic conversion of all outstanding shares of redeemable
convertible preferred stock into 27,822,751 shares of common stock upon
the closing of this offering.
This information should be read in conjunction with Juno's consolidated
financial statements and the notes relating to these statements appearing
elsewhere in this prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1999
------------------------
ACTUAL AS ADJUSTED
----------- -----------
<S> <C> <C>
(IN THOUSANDS)
Total indebtedness, including current maturities........................................ $ 9,930 $ 1,118
----------- -----------
Redeemable convertible preferred stock, $.01 par value:
Series B: 10,138,716 shares
authorized, issued and outstanding on an actual basis; none
authorized, issued or outstanding on
an as adjusted basis................................................................ 61,853 --
Series A: 17,684,035 shares
authorized, issued and outstanding on an actual basis; none
authorized, issued or outstanding on
an as adjusted basis................................................................ 79,578 --
Stockholders' equity (deficit):
Preferred Stock, $.01 par value, 5,000,000 shares authorized; none issued or
outstanding on an actual or as adjusted basis....................................... -- --
Common Stock, $.01 par value, 133,333,334 shares authorized; 251,229 shares issued and
outstanding on an actual basis; and 34,573,980 shares issued and outstanding on an
as adjusted basis................................................................... 3 346
Additional paid-in capital............................................................ (95,724) 116,904
Unearned compensation................................................................. (691) (691)
Accumulated deficit................................................................... (2,417) (2,417)
----------- -----------
Total stockholders' equity (deficit)................................................ (98,829) 114,142
----------- -----------
Total capitalization.............................................................. $ 52,532 $ 115,260
----------- -----------
----------- -----------
</TABLE>
The table above excludes 3,187,305 shares of common stock issuable upon the
exercise of stock options outstanding as of April 22, 1999, with a weighted
average exercise price of $3.99 per share. See "Management--1999 Stock Incentive
Plan," "Description of Capital Stock" and Note 10 of Notes to Consolidated
Financial Statements.
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<PAGE>
DILUTION
The pro forma net tangible book value of Juno as of March 31, 1999, after
giving effect to the automatic conversion of 17,684,035 shares of Series A
redeemable convertible preferred stock and 10,138,716 shares of Series B
redeemable convertible preferred stock into common stock, was $42.6 million, or
$1.52 per share of common stock. Pro forma net tangible book value per share is
equal to the amount of Juno's total tangible assets, which is defined as total
assets less intangible assets, divided by the number of shares of common stock
outstanding, on a pro forma basis, as of March 31, 1999. Assuming the sale by
Juno of the 6,500,000 shares offered hereby at an assumed initial public
offering price of $12.00 per share and after deducting underwriting discounts
and estimated offering expenses, and the application of the estimated net
proceeds therefrom, the pro forma net tangible book value of Juno as of March
31, 1999 would have been $114.1 million, or $3.30 per share of common stock.
This represents an immediate increase in pro forma net tangible book value of
$1.78 per share to existing stockholders and an immediate dilution in pro forma
net tangible book value of $8.70 per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................. $ 12.00
Pro forma net tangible book value per share as of March 31, 1999.......... $ 1.52
Pro forma increase attributable to new investors.......................... 1.78
---------
Pro forma net tangible book value per share after the offering.............. 3.30
---------
Pro forma dilution per share to new investors............................... $ 8.70
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1999,
after giving effect to the automatic conversion of all outstanding shares of
preferred stock into common stock, the total number of shares of common stock
purchased from Juno, the total consideration paid to Juno and the average price
per share paid by existing stockholders and by new investors:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- --------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................. 28,073,980 81.2% $ 144,578,130 65.0% $ 5.15
New investors..................................... 6,500,000 18.8 78,000,000 35.0 12.00
------------ ----- -------------- -----
Total......................................... 34,573,980 100.0% $ 222,578,130 100.0%
------------ ----- -------------- -----
------------ ----- -------------- -----
</TABLE>
The foregoing tables and calculations assume no exercise of outstanding
options. At April 22, 1999, there were 3,187,305 shares of common stock reserved
for issuance upon exercise of outstanding options at a weighted average exercise
price of $3.99 per share. To the extent that these options are exercised, there
will be further dilution to new investors. See "Management--1999 Stock Incentive
Plan."
28
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and the notes to these
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus. The consolidated
statement of operations data for the period from our inception on June 30, 1995
through December 31, 1995 and for the years ended December 31, 1996, 1997 and
1998, and the consolidated balance sheet data at December 31, 1995, 1996, 1997
and 1998, are derived from the consolidated financial statements of Juno which
have been audited by PricewaterhouseCoopers LLP, independent accountants, and
are included elsewhere in this prospectus. The unaudited consolidated financial
statements have been prepared on substantially the same basis as the audited
consolidated financial statements and include all adjustments, consisting of
normal recurring adjustments, which Juno considers necessary for a fair
presentation of the financial position and results of operations for those
periods. Operating results for the three months ended March 31, 1999 are not
necessarily indicative of the results that may be expected for any other
three-month period or for the year ended December 31, 1999.
The pro forma information regarding net loss per share and weighted average
shares outstanding set forth below gives effect, for all periods presented, to
Juno's March 1999 statutory merger and the associated conversion of the
partnership Class A units into 17,684,035 shares of Series A redeemable
convertible preferred stock and the issuance of 10,138,716 shares of Series B
redeemable convertible preferred stock in March 1999 in consideration of net
proceeds of $61.8 million. See the consolidated financial statements and the
notes to these statements appearing elsewhere in this prospectus for the
determination of the number of shares used in computing pro forma basic and
diluted loss per share.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JUNE 30, THREE MONTHS
1995) YEAR ENDED DECEMBER 31, ENDED MARCH 31,
TO DECEMBER ------------------------------------- ------------------------
31, 1995 1996 1997 1998 1998 1999
------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Billable services........................ $ -- $ 6 $ 1,371 $ 6,645 $ 465 $ 5,806
Advertising and transaction fees......... -- 127 1,875 6,454 1,228 2,265
Direct product sales..................... -- 3 5,845 8,595 2,577 1,649
----------- ----------- ----------- ----------- ----------- -----------
Total revenues......................... -- 136 9,091 21,694 4,270 9,720
----------- ----------- ----------- ----------- ----------- -----------
Cost of revenues:
Billable services........................ -- -- 1,053 5,606 387 4,678
Advertising and transaction fees......... -- 278 1,659 3,725 825 1,080
Direct product sales..................... -- 3 5,796 7,627 2,426 1,424
----------- ----------- ----------- ----------- ----------- -----------
Total cost of revenues................. -- 281 8,508 16,958 3,638 7,182
----------- ----------- ----------- ----------- ----------- -----------
Operating expenses:
Operations, free service................. -- 5,803 11,075 9,383 2,824 1,846
Subscriber acquisition................... 592 6,993 3,140 5,334 1,453 2,700
Sales and marketing...................... 389 4,276 12,593 11,584 4,270 2,312
Product development...................... 2,577 3,741 4,860 7,345 1,835 1,854
General and administrative............... 275 2,172 2,897 2,760 914 704
----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses............... 3,833 22,985 34,565 36,406 11,296 9,416
----------- ----------- ----------- ----------- ----------- -----------
Loss from operations................... (3,833) (23,130) (33,982) (31,670) (10,664) (6,878)
Interest income, net....................... -- 128 243 44 74 111
----------- ----------- ----------- ----------- ----------- -----------
Net loss............................... $ (3,833) $ (23,002) $ (33,739) $ (31,626) $ (10,590) $ (6,767)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Pro forma basic and diluted net loss per
share.................................... $ (0.14) $ (0.83) $ (1.21) $ (1.14) $ (0.38) $ (0.24)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Weighted average shares outstanding used in
pro forma basic and diluted per share
calculation.............................. 27,823 27,823 27,823 27,823 27,823 27,897
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------------ -----------
1995 1996 1997 1998 1999
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ -- $ 598 $ 13,770 $ 8,152 $ 53,165
Working capital (deficiency).............................. 92 (2,004) 6,927 (8,343) 48,000
Total assets.............................................. 92 4,774 20,133 14,703 71,660
Total indebtedness, including current maturities.......... -- -- 795 10,188 9,930
Redeemable convertible preferred stock.................... -- -- -- -- 141,431
Partners' capital (deficiency)............................ 92 (2,004) 10,504 (12,588) --
Total stockholders' equity (deficit)...................... -- -- -- -- (98,829)
</TABLE>
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF JUNO SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS AND THE NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS
PROSPECTUS. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. JUNO'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS,
SUCH AS THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
Juno Online Services, Inc. is a leading provider of Internet-related
services to millions of computer users throughout the United States. We offer
several levels of service, ranging from basic dial-up Internet e-mail--which is
provided to the end user for free--to full, competitively priced access to the
World Wide Web. Our revenues are derived primarily from the fees we charge for
the use of our billable subscription services, from the sale of advertising, and
from the direct sale of products to our subscribers.
Our business strategy has encompassed two phases. The initial phase, which
began at our inception in June 1995, focused on building computer systems and
related infrastructure that could be rapidly expanded to accommodate increasing
numbers of users, and on maximizing the number of subscribers to our free basic
e-mail service, which launched in April 1996. In July 1998, we commenced the
second phase of our business strategy by introducing two additional service
levels: an enhanced e-mail service, JUNO GOLD, and a full Internet access
service, JUNO WEB.
We classify our revenues as follows:
(1) Billable services revenues, consisting of:
(a) subscription fees from subscribers to Juno Gold and Juno Web, our
billable subscription services;
(b) technical support fees received when subscribers to our free basic
e-mail service and to Juno Gold call a 900 number for live assistance
from a support technician; and
(c) charges for shipping and handling associated with mailing disks upon
request to prospective Juno subscribers, consulting revenues, and
fees for other billable services.
(2) Advertising and transaction fees, consisting of revenues earned from
advertisers and strategic marketing partners for displaying
advertisements to, and facilitating electronic commerce with, our
subscribers. The majority of these advertisements are displayed while a
Juno subscriber reads or writes e-mail offline. Advertising revenues are
also derived from banner ad impressions displayed to Juno Web subscribers
when they use our portal Web site, to which they are automatically
brought each time they use Juno to connect to the Web.
(3) Direct product sales, consisting of revenues generated from the sale of
products directly by us to our subscribers and the associated shipping
and handling fees.
The commencement of the second phase of our business strategy has affected
the composition of our revenues. On July 22, 1998, we launched our billable
subscription services, and as of March 31, 1999, we had approximately 207,000
billable service subscribers, consisting of approximately 86,000 Juno Gold
subscribers and approximately 121,000 Juno Web subscribers. Since the launch of
our billable subscription services, billable services revenues have increased,
both in absolute terms and as a percentage of our revenues.
We currently offer our billable subscription services under a number of
pricing plans, ranging from $2.95 per month for Juno Gold, billed annually in
advance, to $19.95 per month for the Juno Web
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<PAGE>
flat-rate plan. In marketing the Juno Web service, we have typically offered a
number of promotions, such as a free month of service or a discounted rate for
an initial period. Revenues for these billable subscription services accounted
for approximately 86.2% of billable services revenues during the first quarter
of 1999.
Our strategy contemplates considerable growth in the number of subscribers
to our billable subscription services. We intend to devote significant resources
to advertising, brand marketing and referral programs designed to acquire new
subscribers directly into our billable subscription services and to encourage
migration of our free basic e-mail subscribers to these billable services. We
expect growth in the subscriber base for Juno Gold and Juno Web to result in
substantial growth in subscription fees, both in absolute dollar terms and as a
percentage of total revenues. Our strategy contemplates that revenues for
billable subscription services are likely to be the single largest source of
revenues for Juno in the immediate future.
We are subject to industry trends that affect Internet access providers
generally, including seasonality and subscriber cancellations. We believe
Internet access providers typically incur higher expenses during the last and
first calendar quarters, corresponding to heavier usage during the fall and
winter, and experience relatively lighter usage and relatively fewer account
registrations during the summer. We believe subscriber acquisition also tends to
be most effective during the first and last calendar quarters of each year, and
we may take these types of seasonal effects into consideration in scheduling our
marketing activities. The results of operations of Internet access providers,
including those of Juno, are significantly affected by subscriber cancellations.
The failure to retain subscribers to our billable subscription services, or an
increase in the rate of cancellations of those services, would cause our
business and financial results to suffer.
Additionally, our strategy contemplates increases in revenues from
advertising and transaction fees. We expect that strategic marketing alliances
will account for an increasing portion of such revenues. This is due in part to
our expectation that we may secure additional strategic marketing alliances, as
well as to our expectation that we may earn incremental performance-based
revenues beyond the minimum guaranteed revenues associated with some of these
arrangements. Furthermore, we expect that revenues from direct product sales
will decline in the future as a percentage of total revenues due to our
strategic decision to focus increasingly on higher margin activities.
Our principal expenses consist of marketing, telecommunications, customer
service, personnel and related costs, and the cost of direct product sales. We
have elected to obtain telecommunications services, customer service and
merchandising fulfillment principally from third-party providers.
We have incurred net losses of $99.0 million from our inception on June 30,
1995 through March 31, 1999. In addition, we have recorded cumulative unearned
compensation of $762,000, which represents the difference between the exercise
price and the deemed fair market value at the date of grant for shares of common
stock issuable upon the exercise of stock options. Of the total unearned
compensation amount, $34,000 was amortized for the year ended December 31, 1998
and $37,000 was amortized for the three months ended March 31, 1999. The
remaining unearned compensation amount
is expected to be amortized over the remaining vesting periods of the related
options. In April 1999, we recorded an additional $612,000 of unearned
compensation for additional options granted to purchase shares of common stock.
We have relied on private sales of equity securities, totaling $79.6 million
through December 31, 1998, and borrowings to fund our operations. In March 1999,
we raised an additional $61.8 million of net proceeds through the private
placement of Series B redeemable convertible preferred stock. We expect net
losses to continue for the foreseeable future as we continue to incur
significant expenses while pursuing our business strategy.
32
<PAGE>
Prior to March 1, 1999, we operated our business primarily through a limited
partnership, Juno Online Services, L.P. On that date, we completed a statutory
merger of Juno Online Services, L.P. into Juno Online Services, Inc., which had
been a wholly owned subsidiary of Juno Online Services, L.P. Juno Online
Services, Inc. is the surviving entity after completion of the statutory merger.
The consolidated financial statements included in the prospectus consist of the
accounts of both Juno Online Services, L.P. and Juno Online Services, Inc. All
significant intercompany accounts and transactions have been eliminated in
consolidation. Since we operated as a limited partnership prior to March 1,
1999, taxable losses incurred through that date have been allocated to the
partners for reporting on their respective income tax returns. Accordingly, as
of that date, we had no available net operating loss carryforwards available for
federal and state income tax purposes to offset future taxable income, if any.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
REVENUES
Total revenues increased approximately $5.5 million, from $4.3 million for
the three months ended March 31, 1998 to $9.7 million for the three months ended
March 31, 1999, an increase of 128%. This increase was due primarily to
increases in billable services and in advertising and transaction fees,
partially offset by a decrease in direct product sales.
BILLABLE SERVICES. Billable services revenues increased $5.3 million, from
$0.5 million for the three months ended March 31, 1998 to $5.8 million for the
three months ended March 31, 1999, an increase of 1,149%. This increase was due
primarily to the introduction of our billable subscription services in July
1998, which contributed $5.0 million of revenues in the three months ended March
31, 1999. At March 31, 1999, there were approximately 207,000 billable service
subscribers, with approximately 86,000 subscribing to Juno Gold and
approximately 121,000 subscribing to Juno Web.
ADVERTISING AND TRANSACTION FEES. Advertising and transaction fees
increased approximately $1.0 million, from $1.2 million for the three months
ended March 31, 1998 to $2.3 million for the three months ended March 31, 1999,
an increase of 84.4%. This increase was due to additional revenue from a larger
number of strategic marketing alliances. This increase was also due in part to a
contribution from revenue recognized over the shortened life of a strategic
marketing alliance which featured a minimum revenue guarantee and which was
terminated by the strategic partner effective May 1, 1999. This contribution
accounted for approximately 23.0% of advertising and transaction fees for the
three months ended March 31, 1999. The increase in advertising and transaction
fees was partially offset by declines in the number of and the aggregate revenue
generated from shorter-term ad sales contracts, reflecting our shift in emphasis
towards larger strategic deals.
DIRECT PRODUCT SALES. Direct product sales decreased approximately $0.9
million, from $2.6 million for the three months ended March 31, 1998 to $1.6
million for the three months ended March 31, 1999, a decrease of 36.0%. This
decline reflects our strategic decision in 1998 to narrow the range of our
direct product sales activities and of the types of products offered to our
subscribers. Instead, we decided to concentrate on forming strategic marketing
alliances and developing other uses for our advertising inventory that we
believe should generate revenues with higher margins than direct product sales.
COST OF REVENUES
Total cost of revenues increased approximately $3.5 million, from $3.6
million for the three months ended March 31, 1998 to $7.2 million for the three
months ended March 31, 1999, an increase of 97.4%. This increase was due
primarily to increases in costs associated with billable services and in
33
<PAGE>
advertising and transaction fees, partially offset by a decrease in costs
associated with direct product sales.
BILLABLE SERVICES. Cost of revenues related to billable services consists
primarily of the costs to provide Juno Gold and Juno Web, including
telecommunications, customer service, operator-assisted technical support,
credit card fees, and personnel and related overhead costs. In addition, cost of
revenues related to billable services includes the costs of mailing disks upon
request to prospective Juno subscribers, and the personnel and related overhead
costs associated with our performance of a short-term consulting engagement
during the three months ended March 31, 1999.
Cost of revenues related to billable services increased $4.3 million, from
$0.4 million for the three months ended March 31, 1998 to $4.7 million for the
three months ended March 31, 1999, an increase of 1,109%. This increase was due
primarily to the costs of providing our billable subscription services. Costs
related to the provision of these billable subscription services, principally
customer service, technical support and telecommunications expenses, accounted
for 76.1% of the total costs of revenues related to billable services during the
three months ended March 31, 1999 and accounted for the majority of the
increase. Cost of revenues as a percentage of billable services revenues
decreased from 83.1% for the three months ended March 31, 1998 to 80.6% for the
three months ended March 31, 1999. This decrease is primarily attributable to
the introduction of billable subscription services and the higher margins
realized from those services during the three months ended March 31, 1999.
ADVERTISING AND TRANSACTION FEES. Cost of revenues for advertising and
transaction fees consists primarily of the transmission costs associated with
downloading advertisements to the hard drives of subscribers' computers for
later display, the personnel and related costs associated with the creation and
distribution of such advertisements, and the costs associated with reporting the
results of ad campaigns to advertisers.
Cost of revenues for advertising and transaction fees increased $0.3
million, from $0.8 million for the three months ended March 31, 1998 to $1.1
million for the three months ended March 31, 1999, an increase of 30.8%. This
increase was due primarily to the impact of additional strategic marketing
alliances. Cost of revenues related to advertising and transaction fees as a
percentage of advertising and transaction fees decreased from 67.2% for the
three months ended March 31, 1998 to 47.7% for the three months ended March 31,
1999. This decrease is primarily due to a contribution from revenue recognized
over the shortened life of a strategic marketing alliance that featured a
minimum revenue guarantee, and also to decreased telecommunications rates,
faster average connection speeds and improvements in our production and
distribution methods.
DIRECT PRODUCT SALES. Cost of revenues for direct product sales consists
primarily of the costs of merchandise sold directly by us to our subscribers and
the associated shipping and handling costs.
The cost of revenues for direct product sales decreased $1.0 million, from
$2.4 million for the three months ended March 31, 1998 to $1.4 million for the
three months ended March 31, 1999, a decrease of 41.3%. This decrease
corresponds to the decrease in merchandise sold. The cost of revenues for direct
product sales as a percentage of direct product sales revenues decreased from
94.1% for the three months ended March 31, 1998 to 86.3% for the three months
ended March 31, 1999. This decrease was primarily due to efficiencies associated
with outsourcing various functions rather than performing them internally.
OPERATING EXPENSES
OPERATIONS, FREE SERVICE. Operations, free service consists of the costs
associated with providing our free basic e-mail service, comprising principally
telecommunications costs, expenses associated with
34
<PAGE>
providing customer service, depreciation of network equipment, and personnel and
related overhead costs.
Expenses associated with operations, free service decreased $1.0 million,
from $2.8 million for the three months ended March 31, 1998 to $1.8 million for
the three months ended March 31, 1999, a decrease of 34.6%. This decrease was
primarily due to declining telecommunications rates and increasing connection
speeds resulting from the use of faster modems by a portion of our subscriber
base.
SUBSCRIBER ACQUISITION. Subscriber acquisition costs include all costs
incurred to acquire subscribers to either our free basic e-mail service or one
of our billable subscription services. These costs include direct mail
campaigns, advertising through conventional and computer-based media,
telemarketing, producing advertisements to be displayed over the Juno services
and transmitting them to our subscribers, disk duplication and fulfillment, and
bounties paid to acquire subscribers, among other marketing activities. These
costs also include various subscriber retention activities, as well as personnel
and related overhead costs.
Subscriber acquisition costs increased $1.2 million, from $1.5 million for
the three months ended March 31, 1998 to $2.7 million for the three months ended
March 31, 1999, an increase of 85.8%. This increase is primarily due to ad
production and transmission costs associated with soliciting basic e-mail
subscribers to upgrade to our billable subscription services, costs associated
with preparations for large-scale marketing activities scheduled to begin in the
second quarter of 1999 and inbound telemarketing costs incurred in connection
with subscriber acquisition and retention activities. The increase in these
costs was partially offset by a decrease in expenses related to referral
bounties as various agreements that called for bounty payments expired or were
terminated. As a percentage of revenues, subscriber acquisition costs decreased
from 34.0% in the three months ended March 31, 1998 to 27.8% in the three months
ended March 31, 1999. This percentage decrease was primarily due to the increase
in revenues for the three months ended March 31, 1999. We expect that subscriber
acquisition costs will increase significantly both in absolute dollar terms and
as a percentage of total revenues in the future.
SALES AND MARKETING. Sales and marketing expenses consist primarily of the
personnel and related overhead costs of the following departments: advertising
sales and business development; direct product sales; and product marketing.
Also included are costs associated with trade advertising intended to support
our ad sales effort, corporate branding activities unrelated to subscriber
acquisition, and public relations, as well as ad production, ad transmission,
customer service and fulfillment costs associated with our direct product sales
activities.
Sales and marketing costs decreased $2.0 million, from $4.3 million for the
three months ended March 31, 1998 to $2.3 million for the three months ended
March 31, 1999, a decrease of 45.8%. This decrease is primarily due to cost
savings associated with our decision to narrow the range of our direct product
sales activities. We reduced the headcount assigned to our direct product sales
activities, as well as our inventory risk, primarily by outsourcing
substantially all of the procurement, warehousing, fulfillment, billing and
customer service aspects of the initiative. Sales and marketing expenses for the
three months ended March 31, 1998 include charges of approximately $0.3 million
relating to inventory write-offs and severance pay. As a percentage of revenues,
sales and marketing costs decreased from 100.0% in the three months ended March
31, 1998 to 23.8% in the three months ended March 31, 1999. This percentage
decrease was primarily due to the increase in revenues for the three months
ended March 31, 1999.
PRODUCT DEVELOPMENT. Product development includes research and development
expenses and other product development costs. These costs consist primarily of
personnel and related overhead costs as well as the costs associated with
research and development and other product development activities performed for
us on a contract basis by a related party in Hyderabad, India.
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<PAGE>
Product development costs increased approximately $19,000, from $1.8 million
for the three months ended March 31, 1998 to $1.9 million for the three months
ended March 31, 1999, an increase of 1.0%. Product development costs in the
three months ended March 31, 1998 and 1999 related primarily to the continued
development of our billable subscription services and of various pieces of
software. To date, we have not capitalized any expenses related to any software
development activities.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of personnel and related overhead costs associated with executive,
finance, legal, recruiting, human resources and facilities functions, as well as
various professional expenses.
General and administrative costs decreased $0.2 million, from $0.9 million
for the three months ended March 31, 1998 to $0.7 million for the three months
ended March 31, 1999, a decrease of 23.0%. This decrease is primarily due to
reduced personnel and related overhead costs and cost containment programs. As a
percentage of revenues, general and administrative costs decreased from 21.4% in
the three months ended March 31, 1998 to 7.2% for the three months ended March
31, 1999. This decrease was primarily due to the increase in revenue for the
three months ended March 31, 1999. We expect that we will incur additional
general and administrative expenses as we hire additional personnel and incur
additional costs related to the growth of our business and our operation as a
public company, including directors' and officers' liability insurance, investor
relations programs and professional service fees. Accordingly, we anticipate
that general and administrative expenses will increase in absolute dollar terms
in the future.
INTEREST INCOME, NET. Interest income, net increased $37,000, from $74,000
for the three months ended March 31, 1998 to $111,000 for the three months ended
March 31, 1999, an increase of 50.1%. This increase is primarily due to interest
income earned on higher average cash balances in the three months ended March
31, 1999 due to the receipt of $61.8 million of net proceeds in exchange for the
issuance of redeemable convertible preferred stock in March 1999, partially
offset by higher interest payments for borrowings.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUES
Total revenues increased $12.6 million, from $9.1 million for the year ended
December 31, 1997 to $21.7 million for the year ended December 31, 1998, an
increase of 139%. This increase was due primarily to increases in billable
services and in advertising and transaction fees.
BILLABLE SERVICES. Billable services revenues increased approximately $5.3
million, from $1.4 million for the year ended December 31, 1997 to $6.6 million
for the year ended December 31, 1998, an increase of 385%. This increase was due
primarily to the introduction of our billable subscription services, which
contributed $3.6 million in subscription fees in 1998; a short-term development
consulting contract which contributed $1.0 million; and technical support fees
associated with the growth of the subscriber base of Juno's free basic e-mail
service and of Juno Gold. At December 31, 1998, there were approximately 144,000
billable services subscribers, with approximately 53,000 subscribing to Juno
Gold and approximately 91,000 subscribing to Juno Web.
ADVERTISING AND TRANSACTION FEES. Advertising and transaction fees
increased $4.6 million, from $1.9 million for the year ended December 31, 1997
to $6.5 million for the year ended December 31, 1998, an increase of 244%. This
increase was due primarily to additional advertisers and advertisements
delivered, and the impact of additional strategic marketing alliances.
From time to time, we engage in barter transactions in which we exchange
advertising with other Internet or traditional media companies, provide
advertising in exchange for software distribution services or other forms of
marketing assistance, or participate in other reciprocal service arrangements.
36
<PAGE>
Barter transactions accounted for 0.3% of total advertising and transaction fees
for the year ended December 31, 1997, and 1.9% for the year ended December 31,
1998.
DIRECT PRODUCT SALES. Direct product sales increased $2.8 million, from
$5.8 million for the year ended December 31, 1997 to $8.6 million for the year
ended December 31, 1998, an increase of 47.0%. However, revenues from direct
product sales decreased $1.0 million, from $5.0 million for the six months ended
December 31, 1997 to $4.0 million for the six months ended December 31, 1998, a
decrease of 20.1%. This decline reflects our strategic decision during the first
quarter of 1998 to narrow the range of our direct product sales activities and
of the types of products offered to our subscribers. Instead, we decided to
concentrate on forming strategic marketing alliances and developing other uses
for our advertising inventory that we believe should generate revenues with
higher margins than direct products sales.
COST OF REVENUES
Total cost of revenues increased $8.5 million, from $8.5 million for the
year ended December 31, 1997 to $17.0 million, an increase of approximately
99.3%. This increase was due primarily to increases in costs associated with
billable services and with advertising and transaction fees.
BILLABLE SERVICES. Cost of revenues related to billable services increased
approximately $4.6 million, from $1.1 million for the year ended December 31,
1997 to $5.6 million for the year ended December 31, 1998, an increase of 433%.
This increase is primarily due to the costs of providing our billable
subscription services. Costs related to the provision of these billable
subscription services, principally customer service, technical support and
telecommunications expenses, accounted for 58.0% of the total costs of revenues
related to all billable services during 1998 and accounted for a majority of the
increase. Cost of revenues related to billable services as a percentage of total
billable services revenues increased from 76.8% for the year ended December 31,
1997 to 84.4% for the year ended December 31, 1998. This increase is principally
related to the introduction of billable subscription services, the relatively
high percentage of subscribers to these services who are in their initial
months, and the higher costs incurred in the early stages of a subscriber's life
cycle. We believe that customer service and technical support costs are
substantially higher in the initial months following signup than during later
months. We also incur significant startup costs associated with training
customer service and technical support representatives and with developing
processes necessary to support the subscriber base and its anticipated future
growth. We expect that, other things being equal, these costs will be highest as
a percentage of the related revenues during periods of rapid percentage growth
in the subscriber base of our billable subscription services.
ADVERTISING AND TRANSACTION FEES. Cost of revenues for advertising and
transaction fees increased approximately $2.1 million, from $1.7 million for the
year ended December 31, 1997 to $3.7 million for the year ended December 31,
1998, an increase of 125%. This increase was principally due to additional
advertisers and advertisements delivered and the impact of additional strategic
marketing alliances. The cost of revenues for advertising and transaction fees
as a percentage of advertising and transaction fees revenue decreased from 88.5%
for the year ended December 31, 1997 to 57.7% for the year ended December 31,
1998. This decrease is primarily due to economies of scale associated with
higher volumes of ad production, decreased telecommunications rates, faster
average connection speeds, and improvements in our production and distribution
methods.
DIRECT PRODUCT SALES. The cost of revenues for direct product sales
increased $1.8 million, from $5.8 million for the year ended December 31, 1997
to $7.6 million for the year ended December 31, 1998, an increase of 31.6%. This
increase corresponds to the increase in merchandise sold. The cost of revenues
for direct product sales as a percentage of direct product sales revenue
decreased from 99.2% for the year ended December 31, 1997 to 88.7% for the year
ended December 31, 1998. This decrease
37
<PAGE>
was primarily due to efficiencies associated with outsourcing various functions
rather than performing them internally.
OPERATING EXPENSES
OPERATIONS, FREE SERVICE. Expenses associated with operations, free service
decreased $1.7 million, from $11.1 million for the year ended December 31, 1997
to $9.4 million for the year ended December 31, 1998, a decrease of 15.3%. This
decrease was primarily due to declining telecommunications rates and increasing
connection speeds resulting from the use of faster modems by a portion of our
subscriber base. These cost savings were partially offset by an increase in the
number of subscribers connecting in a given month. During the month ended
December 31, 1997, 1,986,000 subscriber accounts connected and during the month
ended December 31, 1998, 2,434,000 subscriber accounts connected.
SUBSCRIBER ACQUISITION. Subscriber acquisition costs increased $2.2
million, from $3.1 million for the year ended December 31, 1997 to $5.3 million
for the year ended December 31, 1998, an increase of 69.9%. This increase is
primarily due to direct mail and advertising costs incurred to acquire
subscribers to our free basic e-mail service in the first half of 1998, ad
production and transmission costs associated with soliciting basic e-mail
subscribers to upgrade to our billable subscription services starting in July
1998, and costs incurred during the second half of 1998 to prepare for the
large-scale marketing activities planned for 1999. The increase in these costs
was partially offset by a decrease in expenses related to referral bounties as
various agreements that called for bounty payments expired or were terminated.
As a percentage of revenues, subscriber acquisition costs decreased from 34.5%
in 1997 to 24.6% in 1998. This percentage decrease was primarily due to the
relatively larger 1998 revenues. We expect that subscriber acquisition costs
will increase significantly both in absolute dollar terms and as a percentage of
total revenue in the future.
SALES AND MARKETING. Sales and marketing costs decreased $1.0 million, from
$12.6 million for the year ended December 31, 1997 to $11.6 million for the year
ended December 31, 1998, a decrease of 8.0%. This decrease is primarily due to
reductions in the level of trade advertising we undertook in 1998 as well as to
cost savings associated with our decisions to close our regional ad sales
offices and to narrow the range of our direct product sales activities. We
reduced the headcount assigned to our direct product sales activities, as well
as inventory risk, primarily by outsourcing substantially all of the
procurement, warehousing, fulfillment, billing and customer service aspects of
this initiative. In each of the first and second quarters of 1998, sales and
marketing expenses include charges of approximately $300,000 relating to
inventory write-offs, severance pay, and lease termination costs. As a
percentage of revenues, sales and marketing costs decreased from 139% in 1997 to
53.4% in 1998. This percentage decrease was primarily due to our relatively
larger 1998 revenues.
PRODUCT DEVELOPMENT. Product development costs increased approximately $2.5
million, from $4.9 million for the year ended December 31, 1997 to $7.3 million
for the year ended December 31, 1998, an increase of 51.1%. This increase is
primarily due to the costs associated with establishing development operations
in Hyderabad, India, a project we initiated in the fourth quarter of 1997.
Product development costs in 1998 related primarily to the continued development
of our billable subscription services and of various pieces of software. To
date, we have not capitalized expenses related to any software development
activities.
GENERAL AND ADMINISTRATIVE. General and administrative costs decreased $0.1
million, from $2.9 million for the year ended December 31, 1997 to $2.8 million
for the year ended December 31, 1998, a decrease of 4.7%. This decrease is
primarily due to reduced personnel and related overhead costs, lower
professional fees, and cost containment programs. As a percentage of revenues,
general and administrative costs decreased from 31.9% for the year ended
December 31, 1997 to 12.7% for the year ended December 31, 1998. This decrease
was primarily due to the increase in revenues for the
38
<PAGE>
year ended December 31, 1998. We expect that we will incur additional general
and administrative expenses as we hire additional personnel and incur additional
costs related to the growth of our business and our operation as a public
company, including directors' and officers' liability insurance, investor
relations programs and professional service fees. Accordingly, we anticipate
that general and administrative expenses will increase in absolute dollar terms
in the future.
INTEREST INCOME, NET. Interest income, net decreased $199,000, from
$243,000 for the year ended December 31, 1997 to $44,000 for the year ended
December 31, 1998, a decrease of 81.9%. This decrease is primarily due to
interest payments for borrowings and increased capital lease obligations,
partially offset by interest income earned on higher average cash balances
during 1998.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUES
Total revenues increased $9.0 million, from $0.1 million for the year ended
December 31, 1996 to $9.1 million for the year ended December 31, 1997. This
increase was primarily due to increases in direct product sales and in
advertising and transaction fees.
BILLABLE SERVICES. Billable services revenues increased $1.4 million, from
$6,000 for the year ended December 31, 1996 to $1.4 million for the year ended
December 31, 1997. This increase is primarily due to the implementation of
fee-based technical support for subscribers to our free basic e-mail service in
January 1997 and the initiation, as of March 1997, of our policy to charge
prospective subscribers to our free basic e-mail service a shipping and handling
fee if they request that a copy of our software be sent to them by mail.
ADVERTISING AND TRANSACTION FEES. Advertising and transaction fees
increased approximately $1.7 million, from $127,000 for the year ended December
31, 1996 to $1.9 million for the year ended December 31, 1997. This increase
reflects the expansion of our sales force and the growth in the subscriber base
of our free basic e-mail service to a level sufficient to interest advertisers,
and is principally due to the significantly higher number of advertisers and
advertisements delivered.
DIRECT PRODUCT SALES. Direct product sales increased $5.8 million, from
$3,000 for the year ended December 31, 1996 to $5.8 million for the year ended
December 31, 1997. This increase reflects the first full year of direct product
sales activity and the growth of our subscriber base.
COST OF REVENUES
Cost of revenues increased $8.2 million, from $0.3 million for the year
ended December 31, 1996 to $8.5 million for the year ended December 31, 1997.
This increase was primarily due to increases in costs associated with direct
product sales and with advertising and transaction fees.
BILLABLE SERVICES. The cost of revenues related to billable services
increased $1.1 million, from $0 for the year ended December 31, 1996 to $1.1
million in 1997. This increase is primarily due to costs associated with
providing fee-based technical support to subscribers to our free basic e-mail
service starting in January 1997 and with our policy to charge prospective
subscribers to our free basic e-mail service a shipping and handling fee if they
request that a copy of our software be sent to them by mail.
ADVERTISING AND TRANSACTION FEES. The cost of revenues for advertising and
transaction fees increased $1.4 million, from $278,000 for the year ended
December 31, 1996 to $1.7 million for the year ended December 31, 1997. This
increase is principally due to additional production and transmission costs
associated with the increase in advertisements delivered.
39
<PAGE>
DIRECT PRODUCT SALES. The cost of revenues for direct product sales
increased $5.8 million, from $3,000 for the year ended December 31, 1996 to $5.8
million for the year ended December 31, 1997. This increase corresponds to the
increase in products sold.
OPERATING EXPENSES
OPERATIONS, FREE SERVICE. The expenses associated with operations, free
service increased $5.3 million, from $5.8 million for the year ended December
31, 1996 to $11.1 million for the year ended December 31, 1997, an increase of
90.8%. This increase is primarily due to the growth in the subscriber base of
our free basic e-mail service, which resulted in increased telecommunications
and customer service costs, partially offset by declining telecommunication
rates and increasing average connection speeds. During the month ended December
31, 1996, 823,000 subscriber accounts connected and during the month ended
December 31, 1997, 1,986,000 subscriber accounts connected.
SUBSCRIBER ACQUISITION. Subscriber acquisition costs decreased $3.9
million, from $7.0 million for the year ended December 31, 1996 to $3.1 million
for the year ended December 31, 1997, a decrease of 55.1%. This decrease is
primarily due to the reduction in advertising and direct mail activities in 1997
relative to those in 1996, the year in which we launched our free basic e-mail
service. The effect of this reduction in advertising and direct mail activities
was partially offset by increased referral bounty expenses in 1997.
SALES AND MARKETING. Sales and marketing expenses increased $8.3 million,
from $4.3 million for the year ended December 31, 1996 to $12.6 million for the
year ended December 31, 1997, an increase of 195%. This increase is primarily
due to the growth of our advertising sales force as well as the expansion of our
direct product sales activities, which increased our expenses related to ad
production, ad transmission, and order fulfillment. These increases were
partially offset by reductions in the level of trade advertising we undertook in
1997.
PRODUCT DEVELOPMENT. Product development costs increased approximately $1.1
million, from $3.7 million for the year ended December 31, 1996 to $4.9 million
for the year ended December 31, 1997, an increase of 29.9%. This increase is
primarily due to increased personnel and related overhead costs, due to higher
headcount. Product development costs in 1997 related primarily to development of
refinements to our advertising and electronic commerce systems and certain other
pieces of software.
GENERAL AND ADMINISTRATIVE. General and administrative costs increased $0.7
million, from $2.2 million for the year ended December 31, 1996 to $2.9 million
for the year ended December 31, 1997, an increase of 33.4%. This increase is
primarily due to increased personnel and related overhead costs, due to
increased headcount.
INTEREST INCOME, NET. Interest income, net increased $115,000, from
$128,000 for the year ended December 31, 1996 to $243,000 for the year ended
December 31, 1997, an increase of 89.8%. This increase is primarily due to
interest income earned on higher average cash balances in 1997.
QUARTERLY RESULTS OF OPERATIONS DATA
The following table sets forth unaudited quarterly statement of operations
data for each of the five quarters ended March 31, 1999, as well as the same
data expressed as a percentage of our total revenues for the periods indicated.
In our opinion, this unaudited information has been prepared substantially on
the same basis as the audited consolidated financial statements appearing
elsewhere in this prospectus, and all necessary adjustments, consisting only of
normal recurring adjustments, have been included in the amounts stated below to
present fairly the unaudited quarterly results of operations data. The quarterly
data should be read in conjunction with the consolidated financial statements
and the notes to these statements appearing elsewhere in this prospectus. The
operating results for any quarter are not necessarily indicative of the
operating results for any future period.
40
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MAR. 31, SEPT. 30, DEC. 31,
1998 JUNE 30, 1998 1998 1998 MAR. 31, 1999
------------ ------------- ------------- ------------ -------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Billable services........................... $ 465 $ 709 $ 1,528 $ 3,943 $ 5,806
Advertising and transaction fees............ 1,228 1,540 1,759 1,927 2,265
Direct product sales........................ 2,577 2,035 1,847 2,136 1,649
------------ ------------- ------------- ------------ -------------
Total revenues.......................... 4,270 4,284 5,134 8,006 9,720
------------ ------------- ------------- ------------ -------------
Cost of revenues:
Billable services........................... 387 580 1,306 3,333 4,678
Advertising and transaction fees............ 825 875 992 1,033 1,080
Direct product sales........................ 2,426 1,709 1,592 1,900 1,424
------------ ------------- ------------- ------------ -------------
Total cost of revenues.................. 3,638 3,164 3,890 6,266 7,182
------------ ------------- ------------- ------------ -------------
Operating expenses:
Operations, free service.................... 2,824 2,356 2,101 2,102 1,846
Subscriber acquisition...................... 1,453 427 1,067 2,387 2,700
Sales and marketing......................... 4,270 2,884 2,212 2,218 2,312
Product development......................... 1,835 1,630 1,849 2,031 1,854
General and administrative.................. 914 676 513 657 704
------------ ------------- ------------- ------------ -------------
Total operating expenses................ 11,296 7,973 7,742 9,395 9,416
------------ ------------- ------------- ------------ -------------
Loss from operations.................... (10,664) (6,853) (6,498) (7,655) (6,878)
Interest income (expense), net................ 74 (14) 6 (22) 111
------------ ------------- ------------- ------------ -------------
Net loss................................ $ (10,590) $ (6,867) $ (6,492) $ (7,677) $ (6,767)
------------ ------------- ------------- ------------ -------------
------------ ------------- ------------- ------------ -------------
PERCENTAGE OF REVENUES:
Revenues:
Billable services......................... 10.9% 16.6% 29.7% 49.3% 59.7%
Advertising and transaction fees.......... 28.8 35.9 34.3 24.1 23.3
Direct product sales...................... 60.3 47.5 36.0 26.6 17.0
------------ ------------- ------------- ------------ -------------
Total revenues.......................... 100.0 100.0 100.0 100.0 100.0
------------ ------------- ------------- ------------ -------------
Cost of revenues:
Billable services......................... 9.1 13.5 25.4 41.7 48.1
Advertising and transaction fees.......... 19.3 20.4 19.4 12.9 11.1
Direct product sales...................... 56.8 40.0 31.0 23.7 14.7
------------ ------------- ------------- ------------ -------------
Total cost of revenues.................. 85.2 73.9 75.8 78.3 73.9
------------ ------------- ------------- ------------ -------------
Operating expenses:
Operations, free service.................. 66.1 55.0 40.9 26.2 19.0
Subscriber acquisition.................... 34.0 10.0 20.7 29.8 27.8
Sales and marketing....................... 100.0 67.3 43.1 27.7 23.8
Product development....................... 43.0 38.0 36.0 25.4 19.1
General and administrative................ 21.4 15.8 10.1 8.2 7.2
------------ ------------- ------------- ------------ -------------
Total operating expenses................ 264.5 186.1 150.8 117.3 96.9
------------ ------------- ------------- ------------ -------------
Loss from operations.................... (249.7) (160.0) (126.6) (95.6) (70.8)
Interest income (expense), net.............. 1.7 (0.3) 0.1 (0.3) 1.2
------------ ------------- ------------- ------------ -------------
Net loss................................ (248.0)% (160.3)% (126.5)% (95.9)% (69.6)%
------------ ------------- ------------- ------------ -------------
------------ ------------- ------------- ------------ -------------
</TABLE>
41
<PAGE>
The following table sets forth selected subscriber data for each of the five
quarters ended March 31, 1999. This data should be read in conjunction with the
information appearing elsewhere in this prospectus. The selected subscriber data
for any quarter are not necessarily indicative of future periods.
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31, MAR. 31,
SELECTED SUBSCRIBER DATA: MAR. 31, 1998 JUNE 30, 1998 1998 1998 1999
- --------------------------------------- -------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total subscriber accounts as of (1).... 4,699,000 5,298,000 5,852,000 6,336,000 6,817,000
Subscriber accounts that connected in
the three-month period ended....... 2,924,000 3,032,000 3,121,000 3,108,000 3,108,000
Subscriber accounts that connected in
the month ended.................... 2,340,000 2,361,000 2,409,000 2,434,000 2,438,000
Average subscriber accounts that
connected per day in the month
ended.............................. 889,000 836,000 889,000 887,000 912,000
Billable subscription service accounts
as of (2)............................ -- -- 64,000 144,000 207,000
</TABLE>
- ------------------------
(1) Includes all user accounts created since Juno's inception, regardless of
activity level, if any, net of accounts that have been cancelled.
(2) Billable subscription service accounts are a subset of total subscriber
accounts and, to the extent applicable, are also included in the number of
subscriber accounts shown as having connected during the periods described.
We have historically experienced seasonality, with use of Internet services
being somewhat lower during the summer and year-end holiday periods. We believe
seasonality favorably impacts subscriber acquisition during the first and fourth
calendar quarters. We further believe that seasonality may negatively affect our
advertising revenue during the first and third calendar quarters. Finally, we
believe that direct product sales are positively affected in the fourth quarter
due to the year-end holiday buying season, although we cannot assure you that
this trend will continue in future periods. See "Risk Factors--Juno's business
is subject to fluctuations in operating results which may negatively impact the
price of our stock."
Despite the impact of seasonality, our revenues have increased in all
quarters presented. We believe that these increases occurred for a number of
reasons, including:
- the overall growth of our business and the industry's growth as a whole;
- the launch of our billable subscription services on July 22, 1998; and
- the increase in advertising and transaction fees generated by strategic
marketing alliances beginning with the third quarter of 1998.
We cannot assure you that we will not experience seasonal fluctuations and the
risks associated therewith in the future. Primarily due to our previously
described strategic decision to narrow our direct product sales activities,
direct product sales revenue decreased in all quarters except for the fourth
quarter, which we believe was positively affected by the holiday buying season.
Cost of revenues increased as a percentage of total revenues in the third
and fourth quarters of 1998 primarily due to:
- the startup costs associated with the introduction of billable
subscription services;
- the relatively high percentage of subscribers to these services who are in
their initial months;
42
<PAGE>
- the higher costs incurred in the early months of a subscriber's life
cycle; and
- the fact that most Juno Web subscribers currently receive their first
month of service at no charge.
Cost of revenues decreased, as a percentage of total revenues, from 78.3%
for the three months ended December 31, 1998 to 73.9% for the three months ended
March 31, 1999. This decrease was primarily due to the decline in the percentage
of billable subscription service users who were in their initial months
following signup, as compared to previous quarters. In addition, the cost of
revenues, as a percentage of total revenues, was positively impacted by a
contribution from revenue recognized over the shortened life of a strategic
marketing alliance that featured a minimum revenue guarantee.
Operating expenses decreased in the second quarter of 1998 due to reduced
subscriber acquisition activities, and in the second and third quarters of 1998
due to savings resulting from the narrowing of our direct product sales
activities, the closing of regional sales offices, and cost containment
programs. Operating expenses increased in the fourth quarter of 1998 principally
because of increased spending initiated during the third quarter related to
subscriber acquisition. This increase in spending reflects increased levels of
marketing conducted over the Juno service in order to promote our billable
subscription services to our free basic e-mail service subscribers, as well as
preparations for the large-scale marketing activities planned for 1999. The
increase in subscriber acquisition costs continued in the three months ended
March 31, 1999. Total operating costs remained relatively flat as compared to
the three months ended December 31, 1998 primarily due to lower costs associated
with operating the free basic e-mail service. The cost of operations, free
service decreased due to the continued decline in telecommunications rates and
increases in connection speeds resulting from the use of faster modems by a
portion of our subscriber base. We anticipate significant increases in
subscriber acquisition expenses. See "Use of Proceeds." We anticipate that this
increased spending will result in substantial fluctuations in subscriber
acquisition expenses, operating expenses, and net loss on a quarter-to-quarter
basis.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the March 1999 private placement described below, we were financed
primarily through capital contributions from entities or persons affiliated with
D. E. Shaw & Co., Inc. In March 1998, we borrowed $10.0 million from D. E. Shaw
Securities Group, L.P., an affiliated party, pursuant to an unsecured note. The
note bears interest at the Federal Funds rate plus 0.375%, which totalled 5.355%
as of March 31, 1999. Outstanding principal and any accrued but unpaid interest
is required to be paid upon the earlier of December 31, 2000 and the date of
completion of an initial public offering by Juno registered under the Securities
Act of 1933, and will be repaid in full with the proceeds from this offering and
is otherwise scheduled to mature on December 31, 2000. At March 31, 1999, the
balance, including accrued interest, of the note was $8.8 million. See "Use of
Proceeds."
For the three months ended March 31, 1999, we used $6.2 million in cash for
working capital purposes and to fund losses from operations. In addition, we
paid $10.0 million for advertising that may be used at any time prior to March
2001, bringing total net cash used in operating activities to $16.2 million. Net
cash used in operating activities was $16.4 million, $33.6 million and $20.9
million for the years ended December 31, 1996, 1997 and 1998, respectively. The
decrease in net cash used in operating activities of $12.7 million from $33.6
million for the year ended December 31, 1997 to $20.9 million for the year ended
December 31, 1998 was primarily the result of deferred revenues, changes in
working capital accounts, and non-cash charges for depreciation and
amortization.
Net cash used in investing activities was $0.2 million for the three months
ended March 31, 1999. Net cash used in investing activities was $0, $3.4 million
and $1.6 million for the years ended December 31, 1996, 1997 and 1998,
respectively. The principal use of cash for the periods presented was for the
purchase of fixed assets. Prior to July 1997, we utilized fixed assets owned by
DESCO, L.P.,
43
<PAGE>
the expense relating to which was allocated to us. Beginning in July 1997,
substantially all new acquisitions of fixed assets have been made directly by
us.
Net cash provided by financing activities was $61.4 million for the three
months ended March 31, 1999. In March 1999, we received net proceeds of $61.8
million in exchange for our issuance of 10,138,716 shares of Series B redeemable
convertible preferred stock, which will automatically convert into an equivalent
number of shares of common stock upon the closing of this offering. Net cash
provided by financing activities was $17.0 million, $50.1 million and $16.9
million for the years ended December 31, 1996, 1997 and 1998, respectively.
Financing activities are primarily capital contributions, the borrowings and
repayments under the note during 1998, and capital lease obligation payments.
We do not currently have any material commitments for capital expenditures
outside of the normal course of business and recent historical trends. However,
we do anticipate that we will increase our capital expenditures and lease
commitments beyond recent historical trends to expand our infrastructure in
anticipation of the growth of our subscriber base. We may also take advantage of
opportunities to employ various cost-effective but capital-intensive approaches
to the provision of our Internet services. As a result of our outsourcing
arrangements for telecommunications services and customer service, we have
substantially reduced the level of capital expenditures that would otherwise
have been necessary to develop our product offerings. In the event that these
outsourcing arrangements were no longer available to us, significant capital
expenditures would be required and our business and financial results could
suffer. In addition, we anticipate significantly increasing subscriber
acquisition expenses in order to fund subscriber growth and help us gain market
share. Additional expenditures in connection with subscriber acquisition will
represent a material use of our cash resources.
We believe that the net proceeds of this offering, together with our
existing cash and cash equivalents, will be sufficient to meet our anticipated
cash needs for at least the next twelve months. If cash generated from
operations is insufficient to satisfy our liquidity requirements, we may seek to
sell additional equity or debt securities or to obtain a credit facility. The
sale of additional equity or convertible debt securities would result in
additional dilution to our stockholders. The incurrence of indebtedness would
result in increased fixed obligations and could result in covenants that would
restrict our operations. We have not made arrangements to obtain additional
financing and there can be no assurance that financing will be available in
amounts or on terms acceptable to us, if at all. See "Risk Factors--We cannot
predict our future capital needs and we may not be able to secure additional
financing."
IMPACT OF THE YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to identify a given year. Many of the computer
programs that Juno utilizes include specialized functions that involve date
manipulation. These functions are critical to our business, and include:
- signup of new subscribers to our services;
- validation of credit cards;
- transfer, storage and processing of e-mail and advertisements;
- scheduling of advertisements and reporting of results to advertisers; and
- billing and invoicing of advertisers and subscribers to our billable
subscription services.
Juno's business is heavily dependent upon the use of operating systems and
applications that, in the aggregate, involve millions of lines of computer code.
Similarly, our business is also dependent on the coordinated functioning of a
network made up of hundreds of servers and other pieces of computer equipment,
all of which have computer code embedded in them. If any of the programs that
Juno utilizes misinterpret the date code "00" as the year 1900 rather than the
year 2000, significant errors
44
<PAGE>
could be introduced into the information we use to manage the business and the
computer systems that operate our online services. These miscalculations could
result in errors in our operations or in disruption of operations, including,
among other things, a temporary inability to process transactions, send invoices
or engage in other normal business activities.
STATE OF READINESS. We have begun to assess the Year 2000 readiness of our
information technology systems. Our overall Year 2000 readiness plan consists of
the following phases:
- preparing an inventory of all software and hardware items affected by the
Year 2000 issue;
- testing our internally developed proprietary software for quality
assurance;
- contacting providers of material information technology and other
technology;
- repairing or replacing components that are determined to not be Year 2000
compliant; and
- creating contingency plans to address potential Year 2000 failures that we
cannot control or have not previously been able to detect or repair.
Specific steps in our Year 2000 assessment to date have included:
- running several successful Year 2000 simulations on our test systems to
verify software performance by artificially moving the date forward from
December 31, 1999 to January 1, 2000;
- reviewing source code of our proprietary software to identify all
functions that process dates; and
- identifying critical suppliers and communicating with them about their
plans and progress in addressing any Year 2000 problems they may face.
The Year 2000 readiness plan described above is being carried out across the
four critical areas where we believe the Year 2000 problem might affect our
business:
- Juno product software, which consists of all software directly used by
subscribers in connection with our free basic e-mail service and/or our
billable subscription services;
- Juno product hardware, which consists of the hardware that we use directly
in connection with our free basic e-mail service and/or our billable
subscription services;
- infrastructure, which consists of hardware and software used by our staff
in the course of operating our business other than Juno product hardware
and software; and
- external agents, which includes all other hardware, software, services and
related systems provided by third parties and on which we rely.
45
<PAGE>
The following table sets forth our progress and completion targets in
assessing our Year 2000 readiness in these four critical areas. In each case our
remaining assessment and repair is significantly dependent upon the Year 2000
compliance of our suppliers and vendors.
<TABLE>
<CAPTION>
INVENTORY ASSESSMENT REPAIR/REPLACEMENT
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Product Software......................... 100% complete 75% complete
Completion target: Completion target:
August 31, 1999 September 30, 1999
Product Hardware......................... 90% complete 80% complete
Completion target: Completion target: Completion target:
July 31, 1999 September 30, 1999 November 30, 1999
Infrastructure........................... 90% complete 70% complete
Completion target: Completion target: Completion target:
July 31, 1999 September 30, 1999 November 30, 1999
External Agents.......................... 80% complete 30% complete
Completion target: Completion target: Completion target:
July 31, 1999 October 31, 1999 December 15, 1999
</TABLE>
To address the results of our assessment to date, we have:
- enhanced several parts of our software to permit the entry of four-digit
years rather than two-digit years;
- converted all dates within our databases to four-digit years;
- upgraded some of our operating systems and applications to versions
recommended by our vendors in order to achieve Year 2000 compliance of
these components; and
- identified, prioritized and contacted third party vendors who provide us
with key services including telecommunication services and customer
service, requiring them to provide assurances of their Year 2000
compliance.
We plan to continue this Year 2000 assessment and repair process during the
remainder of 1999 with the intention of:
- monitoring our vendors' progress in their own Year 2000 assessment and
repair;
- scheduling tests to determine the ability of our systems to work with
those of our service providers; and
- reviewing non-information technology systems and embedded systems which,
if not Year 2000 compliant, could affect our business.
COSTS. To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. The cost of software tools and
consulting expenses used for detection of Year 2000 problems is not currently
expected to exceed $100,000. We expect that our existing employees or
consultants will perform all significant work for the Year 2000 project
described above. We do not anticipate hiring any additional employees or
incurring any significant consulting expenses for the Year 2000 project. To
date, no other significant information technology projects have been deferred
due to our Year 2000 efforts.
RISKS. We are not currently aware of any significant Year 2000 compliance
problems relating to our proprietary software, our information technology
systems or our other systems that would materially harm our business, results of
operations or financial condition. During our remaining assessment, we may
discover Year 2000 compliance problems in our proprietary software that may
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require substantial repair or replacement. If problems are discovered in
versions of our product software that are already in use by our subscribers, we
may need to distribute new versions of the software to those subscribers. It may
not be possible to correct these problems in a timely manner.
Material third-party software, hardware, service providers or
non-information-technology infrastructure may contain Year 2000 compliance
problems that require substantial repair and/or replacement, which could be
time-consuming and expensive. It may not be possible to repair or replace some
of these components or service providers in a timely manner.
The failure to correct any material Year 2000 problem could materially harm
our business, results of operations and financial condition because:
- new subscribers may be unable to sign up for our services, resulting in
reduced growth and lower effectiveness of our marketing efforts;
- current subscribers may be unable to upgrade to higher service levels,
resulting in reduced revenue growth and lower effectiveness of our
marketing efforts;
- current subscribers may be unable to use our services or get adequate
customer support, which may result in increased attrition, higher customer
support costs and reduced revenue; and/or
- we may be subject to claims of mismanagement, misrepresentation or breach
of contract and related litigation, which could be costly and
time-consuming to defend and, if defended unsuccessfully, could result in
the imposition of substantial fines or judgments.
In addition, we cannot assure you that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside our control will be Year 2000 compliant. The failure by these entities
to be Year 2000 compliant could result in a systemic failure beyond our control,
including, for example, a prolonged failure of Internet, telecommunications
and/or electrical systems, which could also prevent us from providing our
services, or prevent users from accessing our services, either of which would
materially harm our business, results of operations and financial condition.
CONTINGENCY PLANS. We are still engaged in an ongoing Year 2000 assessment
and have not yet developed any contingency plans. Contingency planning will be
conducted as our ongoing assessment and as feedback received from third parties
necessitates.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Statement 133 establishes new accounting
and reporting standards for derivative financial instruments and for hedging
activities. As of December 31, 1998, Juno had no derivative instruments.
In June 1997, FASB issued Statement No. 131 "Disclosures about Segments of
an Enterprise and Related Information." Statement 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued. The statement has not had an impact on Juno's financial
statement disclosures as its financial statements reflect how the "key operating
decision makers" view the business. Accordingly, the financial statements are
presented as a single segment.
In June 1997, FASB issued Statement No. 130, "Reporting Comprehensive
Income." Statement 130 establishes standards for the reporting and display of
comprehensive income and its components in the financial statements. Statement
130 is effective for years beginning after December 15, 1997. The
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statement has not had an impact on Juno's financial statements as Juno has no
other comprehensive income to report.
In February 1997, FASB issued Statement No. 128 "Earnings Per Share."
Statement 128 replaced primary and fully diluted earnings per share with basic
and diluted earnings per share. The statement makes modifications to the
earnings per share calculations defined in the Accounting Principles Board
Opinion No. 15 "Earnings Per Share." Statement 128 is effective for years ending
after December 31, 1997. Juno has adopted Statement 128. Pro forma net loss per
share is computed by dividing the net loss by the sum of the weighted average
number of shares of common stock outstanding and the shares resulting from the
assumed conversion of all outstanding shares of convertible preferred stock.
Options have been excluded from the calculation of loss per share because to
include them would be antidilutive.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" which provides guidance on accounting
for the costs of computer software developed or obtained for internal use. The
pronouncement identifies the characteristics of internal use software and
provides guidance on new cost recognition principles. Statement 98-1 is
effective for financial statements for fiscal years beginning after December 15,
1998. The adoption of Statement 98-1 will not have a significant impact on
Juno's consolidated financial position, results of operations and cash flows.
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BUSINESS
OUR COMPANY
Juno Online Services, Inc. is a leading provider of Internet-related
services to millions of computer users throughout the United States. We offer
several levels of service, ranging from basic dial-up Internet e-mail--which is
provided to the end user for free--to full, competitively priced access to the
Web. Our strategy of offering several different service levels and our
easy-to-use, intuitive software are designed to attract a broad spectrum of
users, including those who are interested only in e-mail, those who initially
begin with e-mail but over time develop a need for Web access, and those who
seek full Web access from the outset.
Our services are provided nationwide through over 1,900 local telephone
numbers, which we lease from several providers. These phone numbers can be
reached by the vast majority of the U.S. population without having to place a
long distance telephone call. Our revenues are derived primarily from the
subscription fees we charge for the use of our more advanced service levels,
from the sale of advertising, and from the direct sale of products to our
subscribers.
Since our inception in 1995, we have pursued a two-phase business strategy.
The initial phase of this strategy focused on building computer systems and
related infrastructure that could be rapidly expanded to accommodate an
increasing number of users, and on maximizing the number of subscribers to our
free basic e-mail service. We chose to focus on e-mail because it is one of the
most popular activities on the Internet, and because we believed that offering
basic e-mail service for free would allow us to rapidly and cost-effectively
build a large user base from which we might then expect to derive various forms
of revenue. In particular, we planned to draw on our ability to communicate
inexpensively with our user base in order to pursue revenues derived from the
sale of advertising and the direct marketing of products to our subscribers and
to offer our basic e-mail users the opportunity to purchase more advanced
services including full Web access. We believed our basic e-mail users would be
more likely to purchase these services from us than from a competing service
provider due to their expected aversion to the process of switching e-mail
addresses. We further believed the economics of this approach would be enhanced
by technology we had developed that allowed us to take advantage of a
substantial number of hours of consumer contact while paying for a much smaller
number of hours during which customers were actually connected by telephone to
our central computers.
In July 1998, we commenced the second phase of our business strategy by
introducing two additional service levels: an enhanced e-mail service and a full
Web access service. Unlike our basic e-mail service, which is free, these
service offerings are billed at either a flat rate or a combination of a reduced
flat rate plus hourly usage fees. These services utilize the same easy-to-use
software as our basic e-mail service, and users of the current version of our
software are able to easily upgrade to our billable subscription services by
clicking on clearly labeled buttons within this environment. JUNO GOLD, the
enhanced e-mail service, supplements our basic e-mail service by allowing users
to send and receive non-text files such as pictures, spreadsheets and word
processor documents. JUNO WEB provides full Internet access utilizing a standard
Web browser of the user's choice. The home page on which all Juno users begin
each Web session is operated under an agreement with Lycos, one of the
Internet's leading "portal" sites, that provides us with a portion of any
associated advertising revenues.
Our services have been very popular, with more than 6.8 million Juno
accounts created since the launch of the basic e-mail service in April 1996.
During the month of March 1999, an average of 912,000 user accounts dialed into
our service on any given day, with a total of 2.4 million user accounts
connecting during the full month of March, and 3.1 million user accounts
connecting during the three-month period ended March 31, 1999. We launched our
billable subscription services on July 22, 1998, and as of March 31, 1999, we
had approximately 207,000 billable service subscribers, consisting of
approximately 86,000 Juno Gold subscribers and approximately 121,000 Juno Web
subscribers. We have initially marketed Juno Gold and Juno Web only to our own
free e-mail subscribers. We intend,
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however, to begin marketing these services beyond the existing Juno user base
through a substantial external marketing campaign beginning in the second
quarter of 1999.
In addition to fees payable by subscribers to our billable subscription
services, we derive revenues from the sale of advertising. As of March 31, 1999,
approximately 200 firms had advertised on the Juno service. Additionally, we
have entered into a number of major strategic marketing alliances, including
several that involve multi-million-dollar guaranteed minimum payments to Juno.
Our strategic marketing alliances include multi-year relationships with First
USA, Qwest, and The Hartford, as well as a one-year agreement with AT&T Wireless
Services.
In servicing the needs of advertisers and marketing partners, we benefit
from the high degree to which custom-tailored advertisements can be selectively
targeted to various segments of our subscriber base. Juno ads can be targeted
based not only on geography and patterns of computer use, as is often possible
in the case of Web site advertising as well, but also according to such
characteristics as age, gender, income, expected major purchases in any of 20
specified categories, hobbies, interests, family size, and/or educational
attainment. This data is obtained from the detailed "Member Profile" survey that
all subscribers to our basic e-mail service are required to complete at the time
they create their accounts.
MARKET OPPORTUNITY
The Internet is becoming an increasingly significant global medium for
communications, advertising, and commerce. International Data Corporation
estimates that more than 56 million individuals in the U.S. used the Internet in
1998, and projects that this figure will reach 136 million by the year 2002. We
expect that these increases will have a significant impact on the three main
service and product sectors in which Juno currently operates.
BILLABLE SUBSCRIPTION SERVICES REVENUES. IDC projects that
consumer-targeted dial-up Internet access revenues in the U.S. will grow from
$4.7 billion in 1998 to $10.6 billion in 2002.
ADVERTISING REVENUES. Jupiter Communications has projected that online
advertising expenditures will grow from an estimated $1.9 billion in 1998 to
$7.7 billion in 2002.
DIRECT PRODUCT SALES. Forrester Research has estimated that online sales
for retail goods other than automobiles totaled $4.8 billion in 1998, and
projects that those sales will increase to $50.2 billion in 2002.
OUR SERVICES
Our services and software have been designed with special attention to the
needs of consumers who are just now beginning to explore the Internet. The needs
and preferences of this large and rapidly growing body of new Internet users are
likely to differ significantly from those of technically sophisticated early
Internet users and computer hobbyists. We believe the success of our design is
reflected in studies indicating that ease of use is among the characteristics
most closely associated with Juno, and in the relatively high rate at which
members pass along copies of the Juno software to others.
In addition, we believe that Juno is unique among major online services in
offering consumers a gradual migration path onto the Internet. Subscribers who
are not yet ready to use or pay for the full capabilities of the Internet can
begin their use of the Internet with our basic e-mail service or with Juno Gold,
then migrate to Juno Web once they are ready to do so.
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BASIC E-MAIL SERVICE
Our basic e-mail service provides subscribers with the ability to send and
receive text-only e-mail over the Internet for free. Unlike Web-based e-mail
services, such as Microsoft's Hotmail, our basic service does not require the
user to have previously subscribed for access to the Web, and unlike subscribers
to most other major online services or Internet access providers, our
subscribers currently pay us no fees of any sort for the use of our basic
service.
We have expended significant effort to make our basic e-mail service easy to
use. Our fundamental design goal has been to create software that novice users
can understand at a glance, but which will continue to satisfy subscribers once
they have gained more experience. In addition to the basic e-mail
functions--sending, receiving, forwarding, printing, and replying to messages,
for example--we also offer a full-function address book, customizable mailing
lists, folders for storing mail, and a built-in spell-check feature, all within
a simple and visually attractive point-and-click environment.
After receiving a copy of our software, a new subscriber follows simple,
clearly worded on-screen instructions to install Juno on his or her computer,
and to select an e-mail address and password. In addition, in order to create a
free e-mail account, each subscriber to our free e-mail service must complete
the Member Profile survey, providing information that can be used for the
selective targeting of advertising.
JUNO GOLD
Juno Gold augments the capabilities of Juno's basic e-mail service by
providing subscribers with the ability to send and receive non-textual computer
files such as word processor documents, spreadsheets, photographs, artwork,
electronic greeting cards, audio and video files, and computer programs by
"attaching" them to e-mail messages. Subscribers who wish to send a file
attachment simply click on the "Attach File" button on the "Write" screen of the
Juno interface and choose the appropriate file from the list of files that
appears. Subscribers who receive an e-mail message containing a file attachment
can view the contents of that attachment by double-clicking on an icon that
appears inside the message on the "Read" screen of the Juno interface.
Juno Gold is presently offered at a list price of $2.95 per month, billed
annually in advance. Juno Gold subscribers also have the option of signing up
for a plan that permits them to use the Web at a rate of $2.95 per hour of Web
usage, with no monthly minimum.
JUNO WEB
Juno Web provides subscribers with the ability to explore the Web using
either Microsoft's Internet Explorer or Netscape's Navigator as their browser.
Users who wish to visit the Web can do so at any time during a Juno session by
clicking on the prominent "Web" tab on the main Juno interface, and may return
to reading or writing e-mail at any time by clicking on Juno's "Read" or "Write"
tabs. When Juno Web subscribers begin a Web session, the first Web pages they
see provide them with a broad set of tools and content to help them understand,
navigate, and use the Web. Most of the content, directory functionality, and
Internet search functions associated with this Web page are currently provided
by Lycos, one of the Internet's leading "portal" sites. In return for directing
visitors to a co-branded version of this portal site, we receive guaranteed
per-visit fees from Lycos as an advance against a share of any revenue Lycos
generates through the sale of advertisements on the various Web pages comprising
this co-branded portal site. We also intend to begin offering Juno Web
subscribers additional Web features such as home page personalization, instant
messaging, and news and information services, either through our current
agreement with Lycos or through alternate arrangements.
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In addition to Web access, Juno Web provides subscribers with all of the
features included in Juno Gold. Each higher level of Juno service thus offers
all of the features provided at any lower service level in addition to the
incremental capabilities associated with that particular service level.
Juno Web is currently marketed at a list price of $19.95 per month for a
flat-rate plan or $9.95 per month for up to seven hours of metered usage with
additional usage billed at a rate of $1.95 per hour. We have also begun testing
a variety of promotional offerings that provide periods of discounted or free
access in order to determine their impact on conversion and retention rates, and
we may experiment with other pricing plans for both services in the future.
OTHER BILLABLE SERVICES
In addition to Juno Gold and Juno Web, we offer other billable services,
including billable technical support for subscribers to our free basic e-mail
service or to Juno Gold, and currently provide consulting services under a
short-term contract with a third party.
OUR STRATEGY
Our principal objective is to strengthen our position as a leading provider
of consumer Internet-related services by capturing an increasing number of hours
of customer contact, and by expanding our billable subscription service
offerings, advertising sales, strategic marketing relationships, and electronic
commerce activities. In particular, we plan to:
RAPIDLY EXPAND OUR OVERALL SUBSCRIBER BASE. Our services are targeted to
meet the needs of consumers with little or no computer experience, who we
believe are seeking access to the Internet in increasing numbers. We intend to
make these consumers aware of our services and to rapidly expand our subscriber
base through a significant expansion of our marketing activities. These
activities may include television, radio, magazine, and newspaper advertising;
direct mail and telemarketing campaigns; the distribution of our software along
with personal computers and other technology products; paid Web advertising; the
bartering of advertising on the Juno system for advertising on various Web sites
and in other online and conventional media; various incentives for referrals by
current subscribers; and/or the acquisition of other Internet access providers.
In addition, we may consider various alternatives for international expansion.
MIGRATE SUBSCRIBERS TO HIGHER LEVELS OF SERVICE. Our software is designed
to allow users to easily move to higher levels of service when they are ready to
use and pay for them through the point-and-click activation of additional
features, and to do so without having to change e-mail addresses. We plan to
continue marketing our higher service levels to our existing subscriber base
through a variety of advertising messages and promotions delivered through the
Juno ad system. Because internal marketing of this sort is generally less
expensive for us on a per-subscriber basis than subscriber acquisition efforts
conducted through direct mail or most other external advertising channels, we
believe the upward migration of our free basic e-mail subscribers should reduce
average subscriber acquisition costs for our billable subscription services. We
may also offer additional services or service levels to meet the needs of our
users, or may restructure or change the nature or pricing of our various service
levels at some point in the future.
LEVERAGE AND EXPAND OUR STRATEGIC MARKETING ALLIANCES AND ADVERTISING
SALES. We plan to maintain our focus on initiating new strategic marketing
alliances and expanding the size and scope of our existing alliances. We believe
there may be significant opportunities to expand the scope of our relationships
with some of our existing alliance partners, which currently include AT&T
Wireless Services, First USA, Qwest and The Hartford. In addition, we believe it
may be possible to execute new category-exclusive strategic alliances with major
firms in other industries. Finally, to the extent we are able to increase the
size of our subscriber base, we believe this expansion could increase the value
of our existing strategic marketing and advertising relationships and our
ability to form similar relationships with other firms on favorable terms.
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EMBRACE NEW TECHNOLOGIES WHILE MAINTAINING TECHNOLOGY INDEPENDENCE. We
currently use several wholesalers of telecommunications services to connect our
subscribers to Juno's central computers and to the Web. Although we may at some
point consider investing in various forms of networking
infrastructure--particularly in cases where a given type of access would
otherwise be difficult or prohibitively costly to obtain--we currently expect to
continue our extensive use of these wholesale providers. We believe this
strategy will enable us to remain network-independent, and to switch providers
or technologies as cost and/or performance improvements become available. As a
result, we believe we can be flexible in responding to subscriber demand for
higher-speed access and other types of improved service. In particular, as
digital subscriber line technology, commonly known as DSL, cable modems,
high-speed wireless access, and/or other broadband technologies begin to
transform the Internet access landscape, we intend to embrace one or more of
these technologies in order to provide high-bandwidth services to our
subscribers in the most cost-effective manner then available to us.
TECHNOLOGY AND INFRASTRUCTURE
The operation of our services is supported by computer systems and related
infrastructure that have successfully sustained high levels of usage and of
growth. Since the launch of our first service, our systems have processed and
delivered more than two billion e-mail messages. Our servers routinely handle
more than two million user connections per day and more than five million e-mail
messages per day. Our members have not suffered the sorts of repeated, prolonged
system-wide outages that have reportedly affected other online services. To
enable our computer and telecommunications facilities to keep pace with the
rapid growth of our subscriber base, we have made a concerted effort to design
our systems architecture to be highly flexible, to grow quickly without
sacrificing reliability, and to handle problems quickly when they arise.
To use our services, subscribers initiate telephone connections between
their personal computers and computer hardware in local or regional facilities
known as points of presence. We contract for the use of points of presence
around the country from various telecommunications carriers, including MCI
WorldCom, through its UUNET Technologies and MCI WorldCom Advanced Networks
divisions; Concentric Network Corporation; and Sprint Communications Company.
These telecommunications companies also carry their data between the points of
presence and our central computers, which are located in Cambridge,
Massachusetts and Jersey City, New Jersey. We currently have lease commitments
for the use of over 1,900 local telephone numbers associated with points of
presence throughout the United States. Subscribers typically need bear no
expenses for communication beyond the cost, if any, of an ordinary local or
regional phone call. We estimate that our current set of local access numbers
covers the vast majority of the U.S. population. Our reliance on several
independent providers of network capacity has allowed us to provide high quality
service throughout the United States while negotiating progressively lower
telecommunications rates from these competing providers.
The time each user spends connected to our central computers is minimized
through the use of a patented architecture that allows subscribers to read and
compose e-mail messages offline, connecting automatically to Juno's central
computer facilities only for the relatively brief period necessary to download
incoming mail or upload one or more outgoing messages. Advertisements are
downloaded to a subscriber's computer along with the subscriber's incoming
e-mail messages, and are displayed not only while the subscriber is actually
connected to our central facilities, but throughout the significantly longer
period during which he or she is reading and writing e-mail messages offline,
using only his or her own computer. The relatively large ratio between average
ad display time, an important revenue-related resource, and average connect
time, an important expense item, is essential to the economics of our basic
e-mail and Juno Gold services. Moreover, because we believe that almost a
quarter of all time spent online by subscribers to the leading Internet access
service is attributable to their reading and writing e-mail messages while
connected to the service's central computers, we believe that our offline e-mail
architecture could also confer an economic advantage on Juno Web.
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SUBSCRIBER ACQUISITION
The first phase of Juno's business strategy focused on maximizing total
subscriber count through the acquisition of large numbers of subscribers to our
free basic e-mail service. A number of acquisition channels have been employed
to achieve these goals, including:
- ONLINE DISTRIBUTION. The Juno software may be downloaded free of charge
from our promotional Web site (http://www.juno.com). In addition, we have
formed relationships with a number of distribution partners who provide
direct links to our Web site from their own Web sites at no cost to us.
- DIRECT MAIL. Since early 1996, we have conducted several direct mail
campaigns employing numerous creative approaches and mailing lists.
- PASS-ALONG DISTRIBUTION. We encourage our basic e-mail subscribers to pass
along the Juno software to their friends and associates or to suggest that
they call our toll-free number to order a diskette or CD-ROM containing
our software. This practice has historically accounted for a significant
fraction of our new subscribers.
- ORIGINAL EQUIPMENT MANUFACTURER BUNDLING. At various times since the
launch of our basic e-mail service, the software necessary to use this
service has been pre-loaded into a number of personal computers
manufactured by IBM, Compaq, and Gateway, among others, and has been
bundled along with models of desktop modems manufactured by U.S. Robotics.
In February 1999, we signed an agreement with Hewlett-Packard to bundle
our software with the installation software for several of their lines of
printers.
We have recently entered the second phase of our subscriber acquisition
program, which emphasizes the development of our billable subscriber base. Since
we launched Juno Gold and Juno Web on July 22, 1998, we have focused almost
exclusively on the upward migration of our free basic e-mail subscribers to
these billable subscription services. Subscribers to Juno's basic e-mail service
are exposed to a stream of marketing messages delivered through the Juno ad
system that encourage them to upgrade to Juno Gold or Juno Web. Juno Gold
members, in turn, are encouraged to upgrade to Juno Web.
[LOGO]
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We cannot predict the ultimate rate of conversion to our billable
subscription services. We believe, however, that continuing increases in the
fraction of the general population using the Web, and in the number of e-mail
messages containing file attachments, may generate interest in the features
provided by our billable subscription services among new segments of our user
base over time. When users of Juno's basic e-mail service develop an interest in
using these types of higher-level services, we believe we are likely to benefit
from individuals' reluctance to switch e-mail addresses or split their Internet-
related activities between two service providers, which may make them more
likely to obtain advanced services from us than from another Internet access
provider. In addition, when a subscriber to our basic e-mail service is ready to
begin using a higher level of service, we believe that it will be easier and
more natural to do so by clicking on a button displayed on the Juno screen that
he or she is already using than by identifying and switching to an alternate
access provider. For risks associated with these beliefs, please see "Risk
Factors--Our business may suffer if we have difficulty acquiring subscribers to
our free basic e-mail service, Juno Gold or Juno Web."
We also plan to launch a substantial marketing campaign designed to acquire
new subscribers directly into our billable subscription services utilizing
proceeds of this offering. See "--Our Strategy."
ADVERTISING AND STRATEGIC ALLIANCES
ADVERTISING SALES
Advertising plays an important role in the business models for each of our
three levels of service. We expect to derive significant revenues from the sale
of advertising displayed to any of the millions of individuals who send and
receive e-mail through the Juno system, regardless of the level of service to
which they subscribe. In addition, we expect to derive revenues from the display
of conventional Web advertising--sold, at least initially, by Lycos under a
revenue-sharing arrangement--on the co-branded Web pages that we make available
to our Juno Web subscribers.
As of March 31, 1999, approximately 200 companies and organizations had
advertised on Juno, including a number of the world's largest advertisers. To
manage ad creation and campaign development, we maintain an in-house ad
production and client service staff. We also employ an internal sales force to
market our ad inventory, with the exception of the banner inventory on our
portal site, which is marketed by Lycos. See "--Our Services--Juno Web."
TYPES OF ADVERTISING ON JUNO'S SERVICES
In addition to Web banner ads displayed to Juno Web subscribers, we display
three distinct types of advertising:
- BANNER ADS, which are displayed in the upper right-hand corner of the main
Juno screen while the subscriber is reading or composing e-mail messages.
Banner ads are displayed on a timed rotation, with a new ad typically
appearing every 15, 20, or 30 seconds, and are interactive, offering
viewers the opportunity to click on them and respond in any of a number of
ways.
- INTERSTITIAL ADS, which are displayed while a subscriber's modem is
dialing into our central computers to send or receive e-mail, and are
displayed for the duration of this telephone connection. Interstitial ads
are approximately four times the size of a banner ad, and are displayed
prominently at a time when the subscriber is not occupied with reading or
writing mail.
- POP-UP ADS that interrupt a user's session, and with which the subscriber
must interact at least briefly before continuing with his or her session.
Pop-up ads are most commonly displayed at the start of a session,
immediately after the subscriber types in his or her password, and may
contain any of the features of banner ads.
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Advertising may be purchased on a price-per-impression,
price-per-clickthrough, or price-per-response basis, or according to special
arrangements negotiated on a case-by-case basis. Each type of ad may be targeted
to a narrowly specified subset of our subscriber base based on data provided by
each subscriber in his or her Member Profile. While our privacy policies
preclude the dissemination to advertisers or other third parties of any of the
data contained in an individual's Member Profile without that individual's
permission, aggregate statistical information about the Juno subscriber base is
routinely provided to advertisers, and can be used to target specific ads to all
subscribers satisfying any specified combination of attributes.
STRATEGIC MARKETING ALLIANCES
We have formed a number of large-scale, strategic marketing alliances that
provide for substantial guaranteed payments to Juno as advances against various
forms of revenue-sharing:
- AT&T WIRELESS SERVICES. Under this one-year agreement, AT&T will cover our
ad transmission costs and other marketing expenses, and will provide us
with a royalty payment for each new wireless subscriber recruited through
Juno as well as a percentage of the revenue stream generated by those
subscribers who do not already purchase other wireless services from AT&T.
- FIRST USA. We recently entered into a multi-year marketing agreement with
First USA which will become operative on May 2, 1999. Under the terms of
this agreement, we will receive payments each year--only the first year of
which, however, is guaranteed--as a non-refundable advance against
bounties paid for each new credit card, banking, or personal loan customer
acquired through Juno. This relationship with First USA replaces a prior
relationship with Bank of America that focused exclusively on the
marketing of credit cards, and which was terminated by Bank of America
effective May 1, 1999.
- QWEST COMMUNICATIONS. Our multi-year agreement with Qwest Communications
calls for guaranteed payments to Juno as a non-refundable advance against
a substantial percentage of all revenues derived, on an ongoing basis,
from telephone customers recruited through the Juno service.
- THE HARTFORD. Our multi-year agreement with The Hartford provides for
reimbursement of our marketing expenses as well as substantial guaranteed
payments as an advance against both bounties paid when a Juno member
purchases an insurance policy and an ongoing percentage of premiums
collected from that subscriber.
The multi-year agreements described above can typically be terminated on
short notice by either party, provided, however, that in some cases, the party
terminating the agreement is required to make specified payments to the other
party.
SELECTED ADVERTISING CUSTOMERS AND STRATEGIC MARKETING PARTNERS
As of March 31, 1999, approximately 200 advertisers and strategic marketing
partners had advertised on Juno, including those listed below.
Allstate
American Airlines
American Express
Ameritrade
AT&T Wireless Services
Audio Book Club
Bank of America
BSG Laboratories
Cendant
Citibank
Columbia House
CompuCom Systems
Computer Associates
Computer Discount Warehouse
Comtrad Industries
DaimlerChrysler
DeLorme
DIRECTV
Dragon Systems
Edmark
Fidelity Investments
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First Union
First USA
Grolier
Hoechst Marion Roussel
IBM
Intel
Intuit
Invesco Funds Group
Isuzu
John Hancock
Lexmark
Market Facts
Microsoft
Microtek
National Consumer Bankruptcy Coalition
National Education Association
Network Associates
Network Solutions
Northwest Airlines
Office of National
Drug Control Policy
Okidata
Philips Electronics
PKWARE
Platinum Capital Group
PowerQuest
Procter & Gamble
Protection One
Qwest Communications
Ralston Purina
Reed Elsevier
Sheraton Hotels and Resorts
Sierra On-Line
Stock Smart
Symantec
SyQuest
The Hartford
The Learning Company
The Signature Group
The Zone Network
U.S. Army
U.S. News & World Report
ViewSonic
Zoom Telephonics
In a relatively small number of instances, we have provided advertising
credit to other companies in return for distribution of the Juno software, or
have exchanged advertising space with companies on a barter basis.
DIRECT PRODUCT SALES
In addition to selling ads to third parties, we use part of our available
advertising inventory to conduct a variety of direct response marketing
campaigns on our own behalf. Direct Alliance currently supplies the bulk of the
merchandise we sell to our subscribers. We also rely on Direct Alliance for the
warehousing, fulfillment, billing, and customer service aspects of most of our
direct product sales activities. Since initiating our direct product sales
program in late 1996, we have sold computer hardware and software, books,
consumer electronics, entertainment products, and other merchandise to our
subscribers. While the margins associated with these products are typically
lower than those associated with the sale of paid advertising, our direct
product sales activities have provided what we believe to be a valuable
demonstration to paid advertisers of Juno's effectiveness as a transaction
medium. In addition, our willingness to feature an advertiser's products in our
own direct product sales campaigns has on several occasions contributed to the
successful closing of an advertising sale. We also sometimes use our direct
product sales infrastructure to assist paid advertisers in fulfilling product
requests generated through Juno.
Since the beginning of 1998, our independent direct marketing activities
have been progressively displaced by an increasing stream of paid advertising,
strategic marketing alliances, and most recently, messages promoting Juno's own
billable subscription services. We expect that this trend will continue in the
future and, consequently, that the percentage of our revenues derived from
direct product sales will decrease over time. Even within the category of direct
marketing activities, the gradual replacement of direct product sales with
strategic marketing alliances should allow us to focus on the cost-effective
delivery of targeted direct sales messages, leaving other aspects of the direct
marketing process to specialized organizations that enjoy greater expertise,
economies of scale and other competitive advantages.
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COMPETITION
The market for Internet services is extremely competitive and includes a
number of substantial participants, including America Online, Microsoft and
AT&T. The markets for Internet-based advertising and direct product sales are
also very competitive. We believe that the primary competitive factors
determining success in these markets include a reputation for reliability and
service, effective customer support, pricing, easy-to-use software and
geographic coverage. Other important factors include the timing and introduction
of new products and services and industry and general economic trends. Our
ability to compete depends upon numerous factors, many of which are outside of
our control. We expect this competition to continue to increase because the
markets in which we operate face few substantial barriers to entry. Competition
may also intensify as a result of industry consolidation and the ability of some
of our competitors to bundle Internet services with other products and services.
Our current and potential competitors include many large national companies that
have substantially greater market presence and financial, technical,
distribution, marketing and other resources than we have. This may allow them to
devote greater resources than we can to the development, promotion and
distribution and sale of products and services.
In recruiting subscribers for our billable subscription services, we
currently compete, or expect to compete, with the following types of companies,
among others:
- Established online service providers such as America Online, CompuServe,
and The Microsoft Network;
- Independent national Internet service providers such as EarthLink,
MindSpring, and Prodigy;
- Numerous independent regional and local Internet service providers which
may offer lower prices than a national Internet service provider;
- Various national and local telephone companies such as AT&T, MCI WorldCom
and Pacific Bell; and
- Companies providing Internet access through "set-top boxes" connected to a
user's television, such as WebTV, or through a "cable modem" connected to
a user's personal computer, such as @Home.
In addition, Microsoft and Netscape, publishers of the Web browsers utilized
by most Internet users, including subscribers to Juno Web, each own or are owned
by online or Internet service providers that compete with Juno Web.
In providing e-mail-related services, we compete with Web-based e-mail
services such as Microsoft's Hotmail and USA.net's Net@ddress.
With respect to the generation of advertising revenue, we compete with many
of the market participants listed above as well as with various
advertising-supported Web sites, including "portal" sites such as Yahoo! and
Excite, "content" sites such as CNET and CNN.com, and interactive advertising
networks and agencies such as DoubleClick and 24/7 Media. We also compete with
traditional media such as print and television for a share of advertisers' total
advertising budgets. If advertisers perceive the Internet to be a limited or
ineffective advertising medium or perceive us to be less effective or less
desirable than other Internet advertising vehicles, advertisers may be reluctant
to advertise on our services. In selling products directly to our subscribers,
we compete with other Internet-based sellers as well as with stores and other
companies that do not distribute their products through the Internet. Many of
these competitors are larger than we are, enjoy greater economies of scale than
are available to us, have substantially greater resources than we have, and may
be able to offer more products or more attractive prices than we can.
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Our competition is likely to increase. We believe this will probably happen
as Internet service providers and online service providers consolidate and
become larger, more competitive companies, and as large diversified
telecommunications and media companies acquire Internet service providers. The
larger Internet service providers and online service providers, including
America Online, offer their subscribers services such as instant messaging,
community message boards, and personal Web-page hosting that we do not currently
provide. Some diversified telecommunications and media companies, such as AT&T,
have begun to bundle other services and products with Internet access services,
potentially placing us at a significant competitive disadvantage. These
competitors may be able to charge less than we do for Internet services, causing
us to reduce, or preventing us from raising, fees for our billable subscription
services. The ability of our competitors to enter into strategic alliances or
joint ventures could also put us at a serious competitive disadvantage.
Competition could require us to increase our spending for sales and marketing as
well as for subscriber acquisition in order to maintain our position in the
marketplace, and could also result in increased subscriber attrition.
For additional information, see "Risk Factors--Competition in the markets
for Internet services, Internet advertising and direct product sales is likely
to increase in the future and may harm our business."
GOVERNMENT REGULATION
Providers of Internet access and e-mail services are not subject to direct
regulation by the Federal Communications Commission, but changes in the
regulatory environment relating to the telecommunications and media industries
could have an effect on our business. For example, several telecommunications
carriers are seeking to have communications over the Internet regulated by the
FCC in the same manner as other more traditional telecommunications services.
Local telephone carriers have also petitioned the FCC to regulate Internet
access providers in a manner similar to long distance telephone carriers and to
impose access fees on these providers, and recent events suggest that they may
be successful in obtaining the treatment they seek. In addition, we operate our
services throughout the United States, and regulatory authorities at the state
level may seek to regulate aspects of our activities as telecommunications
services. As a result, we could become subject to FCC and state regulation as
Internet services and telecommunications services converge.
We remain subject to numerous additional laws and regulations that could
affect our business. Because of the Internet's popularity and increasing use,
new laws and regulations with respect to the Internet are becoming more
prevalent. These laws and regulations have covered, or may cover in the future,
issues such as:
- user privacy;
- pricing;
- intellectual property;
- federal, state and local taxation;
- distribution; and
- characteristics and quality of products and services.
Legislation in these areas could slow the growth in use of the Internet
generally and decrease the acceptance of the Internet as a communications and
commercial medium. Additionally, because we rely on the collection and use of
personal data from our members for targeting advertisements shown on our
services, we may be harmed by any laws or regulations that restrict our ability
to collect or use this data. The Federal Trade Commission has begun
investigations into the privacy practices of companies
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that collect information about individuals on the Internet. Although we are not
currently subject to direct regulation by the FTC, there can be no assurance
that we will not become subject to direct regulation in the future. It may take
years to determine how existing laws such as those governing intellectual
property, privacy, libel and taxation apply to the Internet. Any new legislation
or regulation regarding the Internet, or the application of existing laws and
regulations to the Internet, could harm us. Additionally, while we do not
currently operate outside of the United States, the international regulatory
environment relating to the Internet market could have an adverse effect on our
business, especially if we should expand internationally.
The growth of the Internet, coupled with publicity regarding Internet fraud,
may also lead to the enactment of more stringent consumer protection laws. For
example, numerous bills have been presented to Congress and various state
legislatures designed to address the prevalence of unsolicited commercial bulk
e-mail on the Internet. These laws may impose additional burdens on our
business. The enactment of any additional laws or regulations in this area may
impede the growth of the Internet, which could decrease our potential revenues
or otherwise cause our business to suffer. For additional information, see "Risk
Factors--Changes in government regulation could decrease our revenues and
increase our costs."
INTELLECTUAL PROPERTY
We have been granted three U.S. patents for technology related to the
offline display of advertisements and the authentication and dynamic scheduling
of advertisements and other messages to computer users. We have filed a number
of other patent applications relating to additional techniques for the operation
of online services and the provision of advertising messages. We cannot assure
you, however, that any of these applications will result in the issuance of
patents; that any patents that have been issued or that might be issued in the
future will provide us with any competitive advantages or will be exploited
profitably by us; or that any any of these patents will withstand any challenges
by third parties. Furthermore, we cannot assure you that we will be able to
obtain license rights to patents held by third parties that may be essential to
the successful implementation or operation of our services, or that patents held
or obtained by third parties will not otherwise harm our business or financial
results.
Except as described above, we rely solely upon copyright and trademark law,
trade secret protection, and/or confidentiality agreements with our employees
and with some third parties to protect proprietary technology, processes, and
other intellectual property to the extent that protection is sought or secured
at all. We cannot assure you that any steps we might take will be adequate to
protect against misappropriation of our intellectual property by third parties.
Similarly, we cannot assure you that third parties will not be able to
independently develop similar technology, processes, or other intellectual
property. Furthermore, we cannot assure you that third parties will not assert
claims against us for infringement of their intellectual property rights.
Rights to all intellectual property that was developed for our business at
our expense by personnel assigned to Juno by DESCO, L.P. were originally held by
DESCO, L.P. Through a series of assignments, DESCO, L.P. subsequently
transferred to us its right, title and interest in this intellectual property.
In connection with these assignments, we agreed to indemnify DESCO, L.P. against
any claims relating to the assignment of, or the use of, this intellectual
property. We do not have any right, title, or interest in any other intellectual
property created, developed, produced, or used by DESCO, L.P.
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EMPLOYEES
As of March 31, 1999, we employed 147 people, of whom 67 were in operations,
sales and marketing, and customer support; 53 were in engineering, product
development and network operations; and 27 were in finance, legal and
administration. Our employees are not covered by any collective-bargaining
arrangements, and we consider our relations with our employees to be good.
As of March 31, 1999, we also retained the services of 47 people based in
Hyderabad, India who are employed by an India-based affiliate of DESCO, L.P. on
our behalf. These individuals are engaged in selected aspects of our software
development, customer service, ad production, and other activities that we
believe can be provided more economically overseas, and are provided to us under
an agreement with DESCO, L.P. Some of our back-office support functions are
provided to us by employees of DESCO, L.P. Please see "Certain Transactions" for
more information regarding our offices in New York.
FACILITIES
Our principal executive office is located in New York, New York, where we
lease approximately 26,400 square feet. In addition, we lease additional office
space in New York City and also lease offices in Cambridge, Massachusetts and in
Washington, D.C. We believe that our existing facilities are adequate for our
current requirements and that additional space can be obtained on commercially
reasonable terms to meet our future requirements. Please see "Certain
Transactions" for more information regarding our offices in New York and
Cambridge.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors, executive officers and key employees of Juno, and their ages
and positions as of April 22, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Charles E. Ardai*...................... 29 President and Director
Robert H. Cherins*..................... 59 Executive Vice President, Sales and Marketing
Mark A. Moraes*........................ 33 Executive Vice President, Technology
Richard M. Eaton, Jr.*................. 38 Chief Financial Officer and Treasurer
Jordan S. Birnbaum..................... 28 Senior Vice President, Business Development
Richard D. Buchband.................... 35 Senior Vice President and General Counsel
V. S. Mani............................. 35 Senior Vice President, Database Systems
Peter D. Skopp......................... 28 Senior Vice President, Network Development
David E. Shaw.......................... 48 Chairman of the Board of Directors
Edward J. Ryeom........................ 29 Director
Louis K. Salkind....................... 41 Director
</TABLE>
- ------------------------
* Denotes Executive Officer.
CHARLES E. ARDAI has served as President of Juno since its inception in
June 1995. Mr. Ardai has served as a director of Juno since October 1997. From
January 1992 until June 1995, Mr. Ardai served DESCO, L.P. in a number of
positions--first as Director of Strategic Growth from January 1992 until January
1993, where he was responsible for the development and execution of DESCO,
L.P.'s recruitment strategies, then as Vice President from January 1993 until
January 1995. From January 1995 until June 1995, Mr. Ardai served as Senior Vice
President at DESCO, L.P., with responsibility for development of
Internet-related business ventures. Mr. Ardai also served as a Managing Director
of DESCO, L.P. from January 1998 until February 1999. Prior to joining DESCO,
L.P. in January 1992, Mr. Ardai worked at Davis Publications, where he was
responsible for the development and marketing of products derived from the
firm's media properties. During this period, he also maintained an independent
career as a freelance writer and editor. Mr. Ardai serves on the Advisory Board
of the Association for Interactive Media, and on the Markle Foundation's E-mail
For All Advisory Board. Mr. Ardai graduated SUMMA CUM LAUDE from Columbia
University.
ROBERT H. CHERINS has served as Juno's Executive Vice President, Sales and
Marketing since December 1996. From March 1993 until December 1996, Mr. Cherins
served as President of Jordan, McGrath, Case & Taylor/Direct and Executive Vice
President of its corporate parent, Jordan, McGrath, Case & Taylor. Previously,
Mr. Cherins spent 12 years with McCaffrey and McCall Advertising. He served as
Chairman and CEO of McCaffrey and McCall from 1987 to 1992 and as President from
1986 to 1987. Mr. Cherins served as President of McCaffrey and McCall's Direct
Marketing Division from 1981 to 1986. Mr. Cherins graduated from Hunter College
of the City University of New York.
MARK A. MORAES has served as Juno's Executive Vice President, Technology
since February 1998. From February 1997 until February 1998, he served as a
Senior Vice President of Juno, with responsibility for the development and
operation of Juno's system and networks. From June 1995 until February 1997, Mr.
Moraes served in several positions in Juno's systems development group,
including Vice President. From April 1992 until June 1995, Mr. Moraes served as
a global systems architect at DESCO, L.P., where he designed data distribution
networks. Earlier, he made contributions to the development and roll-out of
UUNET Canada, to the X Windows environment, and to Usenet's news software, which
is used by tens of thousands of sites around the world. Mr. Moraes is also the
moderator of Usenet's news.announce.newusers newsgroup, which is read by tens of
thousands of new Usenet
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users each year. Mr. Moraes received a Bachelor of Technology degree from the
Indian Institute of Technology and a Master of Applied Science degree from the
University of Toronto.
RICHARD M. EATON, JR. has served as Juno's Chief Financial Officer and
Treasurer since February 1999. From February 1998 until February 1999, Mr. Eaton
served as Juno's Senior Vice President, Finance and Administration. From
November 1996 until February 1998, he served as Juno's Vice President &
Corporate Controller. From May 1996 until November 1996, Mr. Eaton served as a
senior financial professional on a consulting basis for Think Systems
Corporation. From April 1995 to April 1996, Mr. Eaton served as Vice President &
Corporate Controller at Datalogix International, Inc. Mr. Eaton served as an
Area Controller of Finance and Administration for J. D. Edwards & Company from
August 1993 to December 1994. Mr. Eaton spent the first seven years of his
career with Coopers & Lybrand, last serving as an audit manager. Mr. Eaton
graduated SUMMA CUM LAUDE from the accelerated combined BBA/MBA degrees program
in public accountancy at Pace University, and is a member of both the
Connecticut Society of Certified Public Accountants and the American Institute
of Certified Public Accountants.
JORDAN S. BIRNBAUM has served as Juno's Senior Vice President, Business
Development since February 1998. He served as Juno's Vice President, Strategic
Marketing from February 1997 to February 1998 and as director of Juno's member
acquisition activities from October 1995 until February 1997. Prior to joining
Juno, Mr. Birnbaum held a number of positions with DESCO, L.P., most recently as
a London-based trader of equity securities from January 1994 until April 1995.
Mr. Birnbaum graduated from Cornell University.
RICHARD D. BUCHBAND has served as Juno's Senior Vice President and General
Counsel since February 1998, and is responsible for oversight of Juno's legal,
human resources and security policies. From January 1997 to February 1998, he
served as Vice President of Juno, and from September 1995 until January 1997 as
associate counsel of DESCO, L.P. Prior to September 1995, Mr. Buchband was a
corporate and transactional lawyer in New York. Mr. Buchband graduated MAGNA CUM
LAUDE with an A.B. from the Woodrow Wilson School of Public and International
Affairs at Princeton University and received his J.D. from Columbia Law School.
V. S. MANI has served as Juno's Senior Vice President, Database Systems
since February 1998. From February 1997 until February 1998, Mr. Mani served as
a Vice President, and from April 1996 until February 1997 as a software engineer
at Juno, with responsibility for the design of many of Juno's advertising and
electronic commerce systems. From February 1993 until March 1996, Mr. Mani held
a number of positions at the Matsushita Information Technology Laboratory in
Princeton, New Jersey, where he conducted research in information retrieval and
mobile computing, and, prior to that, with Digital Equipment Corporation. Mr.
Mani received his bachelor's degree with honors in Mechanical Engineering from
the Indian Institute of Technology and his M.S. in Computer Science from the
University of Wisconsin.
PETER D. SKOPP has served as Juno's Senior Vice President, Network
Development since February 1998. He served as a Vice President of Juno from
February 1997 to February 1998, with responsibility for designing Juno's server
software, and as a member of Juno's technical staff from December 1995 until
February 1997. From December 1992 until December 1995, Mr. Skopp was a manager
at the Programming Systems Laboratory of the Computer Science Department at
Columbia University. Mr. Skopp received his B.S. and M.S. degrees from Columbia
University.
DAVID E. SHAW served as Chairman of Juno Online Services, L.P. from its
inception in June 1995. He has served as a director of Juno since July 1996, and
was named Chairman of the Board of Juno in February 1999. Since November 1992,
Dr. Shaw has been the Chairman and President of D. E. Shaw & Co., Inc., the
parent of DESCO, L.P. Prior to founding a predecessor to DESCO, L.P. in 1988,
Dr. Shaw was a Vice President at Morgan Stanley & Co., where he managed the
firm's automated
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trading technology group. Earlier, he served on the faculty of the Department of
Computer Science at Columbia University, and as President and founder of
Stanford Systems Corporation. In 1994, Dr. Shaw was appointed by President
Clinton to the President's Committee of Advisors on Science and Technology, in
which capacity he served as Chairman of the Panel on Educational Technology. Dr.
Shaw is also a member of the executive committee of the Council on
Competitiveness and of the board of directors of the American Association for
the Advancement of Science. He also serves as the (non-executive) Chairman of
the board of directors of Schrodinger, Inc., a developer of computational
chemistry software. Dr. Shaw graduated with highest honors from the University
of California at San Diego, and received his Ph.D. from Stanford University
following several years of research at the Stanford Artificial Intelligence
Laboratory.
EDWARD J. RYEOM has served as a director of Juno since March 1999. Since
May 1998, Mr. Ryeom has been a Vice President of Prospect Street Ventures, a
venture capital firm focused on information technology investments. From August
1995 to May 1998, he was a Vice President in investment banking for Brenner
Securities. From May 1994 to June 1995, he worked at Cowen & Company, in the
information technology group. From May 1993 to May 1994, he was a consultant
with Andersen Consulting. Mr. Ryeom also serves as a director for several
private information technology companies. Mr. Ryeom graduated with a bachelor's
degree in Electrical Engineering from Columbia University, and an M.E. in
Systems Engineering from University of Virginia.
LOUIS K. SALKIND has served as a director of Juno since March 1999. Since
January 1991, Dr. Salkind has been a Managing Director of DESCO, L.P., where he
manages the firm's proprietary trading business. Since May 1993, he has also
been a Director of D. E. Shaw Securities International, a London-based affiliate
of DESCO, L.P., and since November 1997, he has been a Director of D. E. Shaw
Securities Hong Kong, Ltd. Dr. Salkind graduated CUM LAUDE with an A.B. from
Princeton University and received his M.S. and Ph.D degrees from New York
University.
COMPOSITION OF THE BOARD
The board of directors currently consists of four members. In addition, Juno
has agreed to nominate a person designated by News Corporation to the board of
directors following the closing of this offering. Furthermore, Juno intends to
nominate two additional directors in the foreseeable future.
The board of directors is divided into three classes, each of whose members
will serve for a staggered three-year term. Upon the expiration of the term of a
class of directors, directors in that class will be elected for three-year terms
at the annual meeting of stockholders in the year in which their terms expire.
BOARD COMMITTEES
The Audit Committee of the board of directors reviews, acts on and reports
to the board of directors with respect to various auditing and accounting
matters, including the recommendation of Juno's auditors, the scope of the
annual audits, fees to be paid to the auditors, the performance of Juno's
independent auditors and the accounting practices of Juno. The members of the
Audit Committee are Mr. Ryeom, and Drs. Salkind and Shaw.
The Compensation Committee of the board of directors recommends, reviews and
oversees the salaries, benefits and stock option plans for Juno's employees,
consultants, directors and other individuals compensated by Juno. The
Compensation Committee will also administer Juno's compensation plans. The
members of the Compensation Committee are Messrs. Ardai and Ryeom, and Dr. Shaw.
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DIRECTOR COMPENSATION
Other than reimbursing directors for customary and reasonable expenses of
attending board of directors or committee meetings, Juno does not currently
compensate its directors. On April 9, 1999, Drs. Salkind and Shaw, and Mr.
Ryeom, as non-employee board members, were each granted an option to purchase
22,222 shares of common stock with an exercise price of $9.00 per share, which
will become exercisable upon the completion of four months of board service
measured from that date. Additionally, under our 1999 Stock Incentive Plan each
individual who first joins the Juno board after the effective date of this
offering as a non-employee board member will automatically receive a grant of an
option on that date to purchase 22,222 shares of common stock at the time of his
or her commencement of board service. In addition, on the date of each annual
stockholders' meeting beginning in 2000, each non-employee member of the board
of directors who is to continue to serve as a non-employee board member will
automatically be granted an option to purchase 7,777 shares of common stock.
Please see "--1999 Stock Incentive Plan".
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Juno did not have a Compensation Committee during 1998. During 1998, Mr.
Ardai and Dr. Shaw made decisions relating to compensation of Juno's executive
officers, except that Mr. Ardai did not participate in discussions regarding his
own compensation. No executive officer of Juno serves on the board of directors
or compensation committee of any entity which has one or more executive officers
serving as a member of Juno's board of directors or Compensation Committee.
EMPLOYMENT, SEVERANCE AND OTHER ARRANGEMENTS
Juno has entered into an employment agreement with Charles E. Ardai, dated
September 2, 1998, which may be terminated by either party upon 30 days notice.
The agreement provides that Mr. Ardai will receive a base salary of $300,000 for
calendar year 1998 and will be eligible to receive a bonus at the sole
discretion of the Chairman of the Board of Directors. Subsequent to calendar
year 1998, Mr. Ardai's base salary and bonus amount may be increased, decreased
or eliminated in the sole discretion of the Chairman of the Board of Directors.
Juno has entered into an employment agreement with Robert H. Cherins, dated
June 10, 1998, which may be terminated by either party upon 30 days notice. The
agreement, which incorporated the terms of a letter agreement dated November 20,
1996, provides, for calendar year 1998, that Mr. Cherins will receive a base
salary of $150,000 and a bonus of not less than $300,000. Pursuant to the
agreement, Mr. Cherins received in 1998 a non-refundable advance in the amount
of $200,000, which was deducted against the bonus amount paid for 1998.
Subsequent to calendar year 1998, Mr. Cherins's base salary, bonus amount and
the amount of the non-refundable advance may be increased or decreased in the
sole discretion of the President of Juno, provided that, for each calendar year
he is employed by Juno, his base salary and the amount of the non-refundable
advance shall not be less than $328,500. In addition, in the event that Mr.
Cherins is discharged by Juno prior to January 1, 2000, unless he is terminated
for cause or becomes unable to work due to disability, Juno shall be required to
offer Mr. Cherins a one-year engagement, at a rate of $328,500 per annum, to
provide those consulting services as Juno may determine in its sole discretion,
provided, however, that if Mr. Cherins has been engaged as a consultant for Juno
for the entire nine-month period immediately following the commencement of his
consultancy, then Juno shall be obligated to pay three months additional
severance to Mr. Cherins at a rate of $328,500 per annum. In the event that Mr.
Cherins is discharged by Juno on or after January 1, 2000, unless he is
terminated for cause or becomes unable to work due to disability, Juno shall pay
Mr. Cherins three months of severance at a rate of $328,500 per annum.
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DESCO, L.P., acting for the benefit of Juno, has entered into an employment
agreement with Mark A. Moraes, dated April 6, 1998, under which Mr. Moraes works
on a full-time basis for Juno. This agreement may be terminated by Juno or Mr.
Moraes upon 30 days notice. The agreement provides that Mr. Moraes will receive
a base salary of $150,000 for calendar year 1998 and will be eligible to receive
a bonus at the sole discretion of the President of Juno. Subsequent to calendar
year 1998, Mr. Moraes' base salary and bonus amount may be increased, decreased
or eliminated in the sole discretion of the President of Juno.
Juno has entered into an employment agreement with Richard M. Eaton, Jr.,
dated September 25, 1998, which may be terminated by either party upon 30 days
notice. Pursuant to the agreement Mr. Eaton received a base salary of $125,000
in 1998 and was eligible to receive a bonus in the sole discretion of the
President of Juno. Mr. Eaton also received a non-refundable advance in the
amount of $30,000 in 1998, which was deducted against the bonus amount paid for
1998. Subsequent to calendar year 1998, Mr. Eaton's base salary, bonus amount
and the amount of the non-refundable advance may be increased or decreased in
the sole discretion of the President of Juno. Juno has agreed to pay Mr. Eaton
$13,333 in deferred compensation on December 31, 1999, provided that he has not
voluntarily terminated his employment prior to that date or been dismissed for
cause.
Juno has also granted specified rights to some of our officers in the event
that they are terminated without cause or in the event that they voluntarily
resign following a material reduction in their duties and responsibilities or
their cash compensation or a relocation of their place of employment.
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EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to Juno's chief executive officer and the other three executive officers of
Juno whose annual salary and bonus exceeded $100,000 in 1998 for services
rendered in all capacities during 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
(1) AWARDS
---------------------- SHARES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
- --------------------------------------------------------------------- ---------- ---------- -----------------
<S> <C> <C> <C>
Charles E. Ardai..................................................... $ 300,000 $ -- 238,711
President
Robert H. Cherins.................................................... $ 150,000 $ 300,000 17,600
Executive Vice President,
Sales and Marketing
Mark A. Moraes (2)................................................... $ 150,000 $ 200,000 139,200
Executive Vice President,
Technology
Richard M. Eaton, Jr................................................. $ 125,000 $ 90,000 64,569
Chief Financial Officer and
Treasurer
</TABLE>
- ------------------------
(1) The column for "Other Annual Compensation" has been omitted because there is
no compensation required to be reported in that column. The aggregate amount
of perquisites and other personal benefits provided to each executive
officer above is less than the lesser of $50,000 and 10% of the total annual
salary and bonus of that officer.
(2) Mr. Moraes is employed by DESCO, L.P. but works for Juno under the terms of
his agreement with DESCO, L.P. Juno has agreed to pay Mr. Moraes a one-time
bonus of $100,000 in connection with overseeing the delivery to Juno of
consulting services provided by India-based affiliates of DESCO, L.P. See
"Certain Transactions--Shared Services." The 1998 portion of this one-time
bonus is $75,000 and is included in the amounts presented above. The
remaining portion of this one-time bonus will be included in Mr. Moraes'
1999 bonus.
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<PAGE>
OPTION GRANTS IN LAST YEAR
The following table sets forth information regarding options granted to
Juno's executive officers during the year ended December 31, 1998. In the year
ended December 31, 1998, Juno Online Services, L.P. granted options to purchase
units, which converted into options to purchase 1,577,437 shares of common stock
following the statutory merger with Juno Online Services, Inc. Juno has not
granted any stock appreciation rights.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF ANNUAL RATES
SECURITIES OF STOCK PRICE APPRECIATION
UNDERLYING % OF TOTAL EXERCISE FOR OPTION TERM(2)
OPTIONS OPTIONS GRANTED TO PRICE EXPIRATION ---------------------------------
NAME GRANTED EMPLOYEES IN 1998 PER SHARE DATE 0% 5% 10%
- ------------------------------ ----------- --------------------- ----------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles E. Ardai.............. 189,244 12.0% $ 0.45 02/16/08 $ 0 $ 53,557 $ 135,724
49,467 3.1 1.35 10/04/08 56,866 134,660 253,979
Robert H. Cherins............. 3,422 0.2 0.45 02/16/08 0 968 2,454
14,178 0.9 1.35 10/04/08 16,304 38,595 72,793
Mark A. Moraes................ 59,984 3.8 0.45 02/16/08 0 16,976 43,021
79,216 5.0 1.35 10/04/08 91,097 215,643 406,720
Richard M. Eaton, Jr.......... 25,852 1.6 0.45 02/16/08 0 7,316 18,541
38,717 2.5 1.35 10/04/08 44,524 105,395 198,785
</TABLE>
- ------------------------
(1) Each option represents the right to purchase one share of common stock. The
options shown in this column, which were originally granted pursuant to Juno
Online Services, L.P.'s 1997 Class B Unit Option/Issuance Plan, vest at a
rate of 20% per annum over five years, but did not become exercisable by
option holders until the statutory merger of Juno Online Services, L.P. with
and into Juno Online Services, Inc. in March 1999. See "--1999 Stock
Incentive Plan."
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 0%, 5%
and 10% assumed annual rates of compounded stock price appreciation are
mandated by rules of the Securities and Exchange Commission and do not
represent Juno's estimate or projection of Juno's future common stock
prices. These amounts represent assumed rates of appreciation in the value
of Juno's common stock from the deemed fair market value for accounting
purposes on the date of grant. Actual gains, if any, on stock option
exercises are dependent on the future performance of the common stock and
overall stock market conditions. The amounts reflected in the table may not
necessarily be achieved.
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<PAGE>
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1998 AND YEAR-END
OPTION VALUES
The following table sets forth information concerning the number and value
of unexercised options held by each of Juno's executive officers at December 31,
1998. None of the executive officers exercised options during the year ended
December 31, 1998. Under the terms of the 1997 Class B Unit Option/Issuance
Plan, options remained unexercisable by the option holders until the statutory
merger of Juno Online Services, L.P. with and into Juno Online Services, Inc. in
March 1999. This table assumes the conversion of Juno Online Services, L.P. to a
corporate form of organization as of December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1998 AT DECEMBER 31, 1998(1)
-------------------------- --------------------------
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
Charles E. Ardai.......................................... 72,958 348,153 $ 204,282 $ 930,308
Robert H. Cherins......................................... 72,958 127,042 204,282 342,957
Mark A. Moraes............................................ 24,319 175,683 68,093 420,613
Richard M. Eaton, Jr...................................... 9,728 79,162 27,238 186,805
</TABLE>
- ------------------------
(1) There was no public trading market for the common stock of Juno as of
December 31, 1998. The deemed fair market value for accounting purposes on
December 31, 1998 was determined to be $3.25 per share.
1999 STOCK INCENTIVE PLAN
The 1999 Stock Incentive Plan is intended to serve as the successor equity
incentive program to Juno's 1997 Class B Limited Partnership Unit
Option/Issuance Plan. The 1999 Stock Incentive Plan became effective on March
26, 1999.
Juno has authorized 5,768,611 shares of common stock for issuance under the
1999 Stock Incentive Plan. This share reserve consists of the shares which were
available for issuance under the 1997 Limited Partnership Plan on the effective
date of the 1999 Stock Incentive Plan plus an additional increase of 2,645,855
shares. The share reserve will automatically be increased on the first trading
day of January each calendar year, beginning in January 2000, by a number of
shares equal to 1% of the total number of shares of common stock outstanding on
the last trading day of the immediately preceding calendar year, but no such
annual increase will exceed 444,444 shares. However, in no event may any one
participant in the 1999 Stock Incentive Plan receive option grants or direct
stock issuances for more than 1,111,111 shares in the aggregate per calendar
year.
Outstanding options under the 1997 Limited Partnership Plan will be
incorporated into the 1999 Stock Incentive Plan upon the date of this offering,
and no further option grants will be made under the 1997 Limited Partnership
Plan. The incorporated options will continue to be governed by their existing
terms, unless Juno's Compensation Committee extends one or more features of the
1999 Stock Incentive Plan to those options. However, except as otherwise noted
below, the outstanding options under the 1997 Limited Partnership Plan contain
substantially the same terms and conditions summarized below for the
discretionary option grant program under the 1999 Stock Incentive Plan.
The 1999 Stock Incentive Plan has four separate programs. The first program
is the discretionary option grant program under which eligible individuals in
Juno's employ or service, including officers, non-employee board members and
consultants, may be granted options to purchase shares of Juno's common stock.
The second program is the stock issuance program under which eligible
individuals may be issued shares of common stock directly, through the purchase
of such shares or as a bonus tied to the performance of services. The third
program is the salary investment option grant program under
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<PAGE>
which executive officers and other highly compensated employees may elect to
apply a portion of their base salary to the acquisition of special below-market
stock option grants. The fourth program is the automatic option grant program
under which option grants will automatically be made at periodic intervals to
eligible non-employee board members.
The discretionary option grant and stock issuance programs will be
administered by Juno's Compensation Committee. This committee will determine
which eligible individuals are to receive option grants or stock issuances, the
time or times when option grants or stock issuances are to be made, the number
of shares subject to each grant or issuance, the exercise or purchase price for
each grant or issuance, the status of any granted option as either an incentive
stock option or a non-statutory stock option under the federal tax laws, the
vesting schedule to be in effect for the option grant or stock issuance and the
maximum term for which any granted option is to remain outstanding. The
committee will also select the executive officers and other highly compensated
employees who may participate in the salary investment option grant program in
the event that program is activated for one or more calendar years. Neither the
Compensation Committee nor the board will exercise any administrative discretion
with respect to option grants made under the salary investment option grant
program or under the automatic option grant program for the non-employee board
members.
The exercise price for the options may be paid in cash or in shares of
Juno's common stock valued at fair market value on the exercise date. The option
may also be exercised through a same-day sale program without any cash outlay by
the optionee. In addition, the Compensation Committee may allow a participant to
pay the option exercise price or direct issue price, and any associated
withholding taxes incurred in connection with the acquisition of shares, with a
full-recourse, interest-bearing promissory note.
In the event that Juno is acquired, whether by merger or asset sale or sale
by the stockholders of more than 50% of Juno's voting stock in a transaction
recommended by the board of directors, each outstanding option under the
discretionary option grant program which is not to be assumed by the successor
corporation or otherwise continued will automatically accelerate in full, and
all unvested shares under the discretionary option grant and stock issuance
programs will immediately vest, except to the extent Juno's repurchase rights
with respect to those shares are to be assigned to the successor corporation or
otherwise continued in effect. The Compensation Committee may grant options
under the discretionary option grant program which will accelerate in the event
of an acquisition even if the options are assumed or which will accelerate if
the optionee's service is subsequently terminated. The Compensation Committee
may grant options and issue shares which accelerate in connection with a hostile
change in control effected through a successful tender offer for more than 50%
of Juno's outstanding voting stock or by proxy contest for the election of board
members, or which accelerate upon a subsequent termination of an individual's
service.
Options currently outstanding under the 1997 Limited Partnership Plan may be
assumed by the successor corporation in an acquisition; such options are not by
their terms subject to acceleration at the time of an acquisition or a change in
control or upon the termination of the optionee's service following any such
transaction.
Stock appreciation rights may be issued under the discretionary option grant
program which will provide the holders with the option to surrender their
outstanding options for an appreciation distribution from Juno equal to the fair
market value of the vested shares subject to the surrendered option less the
aggregate exercise price payable for such shares. Such appreciation distribution
may be made in cash or in shares of Juno's common stock. There are currently no
outstanding stock appreciation rights under the 1997 Limited Partnership Plan.
The Compensation Committee has the authority to cancel outstanding options
under the discretionary option grant program, including options incorporated
from the 1997 Limited Partnership Plan,
70
<PAGE>
in return for the grant of new options for the same or different number of
option shares with an exercise price per share based upon the fair market value
of the common stock on the new grant date.
In the event the Compensation Committee elects to activate the salary
investment option grant program for one or more calendar years, each of Juno's
executive officers and other highly compensated employees selected for
participation may elect to reduce his or her base salary for that calendar year
by a specified dollar amount not less than $5,000 nor more than $50,000. In
return, the individual will automatically be granted, on the first trading day
in the calendar year for which the salary reduction is to be in effect, a
non-statutory option to purchase that number of shares of common stock
determined by dividing the salary reduction amount by two-thirds of the fair
market value per share of Juno's common stock on the grant date. The option
exercise price will be equal to one-third of the fair market value of the option
shares on the grant date. As a result, the fair market value of the option
shares on the grant date less the exercise price payable for those shares will
be equal to the salary reduction amount. The option will become exercisable in a
series of 12 equal monthly installments over the calendar year for which the
salary reduction is to be in effect and will be subject to full and immediate
vesting in the event of an acquisition or change in control of Juno.
Under the automatic option grant program, each individual who first joins
the Juno board after the effective date of this offering as a non-employee board
member will automatically be granted an option for 22,222 shares of Juno common
stock at the time of his or her commencement of board service. In addition, on
the date of each annual stockholders meeting, beginning with the meeting in the
year 2000, each individual who is to continue to serve as a non-employee board
member will receive an option grant to purchase 7,777 shares of Juno common
stock. Each automatic grant will have an exercise price equal to the fair market
value per share of Juno common stock on the grant date and will have a maximum
term of 10 years, subject to earlier termination following the optionee's
cessation of board service. Each 22,222-share option will become exercisable
upon the optionee's completion of 4 months of board service measured from the
option grant date and each 7,777-share option grant will become exercisable upon
the optionee's completion of 6 months of service measured from the grant date.
However, each outstanding option will immediately vest upon an acquisition or
change in control or the death or disability of the optionee while serving as a
board member.
Limited stock appreciation rights will automatically be included as part of
each grant made under the automatic option grant and salary investment option
grant programs and may be granted to one or more officers as part of their
option grants under the discretionary option grant program. Options with this
limited stock appreciation right may be surrendered to Juno upon the successful
completion of a hostile tender offer for more than 50% of Juno's outstanding
voting stock. In return for the surrendered option, the optionee will be
entitled to a cash distribution from Juno in an amount per surrendered option
share equal to the highest price per share of common stock paid in connection
with the tender offer less the exercise price payable for such share.
The board may amend or modify the 1999 Stock Incentive Plan at any time,
subject to any required stockholder approval. The 1999 Stock Incentive Plan will
terminate no later than March 25, 2009.
1999 EMPLOYEE STOCK PURCHASE PLAN
The board has approved the 1999 Employee Stock Purchase Plan, which is
expected to be approved by the stockholders prior to the date of this offering.
The plan will become effective immediately upon the execution of the
underwriting agreement for this offering. The plan is designed to allow eligible
employees of Juno and any participating subsidiaries to purchase shares of
common stock, at semi-annual intervals, through periodic payroll deductions. A
total of 555,556 shares of Juno's common stock will be issued under the plan.
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<PAGE>
The plan will have a series of successive offering periods, each with a
maximum duration of 24 months. However, the initial offering period will begin
on the day the underwriting agreement is executed in connection with this
offering and will end on the last business day in July 2001. The next offering
period will begin on the first business day in August 2001, and subsequent
offering periods will be set by Juno's Compensation Committee.
Individuals who are eligible employees on the start date of any offering
period may enter the plan on that start date or on any subsequent semi-annual
entry date, generally February 1 or August 1 each year. Individuals who become
eligible employees after the start date of the offering period may join the plan
on any subsequent semi-annual entry date within that period.
A participant may contribute up to 15% of his or her cash earnings through
payroll deductions and the accumulated payroll deductions will be applied to the
purchase of shares on the participant's behalf on each semi-annual purchase
date, the last business day in January and July each year. The purchase price
per share will be 85% of the lower of the fair market value of Juno's common
stock on the participant's entry date into the offering period or the fair
market value on the semi-annual purchase date. The first purchase date will
occur on the last business day in January 2000. In no event, however, may any
participant purchase more than 1,667 shares, nor may all participants in the
aggregate purchase more than 138,889 shares on any one semi-annual purchase
date. Should the fair market value of Juno's common stock on any semi-annual
purchase date be less than the fair market value on the first day of the
offering period, then the current offering period will automatically end and a
new offering period will begin, based on the lower fair market value.
The board may at any time amend or modify the plan. The plan will terminate
no later than the last business day in July 2009.
72
<PAGE>
CERTAIN TRANSACTIONS
FINANCINGS PRIOR TO THE STATUTORY MERGER
From the formation of Juno Online Services, L.P. on June 30, 1995, until the
statutory merger of Juno Online Services, L.P. with Juno Online Services, Inc.
on March 1, 1999, we were financed through contributions of capital, primarily
from persons or entities affiliated with D. E. Shaw & Co., Inc. In return for
their investments, these investors received Class A limited partnership units.
On March 1, 1999, we converted from a limited partnership into a C
corporation. As part of this conversion, Class A limited partnership units were
converted into shares of Series A redeemable convertible preferred stock at a
one-to-one ratio, and options to acquire Class B limited partnership units under
our 1997 Class B Unit Option/Issuance Plan were converted into options to
acquire common stock of Juno Online Services, Inc. at a one-to-one ratio.
1999 PRIVATE EQUITY INVESTMENT
Following the statutory merger, we raised gross proceeds of $65.0 million by
completing a private placement of 10,138,716 shares of a newly authorized class
of Series B redeemable convertible preferred stock to a group of investors.
Investors in the private round of financing included Intel Corporation, News
Corporation, Prospect Street Ventures and Sycamore Ventures. We undertook this
round of financing to raise capital necessary to fund our ongoing operations,
the planned expansion of our marketing activities and other general corporate
purposes.
Upon completion of this offering, the outstanding shares of Series A
redeemable convertible preferred stock and Series B redeemable convertible
preferred stock will automatically convert to an aggregate of 27,822,751 shares
of our common stock.
SHARED SERVICES
Historically, DESCO, L.P. has provided Juno various administrative services.
These services have included numerous overhead and infrastructure items, such as
providing office space and occupancy-related services, providing insurance and
professional services, providing and maintaining some of the hardware and
software used by Juno, and administering employee benefit plans for the benefit
of Juno employees. Prior to January 1, 1998, expenses related to these and other
services were charged to Juno on the basis of allocation metrics as determined
by DESCO, L.P, based upon square footage, headcount and other resources
utilized. Effective January 1, 1998, Juno and DESCO, L.P. entered into a
services agreement pursuant to which DESCO, L.P. has agreed to provide
administrative and other services for Juno in a specified set of service
categories, in return for a set monthly fee: $152,500 per month for the period
of January 1, 1998 to April 16, 1998 and $61,600 per month for the period
thereafter. The services agreement covers the delivery of:
- telecommunications services;
- personnel-related services, including for 401(k) and other benefit plans
and workers compensation insurance;
- occupancy services through April 18, 1998 for Juno personnel working in
facilities maintained by DESCO, L.P.;
- miscellaneous administrative services;
- various professional services;
- various purchasing services; and
- various information technology services.
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<PAGE>
The term of the services agreement extends on a month-to-month basis until
terminated by either party. The services agreement may be terminated by either
party at any time upon written notice to the other party following a material
default by the other party which remained uncured for 30 days or at any time
upon 90 days written notice to the other party. Juno believes that the amounts
charged to it under the services agreement are generally comparable to the
amounts that would have been charged by an independent third party. We do not
have any current plans to terminate the services agreement.
Effective November 1, 1997, Juno and DESCO, L.P. entered into a services
agreement pursuant to which DESCO, L.P., through certain affiliates based in
India, has agreed to provide various consulting services to Juno. Under this
agreement, DESCO, L.P. provides technical and non-technical consulting services
as well as other consulting services agreed to by the parties. Under this
agreement, DESCO, L.P. is required, in consultation with Juno, to determine the
staffing it requires to perform the consulting services being provided to us.
Each staff member who performs consulting services under this agreement is
categorized as either a technical consultant or a non-technical consultant. In
addition to reimbursing DESCO, L.P. for specified expenses, such as travel costs
and satellite link charges, we are required to pay DESCO, L.P. $3,650 per month
for each technical consultant and $2,300 per month for each non-technical
consultant. The term of this agreement extends on a month-to-month basis until
terminated by either party. This agreement may be terminated by either party at
any time upon written notice to the other party following a material default by
the other party which remained uncured for 30 days or at any time upon 90 days
written notice to the other party. Juno is currently contemplating terminating
this agreement and changing the manner in which it obtains the services
currently provided under that agreement. Juno believes that the amounts charged
to it under this agreement are generally comparable to the amounts that would
have been charged by an independent third party.
We employ a small number of personnel in Cambridge, Massachusetts, primarily
for the purpose of maintaining Juno server equipment that is located in a space
formerly maintained by D. E. Shaw Financial Technology, L.P., an affiliate of
DESCO, L.P. Prior to January 1, 1998, expenses connected with the use and
maintenance of that server equipment and the use of adjacent office space were
charged to Juno on the basis of allocation metrics as determined by DESCO, L.P.,
based upon square footage, headcount and other resources utilized. Effective
January 1, 1998, Juno and Shaw Financial Technology entered into a services
agreement under which Shaw Financial Technology has agreed to provide
information technology, telecommunications, occupancy, and related
administrative services to us, in return for a monthly fee of $11,500. Shaw
Financial Technology has recently sold some of its assets to a third party and
we have made arrangements with this third party to continue to host our server
equipment.
TRANSACTIONS WITH NEWS CORPORATION
Juno has entered into an agreement with News America Incorporated, a
significant stockholder of Juno and an affiliate of News Corporation, to
purchase various forms of advertising on the media properties of News America
Incorporated and its affiliates. Under the March 1, 1999 agreement, Juno spent
$10.0 million for advertising that may be used at any time prior to March 2001,
to be provided by News America and its affiliates at then-current rates which
shall be no greater than those customarily applied to purchasers of similar
amounts of comparable advertising.
LEASE
Prior to November 1997, most of Juno's staff occupied offices within space
leased by DESCO, L.P. in midtown Manhattan, with leasehold and other expenses
being allocated to Juno by DESCO, L.P. based on Juno's use of this space. In
November 1997, Juno relocated its New York-based staff to a single floor at 1540
Broadway leased from Bertelsmann Property, Inc. under an Agreement of Lease
dated September 22, 1997 between DESCO, L.P., as lessee, and Bertelsmann. The
lease permits DESCO, L.P. to sublet all or a portion of the premises to Juno.
Juno has agreed to assume the
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<PAGE>
performance of DESCO, L.P.'s payment obligations under the lease. The term of
the lease continues until March 2003 and DESCO, L.P. has an option to renew for
an additional five-year term. The lease provides DESCO, L.P. the right to
terminate the lease effective January 1, 2000, if DESCO, L.P. delivers a notice
of termination to Bertelsmann on or prior to July 1, 1999. If DESCO, L.P.
terminates the lease under this provision, DESCO, L.P. must make specified
payments to Bertelsmann, including reimbursing it for rent that was abated at
the start of the lease. If DESCO, L.P. elects to terminate the lease pursuant to
the termination right described above, we would be required to relocate our
offices and enter into new lease arrangements. We cannot assure you that the
terms and conditions of any new lease would be as favorable to Juno as this
lease.
INDEBTEDNESS TO RELATED PARTIES
Juno has incurred indebtedness that, by its terms, is required to be repaid
upon the completion of this offering, or as otherwise described below.
On March 31, 1998, Juno issued to D. E. Shaw Securities Group, L.P. a senior
note in the original principal amount of $10.0 million. The senior note bears
interest at the Federal Funds rate of interest plus 0.375%, and interest that is
not paid quarterly shall be satisfied by increasing the outstanding principal
amount of the senior note. Under the terms of the senior note, as amended, the
outstanding principal amount and any accrued but unpaid interest is to be paid
upon the earlier of December 31, 2000 or the date of completion of an initial
public offering by Juno which is registered under the Securities Act of 1933, as
amended. Juno is also required to make mandatory prepayments to Shaw Securities
in the event that Shaw Securities pays specified fees that are independently
owed to DESCO, L.P. On March 31, 1998, Shaw Securities and DESCO, L.P. entered
into a support agreement pursuant to which DESCO, L.P. agreed to pay Shaw
Securities in the event that Juno fails to make any of the mandatory
prepayments.
As of March 31, 1999, the outstanding principal and interest under the
Senior Note was $8.8 million. Juno intends to repay all amounts owed under the
senior note with a portion of the proceeds of this offering.
OPTIONS GRANTED TO EXECUTIVE OFFICERS
For information regarding the grant of stock options to executive officers
and directors, see "Management--Compensation of Directors," "--Executive
Compensation," "--1999 Stock Incentive Plan" and "Principal Stockholders."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the common stock as of April 22, 1999, and as adjusted to reflect
the sale of the shares of common stock offered hereby, by each person or group
of affiliated persons who is known by Juno to beneficially own 5% or more of the
common stock, each director and executive officer of Juno, and all directors and
executive officers of Juno as a group. Unless otherwise indicated, the address
of each beneficial owner listed below is c/o Juno Online Services, Inc., 1540
Broadway, New York, New York 10036.
The following table gives effect to the shares of common stock issuable
within 60 days of April 22, 1999 upon the exercise of all options and other
rights beneficially owned by the indicated stockholders on that date. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and includes voting and investment power with respect to
shares. Unless otherwise indicated, the persons named in the table have sole
voting and sole investment control with respect to all shares beneficially
owned.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF SHARES BENEFICIALLY OWNED
BENEFICIALLY ----------------------------------
BENEFICIAL OWNER OWNED BEFORE OFFERING AFTER OFFERING
- ---------------------------------------------------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
David E. Shaw (1)............................................... 17,332,759 61.7% 50.1%
Shaw Family Trust IV (2)........................................ 7,824,727 27.9 22.6
D. E. Shaw & Co., L.P. (3)...................................... 6,336,734 22.6 18.3
News America Incorporated (4)................................... 3,135,198 11.1 9.1
Edward J. Ryeom (5)............................................. 779,900 2.8 2.3
Louis K. Salkind (6)............................................ 166,482 * *
Charles E. Ardai (7)............................................ 147,286 * *
Robert H. Cherins (8)........................................... 73,642 * *
Mark A. Moraes (9).............................................. 48,476 * *
Richard M. Eaton, Jr. (10)...................................... 14,898 * *
All directors and executive officers as a group
(7 persons) (11).............................................. 18,563,443 65.6 53.3
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes (i) 2,830,337 shares held directly by David E. Shaw, (ii) 107,627
shares held by D. E. Shaw & Co., Inc., (iii) 5,555,556 shares held by D. E.
Shaw & Co., L.P., (iv) 781,178 shares held by
D. E. Shaw Investment Group, L.P., and (v) 233,334 shares held by Shaw Juno
Trust and (vi) 7,824,727 shares held by Shaw Family Trust IV. D. E. Shaw &
Co., Inc., which is wholly owned by Dr. Shaw, is the general partner of D.
E. Shaw & Co., L.P. D. E. Shaw & Co., L.P. is the general partner of D. E.
Shaw Investment Group, L.P. Although Dr. Shaw is neither the trustee nor a
beneficiary of the Shaw Juno Trust, some of the beneficiaries of the Shaw
Juno Trust reside in Dr. Shaw's household. Dr. Shaw is the trustee of the
Shaw Family Trust IV. Dr. Shaw disclaims beneficial ownership of the shares
held by D. E. Shaw & Co., L.P., D. E. Shaw Investment Group, L.P., Shaw Juno
Trust, and Shaw Family Trust IV, except to the extent of his pecuniary
interest therein. The address of the foregoing entities is 120 West 45th
Street, New York, NY 10036.
(2) Dr. Shaw is the trustee of the Shaw Family Trust IV. The address of Shaw
Family Trust IV is 120 West 45th Street, New York, New York 10036.
(3) Includes (i) 5,555,556 shares held directly by D. E. Shaw & Co., L.P. and
(ii) 781,178 shares held by D. E. Shaw Investment Group, L.P. D. E. Shaw &
Co., L.P. is the general partner of D. E. Shaw Investment Group, L.P. D. E.
Shaw & Co., L.P. disclaims beneficial ownership of the shares held by D. E.
Shaw Investment Group, L.P., except to the extent of its pecuniary interest
therein. Dr. Shaw, as President of D. E. Shaw & Co., Inc., the General
Partner of D. E. Shaw &
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<PAGE>
Co., L.P., has voting and dispositive powers with respect to these shares.
The address of D. E. Shaw & Co., L.P. is 120 West 45th Street, New York, New
York 10036.
(4) News America Incorporated is an affiliate of News Corporation, a publicly
traded company. The address of News America Incorporated is 1211 Avenue of
the Americas, New York, NY 10036.
(5) Includes 701,910 shares held by Prospect Street NYC Discovery Fund, L.P. and
77,990 shares held by Prospect Street NYC Co-Investment Fund, L.P. Mr. Ryeom
is an officer of the general partner of each of these funds and he disclaims
beneficial ownership of the shares held by these funds except to the extent
of his pecuniary interest in each of them. The address of the foregoing
entities is 10 East 40th Street, 44th Floor, New York, N.Y. 10016.
(6) All of these shares are held by the Louis K. Salkind 1999 Grantor Retained
Annuity Trust. Although Dr. Salkind is neither the trustee nor a beneficiary
of the Louis K. Salkind 1999 Grantor Retained Annuity Trust, some of the
beneficiaries of this trust reside in Dr. Salkind's household. The address
of the Louis K. Salkind 1999 Grantor Retained Annuity Trust is 120 West 45th
Street, New York, N.Y. 10036.
(7) All of these shares are issuable upon the exercise of options. This number
does not include 694,659 shares issuable upon the exercise of stock options
that do not vest within 60 days of April 22, 1999.
(8) All of these shares are issuable upon the exercise of options. This number
does not include 126,358 shares issuable upon the exercise of stock options
that do not vest within 60 days of April 22, 1999.
(9) Includes 13,476 shares that are issuable upon the exercise of options. This
number does not include 218,193 shares issuable upon the exercise of stock
options that do not vest within 60 days of April 22, 1999.
(10) Includes 9,704 shares that are issuable upon the exercise of options. This
number does not include 162,881 shares issuable upon the exercise of stock
options that do not vest within 60 days of April 22, 1999.
(11) Includes 244,108 shares that are issuable upon the exercise of options.
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DESCRIPTION OF CAPITAL STOCK
The following description of Juno's common stock and preferred stock and
relevant provisions of Juno's amended and restated certificate of incorporation
as will be in effect upon the closing of this offering, and the amended and
restated bylaws as will be in effect upon the closing of this offering are
summaries thereof and are qualified by reference to our amended and restated
certificate of incorporation and the amended and restated bylaws, copies of
which have been filed with the Securities and Exchange Commission as exhibits to
Juno's Registration Statement, of which this prospectus forms a part. The
descriptions of the common stock and preferred stock reflect changes to Juno's
capital structure that will occur upon the closing of the offering in accordance
with the terms of our amended and restated certificate of incorporation.
The authorized capital stock of Juno consists of 133,333,334 shares of
common stock, par value $.01 per share, and 5,000,000 shares of preferred stock,
par value $.01 per share.
COMMON STOCK
As of April 22, 1999, there were 257,716 shares of common stock outstanding
and held of record by stockholders, without giving effect to the conversion of
our preferred stock. Based upon the number of shares outstanding as of that date
and giving effect to the issuance of the 6,500,000 shares of common stock in
this offering and the conversion of our outstanding shares of preferred stock
upon the completion of this offering, there will be 34,580,467 shares of common
stock outstanding upon the closing of this offering.
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive ratably
those dividends, if any, as may be declared by the board of directors out of
funds legally available therefor, subject to any preferential dividend rights of
any outstanding preferred stock. Upon the liquidation, dissolution or winding up
of Juno, the holders of common stock are entitled to receive ratably the net
assets of Juno available after the payment of all debts and other liabilities
and subject to the prior rights of any outstanding preferred stock. Holders of
the common stock have no preemptive, subscription, redemption or conversion
rights. The outstanding shares of common stock are, and the shares offered by
Juno in the offering will be, when issued in consideration for payment thereof,
fully paid and nonassessable. The rights, preferences and privileges of holders
of common stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of preferred stock which Juno may designate
and issue in the future. Upon the closing of the offering, there will be no
shares of preferred stock outstanding.
PREFERRED STOCK
Upon the closing of this offering, there will be no shares of redeemable
convertible preferred stock outstanding.
Upon the closing of this offering, the board of directors will be
authorized, without further stockholder approval, to issue from time to time up
to an aggregate of 5,000,000 shares of preferred stock in one or more series and
to fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each series thereof, including the
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption, including sinking fund provisions, redemption price or prices,
liquidation preferences and the number of shares constituting any series or
designations of series. Juno has no present plans to issue any shares of
preferred stock. See "--Anti-Takeover Effects of Various Provisions of Delaware
Law and Juno's Certificate of Incorporation and Bylaws."
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OPTIONS
Options to purchase a total of 5,768,611 shares of common stock may be
granted under the 1999 Stock Incentive Plan. As of April 22, 1999, there were
outstanding options to purchase a total of 3,187,305 shares of common stock, of
which options to purchase approximately 437,557 shares will be exercisable upon
the closing of this offering. Since Juno intends to file a registration
statement on Form S-8 as soon as practicable following the closing of this
offering, any shares issued upon exercise of these options will be immediately
available for sale in the public market, subject to the terms of lock-up
agreements entered into by and between the holders of substantially all
outstanding options and the underwriters. See "Management--1999 Stock Incentive
Plan" and "Shares Eligible for Future Sale."
REGISTRATION RIGHTS
Pursuant to the terms of the Amended and Restated Registration Rights
Agreement, after the closing of this offering the holders of 27,822,751 shares
of common stock will be entitled to demand registration rights with respect to
the registration of their shares under the Securities Act. The holders of 10% or
more of these shares are entitled to demand that Juno register their shares
under the Securities Act, subject to various limitations. Juno is not required
to effect more than six of these registrations pursuant to these demand
registration rights. In addition, pursuant to the Amended and Restated
Registration Rights Agreement, these holders will be entitled to piggyback
registration rights with respect to the registration of their shares under the
Securities Act, subject to various limitations. Further, at any time after Juno
becomes eligible to file a registration statement on Form S-3, the holders of
common stock who are parties to the Amended and Restated Registration Rights
Agreement may require Juno to file registration statements under the Securities
Act on Form S-3 with respect to their shares of common stock. These registration
rights are subject to certain conditions and limitations, among them the right
of the underwriters of an offering to limit the number of shares of common stock
held by security holders with registration rights to be included in a
registration. Juno is generally required to bear all of the expenses of all of
these registrations, except underwriting discounts and selling commissions.
Registration of any of the shares of common stock held by security holders with
registration rights would result in shares becoming freely tradable without
restriction under the Securities Act immediately upon effectiveness of such
registration.
ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW AND JUNO'S
CERTIFICATE OF INCORPORATION AND BYLAWS
Juno is subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to some exceptions, Section 203 prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
interested stockholder attained that status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
various exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to Juno and, accordingly, may discourage attempts to acquire Juno.
In addition, various provisions of our amended and restated certificate of
incorporation and our amended and restated bylaws, which provisions will be in
effect upon the closing of the offering and are summarized in the following
paragraphs, may be deemed to have an anti-takeover effect and may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might consider
in its best
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interest, including those attempts that might result in a premium over the
market price for the shares held by stockholders.
BOARD OF DIRECTORS VACANCIES. Juno's amended and restated certificate of
incorporation authorizes the board of directors to fill vacant directorships or
increase the size of the board of directors. This may deter a stockholder from
removing incumbent directors and simultaneously gaining control of the board of
directors by filling the vacancies created by this removal with its own
nominees.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. Juno's amended and
restated certificate of incorporation provides that stockholders may not take
action by written consent, but only at duly called annual or special meetings of
stockholders. The amended and restated certificate of incorporation further
provides that special meetings of stockholders of Juno may be called only by the
chairman of the board of directors or a majority of the board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. Juno's amended and restated bylaws provide that stockholders
seeking to bring business before an annual meeting of stockholders, or to
nominate candidates for election as directors at an annual meeting of
stockholders, must provide timely notice thereof in writing. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of Juno, not less than 120 days nor more than 150
days prior to the first anniversary of the date of Juno's notice of annual
meeting provided with respect to the previous year's annual meeting of
stockholders; provided, that if no annual meeting of stockholders was held in
the previous year or the date of the annual meeting of stockholders has been
changed to be more than 30 calendar days earlier than or 60 calendar days after
this anniversary, notice by the stockholder, to be timely, must be so received
not more than 90 days nor later than the later of:
- 60 days prior to the annual meeting of stockholders or
- the close of business on the 10th day following the date on which notice
of the date of the meeting is given to stockholders or made public,
whichever occurs first.
Our amended and restated bylaws also specify certain requirements as to the
form and content of a stockholder's notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of stockholders or
from making nominations for directors at an annual meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to various limitations imposed by the Nasdaq
National Market. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued and unreserved common stock and preferred stock could
make more difficult or discourage an attempt to obtain control of Juno by means
of a proxy contest, tender offer, merger or otherwise.
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.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our amended and restated certificate of incorporation provides that, except
to the extent prohibited by the Delaware General Corporation Law, Juno's
directors shall not be personally liable to Juno or its stockholders for
monetary damages for any breach of fiduciary duty as directors of Juno. Under
the Delaware General Corporation Law, the directors have a fiduciary duty to
Juno which is not eliminated by this provision of the amended and restated
certificate of incorporation and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will
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remain available. In addition, each director will continue to be subject to
liability under the Delaware General Corporation Law for:
- breach of the director's duty of loyalty to Juno;
- acts or omissions which are found by a court of competent jurisdiction to
be not in good faith or which involve intentional misconduct, or knowing
violations of law;
- actions leading to improper personal benefit to the director; and
- payment of dividends or approval of stock repurchases or redemptions that
are prohibited by the Delaware General Corporation Law.
This provision also does not affect the directors' responsibilities under any
other laws, such as the Federal securities laws or state or Federal
environmental laws.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of their capacity or status as directors and officers,
provided that this provision shall not eliminate or limit the liability of a
director:
- for any breach of the director's duty of loyalty to the corporation or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- arising under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's bylaws, any agreement, a vote of stockholders or otherwise. Our
amended and restated certificate of incorporation eliminates the personal
liability of directors to the fullest extent permitted by Section 102(b)(7) of
the Delaware General Corporation Law and provides that Juno shall fully
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
that person is or was a director or officer of Juno, or is or was serving at the
request of Juno as a director or officer of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise. This
indemnification shall be against expenses including attorney's fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by the
indemnitee in connection with such action, suit or proceeding.
Juno has also entered into agreements to indemnify its directors and
executive officers, in addition to the indemnification provided for in Juno's
amended and restated bylaws. Juno believes that these provisions and agreements
are necessary to attract and retain qualified directors and executive officers.
Juno's amended and restated bylaws also permit it to secure insurance on behalf
of any officer, director, employee or other agent for any liability arising out
of his or her actions, regardless of whether the Delaware General Corporation
Law would permit indemnification. Juno intends to obtain liability insurance for
its officers and directors.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the amended and restated certificate of
incorporation. Juno is not aware of any threatened litigation or proceeding that
may result in a claim for this type of indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Continental Stock
Transfer & Trust Company, New York, New York.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has not been any public market for Juno's
common stock, and no prediction can be made as to the effect, if any, that
market sales of shares of common stock or the availability of shares of common
stock for sale will have on the market price of the common stock prevailing from
time to time. Nevertheless, sales of substantial amounts of common stock in the
public market could adversely affect the market price of the common stock and
could impair Juno's future ability to raise capital through the sale of its
equity securities.
Upon the completion of this offering, Juno will have an aggregate of
34,580,467 shares of common stock outstanding, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options. Of
the outstanding shares, the 6,500,000 shares sold in the offering will be freely
tradable, except that any shares held by "affiliates" of Juno, as that term is
defined in Rule 144 promulgated under the Securities Act, may only be sold in
compliance with the limitations described below. The remaining 28,080,467 shares
of common stock will be deemed "restricted securities" as defined under Rule
144. Restricted securities may be sold in the public market only if registered
or if they qualify for an exemption from registration under Rules 144, 144(k) or
701 promulgated under the Securities Act, which rules are summarized below.
Subject to the lock-up agreements described below and the provisions of Rules
144, 144(k) and 701, additional shares will be available for sale in the public
market as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES DATE
- ------------ ----------------------------------------------------------------------------------
<C> <S>
6,500,000 After the date of this prospectus, freely tradable shares sold in this offering
and shares saleable under Rule 144(k) that are not subject to the 180-day lock-up
0 Upon the filing of a registration statement to register for resale shares of
common stock issuable upon the exercise of stock options, which shares are not
subject to the 180-day lock-up
0 After 90 days from the date of this prospectus, shares saleable under Rule 144
that are not subject to the 180-day lock-up
17,684,035 After 180 days from the date of this prospectus, the 180-day lock-up is released
and these shares are saleable under Rule 144 (subject, in some cases, to volume
limitations), Rule 144(k), or pursuant to a registration statement to register for
resale shares of common stock issued upon the exercise of stock options
10,396,432 Over 180 days from the date of this prospectus, restricted securities that are
held for less than one year and are not yet saleable under Rule 144
</TABLE>
In general, under Rule 144, as currently in effect, a person, or persons
whose shares are required to be aggregated, including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of common stock, which will be approximately 345,805 shares immediately
after the offering or the average weekly trading volume in the common stock
during the four calendar weeks preceding the date on which notice of such sale
is filed, subject to certain restrictions. In addition, a person who is not
deemed to have been an affiliate of Juno at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years would be entitled to sell such shares under Rule 144(k)
without regard to the requirements described above. To the extent that shares
were
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acquired from an affiliate of Juno, such person's holding period for the purpose
of effecting a sale under Rule 144 commences on the date of transfer from the
affiliate.
As of the date of this prospectus, options to purchase a total of 3,187,305
shares of common stock are outstanding, of which 422,289 are currently
exercisable. Juno intends to file a Form S-8 registration statement under the
Securities Act shortly after the date of this prospectus to register all shares
of common stock issuable under Juno's option plan. That registration statement
will automatically become effective upon filing. Accordingly, shares covered by
that registration statement will become eligible for sale in the public markets,
subject to vesting restrictions or the lock-up agreement described below. See
"Management--Compensation of Directors" and "--1999 Stock Incentive Plan."
All directors and officers and certain stockholders of Juno, holding
substantially all of the outstanding shares of common stock, have agreed,
subject to specified exceptions, that they will not, without the prior written
consent of the representatives of the underwriters, sell or otherwise dispose of
any shares of common stock or options to acquire shares of common stock during
the 180-day period following the date of this prospectus. See "Underwriting."
Juno has agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of the prospectus, except
Juno may issue, and grant options to purchase, shares of common stock under the
1999 Stock Incentive Plan. In addition, Juno may issue shares of common stock in
connection with any acquisition of another company if the terms of such issuance
provide that such common stock shall not be resold prior to the expiration of
the 180-day period referenced in the preceding sentence. See "Risk
Factors--Future sales of our common stock may negatively affect our stock
price."
Following this offering, under specified circumstances and subject to
customary conditions, holders of 27,822,751 shares of Juno's outstanding common
stock will have certain demand registration rights with respect to their shares
of common stock, subject to the 180-day lock-up arrangement described above, to
require Juno to register their shares of common stock under the Securities Act,
and certain rights to participate in any future registration of securities by
Juno. Juno is not required to effect more than an aggregate of six demand
registrations on behalf of such holders. Pursuant to the agreement pursuant to
which the registration rights were granted, holders of registrable securities
have agreed to be subject to lock-up periods of not more than 180 days following
the date of this prospectus. See "Description of Capital Stock--Registration
Rights."
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UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a general discussion of the material United States federal
income and estate tax consequences of the ownership and disposition of the
common stock applicable to Non-United States Holders of this common stock. For
the purpose of this discussion, a Non-United States Holder is any holder that
for U.S. federal income tax purposes is not a U.S. person. This discussion does
not address all aspects of U.S. federal income and estate taxation that may be
relevant in light of a Non-United States Holder's particular facts and
circumstances, such as being a U.S. expatriate, and does not address any tax
consequences arising under the laws of any state, local or non-U.S. taxing
jurisdiction. Furthermore, the following discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended, and administrative
and judicial interpretations thereof, all as in effect on the date hereof, and
all of which are subject to change, possibly with retroactive effect. Juno has
not and will not seek a ruling from the Internal Revenue Service with respect to
the U.S. federal income and estate tax consequences described below, and as a
result, there can be no assurance that the Internal Revenue Service will not
disagree with or challenge any of the conclusions set forth in this discussion.
For purposes of this discussion, the term U.S. person means:
- a citizen or resident of the United States;
- a corporation, partnership or other entity created or organized in the
United States or under the laws of the United States or any political
subdivision thereof;
- an estate whose income is included in gross income for U.S. federal income
tax purposes regardless of its source; or
- a trust whose administration is subject to the primary supervision of a
U.S. court and which has one or more U.S. persons who have the authority
to control all substantial decisions of the trust.
DIVIDENDS
If Juno pays a dividend, any dividend paid to a Non-United States Holder of
common stock generally will be subject to U.S. withholding tax either at a rate
of 30% of the gross amount of the dividend or such lower rate as may be
specified by an applicable tax treaty. Dividends received by a Non-United States
Holder that are effectively connected with a U.S. trade or business conducted by
the Non-United States Holder are exempt from such withholding tax. However,
those effectively connected dividends, net of certain deductions and credits,
are taxed at the same graduated rates applicable to U.S. persons.
In addition to the graduated tax described above, dividends received by a
corporate Non-United States Holder that are effectively connected with a U.S.
trade or business of the corporate Non-United States Holder may also be subject
to a branch profits tax at a rate of 30% or such lower rate as may be specified
by an applicable tax treaty.
A Non-United States Holder of common stock that is eligible for a reduced
rate of withholding tax pursuant to a tax treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for refund with
the IRS.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-United States Holder generally will not be subject to U.S. federal
income tax on any gain realized upon the sale or other disposition of his common
stock unless:
- the gain is effectively connected with a U.S. trade or business of the
Non-United States Holder (which gain, in the case of a corporate
Non-United States Holder, must also be taken into account for branch
profits tax purposes);
- the Non-United States Holder is an individual who holds his or her common
stock as a capital asset (generally, an asset held for investment
purposes) and who is present in the United States for a period or periods
aggregating 183 days or more during the calendar year in which the sale or
disposition occurs and certain other conditions are met; or
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- Juno is or has been a "United States real property holding corporation"
for U.S. federal income tax purposes at any time within the shorter of the
five-year period preceding the disposition or the holder's holding period
for its common stock. Juno has determined that it is not and does not
believe that it will become a "United States real property holding
corporation" for U.S. federal income tax purposes.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Generally, Juno must report annually to the Internal Revenue Service the
amount of dividends paid, the name and address of the recipient, and the amount,
if any, of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or other agreements, the Internal Revenue Service may make its reports
available to tax authorities in the recipient's country of resident.
Dividends paid to a Non-United States Holder at an address within the U.S.
may be subject to backup withholding at a rate of 31% if the Non-United States
Holder fails to establish that it is entitled to an exemption or to provide a
correct taxpayer identification number and other information to the payer.
Backup withholding will generally not apply to dividends paid to Non-United
States Holders at an address outside the U.S. on or prior to December 31, 1999
unless the payer has knowledge that the payee is a United States person. Under
recently finalized Treasury Regulations regarding withholding and information
reporting, payment of dividends to Non-United States Holders at an address
outside the U.S. after December 31, 1999 may be subject to backup withholding at
a rate of 31% unless such Non-United States Holder satisfies various
certification requirements.
Under current Treasury Regulations, the payment of the proceeds of the
disposition of common stock to or through the U.S. office of a broker is subject
to information reporting and backup withholding at a rate of 31% unless the
holder certifies its non-U.S. status under penalties of perjury or otherwise
establishes an exemption. Generally, the payment of the proceeds of the
disposition by a Non-United States Holder of common stock outside the U.S. to or
through a foreign office of a broker will not be subject to backup withholding
but will be subject to information reporting requirements if the broker is:
- a U.S. person;
- a "controlled foreign corporation" for U.S. federal income tax purposes;
or
- a foreign person 50% or more of whose gross income for certain periods is
from the conduct of a U.S. trade or business
unless the broker has documentary evidence in its files of the holders' non-U.S.
status and certain other conditions are met, or the holder otherwise establishes
an exemption. Neither backup withholding nor information reporting generally
will apply to a payment of the proceeds of a disposition of common stock by or
through a foreign office of a foreign broker not subject to the preceding
sentence.
In general, the recently promulgated final Treasury Regulations, described
above, do not significantly alter the substantive withholding and information
reporting requirements but would alter the procedures for claiming benefits of
an income tax treaty and change the certifications procedures relating to the
receipt by intermediaries of payments on behalf of the beneficial owner of
shares of common stock. Non-United States Holders should consult their tax
advisors regarding the effect, if any, of those final Treasury Regulations on an
investment in the common stock. Those final Treasury Regulations are generally
effective for payments made after December 31, 1999.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the Internal
Revenue Service.
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ESTATE TAX
An individual Non-United States Holder who owns common stock at the time of
his death or had made certain lifetime transfer of an interest in common stock
will be required to include the value of that common stock in such holder's
gross estate for U.S. federal estate tax purposes, unless an applicable estate
tax treaty provides otherwise.
THE FOREGOING DISCUSSION IS A SUMMARY OF THE PRINCIPAL FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES OF THE OWNERSHIP, SALE OR OTHER DISPOSITION OF COMMON
STOCK BY NON-UNITED STATES HOLDERS. ACCORDINGLY, INVESTORS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THE INCOME TAX CONSEQUENCES OF THE
OWNERSHIP AND DISPOSITION OF COMMON STOCK, INCLUDING THE APPLICATION AND EFFECT
OF THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION.
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UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase and Juno has agreed to sell to each underwriter, the number of shares
set forth below opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
Salomon Smith Barney Inc............................................................................
Bear, Stearns & Co. Inc.............................................................................
PaineWebber Incorporated............................................................................
------------
Total........................................................................................... 6,500,000
------------
------------
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of various legal matters by counsel and to various other conditions.
The underwriters are obligated to purchase all the shares, other than those
covered by the over-allotment option described below, if they purchase any of
the shares.
The underwriters, for whom Salomon Smith Barney Inc., Bear, Stearns & Co.
Inc. and PaineWebber Incorporated are acting as representatives, propose to
offer some of the shares directly to the public at the public offering price set
forth on the cover page of this prospectus and some of the shares to various
dealers at the public offering price less a concession not in excess of $ per
share. The underwriters may allow, and those dealers may reallow, a concession
not in excess of $ per share on sales to certain other dealers. If all of the
shares are not sold at the initial offering price, the representatives may
change the public offering price and the other selling terms. The
representatives have advised Juno that the underwriters do not intend to confirm
any sales to any accounts over which they exercise discretionary authority.
Juno has granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to 975,000 additional shares of
common stock at the public offering price less the underwriting discount. The
underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent the
option is exercised, each underwriter will be obligated, subject to various
conditions, to purchase a number of additional shares approximately
proportionate to each underwriter's initial purchase commitment.
Juno, its officers and directors and certain stockholders of Juno, holding
substantially all of the outstanding shares of common stock, have agreed,
subject to specified exceptions, that, for a period of 180 days from the date of
this prospectus, they will not, without the prior written consent of Salmon
Smith Barney Inc., dispose of or hedge any shares of common stock of Juno or any
securities convertible into or exchangeable for common stock. Salomon Smith
Barney Inc. in its sole discretion may release any of the securities subject to
these lock-up agreements at any time without notice.
At our request, the underwriters have reserved up to five percent (5%) of
the shares of common stock for sale, at the initial public offering price, to
employees and friends of ours through a directed share program. The number of
shares of common stock available for sale to the general public in the public
offering will be reduced to the extent these persons purchase those reserved
shares.
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price for the shares was
determined by negotiations among Juno and the representatives. Among the factors
considered in determining the initial public offering price were Juno's
87
<PAGE>
record of operations, its current financial condition, its future prospects, its
markets, the economic conditions in and future prospects for the industry in
which Juno competes, its management, and currently prevailing general conditions
in the equity securities markets, including current market valuations of
publicly traded companies considered comparable to Juno. There can be no
assurance, however, that the prices at which the shares will sell in the public
market after this offering will not be lower than the price at which they are
sold by the underwriters or that an active trading market in the common stock
will develop and continue after this offering.
Juno has applied to have the common stock included for quotation on the
Nasdaq National Market under the symbol "JWEB".
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by Juno in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY JUNO
--------------------------------------
<S> <C> <C>
NO EXERCISE FULL EXERCISE
----------------- -------------------
Per share.............................................................................. $ $
Total.................................................................................. $ $
</TABLE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may over-allot, or engage in syndicate covering transactions,
stabilizing transactions and penalty bids. Over-allotment involves syndicate
sales of common stock in excess of the number of shares to be purchased by the
underwriters in the offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of bids or purchases
of common stock made for the purpose of preventing or retarding a decline in the
market price of the common stock while the offering is in progress. Penalty bids
permit the underwriters to reclaim a selling concession from a syndicate member
when Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member. These activities may cause the price of the common stock to be higher
than the price that otherwise would exist in the open market in the absence of
these types of transactions. These transactions may be effected on the Nasdaq
National Market or in the over-the-counter market, or otherwise, and, if
commenced, may be discontinued at any time.
Most of the shares to be sold by Juno in this offering will be sold to U.S.
purchasers, but a limited number of shares may be sold to non-U.S. purchasers.
Certain of the representatives have performed various investment banking and
advisory services for Juno for which they have received customary fees and
expenses. The representatives may, from time to time, engage in transactions
with and perform services for Juno in the ordinary course of their business.
PaineWebber Incorporated acted as Juno's exclusive placement agent in connection
with the private placement of Juno's Series B redeemable convertible preferred
stock in March 1999, in connection with which Juno paid customary placement fees
to PaineWebber.
If and to the extent that any shares are offered or sold in the United
Kingdom, each representative agrees that it:
- will not offer or sell any shares to persons in the United Kingdom except
to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (whether as principal or agent) for
the purposes of their businesses or in other circumstances which do not
constitute an offer to the public in the United Kingdom for the purposes
of the Public Offers of Securities Regulation 1995 (the "Regulations");
88
<PAGE>
- will comply with all applicable provisions of the Regulations and of the
Financial Services Act 1986 with respect to anything done by it in
relation to the shares of Common Stock offered hereby in, from or
otherwise involving the United Kingdom; and
- will only issue or pass on in the United Kingdom any document received by
it in connection with the issue of these shares if that person is of a
kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 (as amended) or is a
person to whom such document may otherwise lawfully be issued or passed
on.
Juno has agreed to indemnify the underwriters against various liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
89
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Juno by Brobeck, Phleger & Harrison LLP, New York, New York. Legal
matters in connection with the offering will be passed upon for the underwriters
by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The consolidated financial statements for Juno, as of December 31, 1997 and
1998 and for each of the three years in the period ended December 31, 1998
included in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, appearing elsewhere herein,
upon the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Juno has filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits, schedules and amendments filed with
the registration statement, under the Securities Act with respect to the shares
of common stock to be sold in the offering. This prospectus does not contain all
the information set forth in this registration statement. For further
information about Juno and the shares of common stock to be sold in the
offering, please refer to this registration statement. For additional
information, please refer to the exhibits that have been filed with our
registration statement on Form S-1.
You may read and copy all or any portion of the registration statement or
any other information Juno files at the Securities and Exchange Commission's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the Securities and Exchange Commission. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information about the public
reference rooms. Juno's Securities and Exchange Commission filings, including
the registration statement, are also available to you on the Commission's Web
site (http://www.sec.gov).
As a result of the offering, Juno will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended, and,
in accordance therewith, will file periodic reports, proxy statements and other
information with the Securities and Exchange Commission. Upon approval of the
common stock for the quotation on the Nasdaq National Market, these reports,
proxy and information statements and other information may also be inspected at
the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
Juno intends to furnish its stockholders with annual reports containing
audited consolidated financial statements and make available quarterly reports
for the first three quarters of each year containing unaudited interim
consolidated financial information.
90
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and March 31, 1999 (unaudited)................ F-3
Consolidated Statements of Operations for the years ended December 31, 1996, 1997
and 1998 and the three months ended March 31, 1998 and 1999 (unaudited).................................. F-4
Consolidated Statement of Partners' Capital (Deficiency) for the years ended
December 31, 1996, 1997 and 1998 and Consolidated Statement of Stockholders' Equity (Deficit) for the
three months ended March 31, 1999 (unaudited)............................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996,
1997 and 1998 and the three months ended March 31, 1998 and 1999 (unaudited)............................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Juno Online Services, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, partners' capital (deficiency) and cash
flows present fairly, in all material respects, the financial position of Juno
Online Services, Inc. (formerly Juno Online Services, L.P. & Subsidiary) at
December 31, 1997 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
March 4, 1999
F-2
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- -----------
<S> <C> <C> <C>
1997 1998 1999
--------- --------- -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 13,770 $ 8,152 $ 53,165
Accounts receivable, net of allowance for doubtful accounts of $106, $296 and
$395 in 1997, 1998 and 1999, respectively.................................. 1,141 2,115 3,205
Merchandise inventories, net................................................. 769 60 47
Prepaid expenses and other current assets.................................... 400 108 11,140
--------- --------- -----------
Total current assets....................................................... 16,080 10,435 67,557
Fixed assets, net.............................................................. 3,966 4,086 3,876
Other assets................................................................... 87 182 227
--------- --------- -----------
Total assets............................................................... $ 20,133 $ 14,703 $ 71,660
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)/STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses........................................ $ 8,277 $ 11,166 $ 9,884
Current portion of capital lease obligations................................. 525 450 518
Current portion of senior note............................................... -- 1,560 1,560
Deferred revenue............................................................. 351 5,602 7,595
--------- --------- -----------
Total current liabilities.................................................. 9,153 18,778 19,557
Capital lease obligations...................................................... 270 609 600
Senior note.................................................................... -- 7,569 7,252
Deferred rent.................................................................. 206 335 316
Deferred revenue............................................................... -- -- 1,333
Commitments and contingencies (Note 8)
Redeemable convertible preferred stock, $.01 par value;
Series B: 10,138,716 shares authorized, issued and outstanding (liquidation
value of $65,000)............................................................ 61,853
Series A: 17,684,035 shares authorized, issued and outstanding (liquidation
value of $79,578)............................................................ 79,578
Partners' capital (deficiency)................................................. 10,504 (12,588)
Stockholders' equity (deficit):
Common stock--$.01 par value; 133,333,334 authorized, 251,229 issued and
outstanding.................................................................. 3
Additional paid-in capital................................................... (95,724)
Unearned compensation........................................................ (691)
Accumulated deficit.......................................................... (2,417)
-----------
Total shareholders' equity (deficit)....................................... (98,829)
--------- --------- -----------
Total liabilities and partners' capital (deficiency)/stockholders' equity
(deficit)................................................................ $ 20,133 $ 14,703 $ 71,660
--------- --------- -----------
--------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- ----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenues:
Billable services................................... $ 6 $ 1,371 $ 6,645 $ 465 $ 5,806
Advertising and transaction fees.................... 127 1,875 6,454 1,228 2,265
Direct product sales................................ 3 5,845 8,595 2,577 1,649
---------- ---------- ---------- ---------- ----------
Total revenues.................................. 136 9,091 21,694 4,270 9,720
---------- ---------- ---------- ---------- ----------
Cost of revenues:
Billable services................................... -- 1,053 5,606 387 4,678
Advertising and transaction fees.................... 278 1,659 3,725 825 1,080
Direct product sales................................ 3 5,796 7,627 2,426 1,424
---------- ---------- ---------- ---------- ----------
Total cost of revenues.......................... 281 8,508 16,958 3,638 7,182
---------- ---------- ---------- ---------- ----------
Operating expenses:
Operations, free service............................ 5,803 11,075 9,383 2,824 1,846
Subscriber acquisition.............................. 6,993 3,140 5,334 1,453 2,700
Sales and marketing................................. 4,276 12,593 11,584 4,270 2,312
Product development................................. 3,741 4,860 7,345 1,835 1,854
General and administrative.......................... 2,172 2,897 2,760 914 704
---------- ---------- ---------- ---------- ----------
Total operating expenses........................ 22,985 34,565 36,406 11,296 9,416
---------- ---------- ---------- ---------- ----------
Loss from operations............................ (23,130) (33,982) (31,670) (10,664) (6,878)
Interest income, net.................................. 128 243 44 74 111
---------- ---------- ---------- ---------- ----------
Net loss........................................ $ (23,002) $ (33,739) $ (31,626) $ (10,590) $ (6,767)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Pro forma basic and diluted net loss
per share........................................... $ (0.83) $ (1.21) $ (1.14) $ (0.38) $ (0.24)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Weighted average shares outstanding used in pro forma
basic and diluted per share calculation............. 27,823 27,823 27,823 27,823 27,897
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIENCY)/
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARTNERS'
CONTRIBUTIONS COMMON STOCK ADDITION
---------------------- ------------------------ PAID-IN UNEARNED ACCUMULATED
UNITS AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
--------- ----------- ----------- ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995........ 873 $ 3,925 $ (3,833)
Capital contributions........... 4,646 20,906 --
Net loss........................ -- -- (23,002)
--------- ----------- ------------
Balance, December 31, 1996........ 5,519 24,831 (26,835)
Capital contributions........... 10,275 46,247 --
Net loss........................ -- -- (33,739)
--------- ----------- ------------
Balance, December 31, 1997........ 15,794 71,078 (60,574)
Capital contributions........... 1,890 8,500 --
Net loss........................ -- -- (31,626)
Amortization of unearned
compensation.................. -- -- 34
--------- ----------- ------------
Balance, December 31, 1998........ 17,684 79,578 (92,166)
Net loss for the period January
1, 1999 to February 28, 1999
(unaudited)................... -- -- (4,350)
Effect of statutory merger (see
Note 12)...................... (17,684) (79,578) -- -- $ (95,788) $ (728) 96,516
Preferred stock accretion
(unaudited)................... -- -- (53) -- --
Issuance of common stock upon
(unaudited)................... 251 $ 3 117 -- --
Net loss for the month ended
March 31, 1999 (unaudited).... -- -- -- -- (2,417)
Amortization of unearned
compensation (unaudited)...... -- -- -- 37 --
--------- ----------- --- ----- ----------- ----- ------------
Balance, March 31, 1999
(unaudited)..................... -- $ -- 251 $ 3 $ (95,724) $ (691) $ (2,417)
--------- ----------- --- ----- ----------- ----- ------------
--------- ----------- --- ----- ----------- ----- ------------
<CAPTION>
TOTAL
---------
<S> <C>
Balance, December 31, 1995........ $ 92
Capital contributions........... 20,906
Net loss........................ (23,002)
---------
Balance, December 31, 1996........ (2,004)
Capital contributions........... 46,247
Net loss........................ (33,739)
---------
Balance, December 31, 1997........ 10,504
Capital contributions........... 8,500
Net loss........................ (31,626)
Amortization of unearned
compensation.................. 34
---------
Balance, December 31, 1998........ (12,588)
Net loss for the period January
1, 1999 to February 28, 1999
(unaudited)................... (4,350)
Effect of statutory merger (see
Note 12)...................... (79,578)
Preferred stock accretion
(unaudited)................... (53)
Issuance of common stock upon
(unaudited)................... 120
Net loss for the month ended
March 31, 1999 (unaudited).... (2,417)
Amortization of unearned
compensation (unaudited)...... 37
---------
Balance, March 31, 1999
(unaudited)..................... $ (98,829)
---------
---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------- ----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................ $ (23,002) $ (33,739) $ (31,626) $ (10,590) $ (6,767)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization..................... -- 161 2,438 563 567
Amortization of deferred rent..................... -- 244 157 195 (16)
Amortization of unearned compensation............. -- -- 34 -- 37
Changes in operating assets and liabilities:
Accounts receivable............................. (121) (1,020) (974) (249) (1,090)
Merchandise inventories......................... -- (769) 709 437 13
Prepaid expenses and other current assets....... (90) (214) 292 146 (11,032)
Accounts payable and accrued expenses........... 6,834 1,401 2,861 (2,055) (1,285)
Deferred revenue................................ 6 345 5,251 1,928 3,326
---------- ---------- ---------- ---------- ----------
Net cash used in operating activities......... (16,373) (33,591) (20,858) (9,625) (16,247)
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Purchases of fixed assets........................... -- (3,270) (1,942) (1,248) (105)
Proceeds from sale of fixed assets.................. -- -- 402 -- --
Other assets........................................ -- (87) (95) (3) (45)
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities......... -- (3,357) (1,635) (1,251) (150)
---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Payments on capital lease obligations............... -- (62) (754) (125) (193)
Proceeds from senior note........................... -- -- 10,000 10,000 --
Payments on senior note............................. -- -- (871) -- (317)
Net proceeds from issuance of redeemable convertible
preferred stock................................... -- -- -- -- 61,800
Capital contributions............................... 16,971 50,182 8,500 3,500 --
Proceeds from issuance of common stock.............. -- -- -- -- 120
---------- ---------- ---------- ---------- ----------
Net cash provided by financing activities..... 16,971 50,120 16,875 13,375 61,410
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents................................. 598 13,172 (5,618) 2,499 45,013
Cash and cash equivalents, beginning of period........ -- 598 13,770 13,770 8,152
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents, end of period.............. $ 598 $ 13,770 $ 8,152 $ 16,269 $ 53,165
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Supplemental disclosure of cash flow information:
Cash paid for interest.............................. $ -- $ 127 $ 496 $ 28 $ 145
Supplemental schedule of noncash investing and
financing activities:
Accretion of preferred stock........................ $ -- $ -- $ -- $ -- $ 53
Capital lease obligations incurred for network
equipment......................................... -- 857 1,018 878 252
Notes received for issuance of partnership units.... 3,935 -- -- -- --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
1. ORGANIZATION AND BUSINESS
Juno Online Services, Inc. is the surviving entity of a Statutory Merger
with Juno Online Services, L.P. This merger of entities under common control was
effected on March 1, 1999 (see Note 12, Subsequent Events).
Juno Online Services, L.P. was organized as a Delaware limited partnership
on June 30, 1995. The consolidated financial statements include the accounts of
Juno Online Services, L.P. and its wholly owned subsidiary, Juno Online
Services, Inc. (collectively, the "Company" or "Juno"). Juno Online Services,
Inc. was incorporated in the State of Delaware on July 2, 1996, and was a wholly
owned subsidiary from February 12, 1997 through March 1, 1999, the date of the
Statutory Merger. All significant intercompany accounts and transactions have
been eliminated in consolidation.
The Company is a provider of Internet-related services throughout the United
States. The Company offers several levels of service, ranging from basic dial-up
Internet e-mail -- which is provided to the end user for free -- to billable
subscription services, including full access to the World Wide Web. Revenues are
derived primarily from the subscription fees charged for billable subscription
services, from the sale of advertising, and from the direct sale of products to
the Company's subscribers.
The Company has experienced operating losses since its inception. Such
losses are due to the Company's efforts to maximize the number of subscribers to
both its free basic e-mail service and, more recently, its billable subscription
services, and to its development of computer systems and related infrastructure
that could be rapidly expanded to accommodate additional users. Juno Online
Services, Inc. expects that it will continue to incur net losses as it expends
substantial additional resources in an attempt to rapidly increase its market
share. There can be no assurance that Juno Online Services, Inc. will achieve or
sustain profitability or positive cash flow from its operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The Company's consolidated financial statements are prepared in accordance
with generally accepted accounting principles, which require management to use
its judgment in making certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
liabilities at the dates of the financial statements and the reported amounts of
operating revenues and expenses during the reporting periods. It is expected
that such estimates will differ to some extent from the amounts ultimately
realized due to uncertainties inherent in any such estimation process.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The financial statements as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 are unaudited. In the opinion of management, this
unaudited information has been prepared substantially on the same basis as the
audited consolidated financial statements and all necessary adjustments,
consisting only of normal recurring adjustments, have been included in the
amounts presented to present fairly the unaudited quarterly results. The results
for a quarter are not necessarily indicative of the results for any future
period.
F-7
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash balances at
December 31, 1998 consisted of bank deposits with one institution and investment
grade overnight securities. The Company reviews the credit ratings of its
banking institution on a regular basis.
REVENUE RECOGNITION
Billable services revenues are recognized over the period services are
provided. In 1997, billable services revenues consisted primarily of technical
support fees. In 1998, billable services revenues consisted primarily of fees
charged for our billable subscription services and technical support fees.
Advertising and transaction fees are derived from both advertising and
strategic marketing alliance contracts in which the Company receives a fee for
displaying impressions (a single display of an advertisement to a subscriber) or
is compensated for generating leads or transactions. Revenues generated by these
contracts are generally recognized as earned, which typically coincides with
when the services are performed, provided that the Company does not have any
significant remaining obligations and collection of the resulting receivable is
probable. Costs associated with advertising and strategic marketing alliance
contracts, principally transmission, development, production and campaign
management costs, are expensed as incurred.
Revenues from direct product sales and delivery fees are recognized upon
shipment of products to subscribers.
Revenues are reported net of a provision for sales allowances. Sales
allowances and bad debt expenses were $9, $233 and $616 in 1996, 1997 and 1998,
respectively.
Deferred revenue consists of monthly and annual prepaid subscriber fees
related to billable subscription services and advertising and transaction fees
billed in advance of the performance of all or a portion of the related service.
MERCHANDISE INVENTORIES
Inventories, principally microcomputers and computer hardware and software,
are stated at the lower of cost (on a first-in, first-out basis) or market. As
of December 31, 1997 and 1998, merchandise inventories held in connection with
the Company's direct product sales initiative are presented net of reserves of
$150 and $11, respectively, for obsolete, slow moving and excess inventories.
FIXED ASSETS
Fixed assets are stated at cost, net of accumulated depreciation and
amortization, which is calculated on a straight-line basis over lives ranging
from 3 to 5 years or, for leasehold improvements, over the life of the lease, if
shorter.
F-8
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LONG-LIVED ASSETS
The Company periodically evaluates the net realizable value of long-lived
assets, including fixed assets and other assets, relying on a number of factors
including operating results, business plans, economic projections and
anticipated future cash flows. In addition, the Company's evaluation considers
nonfinancial data such as market trends, product and development cycles, and
changes in management's market emphasis. An impairment in the carrying value of
an asset is recognized when the expected future operating cash flows derived
from the asset are less than its carrying value.
ADVERTISING AND SUBSCRIBER ACQUISITION COSTS
The Company accounts for advertising and subscriber acquisition costs
pursuant to Statement of Position ("SOP") 93-7, "Reporting on Advertising
Costs." Accordingly, the Company expenses all costs of advertising as incurred.
Advertising expenses for 1996, 1997 and 1998 were $6,178, $1,878 and $2,389,
respectively.
MAINTENANCE AND REPAIRS
These costs are charged to expense as incurred. Major renewals, betterments
and additions are capitalized.
PRODUCT DEVELOPMENT COSTS
The Company's product offerings are comprised of various features which
contribute to the overall functionality and are delivered through client-side
software, server-side software, and database applications which have been
principally developed internally. Software development costs include direct
labor and related overhead for software produced by the Company and the cost of
software licensed from third parties. All costs in the software development
process which are classified as research and development are expensed as
incurred until technological feasibility has been established, at which time
such costs are capitalized until the software is generally available. To date,
the establishment of technological feasibility of the Company's products and the
general availability of such software have substantially coincided. As a result,
software development costs that qualify for capitalization have been
insignificant and therefore, the Company has not capitalized any software
development costs.
OPTION PLAN
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), which permits entities to recognize as expense over the vesting period
the fair value of all equity-based awards on the date of grant. Alternatively,
SFAS 123 allows entities to continue to apply the provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and provide pro forma disclosures for employee unit option grants
made in 1997 and future years as if the fair-value based method defined in SFAS
123 had been applied. The Company has elected to continue
F-9
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
to apply the provisions of APB Opinion No. 25 and apply the pro forma disclosure
provisions of SFAS 123.
INCOME TAXES
U.S. federal and state income taxes have not been provided because the
partners report their respective distributive share of the Company's income or
loss on their respective returns.
FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
The carrying values of the Company's cash and cash equivalents, accounts
receivable and accounts payable approximate fair value. Financial instruments
that potentially subject the Company to concentration of credit risk consist
principally of cash investments and trade receivables. The Company has limited
its cash investments to investment grade overnight securities. Credit is
extended to trade customers based on an evaluation of their financial condition.
The Company performs ongoing credit evaluations of its trade customers and
maintains an allowance for doubtful accounts. Credit risk with regard to the
sale of products and billable subscription services is mitigated by the
requirement of credit cards for purchases.
RECLASSIFICATION
Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes new accounting and reporting standards for
derivative financial instruments and for hedging activities. As of December 31,
1998, the Company had no derivative instruments.
In June 1997, FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued. The statement has not had an impact on the Company's financial
statement disclosures as its financial statements reflect how the "key operating
decision makers" view the business. Accordingly, the financial statements are
presented as a single segment.
In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for the reporting and display of
comprehensive income and its components in the financial statements. SFAS 130 is
effective for years beginning after December 15, 1997. The statement has not had
an impact on the Company's financial statements as the Company has no other
comprehensive income to report.
F-10
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In February 1997, FASB issued SFAS No. 128 "Earnings Per Share" ("SFAS
128"). SFAS 128 replaced primary and fully diluted earnings per share with basic
and diluted earnings per share. The statement makes certain modifications to the
earnings per share calculations defined in APB Opinion No. 15. SFAS 128 is
effective for years ending after December 31, 1997. The Company has adopted SFAS
128. Pro forma net loss per share is computed by dividing the net loss by the
sum of the weighted average number of shares of common stock outstanding and the
shares resulting from the assumed conversion of all outstanding shares of
Redeemable Convertible Preferred Stock. Historical net loss per share includes
the effect of a $1,119 dividend on convertible redeemable preferred shares. This
dividend will not be payable in the event of a qualified initial public
offering. Unaudited historical basic and diluted net loss per share at March 31,
1999 was $0.28 and $0.24, respectively. Options have been excluded from the
calculations of loss per share because to include them would be antidilutive.
In March 1998, the American Institute of Certified Public Accountants issued
SOP 98-1 "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use" ("SOP 98-1") which provides guidance on accounting for the
costs of computer software developed or obtained for internal use. The
pronouncement identifies the characteristics of internal use software and
provides guidance on new cost recognition principles. SOP 98-1 is effective for
financial statements for fiscal years beginning after December 15, 1998. The
adoption of SOP 98-1 will not have a significant impact on the Company's
consolidated financial position, results of operations, and cash flows.
3. FIXED ASSETS
Fixed assets consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Computers, network equipment and software.................................. $ 3,225 $ 5,672
Furniture and office equipment............................................. 197 187
Leasehold improvements..................................................... 705 772
--------- ---------
Subtotal............................................................... 4,127 6,631
Accumulated depreciation and amortization.................................. (161) (2,545)
--------- ---------
Total.................................................................. $ 3,966 $ 4,086
--------- ---------
--------- ---------
</TABLE>
Included in fixed assets is equipment acquired under capital leases,
principally network equipment, of $977 and $1,995 as of December 31, 1997 and
1998, less accumulated amortization of $13 and $859, respectively.
F-11
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Trade accounts payable................................................... $ 2,067 $ 2,315
Personnel and related expenses........................................... 3,511 4,038
Telecommunications services.............................................. 728 1,210
Customer service expenses................................................ 230 857
Marketing expenses....................................................... 182 756
Other.................................................................... 1,559 1,990
--------- ---------
Total................................................................ $ 8,277 $ 11,166
--------- ---------
--------- ---------
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Company is affiliated with a group of entities that are under control of
or are subject to substantial influence by D. E. Shaw & Co., Inc. ("DESCO,
Inc.") which is the general partner of the Company's general partner, D. E. Shaw
Development, L.P. The affiliated entity with which the Company interacts most
(due to that affiliate's role as management company for many of the entities) is
D. E. Shaw & Co., L.P. ("DESCO, L.P."). DESCO, Inc. is also the general partner
of DESCO, L.P. (Prior to March 1997, DESCO, L.P. was the general partner of D.
E. Shaw Development, L.P.) DESCO, L.P. became a limited partner of the Company
in October 1997.
During 1996 substantially all of the Company's personnel, management and
overhead services were provided by DESCO, L.P., the costs of which were
allocated to the Company on the basis of various metrics as determined by DESCO,
L.P. During that period, all of the individuals working on Company initiatives
were employed by DESCO, L.P. On February 22, 1997, substantially all of the
individuals working on Company initiatives were transferred to, and became
employees of, the Company's wholly owned subsidiary, Juno Online Services, Inc.
Subsequently, DESCO, L.P. continued to provide certain administrative and
support services to the Company, albeit in a decreased capacity. Effective
January 1, 1998, the Company entered into services agreements with DESCO, L.P.
and an affiliate of DESCO, L.P. for the provision of certain of these services
at fixed rates.
In addition, the Company entered into a services agreement with an
India-based affiliate of DESCO, L.P. DESCO, L.P. is paid a fixed monthly fee
for engineering and operations services rendered, and is reimbursed for
incidental expenses.
F-12
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
5. RELATED PARTY TRANSACTIONS (CONTINUED)
These agreements extend on a month-to-month basis. Either party may
terminate the agreements for convenience at any time upon ninety days written
notice. The aggregate amounts and nature of the expenditures made by DESCO, L.P.
on behalf of the Company were as follows:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
India-based engineering and operations expense.......................... $ -- $ -- $ 1,454
Personnel and related expenses.......................................... 5,499 1,561 521
Depreciation and leased equipment....................................... 1,140 617 --
Occupancy costs......................................................... 484 784 338
Other operating expenses................................................ 7,952 1,362 375
--------- --------- ---------
Total............................................................. $ 15,075 $ 4,324 $ 2,688
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company's balance sheet reflects $96 due from DESCO, L.P. under the
caption "Prepaid expenses and other current assets" at December 31, 1997.
ASSET PURCHASES AND TRANSFERS
Historically, the Company has utilized certain fixed assets, including
leasehold improvements, computers, telecommunications and server hardware, owned
by DESCO, L.P., the expense of which has been allocated to the Company.
Beginning in July 1997, substantially all new acquisitions of fixed assets have
been made by the Company directly.
In 1998, the Company transferred fixed assets with a net book value of $402
to DESCO, L.P.
Pursuant to an asset purchase agreement dated December 31, 1997, the Company
acquired various fixed assets from DESCO, L.P. These assets, principally
computers, equipment and network software, were originally purchased by DESCO,
L.P. on behalf of the Company. The total purchase price of the assets was
$1,202.
GENERAL PARTNER FEES AND OTHER COMPENSATION
As compensation for managing the affairs of the Company, the Company's
general partner is entitled to a monthly management fee equal to one-twelfth of
one percent of the aggregate value of all outstanding limited partnership Units
(or other property into which such Units have been converted) as of the most
recent Valuation Event (as specified in the limited partnership agreement, as
amended). In 1996, 1997 and 1998, the Company's general partner elected to waive
management fees of $49, $81 and $285, respectively.
F-13
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
6. OBLIGATIONS UNDER CAPITAL LEASES
The following is a schedule, by year, of future minimum lease payments under
capital leases, together with the present value of the minimum lease payments as
of December 31, 1998:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -------------------------------------------------------------------------------------
<S> <C>
1999................................................................................. $ 526
2000................................................................................. 460
2001................................................................................. 134
2002................................................................................. 40
2003................................................................................. 33
---------
Total minimum lease payments................................................... 1,193
Less: Amount representing interest................................................... (134)
---------
Present value of the minimum lease payments.................................... $ 1,059
---------
---------
</TABLE>
Included in total minimum lease payments above are $164 of obligations under
capital leases for network equipment that were assigned to the Company by DESCO,
L.P. As the original lessee, DESCO, L.P. remains responsible under these lease
agreements in the event of a default by the Company.
7. SENIOR NOTE
On March 31, 1998, the Company borrowed $10,000 from D. E. Shaw Securities
Group, L.P. ("Shaw Securities"), pursuant to an unsecured Senior Note (the
"Senior Note"). Shaw Securities, whose general partner is DESCO, L.P. is an
affiliate of the Company. The Senior Note, as amended, bears interest at the
Federal Funds Rate plus 0.375% (4.445% at December 31, 1998) and matures on
December 31, 2000 unless extended by Shaw Securities. The Senior Note requires
mandatory prepayments equal to 10% of certain distributions from Shaw Securities
to DESCO, L.P. As of March 1, 1999, DESCO, L.P. and Juno modified certain
support arrangements. As modified, these arrangements provide that Juno shall be
indebted to DESCO, L.P. under terms substantially similar to the Senior Note in
the event that Juno fails to make such mandatory prepayments and DESCO, L.P.
makes such payments on Juno's behalf. Under certain circumstances, DESCO, L.P.
shall receive Series B redeemable convertible preferred stock at $6.41 per share
in return for making such support payments. The Senior Note shall be repaid in
full at completion of an initial public offering by the Company registered under
the U.S. Securities Act of 1933, as amended. The Company may prepay the Senior
Note at any time, in whole or in part, without premium or penalty. Pursuant to
the Senior Note, the Company may not incur any additional indebtedness in an
aggregate principal amount greater than $1,000, excluding the acquisition of
fixed assets in the ordinary course of business.
The Company's interest expense under the Senior Note was approximately $418
for the year ended December 31, 1998.
F-14
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
8. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
The Company has entered into various non-cancellable operating leases for
equipment. DESCO, L.P. has also entered into a leasing arrangement for office
space used by the Company. Substantially all of the Company's operations are
located in a single location that is leased by DESCO, L.P. The Company, which
benefits from the use of this office space, has agreed to assume performance of
DESCO, L.P.'s payment obligations under the lease to the extent the Company
occupies such office space. Minimum lease payments below include $1,875 related
to this arrangement with DESCO, L.P. Minimum lease payments as of December 31,
1998 under these operating leases and this arrangement are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -------------------------------------------------------------------------------------
<S> <C>
1999................................................................................. $ 1,993
2000................................................................................. 110
---------
Total minimum lease payments................................................... $ 2,103
---------
---------
</TABLE>
The Company's rental expense under operating leases in the years ended
December 31, 1996, 1997 and 1998, was approximately $290, $889, and $1,070,
respectively.
The Company has committed to minimum usage levels for certain
telecommunications services. The remaining commitments are $570 and $90 for the
years ending December 31, 1999 and 2000, respectively. Telecommunications
services expense for the years ended December 31, 1996, 1997 and 1998 was
$2,655, $7,155 and $8,772, respectively.
CONTINGENCIES
Various claims and actions have been asserted or threatened against the
Company in the ordinary course of business. There are no threats, asserted
claims or actions, the outcome of which, in the opinion of management, would
have a materially adverse effect on the Company's consolidated financial
position, results of operations, and cash flows, taken as a whole.
9. PARTNERS' CAPITAL
Interests in Juno Online Services, L.P., which take the form of Units, are
comprised of Class A Units and Class B Units. Class A Units are senior to Class
B Units, and have several preferential attributes, including (i) a contingent
priority distribution feature that provides holders of Class A Units, at the end
of a Fiscal Period (as specified in the limited partnership agreement, as
amended), a priority distribution of net profits equivalent to a $0.41 per Unit
annual return (but only if the Company's general partner elects to declare a
distribution with respect to such Fiscal Period), and (ii) a preference upon
liquidation equal to $4.50 per Class A Unit (less certain distributions) plus
any declared and unpaid priority distributions. There have been no priority
distributions declared by the Company's general partner to date. The preference
payment upon liquidation is payable before proceeds of a liquidation are applied
to other holders of Units. As of December 31, 1998, an aggregate of 17,768,035
Class A Units were issued and outstanding. As of December 31, 1998, although
Class B Units are subject to the Company's 1997 Class B Unit Option/Issuance
Plan, no Class B Units had been issued.
F-15
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
10. EMPLOYEE OPTION PLAN
The Company's 1997 Class B Unit Option/Issuance Plan (the "1997 Plan")
provides the Company's general partner the right to increase or decrease the
number of Class B Units that may be issued under the Plan. The number of Class B
Units issuable under the plan was increased to 3,366,667 in October 1998. Under
the 1997 Plan, non-qualified options to issue Units may be granted to all
employees of the Company and consultants as an incentive to remain in the
Company's service, among other reasons. The exercise price per Unit shall not be
less than 85% of the fair market value on the option grant date. For any 10%
owners of the Company, the exercise price per Unit shall not be less than 110%
of the fair market value on the option grant date. In general, the options vest
at a rate of 20% annually on the anniversary of the grant date and expire 10
years from the date of grant. However, in general, no options may be exercised
prior to the earlier of (i) the date that the Company converts to a corporate
form of organization or (ii) the expiration of the three year period measured
from the grant date. The initial date of grant was April 2, 1997. A grandfather
provision was made by the 1997 Plan Administrator to enable the commencement of
vesting, for employees involved with the Company prior to January 1, 1997, to
begin on the later of their employment date or January 1, 1996. For the year
ended December 31, 1998, the Company recorded unearned compensation of $762 for
options issued below deemed fair value for accounting purposes of the Company's
Class B Units. This amount is being charged to compensation expense over a five
year period (the vesting period of the options).
The following information relates to options issued to purchase Class B
Units under the 1997 Plan:
<TABLE>
<CAPTION>
CLASS B WEIGHTED AVERAGE
UNITS PRICE PER UNIT
---------- -----------------
<S> <C> <C>
Outstanding January 1, 1997.................................... -- $ -
Granted...................................................... 1,495,546 0.45
Exercised.................................................... -- -
Forfeited.................................................... (135,443) 0.45
----------
Outstanding January 1, 1998.................................... 1,360,103 0.45
Granted...................................................... 1,577,437 0.84
Exercised.................................................... -- -
Forfeited.................................................... (353,171) 0.45
----------
Outstanding December 31, 1998.................................. 2,584,369 0.67
----------
----------
</TABLE>
On December 31, 1998, the exercise price of outstanding options ranged from
$0.45 to $2.70. The weighted average remaining contractual life was 9.0 years.
The Company accounts for its equity-based compensation in accordance with
APB Opinion No. 25 and its related interpretations.
Had the Company's equity-based employee compensation been determined by the
fair-value based method of SFAS 123, the Company's net loss on a pro-forma basis
for the years ended December 31, 1996, 1997 and 1998 would have been $(23,002),
$(33,773) and $(31,723), respectively.
The Company has used the minimum value method to value the options issued.
The weighted average fair value of the options on the dates granted during 1997
and 1998 were $0.22 and $0.23,
F-16
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
10. EMPLOYEE OPTION PLAN (CONTINUED)
respectively. The fair value was based on a risk free interest rate of 5%, zero
dividend yield, and an expected life of 7 years.
11. EMPLOYEE BENEFIT PLAN
The Company is a participating employer in a tax-qualified retirement plan
(the "Savings Plan") under Section 401(k) of the Internal Revenue Code. Under
the Savings Plan, participating employees may defer a portion of their pre-tax
earnings, up to the Internal Revenue Service annual contribution limit. The
Company matches 50% of each employee's contribution up to a maximum of 6% of the
employee's eligible earnings. In 1996, 1997 and 1998 the Company match was $0,
$159 and $238, respectively. Company matching payments vest over 7 years.
12. SUBSEQUENT EVENTS
STATUTORY MERGER AND CHANGE IN TAX STATUS
On March 1, 1999, Juno Online Services, L.P. and Juno Online Services, Inc.,
entities under common control, effected a statutory merger pursuant to which
Juno Online Services, L.P. was merged with and into Juno Online Services, Inc.,
in a manner similar to a pooling of interests (the "Statutory Merger"). This tax
free transaction resulted in the combination of Juno Online Services, L.P. (the
"Partnership") with its wholly owned subsidiary, Juno Online Services, Inc. such
that Juno Online Services, Inc. is the surviving entity. In connection with the
Statutory Merger, the Class A Units of the Partnership were converted into
Series A Redeemable Convertible Preferred Stock (see below), and accumulated
losses of the Partnership were reclassified to additional paid-in capital.
Prior to the Statutory Merger, U.S. federal and state income taxes have not
been provided because the partners reported their respective share of the
Company's losses on their respective returns. The Company has incurred
accumulated book losses of $92,200 through December 31, 1998. Accumulated tax
losses through to December 31, 1998 amounted to $81,101. Had the Company been
subject to corporate income taxes, it would have recorded a deferred tax asset
(estimated at an effective rate of 40%), subject to a full valuation allowance.
This pro forma net deferred tax asset (pro forma to exclude the effect of tax
losses which passed through to the former partners) is comprised of the
following:
<TABLE>
<S> <C>
Deferred revenue.................................................... $ 1,593
Start-up costs, capitalized for tax purposes........................ 1,417
Accrued expenses and other.......................................... 1,386
---------
4,396
Valuation allowance................................................. (4,396)
---------
$ --
---------
---------
</TABLE>
Deferred tax assets will be available to Juno Online Services, Inc. as the
successor company following the Statutory Merger.
F-17
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
12. SUBSEQUENT EVENTS (CONTINUED)
ISSUANCE OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
In March 1999, the Company, after giving effect to the Statutory Merger,
received $61,800 in proceeds net of $3,200 of issuance costs, for the issuance
of 10,138,716 shares of Series B Redeemable Convertible Preferred Stock ("Series
B Preferred"), $.01 par value. In addition, 17,684,035 shares of Series A
Redeemable Convertible Preferred Stock ("Series A Preferred"), $.01 par value,
were issued to the holders of Series A Partnership Units in connection with the
Statutory Merger.
Dividends are cumulative and payable at a rate of $0.64 per share per annum
with respect to the Series B Preferred and $0.41 per share per annum with
respect to the Series A Preferred. Dividends cease to accrue upon a public
offering of common stock in which the aggregate net proceeds to the Company are
at least $40 million (a "Qualified Public Offering").
At any time on or after March 1, 2004, the holders of at least 66 2/3% of
the outstanding shares of Series B Preferred may require the Company to redeem
all shares of Series B Preferred. At any time after the holders of Series B
Preferred have demanded a redemption, the holders of a majority of the
outstanding shares of Series A Preferred may require the Company to redeem all
shares of Series A Preferred. The redemption price per share shall be $6.41 for
Series B Preferred and $4.50 for Series A Preferred (both as adjusted for any
stock dividends payable in shares of the respective series of Preferred Stock or
combinations or splits of Preferred Stock, plus any accrued but unpaid
dividends).
The holders of Preferred Stock shall have the right, at their option, at any
time, to convert such shares of Preferred Stock into such number of fully paid
and non-assessable shares of Common Stock as is obtained by multiplying the
number of shares of Series B or Series A Preferred to be converted by the
fraction obtained by dividing the Original Series Issue Price ($6.41 for Series
B Preferred and $4.50 for Series A Preferred) by the Applicable Conversion Price
in effect on the date the certificate is surrendered for conversion ($6.41 for
Series B Preferred and $4.50 for Series A Preferred on date of issuance, subject
to future adjustment).
In the event that, at any time while any of the Preferred Stock shall be
outstanding, the Company completes a Qualified Public Offering, then all
outstanding shares of Preferred Stock shall be converted into shares of Common
Stock in accordance with the conversion calculation above.
If the Company for any reason (including the failure to have sufficient
funds available) fails to redeem on any redemption date the amount due to the
holders of Series B Preferred shall bear interest at the prime rate plus 6% per
annum, compounded annually. In addition, the holders of a majority of Series B
Preferred shall have the right, to the exclusion of the holders of Series A
Preferred or Common Stock, to elect a majority of the directors of the Company,
subject to certain conditions as specified in the Certificate of Incorporation.
Upon any liquidation of the Company, the holders of the Series B Preferred
shall be entitled, before any distribution is made upon any Series A Preferred
or Common Stock, to be paid with respect to each outstanding share of Series B
Preferred an amount equal to $1.91 per share (the "Series B Liquidation
Preference"). After holders of Series B Preferred have been paid the Series B
Liquidation Preference, the holders of Series A Preferred and the holders of
Series B Preferred shall be entitled,
F-18
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
12. SUBSEQUENT EVENTS (CONTINUED)
before any distribution is made upon the Common Stock, to be paid with respect
to each outstanding share of their respective series of Preferred Stock an
amount equal to $4.50 per share.
After the holders of Preferred Stock shall have been paid in full the
preferential amounts to which they are entitled as provided in the preceding
paragraph, the holders of Common Stock, together with the holders of Preferred
Stock, shall be entitled to share ratably according to the number of shares of
Common Stock held by them (or issuable to them upon conversion of shares of the
Preferred Stock).
Holders of Preferred Stock shall have one vote for each full share of Common
Stock into which their respective series of Preferred Stock are convertible on
the record date for the vote.
The following December 31, 1998 pro forma condensed balance sheet is
presented to give effect to the Statutory Merger and the issuance of the
Redeemable Convertible Preferred Stock described above. The as adjusted data
reflects the conversion of redeemable convertible preferred stock to common
stock upon completion of an initial public offering.
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED
DECEMBER 31, DECEMBER 31,
1998 1998
------------ ------------
<S> <C> <C>
Current assets....................................................................... $ 72,235 $ 72,235
Noncurrent assets.................................................................... 4,268 4,268
------------ ------------
Total assets................................................................. $ 76,503 $ 76,503
------------ ------------
------------ ------------
Current liabilities.................................................................. $ 18,778 $ 18,778
Noncurrent liabilities............................................................... 8,513 8,513
Commitments and contingencies
Redeemable convertible preferred stock, $.01 par value;
Series B: 10,138,716 shares authorized, issued and outstanding (liquidation value
of $65,000)........................................................................ 61,800 --
Series A: 17,684,035 shares authorized, issued and outstanding (liquidation value
of $79,578)........................................................................ 79,578 --
Stockholders' equity (deficit):
Common stock--$.01 par value; 133,333,334 shares authorized; 23 shares
issued and outstanding........................................................... -- 228
Additional paid-in capital......................................................... (92,166) 48,984
Accumulated deficit................................................................ -- --
------------ ------------
Total stockholders' equity (deficit)......................................... (92,166) 49,212
------------ ------------
Total liabilities and stockholders' equity (deficit)......................... $ 76,503 $ 76,503
------------ ------------
------------ ------------
</TABLE>
1999 STOCK INCENTIVE PLAN (UNAUDITED)
The 1999 Stock Incentive Plan (the "1999 Plan") is intended to serve as the
successor equity incentive program to the 1997 Plan. The 1999 Plan became
effective on March 26, 1999. Under the 1999 Plan, 5,768,611 shares have been
authorized subject to automatic increases in January of each year. On the
effective date, shares authorized for issuance under the 1997 Plan will be
incorporated
F-19
<PAGE>
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT LIMITED PARTNERSHIP UNIT AND SHARE DATA)
12. SUBSEQUENT EVENTS (CONTINUED)
into the 1999 Plan. No further option grants will be made under the 1997 Plan.
Options outstanding under the 1997 Plan will be incorporated into the 1999 Plan.
The 1999 Stock Incentive Plan will include four programs. The first provides
for the discretionary grant of options to purchase common shares to employees,
consultants, and members of the board of directors. The second will allow
individuals to purchase shares or receive them as a bonus tied to the
performance of services. The third will allow executive officers and other
highly compensated employees to apply a portion of their salary to the
acquisition of special below-market stock option grants. The fourth program will
automatically grant options at periodic intervals to eligible non-employee board
members.
EMPLOYEE STOCK PURCHASE PLAN (UNAUDITED)
On April 19, 1999, the Board of Directors approved the 1999 Employee Stock
Purchase Plan (the "1999 ESPP"), subject to stockholder approval. A total of
555,556 shares are available to be issued under the 1999 ESPP. The 1999 ESPP
allows eligible employees to purchase shares of common stock at semi-annual
intervals, through periodic payroll deductions of up to 15% of cash earnings, as
defined. The purchase price per share is 85% of the lower of the fair market
value on the eligible employee's entry date or the fair market value on the
semi-annual purchase date. The 1999 ESPP will terminate no later than the last
business day in July 2009.
REVERSE STOCK SPLIT (UNAUDITED)
On April 19, 1999, the Company's Board of Directors authorized a reverse
stock split. Accordingly, all share data and limited partnership units have been
restated for the retroactive effect of the reverse split as if it had occurred
at the beginning of the earliest period presented.
F-20
<PAGE>
Back Cover:
[The Juno Member Profile]
The picture depicts each page of the electronic survey that Juno subscribers are
asked to complete. Each page contains questions relevant to its particular
topic. The upper left corner of the "General Account Information" page is
magnified to show certain information entered by a hypothetical Juno subscriber.
An arrow points from that close-up to the following text at the bottom of the
page:
"Detailed Information About Millions of Subscribers--All subscribers to Juno's
basic e-mail service are required to complete a detailed electronic survey
containing questions about age, gender, income, hobbies, interests, family size,
education, patters of computer use, expected purchases, and more. Advertisements
on our service may be targeted to a narrowly specified subset of our subscriber
base on the basis of any combination of Member Profile data."
[Juno Logo]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6,500,000 SHARES
JUNO ONLINE SERVICES, INC.
COMMON STOCK
[LOGO]
--------
PROSPECTUS
, 1999
--------
SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.
PAINEWEBBER INCORPORATED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses, other than
the underwriting discounts and commissions, payable by the registrant in
connection with the sale of the common stock being registered.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
------------
<S> <C>
SEC registration fee................................................................................ $ 27,015
NASD filing fee..................................................................................... 10,218
Nasdaq National Market listing fee.................................................................. 95,000
Legal fees and expenses............................................................................. 350,000
Accounting fees and expenses........................................................................ 175,000
Printing and engraving.............................................................................. 250,000
Transfer agent fees................................................................................. 10,000
Miscellaneous....................................................................................... 82,767
------------
Total........................................................................................... $ 1,000,000
------------
------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant's Amended and Restated Certificate of Incorporation in effect
as of the date hereof, and the registrant's Amended and Restated Certificate of
Incorporation to be in effect upon the closing of this offering (collectively,
the "Certificate") provides that, except to the extent prohibited by the
Delaware General Corporation Law, as amended (the "DGCL"), the registrant's
directors shall not be personally liable to the registrant or its stockholders
for monetary damages for any breach of fiduciary duty as directors of the
registrant. Under the DGCL, the directors have a fiduciary duty to the
registrant which is not eliminated by this provision of the Certificate and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available. In addition, each director will
continue to be subject to liability under the DGCL for breach of the director's
duty of loyalty to the registrant, for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are prohibited by DGCL. This provision
also does not affect the directors' responsibilities under any other laws, such
as the Federal securities laws or state or Federal environmental laws. The
registrant has obtained liability insurance for its officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) arising under Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the corporation's bylaws, any agreement, a vote
of stockholders or otherwise. The Certificate eliminates the personal liability
of directors to the fullest extent permitted by Section 102(b)(7) of the DGCL
and provides that the registrant shall fully indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a
II-1
<PAGE>
director or officer of the registrant, or is or was serving at the request of
the registrant as a director or officer of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Certificate. The registrant is not aware of any
threatened litigation or proceeding that may result in a claim for this type of
indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The registrant has sold and issued the following securities since June 30,
1995 (inception):
PARTNERSHIP UNITS. Between June 30, 1995 and March 1, 1999, the registrant
issued a total of 17,684,035 limited partnership units for a price per unit of
$4.50. These units were all purchased by entities or persons affiliated with D.
E. Shaw & Co., Inc. Of the 17,684,035 units issued, 872,192 were issued in 1995,
4,646,098 were issued in 1996, 10,276,854 were issued in 1997 and 1,888,891 were
issued in 1998. On March 1, 1999, Juno Online Services, L.P. was merged with and
into Juno Online Services, Inc., its wholly owned subsidiary. In connection with
this merger, each outstanding partnership unit was converted into one share of
Series A Redeemable Convertible Preferred Stock. Upon the closing of this
offering, the shares of Series A Redeemable Convertible Preferred Stock will
automatically convert into shares of the registrant's common stock.
PREFERRED STOCK. On March 1, 1999 and March 4, 1999, the registrant issued
a total of 10,138,716 shares of Series B Redeemable Convertible Preferred Stock
to a group of investors including affiliates of Intel Corporation, News
Corporation, Prospect Street Ventures and Sycamore Ventures. PaineWebber
Incorporated acted as the placement agent in connection with the sale of this
Series B Redeemable Convertible Preferred Stock. Upon the closing of this
offering, the shares of Series B Redeemable Convertible Preferred Stock will
automatically convert into shares of the registrant's common stock.
OPTIONS. The registrant has from time to time granted options to purchase
shares of common stock to employees in reliance upon exemptions from
registration pursuant to either (i) Section 4(2) of the Securities Act of 1933,
as amended, or (ii) Rule 701 promulgated under the Securities Act of 1933, as
amended. The following table sets forth information regarding these grants and
assumes a 1 for 4.5 reverse stock split of the registrant's common stock to be
effected prior to the closing of this offering.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
---------- -----------
<S> <C> <C>
June 30, 1995 (inception) to December 31, 1996......................... -- --
January 1, 1997 to December 31, 1997................................... 1,495,546 $ 0.45
January 1, 1998 to December 31, 1998................................... 1,577,437 $ 0.84
January 1, 1999 to April 22, 1999...................................... 934,174 $ 11.89
</TABLE>
The above securities were offered and sold by the registrant in reliance
upon exemptions from registration pursuant to either (i) Section 4(2) of the
Securities Act of 1933, as amended, as transactions not involving any public
offering, or (ii) Rule 701 promulgated under the Securities Act of 1933, as
amended. No underwriters were involved in connection with the sales of
securities referred to in this Item 15, except for PaineWebber Incorporated,
which acted as the placement agent in connection with the sale of Series B
Redeemable Convertible Preferred Stock in March 1999.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1** Certificate of Incorporation.
3.2** Certificate of Amendment to Certificate of Incorporation, filed March 1, 1999.
3.3** Certificate of Amendment to Certificate of Incorporation, filed March 1, 1999.
3.4 Certificate of Amendment to Certificate of Incorporation, filed March 4, 1999.
3.5* Form of Amended and Restated Certificate of Incorporation to be in effect upon the closing of this
offering.
3.6** Bylaws.
3.7* Form of Amended and Restated Bylaws to be in effect upon the closing of this offering.
4.1 Specimen Common Stock certificate.
4.2 See Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 for provisions defining the rights of holders of common
stock of the registrant.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 1999 Stock Incentive Plan.
10.2 1999 Employee Stock Purchase Plan.
10.3 Amended and Restated Registration Rights Agreement.
10.4+ Marketing Services Agreement, dated September 30, 1998, among the registrant and Hartford Fire
Insurance Company and its affiliates/subsidiaries.
10.5+ Marketing Services Agreement, dated December 11, 1998, between the registrant and AT&T Wireless
Services, Inc.
10.6+ Distributor Agreement, dated March 12, 1998, between the registrant and LCI International Telecom Corp.
10.7+ Financial Services Marketing Agreement, dated February 17, 1999, between the registrant and First USA
Bank, N.A.
10.8+ Master Service Agreement, dated August 1, 1998, between the registrant and Softbank Services Group.
10.9 India Services Agreement, dated November 1, 1997, between the registrant and D. E. Shaw & Co., L.P.
10.10 Services Agreement, dated January 1, 1998, between the registrant and D. E. Shaw & Co., L.P.
10.11 Advertising Agreement, dated March 1, 1999, between the registrant and News America Incorporated.
10.12 Employment Agreement between the registrant and Charles Ardai.
10.13 Employment Agreement between the registrant and Robert Cherins.
10.14 Employment Agreement between the registrant and Mark Moraes.
10.15 Employment Agreement between the registrant and Richard Eaton.
23.1 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
24.1** Powers of Attorney.
27.1** Financial Data Schedule for the twelve months ended December 31, 1998.
27.2 Financial Data Schedule for the three months ended March 31, 1999.
</TABLE>
- ------------------------
* To be supplied by amendment.
** Supplied previously as exhibits to Form S-1 filed on March 5, 1999.
+ Confidential treatment requested for portions of this agreement.
II-3
<PAGE>
(b) Financial Statement Schedule.
SCHEDULE II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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 a form of
prospectus filed by the registrant pursuant to Rule 424 (b)(1) or (4), or 497(h)
under the Securities Act of 1933, shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to the registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized in The
City of New York, State of New York, on this 23rd day of April, 1999.
JUNO ONLINE SERVICES, INC.
By: /s/ CHARLES E. ARDAI
-----------------------------------------
Name: Charles E. Ardai
Title: President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 23, 1999.
SIGNATURE TITLE(S)
- ------------------------------ ---------------------------
/s/ CHARLES E. ARDAI President and Director
- ------------------------------ (principal executive
Charles E. Ardai officer)
Chief Financial Officer and
/s/ RICHARD M. EATON, JR. Treasurer (principal
- ------------------------------ accounting and financial
Richard M. Eaton, Jr. officer)
* Director
- ------------------------------
Edward J. Ryeom
* Director
- ------------------------------
Louis K. Salkind
* Director
- ------------------------------
David E. Shaw
<TABLE>
<S> <C> <C> <C>
*By: /s/ CHARLES E. ARDAI
-------------------------
Charles E. Ardai
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1** Certificate of Incorporation.
3.2** Certificate of Amendment to Certificate of Incorporation, filed March 1, 1999.
3.3** Certificate of Amendment to Certificate of Incorporation, filed March 1, 1999.
3.4 Certificate of Amendment to Certificate of Incorporation, filed March 4, 1999.
3.5* Form of Amended and Restated Certificate of Incorporation to be in effect upon the closing of this
offering.
3.6** Bylaws.
3.7* Form of Amended and Restated Bylaws to be in effect upon the closing of this offering.
4.1 Specimen Common Stock certificate.
4.2 See Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 for provisions defining the rights of holders of common
stock of the registrant.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 1999 Stock Incentive Plan.
10.2 1999 Employee Stock Purchase Plan.
10.3 Amended and Restated Registration Rights Agreement.
10.4+ Marketing Services Agreement, dated September 30, 1998, among the registrant and Hartford Fire Insurance
Company and its affiliates/subsidiaries.
10.5+ Marketing Services Agreement, dated December 11, 1998, between the registrant and AT&T Wireless
Services, Inc.
10.6+ Distributor Agreement, dated March 12, 1998, between the registrant and LCI International Telecom Corp.
10.7+ Financial Services Marketing Agreement, dated February 17, 1999, between the registrant and First USA
Bank, N.A.
10.8+ Master Service Agreement, dated August 1, 1998, between the registrant and Softbank Services Group.
10.9 India Services Agreement, dated November 1, 1997, between the registrant and D. E. Shaw & Co., L.P.
10.10 Services Agreement, dated January 1, 1998, between the registrant and D. E. Shaw & Co., L.P.
10.11 Advertising Agreement, dated March 1, 1999, between the registrant and News America Incorporated.
10.12 Employment Agreement between the registrant and Charles Ardai.
10.13 Employment Agreement between the registrant and Robert Cherins.
10.14 Employment Agreement between the registrant and Mark Moraes.
10.15 Employment Agreement between the registrant and Richard Eaton.
23.1 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
24.1** Powers of Attorney (See Signature Page).
27.1** Financial Data Schedule for the twelve months ended December 31, 1998.
27.2 Financial Data Schedule for the three months ended March 31, 1999.
</TABLE>
- ------------------------
* To be supplied by amendment.
** Supplied previously as exhibits to Form S-1 filed on March 5, 1999.
+ Confidential treatment requested for portions of this agreement.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Juno Online Services, Inc.:
In connection with our audits of the consolidated financial statements of
Juno Online Services, Inc. (formerly Juno Online Services, L.P. & Subsidiary) as
of December 31, 1997 and 1998, and for each of the three years in the period
ended December 31, 1998, which financial statements are included in the
registration statement on Form S-1, we have also audited the financial statement
schedule listed in Item 16(b) herein.
In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 4, 1999
S-1
<PAGE>
SCHEDULE II- VALUATION AND QUALIFYING ACCOUNTS
JUNO ONLINE SERVICES, INC.
(FORMERLY JUNO ONLINE SERVICES, L.P. & SUBSIDIARY)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING OF COSTS AND BALANCE AT
CLASSIFICATION PERIOD EXPENSES DEDUCTIONS(A) END OF PERIOD
- ----------------------------------------------------------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful accounts.............................. $ 0 $ 9 $ 0 $ 9
Year ended December 31, 1997:
Allowance for doubtful accounts.............................. $ 9 $ 233 $ (136) $ 106
Year ended December 31, 1998:
Allowance for doubtful accounts.............................. $ 106 $ 377 $ (187) $ 296
</TABLE>
- ------------------------
(a) Represents sales concessions and accounts written-off as uncollectible.
S-2
<PAGE>
Exhibit 3.4
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
JUNO ONLINE SERVICES, INC.
Juno Online Services, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of Delaware, does
hereby certify that:
1. The name of the Corporation is Juno Online Services, Inc.
2. The Certificate of Incorporation of the Corporation is hereby amended by
striking out Article FOURTH thereof and by substituting in lieu thereof the
following:
"FOURTH. The total number of shares of stock which the Corporation shall
have authority to issue is Seven Hundred Twenty Five Million Two Hundred
Two Thousand Two Hundred Seventy Three (725,202,273) shares, including Six
Hundred Million (600,000,000) shares of Common Stock, $0.01 par value per
share, and One Hundred Twenty Five Million Two Hundred Two Thousand Two
Hundred Seventy Three (125,202,273) shares of Preferred Stock, $0.01 par
value per share, of which Seventy Nine Million Five Hundred Seventy Eight
Thousand One Hundred Thirty (79,578,130) shares have been designated Series
A Preferred Stock, and Forty Five Million Six Hundred Twenty Four Thousand
One Hundred Forty Three (45,624,143) shares have been designated Series B
Preferred Stock (including the 3,580,442 shares designated as Series B
Prime Preferred Stock)."
3. The amendment of the Certificate of Incorporation herein certified has
been duly adopted in accordance with the provisions of Sections 228 and 242 of
the General Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, JUNO ONLINE SERVICES, INC. has caused this Certificate
to be signed by Charles Ardai, its President, who hereby acknowledges under
penalties of perjury that the facts herein stated are true and that this
certificate is the act and deed of the Corporation, this 4th day of March, 1999.
JUNO ONLINE SERVICES, INC.
By: /S/ CHARLES ARDAI
-----------------------------------
Name: Charles Ardai
Office: President
<PAGE>
JUNO ONLINE SERVICES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 482048 10 5
THIS IS TO CERTIFY THAT
----------------------------------------
is the owner of
------------------------------------------------
fully paid and non-assessable shares, $.01 par value, of the COMMON STOCK of
JUNO ONLINE SERVICES, INC.
(hereinafter called the "Corporation"), transferable on the books of the
Corporation by the holder hereof in person, or by duly authorized attorney,
upon surrender of this certificate properly endorsed. This certificate and
the shares represented hereby are issued and shall be held subject to all the
provisions of the Certificate of Incorporation of the Corporation and all
amendments thereto (copies of which are on file in the office of the Transfer
Agent), to all of which the holder of this certificate by acceptance hereof
assents. This certificate is not valid until countersigned by the Transfer
Agent.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/s/ Richard Buchband /s/ Charles Ardai
- ------------------------ ----------------------------------
SECRETARY PRESIDENT
COUNTERSIGNED
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(Jersey City, NJ)
TRANSFER AGENT
AUTHORIZED OFFICER
<PAGE>
The Corporation will furnish to any shareholder upon request and without
charge a full statement of the designation, retative rights, preferences and
limitations of the shares of each class authorized to be issued and the
designation, relative rights, preferences and limitations of each series of
preferred shares which the Company is authorized to issue so far as the same
have been fixed, and the authority of the Board of Directors of the Company
to designate and fix the relative rights, preferences and limitations of
other series.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT - Custodian
------------------- -----------------------
(Cust) (Minor)
under Uniform Gifts to Minors
Act
-------------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, hereby sell, assign
--------------------------------
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
/ /
--------------------------------------
- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- ------------------------------------------------------------------ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ------------------------------------------------------------------ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated
----------------------------------
-----------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATSOEVER.
Signature(s) Guaranteed:
- ------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
Exhibit 10.1
JUNO ONLINE SERVICES, INC.
1999 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1999 Stock Incentive Plan is intended to promote the interests
of Juno Online Services, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for
them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate equity programs:
(i) the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock,
(ii) the Salary Investment Option Grant Program under which eligible
employees may elect to have a portion of their base salary invested
each year in special options,
(iii) the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common
Stock directly, either through the immediate purchase of such shares or
as a bonus for services rendered the Corporation (or any Parent or
Subsidiary), and
(iv) the Automatic Option Grant Program under which eligible
non-employee Board members shall automatically receive options at
periodic intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Six shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
III. ADMINISTRATION OF THE PLAN
A. The following provisions shall govern the administration of the
Plan:
(i) The Board shall have the authority to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to
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16 Insiders but may delegate such authority in whole or in part to the
Primary Committee.
(ii) Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested
in the Primary Committee or a Secondary Committee, or the Board may
retain the power to administer those programs with respect to all such
persons.
(iii) The Primary Committee shall have the sole and exclusive
authority to determine which Section 16 Insiders and other highly
compensated Employees shall be eligible for participation in the Salary
Investment Option Grant Program for one or more calendar years.
However, all option grants under the Salary Investment Option Grant
Program shall be made in accordance with the express terms of that
program, and the Primary Committee shall not exercise any discretionary
functions with respect to the option grants made under that program.
(iv) Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program.
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full power and authority
subject to the provisions of the Plan:
(i) to establish such rules as it may deem appropriate for proper
administration of the Plan, to make all factual determinations, to
construe and interpret the provisions of the Plan and the awards
thereunder and to resolve any and all ambiguities thereunder;
(ii) to determine, with respect to awards made under the
Discretionary Option Grant and Stock Issuance Programs, which eligible
persons are to receive such awards, the time or times when such awards
are to be made, the number of shares to be covered by each such award,
the vesting schedule (if any) applicable to the award, the status of a
granted option as either an Incentive Option or a Non-Statutory Option
and the maximum term for which the option is to remain outstanding;
(iii) to amend, modify or cancel any outstanding award with the
consent of the holder or accelerate the vesting of such award; and
(iv) to take such other discretionary actions as permitted pursuant
to the terms of the applicable program.
Decisions of each Plan Administrator within the scope of its administrative
functions under the Plan shall be final and binding on all parties.
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at
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any time. The Board may also at any time terminate the functions of any
Secondary Committee and reassume all powers and authority previously delegated
to such committee.
D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any options or stock issuances under the Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of directors of
any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Only non-employee Board members shall be eligible to participate in
the Automatic Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed Five
Million, Seven Hundred Sixty Eight Thousand, Six Hundred and Eleven (5,768,611)
shares. Such authorized share reserve consists of (i) the number of shares which
remain available for issuance, as of the Plan Effective Date, under the
Predecessor Plan, including the shares subject to the outstanding options to be
incorporated into the Plan and the additional shares which would otherwise be
available for future grant, plus (ii) an increase of Two Million, Six Hundred
Forty Five Thousand, Eight Hundred Fifty Five (2,645,855) shares authorized
by the Board subject to stockholder approval prior to the Section 12
Registration Date.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of each calendar
year during the term of the Plan, beginning with the 2000 calendar year, by an
amount equal to one percent (1%) of the shares of Common Stock outstanding on
the last trading day of the immediately preceding
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calendar year, but in no event shall any such annual increase exceed Four
Hundred Forty Four Thousand, Four Hundred Forty Five (444,445) shares.
C. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than One Million, One Hundred Eleven Thousand, One Hundred and Twelve
(1,111,112) shares of Common Stock in the aggregate per calendar year, beginning
with the 1999 calendar year.
D. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent those options
expire, terminate or are cancelled for any reason prior to exercise in full.
Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the original exercise or issue price paid per share, pursuant to
the Corporation's repurchase rights under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent options
or direct stock issuances under the Plan. However, should the exercise price of
an option under the Plan be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option or the vesting of a stock issuance under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the stock issuance, and not by the net number of shares of Common Stock
issued to the holder of such option or stock issuance. Shares of Common Stock
underlying one or more stock appreciation rights exercised under the Plan shall
NOT be available for subsequent issuance.
E. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities by which the share reserve is
to increase each calendar year pursuant to the automatic share increase
provisions of the Plan, (iii) the number and/or class of securities for which
any one person may be granted options, separately exercisable stock appreciation
rights and direct stock issuances under the Plan per calendar year, (iv) the
number and/or class of securities for which grants are subsequently to be made
under the Automatic Option Grant Program to new and continuing non-employee
Board members, (iv) the number and/or class of securities and the exercise price
per share in effect under each outstanding option under the Plan and (v) the
number and/or class of securities and price per share in effect under each
outstanding option incorporated into this Plan from the Predecessor Plan. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator at the time of the option grant.
2. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section II of Article Six and
the documents evidencing the option, be payable in cash or check made payable to
the Corporation. Should the Common Stock be registered under Section 12 of the
1934 Act at the time the option is exercised, then the exercise price may also
be paid as follows:
(i) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
(ii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable instructions to (a) a
Corporation-approved brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
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<PAGE>
C. Cessation of Service.
1. The following provisions shall govern the exercise of any options
outstanding at the time of the Optionee's cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option
shall be exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee
at the time of death may be subsequently exercised by his or her
Beneficiary.
(iii) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
(iv) Should the Optionee's Service be terminated for Misconduct
or should the Optionee engage in Misconduct while his or her options are
outstanding, then all such options shall terminate immediately and cease to
be outstanding.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding:
(i) to extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service to such
period of time as the Plan Administrator shall deem appropriate, but in no
event beyond the expiration of the option term, and/or
(ii) to permit the option to be exercised, during the applicable
post-Service exercise period, for one or more additional installments in
which the Optionee would have vested had the Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the discretion
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee
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<PAGE>
cease Service while holding such unvested shares, the Corporation shall have the
right to repurchase, at the exercise price paid per share, any or all of those
unvested shares. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. Non-Statutory Options shall be
subject to the same restrictions, except that a Non-Statutory Option may, to the
extent permitted by the Plan Administrator, be assigned in whole or in part
during the Optionee's lifetime (i) as a gift to one or more members of the
Optionee's immediate family, to a trust in which Optionee and/or one or more
such family members hold more than fifty percent (50%) of the beneficial
interest or to an entity in which more than fifty percent (50%) of the voting
interests are owned by one or more such family members or (ii) pursuant to a
domestic relations order. The terms applicable to the assigned portion shall be
the same as those in effect for the option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Six shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall NOT be subject to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
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<PAGE>
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Each option outstanding at the time of a Change in Control but not
otherwise fully-vested shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Change in Control, become
exercisable for all of the shares of Common Stock at the time subject to that
option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Change in
Control, assumed or otherwise continued in full force and effect by the
successor corporation (or parent thereof) pursuant to the terms of the Change in
Control, (ii) such option is replaced with a cash incentive program of the
successor corporation which preserves the spread existing at the time of the
Change in Control on the shares of Common Stock for which the option is not
otherwise at that time exercisable and provides for subsequent payout in
accordance with the same vesting schedule applicable to those option shares or
(iii) the acceleration of such option is subject to other limitations imposed by
the Plan Administrator at the time of the option grant. Each option outstanding
at the time of the Change in Control shall terminate as provided in Section
III.C. of this Article Two.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Change in Control, except to
the extent: (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) or otherwise continue in full force and effect
pursuant to the terms of the Change in Control or (ii) such accelerated vesting
is precluded by other limitations imposed by the Plan Administrator at the time
the repurchase right is issued.
C. Immediately following the consummation of the Change in Control, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof) or otherwise
expressly continued in full force and effect pursuant to the terms of the Change
in Control.
D. Each option which is assumed in connection with a Change in Control
shall be appropriately adjusted, immediately after such Change in Control, to
apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Change in Control had the option been
exercised immediately prior to such Change in Control. Appropriate adjustments
to reflect such Change in Control shall also be made to (i) the exercise price
payable per share under each outstanding option, PROVIDED the aggregate exercise
price payable for such securities shall remain the same, (ii) the maximum number
and/or class of securities available for issuance over the remaining term of the
Plan and (iii) the maximum number and/or class of securities for which any one
person may be granted options, separately exercisable stock appreciation rights
and direct stock issuances under the Plan per calendar year.
E. The Plan Administrator may at any time provide that one or more
options will automatically accelerate in connection with a Change in Control,
whether or not those options are assumed or otherwise continued in full force
and effect pursuant to the terms of the Change in Control. Any such option shall
accordingly become exercisable, immediately prior to
8
<PAGE>
the effective date of such Change in Control, for all of the shares of Common
Stock at the time subject to that option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. In addition, the Plan
Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall not be assignable in connection with such Change in
Control and shall terminate upon the consummation of such Change in Control.
F. The Plan Administrator may at any time provide that one or more
options will automatically accelerate upon an Involuntary Termination of the
Optionee's Service within a designated period (not to exceed eighteen (18)
months) following the effective date of any Change in Control in which those
options do not otherwise accelerate. Any options so accelerated shall remain
exercisable for fully-vested shares until the EARLIER of (i) the expiration of
the option term or (ii) the expiration of the one (1) year period measured from
the effective date of the Involuntary Termination. In addition, the Plan
Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall immediately terminate upon such Involuntary Termination.
G. The Plan Administrator may at any time provide that one or more
options will automatically accelerate in connection with a Hostile Take-Over.
Any such option shall become exercisable, immediately prior to the effective
date of such Hostile Take-Over, for all of the shares of Common Stock at the
time subject to that option and may be exercised for any or all of those shares
as fully-vested shares of Common Stock. In addition, the Plan Administrator may
at any time provide that one or more of the Corporation's repurchase rights
shall terminate automatically upon the consummation of such Hostile Take-Over.
Alternatively, the Plan Administrator may condition such automatic acceleration
and termination upon an Involuntary Termination of the Optionee's Service within
a designated period (not to exceed eighteen (18) months) following the effective
date of such Hostile Take-Over. Each option so accelerated shall remain
exercisable for fully-vested shares until the expiration or sooner termination
of the option term.
H. The portion of any Incentive Option accelerated in connection with a
Change in Control or Hostile Take Over shall remain exercisable as an Incentive
Option only to the extent the applicable One Hundred Thousand Dollar ($100,000)
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
IV. STOCK APPRECIATION RIGHTS
The Plan Administrator may, subject to such conditions as it may
determine, grant to selected Optionees stock appreciation rights which will
allow the holders of those rights to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of that option in
exchange for a distribution from the Corporation in an amount equal to the
excess of (a) the Option Surrender Value of the number of shares for which the
option is surrendered over (b) the aggregate exercise price payable for such
shares. The distribution may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
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ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee may implement the Salary Investment Option Grant
Program for one or more calendar years beginning after the Underwriting Date and
select the Section 16 Insiders and other highly compensated Employees eligible
to participate in the Salary Investment Option Grant Program for each such
calendar year. Each selected individual who elects to participate in the Salary
Investment Option Grant Program must, prior to the start of each calendar year
of participation, file with the Plan Administrator (or its designate) an
irrevocable authorization directing the Corporation to reduce his or her base
salary for that calendar year by an amount not less than Five Thousand Dollars
($5,000.00) nor more than Fifty Thousand Dollars ($50,000.00). The Primary
Committee shall have complete discretion to determine whether to approve the
filed authorization in whole or in part. To the extent the Primary Committee
approves the authorization, the individual who filed that authorization shall be
granted an option under the Salary Investment Grant Program on the first trading
day in January for the calendar year for which the salary reduction is to be in
effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; PROVIDED, however,
that each such document shall comply with the terms specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three and one-third
percent (33-1/3%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
A is the dollar amount of the approved reduction in the Optionee's
base salary for the calendar year, and
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<PAGE>
B is the Fair Market Value per share of Common Stock on the option
grant date.
C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable in
a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Service in the calendar year for
which the salary reduction is in effect. Each option shall have a maximum term
of ten (10) years measured from the option grant date.
D. CESSATION OF SERVICE. Each option outstanding at the time of the
Optionee's cessation of Service shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the EARLIER of (i) the expiration of the option term or (ii) the
expiration of the three (3)-year period following the Optionee's cessation of
Service. To the extent the option is held by the Optionee at the time of his or
her death, the option may be exercised by his or her Beneficiary. However, the
option shall, immediately upon the Optionee's cessation of Service, terminate
and cease to remain outstanding with respect to any and all shares of Common
Stock for which the option is not otherwise at that time exercisable.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile Take-Over while the
Optionee remains in Service, each outstanding option shall automatically
accelerate so that each such option shall, immediately prior to the effective
date of the Change in Control or Hostile Take-Over, become fully exercisable
with respect to the total number of shares of Common Stock at the time subject
to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. Each such option accelerated in connection
with a Change in Control shall terminate upon the Change in Control, except to
the extent assumed by the successor corporation (or parent thereof) or otherwise
continued in full force and effect pursuant to the terms of the Change in
Control. Each such option accelerated in connection with a Hostile Take-Over
shall remain exercisable until the expiration or sooner termination of the
option term.
B. Upon the occurrence of a Hostile Take-Over, the Optionee shall have
a thirty (30)-day period in which to surrender to the Corporation each of his or
her outstanding options. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Option Surrender Value of the shares of Common Stock at the time subject to each
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation.
IV. REMAINING TERMS
The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for options made
under the Discretionary Option Grant Program.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening options. Shares
of Common Stock may also be issued under the Stock Issuance Program pursuant to
share right awards which entitle the recipients to receive those shares upon the
attainment of designated performance goals or Service requirements. Each such
award shall be evidenced by one or more documents which comply with the terms
specified below.
A. PURCHASE PRICE.
1. The purchase price per share of Common Stock subject to direct
issuance shall be fixed by the Plan Administrator.
2. Subject to the provisions of Section II of Article Six, shares of
Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or
Subsidiary).
B. VESTING/ISSUANCE PROVISIONS.
1. The Plan Administrator may issue shares of Common Stock which are
fully and immediately vested upon issuance or which are to vest in one or more
installments over the Participant's period of Service or upon attainment of
specified performance objectives. Alternatively, the Plan Administrator may
issue share right awards which shall entitle the recipient to receive a
specified number of vested shares of Common Stock upon the attainment of one or
more performance goals or Service requirements established by the Plan
Administrator.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with respect
to the issued shares of Common Stock, whether or not the Participant's interest
in those shares is
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<PAGE>
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock, or should the performance
objectives not be attained with respect to one or more such unvested shares of
Common Stock, then those shares shall be immediately surrendered to the
Corporation for cancellation, and the Participant shall have no further
stockholder rights with respect to those shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid in cash
or cash equivalent (including the Participant's purchase-money indebtedness),
the Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to the
surrendered shares.
5. The Plan Administrator may waive the surrender and cancellation
of one or more unvested shares of Common Stock (or other assets attributable
thereto) which would otherwise occur upon the cessation of the Participant's
Service or the non-attainment of the performance objectives applicable to those
shares. Such waiver shall result in the immediate vesting of the Participant's
interest in the shares of Common Stock as to which the waiver applies. Such
waiver may be effected at any time, whether before or after the Participant's
cessation of Service or the attainment or non-attainment of the applicable
performance objectives.
6. Outstanding share right awards shall automatically terminate, and
no shares of Common Stock shall actually be issued in satisfaction of those
awards, if the performance goals or Service requirements established for such
awards are not attained. The Plan Administrator, however, shall have the
authority to issue shares of Common Stock in satisfaction of one or more
outstanding share right awards as to which the designated performance goals or
Service requirements are not attained.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. All of the Corporation's outstanding repurchase rights shall
terminate automatically, and all the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Change in
Control, except to the extent (i) those repurchase rights are assigned to the
successor corporation (or parent thereof) or otherwise continue in full force
and effect pursuant to the terms of the Change in Control or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
B. The Plan Administrator may at any time provide for the automatic
termination of one or more of those outstanding repurchase rights and the
immediate vesting of the shares of Common Stock subject to those terminated
rights upon (i) a Change in Control or Hostile Take-Over or (ii) an Involuntary
Termination of the Participant's Service within a designated period (not to
exceed eighteen (18) months) following the effective date of any Change in
Control or Hostile Take-Over in which those repurchase rights are assigned to
the successor corporation (or parent thereof) or otherwise continue in full
force and effect.
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III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
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ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Options shall be made on the dates specified below:
1. Each individual who is first elected or appointed as a
non-employee Board member at any time after the Underwriting Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase Twenty Two Thousand, Two Hundred Twenty Three
(22,223) shares of Common Stock.
2. On the date of each Annual Stockholders Meeting held after the
Plan Effective Date, each individual who is to continue to serve as a
non-employee Board member, whether or not that individual is standing for
re-election to the Board, shall automatically be granted a Non-Statutory Option
to purchase Seven Thousand, Seven Hundred Seventy Eight (7,778) shares of Common
Stock, provided such individual has served as a non-employee Board member for at
least six (6) months.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each initial 100,000-share option
grant shall become exercisable upon the Optionee's completion of four (4) months
of Board service measured from the grant date. Each annual 7,778-share option
grant shall become exercisable upon the Optionee's completion of six (6) months
of Board service measured from the grant date.
E. CESSATION OF BOARD SERVICE. The following provisions shall govern
the exercise of any options outstanding at the time of the Optionee's cessation
of Board service:
(i) Any option outstanding at the time of the Optionee's
cessation of Board service for any reason shall remain exercisable for a
twelve (12)-month period following the date of such cessation of Board
service, but in no event shall such option be exercisable after the
expiration of the option term.
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(ii) Any option exercisable in whole or in part by the Optionee
at the time of death may be subsequently exercised by his or her
Beneficiary.
(iii) Following the Optionee's cessation of Board service, the
option may not be exercised in the aggregate for more than the number of
shares for which the option was exercisable on the date of such cessation
of Board service. Upon the expiration of the applicable exercise period or
(if earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for which the
option has not been exercised. However, the option shall, immediately upon
the Optionee's cessation of Board service, terminate and cease to be
outstanding for any and all shares for which the option is not otherwise at
that time exercisable.
(iv) However, should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at the
time subject to the option shall immediately vest so that such option may,
during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for all or any portion of those shares as
fully-vested shares of Common Stock.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile Take-Over, each
outstanding option to the extent not otherwise exercisable shall automatically
accelerate in full so that each such option may, immediately prior to the
effective date of such Change in Control the Hostile Take-Over, be exercised for
all or any of those Option Shares as fully-vested shares of Common Stock. Each
such option accelerated in connection with a Change in Control shall terminate
upon the Change in Control, except to the extent assumed by the successor
corporation (or parent thereof) or otherwise continued in full force and effect
pursuant to the terms of the Change in Control. Each such option accelerated in
connection with a Hostile Take-Over shall remain exercisable until the
expiration or sooner termination of the option term.
B. Upon the occurrence of a Hostile Take-Over, the Optionee shall have
a thirty (30)-day period in which to surrender to the Corporation each of his or
her outstanding options. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Option Surrender Value of the shares of Common Stock at the time subject to each
surrendered option (whether or not the option is otherwise at the time
exercisable for those shares) over (ii) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five (5) days following
the surrender of the option to the Corporation.
C. Each option which is assumed in connection with a Change in Control
shall be appropriately adjusted to apply to the number and class of securities
which would have been issuable to the Optionee in consummation of such Change in
Control had the option been exercised immediately prior to such Change in
Control. Appropriate adjustments shall also be
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made to the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall remain
the same.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for options made under
the Discretionary Option Grant Program.
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ARTICLE SIX
MISCELLANEOUS
I. NO IMPAIRMENT OF AUTHORITY
Outstanding awards shall in no way affect the right of the Corporation
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
II. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Taxes incurred by such holders in connection with the exercise of their
options or the vesting of their shares. Such right may be provided to any such
holder in either or both of the following formats:
STOCK WITHHOLDING: The election to have the Corporation withhold,
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
STOCK DELIVERY: The election to deliver to the Corporation, at the
time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
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IV. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Plan Effective
Date. However, the Salary Investment Option Grant Program shall not be
implemented until such time as the Primary Committee or the Board may deem
appropriate. Options may be granted under the Discretionary Option Grant or
Automatic Option Grant Program at any time on or after the Plan Effective Date.
However, no options granted under the Plan may be exercised, and no shares shall
be issued under the Plan, until the Plan is approved by the Corporation's
stockholders. If such stockholder approval is not obtained within twelve (12)
months after the Plan Effective Date, then all options previously granted under
this Plan shall terminate and cease to be outstanding, and no further options
shall be granted and no shares shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan, and
no further options or direct stock issuances shall be made under the Predecessor
Plan after the Section 12 Registration Date. All options outstanding under the
Predecessor Plan on the Section 12 Registration Date shall be incorporated into
the Plan at that time and shall be treated as outstanding options under the
Plan. However, each outstanding option so incorporated shall continue to be
governed solely by the terms of the documents evidencing such option, and no
provision of the Plan shall be deemed to affect or otherwise modify the rights
or obligations of the holders of such incorporated options with respect to their
acquisition of shares of Common Stock.
C. One or more provisions of the Plan, including (without limitation)
the option/vesting acceleration provisions of Article Two relating to Changes in
Control, may, in the Plan Administrator's discretion, be extended to one or more
options incorporated from the Predecessor Plan which do not otherwise contain
such provisions.
D. The Plan shall terminate upon the EARLIEST of (i) March 25, 2009,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Change in Control. Upon such plan
termination, all outstanding options and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.
V. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in
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excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under those programs shall be held in
escrow until there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under the
Plan. If such stockholder approval is not obtained within twelve (12) months
after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
B. BENEFICIARY shall mean, in the event the Plan Administrator
implements a beneficiary designation procedure, the person designated by an
Optionee or Participant, pursuant to such procedure, to succeed to such person's
rights under any outstanding awards held by him or her at the time of death. In
the absence of such designation or procedure, the Beneficiary shall be the
personal representative of the estate of the Optionee or Participant or the
person or persons to whom the award is transferred by will or the laws of
descent and distribution.
C. BOARD shall mean the Corporation's Board of Directors.
D. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:
(i) a merger, consolidation or reorganization approved by the
Corporation's stockholders, UNLESS securities representing more than fifty
percent (50%) of the total combined voting power of the voting securities
of the successor corporation are immediately thereafter beneficially owned,
directly or indirectly and in substantially the same proportion, by the
persons who beneficially owned the Corporation's outstanding voting
securities immediately prior to such transaction,
(ii) any stockholder-approved transfer or other disposition of all
or substantially all of the Corporation's assets, or
(iii) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders which the Board recommends such
stockholders accept.
E. CODE shall mean the Internal Revenue Code of 1986, as amended.
F. COMMON STOCK shall mean the Corporation's common stock.
G. CORPORATION shall mean Juno Online Services, Inc., a Delaware
corporation, and its successors.
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H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary
option grant program in effect under the Plan.
I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as such price is reported on
the Nasdaq National Market or any successor system. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
(iii) For purposes of any options made prior to the Section 12
Registration Date, the Fair Market Value shall be determined by the Plan
Administrator, after taking into account such factors as it deems
appropriate.
L. HOSTILE TAKE-OVER shall mean:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders which the Board does not recommend such
stockholders to accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board
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membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who were
still in office at the time the Board approved such election or nomination.
M. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
N. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change
in his or her position with the Corporation or Parent or Subsidiary
employing the individual which materially reduces his or her duties and
responsibilities or the level of management to which he or she reports, (B)
a reduction in his or her level of compensation (including base salary,
fringe benefits and target bonus under any performance based bonus or
incentive programs) by more than fifteen percent (15%) or (C) a relocation
of such individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected by
the Corporation without the individual's consent.
O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any intentional wrongdoing by such
person, whether by omission or commission, which adversely affects the business
or affairs of the Corporation (or any Parent or Subsidiary) in a material
manner. This shall not limit the grounds for the dismissal or discharge of any
person in the Service of the Corporation (or any Parent or Subsidiary).
P. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
Q. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
R. OPTION SURRENDER VALUE shall mean the Fair Market Value per share of
Common Stock on the date the option is surrendered to the Corporation or, in the
event of a Hostile Take-Over, effected through a tender offer, the highest
reported price per share of Common Stock paid by the tender offeror in effecting
such Hostile Take-Over, if greater. However, if the surrendered option is an
Incentive Option, the Option Surrender Value shall not exceed the Fair Market
Value per share.
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S. OPTIONEE shall mean any person to whom an option is granted under
the Discretionary Option Grant, Salary Investment Option Grant or Automatic
Option Grant Program.
T. PARENT shall mean any entity that directly or indirectly possesses
the power to direct or cause the direction of the management or policies of the
Corporation, whether through ownership of voting securities, by contract or
otherwise.
U. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
Program, Permanent Disability or Permanently Disabled shall mean the inability
of the non-employee Board member to perform his or her usual duties as a Board
member by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12)
months or more.
W. PLAN shall mean the Corporation's 1999 Stock Incentive Plan, as set
forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant, Salary Investment Option Grant and
Stock Issuance Programs with respect to one or more classes of eligible persons,
to the extent such entity is carrying out its administrative functions under
those programs with respect to the persons under its jurisdiction. However, the
Primary Committee shall have the plenary authority to make all factual
determinations and to construe and interpret any and all ambiguities under the
Plan to the extent such authority is not otherwise expressly delegated to any
other Plan Administrator.
Y. PLAN EFFECTIVE DATE shall mean March 26, 1999, the date on which the
Plan was adopted by the Board.
Z. PREDECESSOR PLAN shall mean the Corporation's pre-existing 1997
Class B Limited Partnership Unit Option/Issuance Plan in effect immediately
prior to the Plan Effective Date hereunder.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and to administer the Salary Investment Option Grant Program with
respect to all eligible individuals.
BB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
investment grant program in effect under the Plan.
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CC. SECONDARY COMMITTEE shall mean a committee of one (1) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
DD. SECTION 12 REGISTRATION DATE shall mean the date on which the
Common Stock is first registered under Section 12(g) of the 1934 Act.
EE. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
FF. SERVICE shall mean the performance of services for the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
GG. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
HH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.
II. SUBSIDIARY shall mean any entity in which the Corporation
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies, whether through ownership of voting securities, by
contract or otherwise.
JJ. TAXES shall mean the Federal, state and local income and employment
withholding tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those options
or the vesting of those shares.
KK. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
LL. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
MM. UNDERWRITING DATE shall mean the date on which the Underwriting
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.
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Exhibit 10.2
JUNO ONLINE SERVICES, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This 1999 Employee Stock Purchase Plan is intended to promote the
interests of Juno Online Services, Inc., a Delaware corporation, by providing
eligible employees with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll-deduction based employee stock
purchase plan designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such terms
in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Section 423 of the Code. Decisions of the Plan Administrator
shall be final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of
Common Stock purchased on the open market. The maximum number of shares of
Common Stock which may be issued over the term of the Plan shall not exceed
Five Hundred Fifty Five Thousand, Five Hundred Fifty Six (555,556) shares.
B. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant and in the aggregate on any one Purchase Date and (iii) the number
and class of securities and the price per share in effect under each outstanding
purchase right in order to prevent the dilution or enlargement of benefits
thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
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B. Each offering period shall be of such duration (not to exceed
twenty-four (24) months) as determined by the Plan Administrator prior to the
start date of such offering period. However, the initial offering period shall
commence at the Effective Time and terminate on the last business day in July
2001. Subsequent offering periods shall commence as designated by the Plan
Administrator.
C. Each offering period shall be comprised of a series of one or
more successive Purchase Intervals. Purchase Intervals shall run from the first
business day in February each year to the last business day in July of the same
year and from the first business day in August each year to the last business
day in January of the following year. However, the first Purchase Interval in
effect under the initial offering period shall commence at the Effective Time
and terminate on the last business day in January 2000.
D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within an offering period be less than the Fair Market Value per
share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new offering
period shall have a duration of twenty (24) months, unless a shorter duration is
established by the Plan Administrator within five (5) business days following
the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of
an offering period under the Plan may enter that offering period on such start
date or on any subsequent Semi-Annual Entry Date within that offering period,
provided he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee after the
start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.
C. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.
D. To participate in the Plan for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes
of acquiring shares of Common Stock during an offering period may be any
multiple of one percent (1%) of the Cash Earnings paid to the Participant during
each Purchase Interval within that offering period, up to a maximum of fifteen
percent (15%). The deduction rate so authorized shall
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continue in effect throughout the offering period, except to the extent such
rate is changed in accordance with the following guidelines:
(i) The Participant may, at any time during the offering period,
reduce his or her rate of payroll deduction to become effective as soon
as possible after filing the appropriate form with the Plan
Administrator. The Participant may not, however, effect more than one (1)
such reduction per Purchase Interval.
(ii) The Participant may, prior to the commencement of any new
Purchase Interval within the offering period, increase the rate of his or
her payroll deduction by filing the appropriate form with the Plan
Administrator. The new rate (which may not exceed the fifteen percent
(15%) maximum) shall become effective on the start date of the first
Purchase Interval following the filing of such form.
B. Payroll deductions shall begin on the first pay day following
the Participant's Entry Date into the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be required
to be held in any segregated account or trust fund and may be commingled with
the general assets of the Corporation and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the
termination of the Participant's purchase right in accordance with the
provisions of the Plan.
D. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive installments over
the remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Corporation or any Corporate Affiliate.
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B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant (other than Participants whose payroll deductions
have previously been refunded pursuant to the Termination of Purchase Right
provisions below) on each such Purchase Date. The purchase shall be effected by
applying the Participant's payroll deductions for the Purchase Interval ending
on such Purchase Date to the purchase of whole shares of Common Stock at the
purchase price in effect for the Participant for that Purchase Date.
C. PURCHASE PRICE. The purchase price per share at which Common
Stock will be purchased on the Participant's behalf on each Purchase Date within
the offering period shall be equal to eighty-five percent (85%) of the LOWER of
(i) the Fair Market Value per share of Common Stock on the Participant's Entry
Date into that offering period or (ii) the Fair Market Value per share of Common
Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common
Stock purchasable by a Participant on each Purchase Date during the offering
period shall be the number of whole shares obtained by dividing the amount
collected from the Participant through payroll deductions during the Purchase
Interval ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any one Purchase Date shall not
exceed One Thousand, Six Hundred Sixty Seven (1,667) shares, subject to periodic
adjustments in the event of certain changes in the Corporation's capitalization.
In addition, the maximum number of shares of Common Stock purchasable in the
aggregate by all Participants on any one Purchase Date shall not exceed One
Hundred Thirty Eight, Eight Hundred Eighty Nine (138,889) shares, subject to
periodic adjustments in the event of certain changes in the corporation's
capitalization.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to
the purchase of shares of Common Stock on any Purchase Date because they are not
sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable on the Purchase Date
shall be promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next scheduled
Purchase Date in the offering period, terminate his or her outstanding
purchase right by filing the appropriate form with the Plan Administrator
(or its designate), and no further payroll deductions shall be collected
from the Participant with respect to the terminated purchase right. Any
payroll deductions collected during the Purchase Interval in which such
termination occurs shall, at the Participant's election, be immediately
refunded or held for the purchase of shares on the next Purchase Date. If
no such election is made at the time such purchase right is terminated,
then the payroll deductions collected with respect to the terminated
right shall be refunded as soon as possible.
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(ii) The termination of such purchase right shall be irrevocable,
and the Participant may not subsequently rejoin the offering period for
which the terminated purchase right was granted. In order to resume
participation in any subsequent offering period, such individual must
re-enroll in the Plan (by making a timely filing of the prescribed
enrollment forms) on or before his or her scheduled Entry Date into that
offering period.
(iii) Should the Participant cease to remain an Eligible Employee
for any reason (including death, disability or change in status) while
his or her purchase right remains outstanding, then that purchase right
shall immediately terminate, and all of the Participant's payroll
deductions for the Purchase Interval in which the purchase right so
terminates shall be immediately refunded. However, should the Participant
cease to remain in active service by reason of an approved unpaid leave
of absence, then the Participant shall have the right, exercisable up
until the last business day of the Purchase Interval in which such leave
commences, to (a) withdraw all the payroll deductions collected to date
on his or her behalf for that Purchase Interval or (b) have such funds
held for the purchase of shares on his or her behalf on the next
scheduled Purchase Date. In no event, however, shall any further payroll
deductions be collected on the Participant's behalf during such leave.
Upon the Participant's return to active service (i) within ninety (90)
days following the commencement of such leave or, (ii) prior to the
expiration of any longer period for which such Participant's right to
reemployment with the Corporation is guaranteed by either statute or
contract, his or her payroll deductions under the Plan shall
automatically resume at the rate in effect at the time the leave began.
However, should the Participant's leave of absence exceed ninety (90)
days and his or her re-employment rights not be guaranteed by either
statute or contract, then the Participant's status as an Eligible
Employee will be deemed to terminate on the ninety-first (91st) day of
that leave, and such Participant's purchase right for the offering period
in which that leave began shall thereupon terminate. An individual who
returns to active employment following such a leave shall be treated as a
new Employee for purposes of the Plan and must, in order to resume
participation in the Plan, re-enroll in the Plan (by making a timely
filing of the prescribed enrollment forms) on or before his or her
scheduled Entry Date into the offering period.
G. CORPORATE TRANSACTION. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the Purchase Interval in which such Corporate Transaction occurs to the
purchase of whole shares of Common Stock at a purchase price per share equal to
eighty-five percent (85%) of the LOWER of (i) the Fair Market Value per share of
Common Stock on the Participant's Entry Date into the offering period in which
such Corporate Transaction occurs or (ii) the Fair Market Value per share of
Common Stock immediately prior to the effective date of such Corporate
Transaction. However, the applicable limitations on the number of shares of
Common Stock purchasable per Participant and in the aggregate shall continue to
apply to any such purchase.
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The Corporation shall use its best efforts to provide at least
ten (10)-days prior written notice of the occurrence of any Corporate
Transaction, and Participants shall, following the receipt of such notice, have
the right to terminate their outstanding purchase rights prior to the effective
date of the Corporate Transaction.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares
of Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only by
the Participant and shall not be assignable or transferable by the Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations to the
purchase rights granted under the Plan, the following provisions shall be in
effect:
(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue in a series of installments on each
successive Purchase Date during the offering period on which such right
remains outstanding.
(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Common Stock under
one (1) or more other purchase rights at a rate equal to Twenty-Five
Thousand Dollars ($25,000) worth of Common Stock (determined on the basis
of the Fair Market Value per share on the date or dates of grant) for
each calendar year such rights were at any time outstanding.
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C. If by reason of such accrual limitations, any purchase right of
a Participant does not accrue for a particular Purchase Interval, then the
payroll deductions which the Participant made during that Purchase Interval with
respect to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of
this Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on April 19, 1999 and shall
become effective at the Effective Time, PROVIDED no purchase rights granted
under the Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such stockholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect, and all sums collected from Participants during
the initial offering period hereunder shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate
upon the EARLIEST of (i) the last business day in July 2009, (ii) the date on
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Corporate Transaction. No
further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.
X. AMENDMENT/TERMINATION OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan at any
time to become effective immediately following the close of any Purchase
Interval. However, the Plan may be amended or terminated immediately upon Board
action, if and to the extent necessary to assure that the Corporation will not
recognize, for financial reporting purposes, any compensation expense in
connection with the shares of Common Stock offered for purchase under the Plan,
should the financial accounting rules applicable to the Plan at the Effective
Time be subsequently revised so as to require the recognition of compensation
expense in the absence of such amendment or termination.
B. In no event may the Board effect any of the following amendments
or revisions to the Plan without the approval of the Corporation's stockholders:
(i) increase the number of shares of Common Stock issuable under the Plan or the
maximum number of shares purchasable per Participant on any one Purchase Date,
except for permissible adjustments in the
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event of certain changes in the Corporation's capitalization, (ii) alter the
purchase price formula so as to reduce the purchase price payable for the shares
of Common Stock purchasable under the Plan or (iii) modify eligibility
requirements for participation in the Plan.
XI. GENERAL PROVISIONS
A. Nothing in the Plan shall confer upon the Participant any right
to continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
B. All costs and expenses incurred in the administration of the
Plan shall be paid by the Corporation; however, each Plan Participant shall bear
all costs and expenses incurred by such individual in the sale or other
disposition of any shares purchased under the Plan.
C. The provisions of the Plan shall be governed by the laws of the
State of New York without regard to that State's conflict-of-laws rules.
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SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
Juno Online Services, Inc.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CASH EARNINGS shall mean the (i) base salary payable to a
Participant by one or more Participating Corporations during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
all overtime payments, bonuses, commissions, current profit-sharing
distributions and other incentive-type payments. Such Cash Earnings shall be
calculated before deduction of (A) any income or employment tax withholdings or
(B) any pre-tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. However,
Cash Earnings shall NOT include any contributions (other than Code Section
401(k) or Code Section 125 contributions) made on the Participant's behalf by
the Corporation or any Corporate Affiliate to any employee benefit or welfare
plan now or hereafter established.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation.
G. CORPORATION shall mean Juno Online Services, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Juno Online Services, Inc. which shall by appropriate
action adopt the Plan.
H. EFFECTIVE TIME shall mean the time at which the Underwriting
Agreement is executed. Any Corporate Affiliate which becomes a Participating
Corporation after such Effective Time shall designate a subsequent Effective
Time with respect to its employee-Participants.
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I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
J. ENTRY DATE shall mean the date an Eligible Employee first
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which
such quotation exists.
(iii) For purposes of the initial offering period which begins at
the Effective Time, the Fair Market Value shall be deemed to be equal to
the price per share at which the Common Stock is sold in the initial
public offering pursuant to the Underwriting Agreement.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
M. PARTICIPANT shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.
N. PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.
O. PLAN shall mean the Corporation's 1999 Employee Stock Purchase
Plan, as set forth in this document.
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P. PLAN ADMINISTRATOR shall mean the committee of two (2) or more
Board members appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each Purchase
Interval. The initial Purchase Date shall be January 31, 2000.
R. PURCHASE INTERVAL shall mean each successive six (6)-month
period within the offering period at the end of which there shall be purchased
shares of Common Stock on behalf of each Participant.
S. SEMI-ANNUAL ENTRY DATE shall mean the first business day in
February and August each year on which an Eligible Employee may first enter an
offering period.
T. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
U. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the Corporation's
initial public offering of its Common Stock.
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EXHIBIT 10.3
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT is made as of March
1, 1999, by and among JUNO ONLINE SERVICES, INC., a Delaware corporation (the
"Company"), and the investors listed on Annex I hereto, each of which is herein
referred to as an "Investor."
RECITALS
WHEREAS, certain of the Investors own the respective number of shares of
Series A Convertible Preferred Stock, $.01 par value ("Series A Preferred
Stock") of the Company, as set forth opposite each of their names in Annex I
hereto;
WHEREAS, the holders of Series A Preferred Stock possess registration
rights and other rights pursuant to that certain Registration Rights Agreement,
dated as of February 1, 1999, between the Company and such Investors (the "Prior
Agreement");
WHEREAS, the holders of Series A Preferred Stock desire to terminate the
Prior Agreement and to accept the rights created pursuant hereto in lieu of the
rights granted to them under the Prior Agreement;
WHEREAS, certain Investors are purchasing shares of the Company's Series B
Convertible Preferred Stock, $.01 par value per share or of the Company's Series
B Prime Preferred Stock, $.01 par value per share (together, the "Series B
Preferred Stock"), pursuant to the terms of the Series B Convertible Preferred
Stock Purchase Agreement of even date herewith between the Company and such
Investors (the "Series B Preferred Stock Purchase Agreement"), certain of the
Company's and such Investors' obligations under which are conditioned upon the
execution and delivery of this Agreement by such Investors, the holders of
Series A Preferred Stock and the Company; and
WHEREAS, the parties to the Series B Preferred Stock Purchase Agreement are
also entering into a Stockholders Agreement dated as of the date hereof (the
"Stockholders Agreement") in connection with the transactions contemplated by
the Series B Preferred Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the holders of Series A Preferred Stock hereby agree that the
Prior Agreement shall be superseded and replaced in its entirety by this
Agreement, and the parties hereto further agree as follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have the
following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"COMMON STOCK" shall mean the Common Stock, $.01 par value per share, of
the Company, as constituted as of the date of this Agreement.
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"CONVERSION SHARES" shall mean the shares of Common Stock issued upon
conversion of the Series A Preferred Stock and/or upon conversion of the Series
B Preferred Stock.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"PREFERRED STOCK" shall mean the Series A Preferred Stock and the Series
B Preferred Stock.
"PUBLIC SALE" shall mean any sale of Common Stock to the public pursuant
to an offering registered under the Securities Act or to the public pursuant to
the provisions of Rule 144 (or any successor or similar rule) adopted under the
Securities Act.
"QUALIFIED PUBLIC OFFERING" shall mean the consummation of a firm
commitment underwritten public offering of shares of the Company's Common Stock
in which the aggregate net proceeds to the Company (after deduction of
underwriting discounts and commissions and expenses of the offering) shall be at
least $40,000,000.
"REGISTRATION EXPENSES" shall mean the expenses so described in Section
9 hereof.
"RESTRICTED STOCK" shall mean any shares of capital stock of the Company
held by the Investors, the certificates for which are required by the provisions
of Section 3 hereof to bear the legend set forth in such Section.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"SELLING EXPENSES" shall mean the expenses so described in Section 9
hereof.
"SERIES A PREFERRED STOCK" shall have the meaning ascribed thereto in
the second recital paragraph to this Agreement.
"SERIES B PREFERRED STOCK" shall have the meaning ascribed thereto in
the fifth recital paragraph to this Agreement.
2. PRIOR AGREEMENT; WAIVER AND CONSENT.
(a) The parties hereto hereby acknowledge and agree that the Prior
Agreement is hereby amended, restated and superseded in all respects by this
Agreement.
(b) The holders of Series A Preferred Stock hereby waive any and all
rights granted to them in the Prior Agreement and hereby consent to the entering
by the Company into the Series B Preferred Stock Purchase Agreement and all of
the transactions contemplated thereby.
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3. RESTRICTIVE LEGEND. Each certificate representing the Series A Preferred
Stock, each certificate representing the Series B Preferred Stock, each
certificate representing the Conversion Shares, and, other than in a Public Sale
or as otherwise provided in Section 4 hereof, each certificate issued upon
exchange or transfer of any Series A Preferred Stock, Series B Preferred Stock
or Conversion Shares, as the case may be, shall be stamped or otherwise
imprinted with a legend substantially in the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED
UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
4. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any
Restricted Stock (other than under the circumstances described in Sections 5, 6
or 7 hereof), the holder thereof shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel reasonably satisfactory to the effect that the proposed
transfer of such Restricted Stock may be effected without registration under the
Securities Act, whereupon the holder of such Restricted Stock shall be entitled
to transfer such Restricted Stock in accordance with the terms of its notice;
PROVIDED, HOWEVER, that in the case of any holder of Preferred Stock that is a
partnership or limited liability company, no such opinion or other documentation
shall be required if such notice shall cover a pro-rata distribution by such
partnership or limited liability company to its partners or members; PROVIDED,
FURTHER, that no such opinion or other documentation shall be required if such
notice shall describe the transfer (i) from a holder of Restricted Stock to a
shareholder, affiliate, spouse or lineal descendant of such person or (ii) from
one News Group Company (as hereinafter defined) to another News Group Company,
provided that, in each such case, any such transferee shall agree in writing to
be bound by, and to comply with, all applicable provisions of the Agreement and
be deemed a Stockholder for purposes of this Agreement. For purposes of this
section, a "News Group Company" shall mean British Sky Broadcasting plc and any
other entity, affiliate, person or joint venture, including any successors, in
which News Corporation (X) holds at least a 25% voting or non-voting equity
interest and (Y) possesses the power, either directly or indirectly, to direct
or participate in the direction of management and policies of such entity,
affiliate, person or joint venture, whether through the ownership of voting
securities, by contract or otherwise. In addition to any legend required by the
Stockholders Agreement, each certificate representing the Restricted Stock
transferred as above provided shall bear the legend set forth in Section 3,
unless (i) such transfer is in accordance with the provisions of Rule 144 (or
any other rule permitting public sale without registration under the Securities
Act) or (ii) the opinion of counsel referred to above is to the further effect
that the transferee and any subsequent transferee (other than an affiliate of
the Company) would be entitled to transfer such securities without registration
under the Securities Act.
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The foregoing restrictions on transferability of Restricted Stock shall
terminate as to any particular shares of Restricted Stock when such shares shall
have been effectively registered under the Securities Act and sold or otherwise
disposed of in accordance with the intended method of disposition by the seller
or sellers thereof set forth in the registration statement concerning such
shares. Whenever a holder of Restricted Stock is able to demonstrate to the
reasonable satisfaction of the Company (and its counsel) that the provisions of
Rule 144(k) of the Securities Act (or subsequent similar rule) are available to
such holder without limitation, such holder of Restricted Stock shall be
entitled to receive from the Company, without expense, a new certificate not
bearing the restrictive legend set forth in Section 3.
5. REQUIRED REGISTRATION.
(a) At any time commencing on the date that is 180 days following the
consummation of the first public offering of shares of Common Stock by the
Corporation, the holders of at least 10% of the Series A Preferred Stock (or the
holders of shares of Common Stock issued upon conversion of the Series A
Preferred Stock) may request the Company to register under the Securities Act
shares of such stock held by such requesting holder or holders for sale in the
manner specified in such notice, PROVIDED, HOWEVER, that the only securities
which the Company shall be required to register pursuant hereto shall be shares
of Common Stock, and PROVIDED, FURTHER, that the value of such securities to be
registered is at least $5,000,000. The Company shall be obligated to register
Restricted Stock pursuant to this Section 5(a) on three occasions only.
(b) At any time commencing on the date that is 180 days following the
consummation of the first public offering of shares of Common Stock by the
Corporation, the holders of at least 10% of the Series B Preferred Stock (or the
holders of shares of Common Stock issued upon conversion of the Series B
Preferred Stock) may request the Company to register under the Securities Act
shares of such stock held by such requesting holder or holders for sale in the
manner specified in such notice, provided, however, that the only securities
which the Company shall be required to register pursuant hereto shall be shares
of Common Stock, and PROVIDED, FURTHER, that the value of such securities to be
registered is at least $5,000,000. The Company shall be obligated to register
Restricted Stock pursuant to this Section 5(b) on three occasions only.
(c) Promptly following receipt of any notice under Section 5(a) or under
Section 5(b), the Company shall immediately notify any holders of Restricted
Stock from whom notice has not been received and shall use its best efforts to
register under the Securities Act, for public sale in accordance with the method
of disposition specified in such notice from requesting holders, the number of
shares of Restricted Stock specified in such notice (and the number of shares of
Restricted Stock in any notices received from other holders within 10 days after
their receipt of such notice from the Company). If such method of disposition
shall be an underwritten public offering, (i) the Company may designate the
managing underwriter of such offering, such designation subject to the approval
of the party or parties making the request pursuant to this Section 5, such
approval not to be unreasonably withheld, and (ii) as and to the extent that, in
the opinion of the managing underwriter, the Restricted Stock so requested to be
registered would adversely affect the marketing of such Restricted Stock, the
number of shares
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of Restricted Stock included in such registration shall be reduced pro rata
among all the holders of Preferred Stock making such request under this Section
5, based upon the number of shares owned by such holders of Preferred Stock. In
the event that the number of shares of Restricted Stock included in such
registration shall be reduced for the requesting holders of Restricted Stock by
an amount equal to or greater than 37.5% of the aggregate number of shares of
Restricted Stock requested to be registered by such holders of Restricted Stock,
then such request to register Restricted Stock shall not be counted as one of
the permitted requests for registration pursuant to Section 5(a) or 5(b) above.
(d) Notwithstanding anything to the contrary contained herein, the
obligation of the Company under this Section 5 shall be deemed satisfied only
when a registration statement covering all shares of Restricted Stock specified
in notices received under paragraph (a) or (b) above, as reduced (if at all)
pursuant to the provisions of paragraph (c) above, for sale in accordance with
the method of disposition specified by the requesting holder, shall have become
effective and, if such method of disposition is a firm commitment underwritten
public offering, all such shares shall have been sold pursuant thereto.
(e) The Company shall be entitled to include in any registration
statement referred to in this Section 5, for sale in accordance with the method
of disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account, except as and to the extent that, in
the opinion of the managing underwriter (if such method of disposition shall be
an underwritten public offering), such inclusion would adversely affect the
marketing of the Restricted Stock to be sold. In the event that a reduction of
shares of Restricted Stock being registered is necessary pursuant to the
provisions of paragraph (c) above, all shares of Common Stock to be sold by the
Company for its own account will get cut-back before any shares of Restricted
Stock to be sold by a holder of such Restricted Stock get cut-back. Except as
provided in this paragraph (e), the Company will not effect any other
registration of its Common Stock, whether for its own account or that of other
holders, from the date of receipt of a notice from requesting holders pursuant
to this Section 5 until the completion of the period of distribution of the
registration contemplated thereby.
6. FORM S-3 REGISTRATION.
(a) If the Company shall receive from any holder or holders of
Restricted Stock, a written request or requests that the Company effect a
registration on Form S-3 (or any successor form to Form S-3 regardless of its
designation), the Company will: (i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other holders
of Restricted Stock from whom notice has not been received; and
(ii) as soon as practicable, effect such registration (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualifications under applicable blue sky or other
state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other government
requirements or regulations) as may be so requested and as would permit or
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facilitate the sale and distribution of all or such portion of such
holder's or holders' Restricted Stock as are specified in such request,
together with all or such portion of the Restricted Stock of any holder or
holders thereof joining in such request as are specified in a written
request given within thirty (30) days after receipt of such written notice
from the Company, PROVIDED that the Company shall not be obligated to
effect any such registration, qualification or compliance pursuant to this
Section 6(a) if (A) the Company is not entitled to use Form S-3 (or any
subsequent similar form) or (B) the aggregate amount of the Restricted
Stock requested to be registered pursuant to this Section is less than
$1,000,000, and PROVIDED, FURTHER, that the only securities which the
Company shall be required to register pursuant hereto shall be shares of
Common Stock. Subject to the foregoing, the Company shall file a
registration statement covering the Restricted Stock so requested to be
registered as soon as practicable after receipt of the request or requests
of the holders of the Restricted Stock.
(b) Registrations effected pursuant to this Section 6 shall not be
counted as requests for registration effected pursuant to Section 5.
7. INCIDENTAL REGISTRATION. If the Company, at any time following the
consummation of its initial public offering of equity securities (other than
pursuant to Section 5 or Section 6 hereof), proposes to register any of its
Common Stock under the Securities Act for sale to the public, whether for its
own account or for the account of other security holders or both (except with
respect to registration statements on Form S-4 or S-8 or another form not
available for registering the Restricted Stock for sale to the public), it will
give written notice at such time to all holders of outstanding Restricted Stock
of its intention to do so. Upon the written request of any such holder, given
within 10 days after receipt of any such notice by the Company, to register any
of its Restricted Stock (which request shall state the intended method of
disposition thereof), the Company will use its best efforts to cause the
Restricted Stock as to which registration shall have been so requested to be
included in the securities to be covered by the registration statement proposed
to be filed by the Company, all to the extent requisite to permit the sale or
other disposition by the holder (in accordance with its written request) of such
Restricted Stock so registered, PROVIDED, HOWEVER, that the only securities
which the Company shall be required to register pursuant hereto shall be shares
of Common Stock. In the event that any registration pursuant to this Section 7
shall be, in whole or in part, an underwritten public offering of Common Stock,
any request by a holder pursuant to this Section 7 to register Restricted Stock
shall specify that either (i) such Restricted Stock is to be included in the
underwriting on the same terms and conditions as the shares of Common Stock
otherwise being sold through underwriters under such registration or (ii) such
Restricted Stock is to be sold in the open market without any underwriting, on
terms and conditions comparable to those normally applicable to offerings of
common stock in reasonably similar circumstances. The number of shares of
Restricted Stock to be included in such an underwriting may be reduced (PRO RATA
among the requesting holders based upon the number of shares so requested to be
registered) if and to the extent that the managing underwriter shall be of the
opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company therein, PROVIDED, HOWEVER, that such
number of shares of Restricted Stock shall not be reduced if any shares are to
be included in such underwriting for the account of any person other than the
Company or other than a holder of Restricted Stock and PROVIDED, FURTHER, that
no reduction in the number of shares
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of Restricted Stock requested to be included in such registration shall limit
the number of shares of Restricted Stock being offered pursuant to such
registration to less than thirty percent (30%) of the aggregate number of shares
offered under the registration.
8. REGISTRATION PROCEDURES AND EXPENSES. If and whenever the Company is
required by the provisions of Sections 5, 6 or 7 hereof to effect the
registration of any of the Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare (and afford counsel for the selling holders reasonable
opportunity to review and comment thereon) and file with the Commission a
registration statement (which, in the case of an underwritten public offering
pursuant to Section 5 hereof, shall be on Form S-1 or other form of general
applicability satisfactory to the managing underwriter selected as therein
provided) with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) prepare (and afford counsel for the selling holders reasonable
opportunity to review and comment thereon) and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (a) above and as shall
comply with the provisions of the Securities Act with respect to the disposition
of all Restricted Stock covered by such registration statement in accordance
with the sellers' intended method of disposition set forth in such registration
statement for such period;
(c) furnish to each seller and to each underwriter such number of copies
of the registration statement and the prospectus included therein (including
each preliminary prospectus) as such persons may reasonably request in order to
facilitate the public sale or other disposition of the Restricted Stock covered
by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or blue sky laws of
such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter, shall reasonably
request;
(e) immediately notify each seller under such registration statement and
each underwriter, at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, of the happening of any event as a result
of which the prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(f) use its best efforts (if the offering is underwritten) to furnish,
at the request of any seller, on the date that Restricted Stock is delivered to
the underwriters for sale pursuant to such registration: (i) an opinion, in
customary form, dated as of such date, of counsel representing the Company for
the purposes of such registration, addressed to the underwriters and to such
seller, stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no stop order
suspending the
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effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (B) the
registration statement, the related prospectus, and each amendment or supplement
thereof, comply as to form in all material respects with the requirements of the
Securities Act and the applicable rules and regulations of the Commission
thereunder (except that such counsel need express no opinion as to financial
statements contained therein or any information provided by the underwriters or
the sellers) and (C) to such other effects as may reasonably be requested by
counsel for the underwriters or by such seller or its counsel (including a
so-called 10b-5 opinion), and (ii) a letter, dated as of such date, from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as of the
period ending no more than five business days prior to the date of such letter)
with respect to the registration in respect of which such letter is being given
as such underwriters or seller may reasonably request; and
(g) make available for inspection by each seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by such seller or underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to
supply, subject to any confidentiality agreement reasonably required by the
Company, all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement and
permit such seller, attorney, accountant or agent to participate in the
preparation of such registration statement.
For purposes of paragraphs (a) and (b) above and of Section 5(d) hereof,
the period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby or
six months after the effective date thereof.
In connection with each registration hereunder, the selling holders of
Restricted Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as shall be
reasonably necessary in order to assure compliance with federal and applicable
state securities laws.
In connection with each registration pursuant to Sections 5, 6 and 7
hereof covering an underwritten public offering, the Company agrees to enter
into a written agreement with the managing underwriter selected in the manner
herein provided in such form and containing such provisions as are customary in
the securities business for such an arrangement between major underwriters and
companies of the Company's size and investment stature (including, without
limitation, customary provisions providing for indemnification of the selling
security-holders by the underwriters), PROVIDED that (i) such agreement shall
not contain any such
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<PAGE>
provision applicable to the Company which is inconsistent with the provisions
hereof, (ii) the time and place of the closing under said agreement shall be as
mutually agreed upon among the Company, such managing underwriter and the
selling holders of Restricted Stock and (iii) the selling holders of Restricted
Stock shall be obligated to agree, pursuant to the terms of such underwriting
agreement, not to sell, pledge or otherwise transfer the remaining shares of
Common Stock or Preferred Stock held by such selling holders for the lock-up
period specified in such underwriting agreement; PROVIDED, HOWEVER, that such
period shall not exceed the lesser of (i) 180 days or (ii) the number of days
which officers and directors of the Company are contractually restricted from
selling stock in the Company.
The Company may postpone, for a period not to exceed three months, the
filing or the effectiveness of a Registration Statement pursuant to the
provisions of Sections 5 or 6 hereof if the Company, by action of its Board of
Directors, determines in good faith that such demand registration might
reasonably be expected to have a material adverse effect on the Company's
ability to consummate any proposal or plan by the Company or any of its
subsidiaries to engage in any acquisition of assets or any merger,
consolidation, tender offer or similar transaction. Under no circumstances may
the Company avail itself of the postponement provision set forth in the
preceding sentence more than once every 12 months.
9. EXPENSES. All expenses incurred by the Company in complying with
Sections 5, 6 and 7 hereof, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees of the National Association
of Securities Dealers, Inc. or any successor thereto, transfer taxes, fees of
transfer agents and registrars, costs of insurance and fees and expenses of one
counsel reasonably acceptable to the Company for all sellers of Restricted
Stock, but excluding any Selling Expenses, are herein called "Registration
Expenses." All underwriting discounts and selling commissions applicable to the
sale of Restricted Stock are herein called "Selling Expenses."
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Sections 5, 6 or 7 hereof. All Selling
Expenses in connection with any registration statement filed pursuant to
Sections 5, 6 or 7 hereof shall be borne by the participating sellers in
proportion to the number of shares sold by each, or by such persons other than
the Company (except to the extent the Company shall be a seller) as they may
agree.
10. INDEMNIFICATION AND CONTRIBUTION. In the event of a registration of any
of the Restricted Stock under the Securities Act pursuant to Sections 5, 6 or 7
hereof, to the extent permitted by law, the Company will indemnify and hold
harmless each seller of such Restricted Stock thereunder and each underwriter of
Restricted Stock thereunder and each officer, director and each other person, if
any, who controls such seller or underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Sections 5, 6 or 7, any
preliminary prospectus or final
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<PAGE>
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such seller, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by such seller, such underwriter or such
controlling person in writing specifically identified for use in such
registration statement or prospectus and, PROVIDED FURTHER, that the indemnity
agreement provided in this Section 10 with respect to any preliminary prospectus
shall not inure to the benefit of any underwriter of Restricted Stock from whom
the person asserting any losses, claims, damages, liabilities or actions based
upon any untrue statement or alleged untrue statement of material fact or
omission or alleged omission to state therein a material fact purchased such
shares, if a copy of the final prospectus in which such untrue statement or
alleged untrue statement or omission or alleged omission was corrected had not
been sent or given to such person within the time required by the Securities Act
and the rules and regulations promulgated thereunder, unless such failure is the
result of noncompliance by the Company with its obligations in connection with
such underwriting.
In the event of a registration of any of the Restricted Stock under the
Securities Act pursuant to Sections 5, 6 or 7 hereof, to the extent permitted by
law, each seller of such Restricted Stock thereunder, severally and not jointly,
will indemnify and hold harmless the Company and each officer, director and each
other person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter of Restricted Stock
and each person who controls any such underwriter within the meaning of the
Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer or director or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Restricted Stock was registered under the Securities Act pursuant to
Sections 5, 6 or 7 hereof, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that such seller will be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such seller, as such, furnished
in writing to the Company by such seller specifically identified for use in such
registration statement or prospectus; PROVIDED, FURTHER, HOWEVER, that the
liability of each seller hereunder shall be limited to the proportion of any
such loss, claim, damage, liability or expense which is equal to the proportion
that the public offering price of shares sold by such seller under
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such registration statement bears to the total public offering price of all
securities sold thereunder, but not to exceed the proceeds received by such
seller from the sale of Restricted Stock covered by such registration statement.
Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this Section 10. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 10 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
HOWEVER, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded (on advice of counsel) that there may be reasonable defenses available
to it which are different from or additional to those available to the
indemnifying party, or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel with the
consent of the indemnifying party (which consent shall not be unreasonably
withheld) and to assume such legal defenses and otherwise to participate in the
defense of such action, with the reasonable expenses and fees of such separate
counsel and other reasonable expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the
right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that, except as noted above with respect to conflicts, the
indemnifying party shall not, in connection with any action or related actions
in the same jurisdiction, be liable for the fees and disbursements of more than
one separate firm qualified in such jurisdiction to act as counsel for the
indemnified parties hereunder. The indemnifying party shall not be liable for
any settlement of any proceeding for which indemnification is provided for
hereunder effected without its prior written consent, but if settled with such
consent or if there be a final judgment in any such proceeding for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment.
If the indemnification provided for in the first two paragraphs of this
Section 10 is unavailable or insufficient to hold harmless an indemnified party
under such paragraphs in respect of any losses, claims, damages or liabilities
or actions in respect thereof referred to therein, then each indemnifying party
shall in lieu of indemnifying such indemnified party
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<PAGE>
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the sellers of such Restricted Stock, on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or actions as well as any other relevant equitable considerations,
including without limitation the failure to give any notice under the third
paragraph of this Section 10. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact relates to information supplied by the Company, on the one
hand, or the sellers of such Restricted Stock, on the other, and to the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the sellers of Restricted
Stock agree that it would not be just and equitable if contributions pursuant to
this paragraph were determined by PRO RATA allocation (even if all of the
sellers of such Restricted Stock were treated as one entity for such purpose) or
by any other method of allocation which did not take account of the equitable
considerations referred to above in this paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or action in respect thereof, referred to above in this paragraph, shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this paragraph, the sellers of
Restricted Stock shall not be required to contribute any amount in excess of the
amount, if any, by which the total price at which the Common Stock sold by each
of them was offered to the public exceeds the amount of any damages which they
would have otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission. No person guilty of fraudulent misrepresentations
(within the meaning of Section 11(f) of the Securities Act), shall be entitled
to contribution from any person who is not guilty of such fraudulent
misrepresentation.
The indemnification of underwriters provided for in this Section 10
shall be on such other terms and conditions as are at the time customary and
reasonably required by such underwriters. In the event that such indemnification
of underwriters is on such other terms and conditions, the indemnification of
the sellers of Restricted Stock in such underwriting shall, at the sellers'
request, be modified to conform to such terms and conditions.
11. CHANGES IN COMMON STOCK. If, and as often as, there are any changes in
the Common Stock by way of stock split, stock dividend, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed and
shall apply to any securities received in any such transaction.
12. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Investors as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-Laws of the Company, or any
provision of any indenture, agreement or other instrument to
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which it or any of its properties or assets is bound, or conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject as to enforcement of remedies
to (i) applicable bankruptcy, reorganization, insolvency, moratorium and similar
laws affecting the rights of creditors generally, (ii) a limitation by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) the extent the indemnification provisions contained
herein may be limited by applicable federal or state securities laws.
13. RULE 144 REPORTING. The Company agrees with the Investors as follows:
(a) The Company shall make and keep public information available, as
those terms are understood and defined in Rule 144 (and subsequent similar
rules) under the Securities Act, at all times from and after the date the
Company becomes subject to the periodic reporting requirements of the Exchange
Act.
(b) The Company shall use its best efforts to file with the Commission,
prior to the filing deadline for such reports and other documents, all reports
and other documents as the Commission may prescribe under Section 13(a) or 15(d)
of the Exchange Act at any time after the Company has become subject to such
reporting requirements of the Exchange Act.
(c) The Company shall furnish to such holder of Restricted Stock
forthwith upon request (i) a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after the date it first becomes subject to the reporting requirements of the
Exchange Act), and of the Securities Act and the Exchange Act (at any time after
it has become subject to such reporting requirements), (ii) a copy of the most
recent annual or quarterly report of the Company, and (iii) such other reports
and documents so filed as a holder may reasonably request to avail itself of any
rule or regulation of the Commission allowing a holder of Restricted Stock to
sell any such securities without registration.
14. MERGERS, ETC. The Company shall not, directly or indirectly, enter into
any merger, consolidation or reorganization in which the Company shall not be
the surviving corporation unless the proposed surviving corporation shall, prior
to such merger, consolidation or reorganization, agree in writing to assume the
obligations of the Company under this Agreement, and for that purpose references
hereunder to "Restricted Stock" shall be deemed to be references to the
securities which the holders of Preferred Stock would be entitled to receive in
exchange for Restricted Stock under any such merger, consolidation or
reorganization; provided, however, that the provisions of this Agreement shall
not apply to any holder of Preferred Stock, in the event of any merger,
consolidation or reorganization in which the Company is not the surviving
corporation if such stockholder is entitled to receive in exchange therefor (i)
cash or
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(ii) securities all of which may be immediately sold to the public without
registration under the Securities Act.
15. MISCELLANEOUS.
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto, including, without limitation, the rights
to indemnification under Section 10 hereof, shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not. Without limiting the generality of the foregoing, the
registration rights conferred herein on the holders of Restricted Stock shall
inure to the benefit of any and all subsequent transferees of such stock who
individually acquire not less than 50,000 shares of such stock (appropriately
adjusted to reflect stock splits, stock dividends, combinations of shares or the
like after the date hereof); provided the transfer of such stock complies in all
material respects with the terms and conditions in the Stockholders Agreement.
(b) Notwithstanding any provision to the contrary contained herein, the
rights relating to registration of Restricted Stock set forth herein shall
terminate with respect to any holder of Restricted Stock at the date which is
the latest of (i) when such holder, together with its affiliates, owns less than
5% of the Company's outstanding Common Stock, (ii) when such Holder would be
entitled to sell within a single three-month period all of the Restricted Stock
then held by such Holder, under the provisions of Rule 144 (or subsequent
similar rule) under the Securities Act, and (iii) the fifth anniversary of the
date of this Agreement.
(c) All notices, requests, consents and other communications hereunder
shall be in writing and shall be sent by telecopier or overnight courier,
addressed as follows:
if to the Company, to it at:
Juno Online Services, Inc.
120 West 45th Street, 39th Floor
New York, New York 10036
Attention: Richard Buchband, Esq.
with a copy to:
Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10019
Attention: Alexander D. Lynch, Esq.
if to any Investor (other than NAI, Offshore Online Investors, PW
Partners 1998 L.P., Seligman Communications and Information Fund), to it at its
address set forth in Annex I hereto,
14
<PAGE>
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 24th Floor
New York, New York 10112
Attention: Robert Seber
Telephone: (212) 408-2400
Telecopier: (212) 728-5950
if to NAI, to it at its address set forth in Annex I hereto,
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Joel I. Papernik, Esq.
if to Offshore Online Investors, Inc., to it at its address set
forth in Annex I hereto,
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Daniel Schloendorn, Esq.
Telephone: (212) 728-8265
Facsimile: (212) 728-8111
if to PW Partners 1998 L.P., to it at its address set forth in
Annex I hereto,
with a copy to:
Brock Silverstein LLC
One Citicorp Center
153 East 53rd Street, 56th Floor
New York, New York 10022
Attention: Edward G. Reitler, Esq.
15
<PAGE>
if to Seligman Communications and Information Fund, to it at its
address set forth in Annex I hereto,
with a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Attention: David Brinton, Esq.
if to any subsequent holder of Preferred Shares, to such
holder at its address appearing on the stock transfer
records of the Company; or, in any such case, at such other
address or addresses as shall have been furnished in
writing by such party to the others, and
if to any Common Stockholder, to the addresses of such stockholder
set forth in Annex I hereto;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Restricted Stock) or to
the holders of Restricted Stock (in the case of the Company). Any notice or
other communication pursuant to this Agreement shall be deemed to have been duly
given or made and to have become effective when delivered to the Party to which
directed.
(d) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to the principles
thereof governing conflict of laws.
(e) This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and may not be modified or amended except
in a writing executed by the Company, the holders of a majority of the
outstanding shares of Series A Preferred Stock (including shares of Common Stock
issued upon conversion thereof), and the holders of at least 66-2/3% of the
shares of Series B Preferred Stock (including shares of Common Stock issued upon
conversion thereof).
(f) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
16
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IN WITNESS WHEREOF, the Company and each of the Investors has executed this
Agreement as of the day and year first above written.
JUNO ONLINE SERVICES, INC.
By: /S/ CHARLES ARDAI
--------------------------------------
Name: Charles Ardai
Title: President
<PAGE>
[Investor Signature Pages]
<PAGE>
ANNEX I
INVESTORS AND AMOUNT OF SECURITIES OWNED
NAME AND ADDRESS OF PURCHASER NUMBER OF SHARES
COMMON STOCK
DAVID E. SHAW 100
c/o DESCO
120 West 45th Street, 39th Floor
New York, New York 10036
SERIES A PREFERRED STOCK
D.E. SHAW DEVELOPMENT, L.P. 48,431,999
c/o DESCO
120 West 45th Street, 39th Floor
New York, New York 10036
D.E. SHAW & CO., L.P. 25,000,000
c/o DESCO
120 West 45th Street, 39th Floor
New York, New York 10036
D.E. SHAW INVESTMENT GROUP, L.P. 3,515,298
c/o DESCO
120 West 45th Street, 39th Floor
New York, New York 10036
SHAW-JUNO TRUST 1,050,000
c/o DESCO
120 West 45th Street, 39th Floor
New York, New York 10036
LOUIS SALKIND 749,167
c/o DESCO
120 West 45th Street, 39th Floor
New York, New York 10036
<PAGE>
ANNE DINNING 549,166
c/o DESCO
120 West 45th Street, 39th Floor
New York, New York 10036
MAX STONE 146,500
c/o DESCO
120 West 45th Street, 39th Floor
New York, New York 10036
STUART STECKLER 100,000
c/o DESCO
120 West 45th Street, 39th Floor
New York, New York 10036
MARTIN FLEISHER 7,500
c/o DESCO
120 West 45th Street, 39th Floor
New York, New York 10036
MARCIA ROLTNER 7,500
c/o DESCO
120 West 45th Street, 39th Floor
New York, New York 10036
DONALD PASSMAN 20,000
c/o DESCO
120 West 45th Street, 39th Floor
New York, New York 10036
SERIES B PREFERRED STOCK
PROSPECT STREET NYC CO-DISCOVERY FUND, L.P. 3,158,595
Edward
Ryeom
10 East 40th Street
44th Floor
New York, NY 10016
PROSPECT STREET NYC CO-INVESTMENT FUND, L.P. 350,955
Edward
Ryeom
10 East 40th Street
44th Floor
New York, NY 10016
<PAGE>
CG ASIAN-AMERICAN FUND, LP 1,754,775
c/o Sycamore Ventures
989 Lenox Drive
Suite 208
Lawrenceville, NJ 08648
Attention: Kit C. Wong
CITI GROWTH FUND II OFFSHORE, LP 701,910
c/o Sycamore Ventures
989 Lenox Drive
Suite 208
Lawrenceville, NJ 08648
Attention: Kit C. Wong
PRINCETON GLOBAL FUND, LP 1,052,865
c/o Sycamore Ventures
989 Lenox Drive
Suite 208
Lawrenceville, NJ 08648
Attention: Kit C. Wong
KILIN TO
c/o Sycamore Ventures 70,191
989 Lenox Drive
Suite 208
Lawrenceville, NJ 08648
Attention: Kit C. Wong
JOHN R. WHITMAN 70,191
c/o Sycamore Ventures
989 Lenox Drive
Suite 208
Lawrenceville, NJ 08648
Attention: Kit C. Wong
KIT C. WONG 33,692
c/o Sycamore Ventures
989 Lenox Drive
Suite 208
Lawrenceville, NJ 08648
Attention: Kit C. Wong
PETER G. GERRY 17,548
c/o Sycamore Ventures
989 Lenox Drive
Suite 208
<PAGE>
Lawrenceville, NJ 08648
Attention: Kit C. Wong
JOHN WILLIAM TAYLOR 17,548
c/o Sycamore Ventures
989 Lenox Drive
Suite 208
Lawrenceville, NJ 08648
Attention: Kit C. Wong
RICHARD M. CHONG 14,038
c/o Sycamore Ventures
989 Lenox Drive
Suite 208
Lawrenceville, NJ 08648
Attention: Kit C. Wong
SUBIR RAY 7,019
c/o Sycamore Ventures
989 Lenox Drive
Suite 208
Lawrenceville, NJ 08648
Attention: Kit C. Wong
TAISHIN VENTURE CAPITAL INVESTMENT CO. LTD. 839,353
Charles Chu , Director
9F 44 Chung Shan N. Road, Sec. 2., Taipei,
Taiwan
GOLDEN J&N INVESTMENT INC. 839,353
c/o Mr. Adam Pon
P.O. Box 81-191
Taipei, TAIWAN
FEDERATED LIMITED 839,353
c/o Ms. Li-Hong Chen
8F 123 Nanking E. Road, Sec. 2
Taipei, TAIWAN
WIN GROUP INVESTMENT CO., INC. 294,576
Lin, Yi Ling
10F 259 Tung Hua South Road., Taipei, Taiwan
MR. CHIH YUAN HSU 294,576
10F 259 Tung Hua South Road Sec.1
Taipei, TAIWAN
<PAGE>
J. MOORE MGF. CO., LTD. 294,576
Julie Cheng, Director
7F 325 Fushin North Road
Taipei, Taiwan
FAITH HOLDINGS INTERNATIONAL, LTD. 294,576
Robert Chang
5F 9 Lane 218
Chilin Road
Taipei, Taiwan
CHINA INVESTMENT & DEVELOPMENT CORP. 587,561
Mr. T.S. Shih
16F 563 Chungsiao E. Rd. Sec 4
Taipei, Taiwan
GLOBAL INVESTMENT LTD. 589,152
Mazen Hassonah
c/o Rana Investment Co.
P.O. Box 60148
Riyadh 11545, SAUDI ARABIA
THE INDIANAPOLIS COMPANY LTD. 1,178,304
Jim Hodge
President
c/o Worms & Co., Inc.
900 Third Avenue
New York, NY 10022
APPLEWOOD ASSOCIATES, L.P. 1,403,820
Maureen Wilson
Applewood Associates, L.P.
68 Wheatley Road
Brookville, NY 11545
WINFIELD CAPITAL CORP. 1,178,304
Paul A. Perlin
237 Mamaroneck Avenue
White Plains, NY 10605
PEAK PARTNERS 589,152
Dr. Kay Gow
10 Seagate Drive
Penthouse 2 North
Naples, FL 34103
22
<PAGE>
CLEMENTE CAPITAL, INC. 294,576
Lilia Clemente
Carnegie Hall Towers
152 West 57th Street
New York, NY 10019
PW PARTNERS 1998 L.P. 1,930,252
Dhan Pai
1285 Avenue of the Americas
14th Floor
New York, NY 10019
OFFSHORE ONLINE INVESTORS, INC. 4,713,216
Adele Klyne
Craigmuir Chambers
P.O. Box 71
Road Town
Tortola, British Virgin Islands
SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC. 3,509,549
Storm Boswick
J. & W. Seligman & Co., Inc.
100 Park Avenue
New York, NY 10017
PHILIP A. MAHONEY 294,576
12001 Foothill Lane
Los Altos Hills, CA 94022-3375
DANIEL M. FISHBANE 52,643
18 Lakeside Road
Mt. Kisco, NY 10549-4204
JULIUS RALPH GAUDIO 52,643
100 Grand Street, Fourth Floor
New York, NY 10013
ELIOT KARL GOLDBERG 7,019
68 Waterford Avenue
Morganville, NJ 07751
JOHN OVERDECK 100,022
350 W. 50th Street #27B
New York, NY 10019
23
<PAGE>
MONY RUEVEN 50,011
4 Fraser Rd.
Westport, CT 06880
STUART STECKLER 70,191
77 Cider Hill
Upper Saddle River, NJ 07458
MAXIMILIAN DANA STONE 35,095
29 Ridgecroft Road
Bronxville, NY 10708
MAHMOUD FAGHIHI 21,057
c/o D. E. Shaw Securities International
Finsbury Dials
20 Finsbury Street
London EC2Y 9AY
United Kingdom
DARREN CARTER 42,115
c/o D. E. Shaw Securities International
Finsbury Dials
20 Finsbury Street
London EC2Y 9AY
United Kingdom
HOWARD M. BERGTRAUM 21,057
C/O O'SULLIVAN GRAEV & KARABELL, LLP
30 Rockefeller Plaza
New York, NY 10112
LAWRENCE G. GRAEV 14,038
C/O O'SULLIVAN GRAEV & KARABELL, LLP
30 Rockefeller Plaza
New York, NY 10112
GORDON R. CAPLAN 10,529
C/O O'SULLIVAN GRAEV & KARABELL, LLP
30 Rockefeller Plaza
New York, NY 10112
O'SULLIVAN GRAEV & KARABELL, LLP PROFIT SHARING PLAN 10,529
C/O O'SULLIVAN GRAEV & KARABELL, LLP
30 Rockefeller Plaza
New York, NY 10112
24
<PAGE>
ROBERT SEBER 7,019
C/O O'SULLIVAN GRAEV & KARABELL, LLP
30 Rockefeller Plaza
New York, NY 10112
LYNETTE P. KOPPEL 3,510
C/O O'SULLIVAN GRAEV & KARABELL, LLP
30 Rockefeller Plaza
New York, NY 10112
NEWS AMERICA INCORPORATED 10,527,946
1211 Avenue of the Americas
New York, NY 10036
NEWS AMERICA INCORPORATED 3,580,442 (Series B Prime)
1211 Avenue of the Americas
New York, NY 10036
25
<PAGE>
EXHIBIT 10.4
MARKETING SERVICES AGREEMENT
THIS AGREEMENT (the "Agreement") is effective as of the 30th day of
September, 1998, by and between Juno Online Services, L.P. ("Juno"), a limited
partnership, organized under the laws of the State of Delaware, having an
address at 120 West 45th Street, 15th Floor, New York, New York 10036, on the
one hand, and Hartford Fire Insurance Company, a corporation organized under the
laws of the State of Connecticut, and its affiliated property/casualty insurance
companies, (collectively, "The Hartford"), having an address at Hartford Plaza,
Hartford CT 06001, on the other hand (each of Juno and The Hartford is referred
to herein as a "Party", and both collectively referred to as the "Parties").
WHEREAS, Juno provides certain branded online services to subscribers; and
WHEREAS, The Hartford desires to engage Juno to, among other things,
advertise certain of The Hartford's "Personal" lines of insurance to Juno's
subscribers, on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the Parties agree as follows:
1. DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the
following meanings:
1.1. "Ad Bundles" shall mean a set of Materials promoting any of the
Hartford Products, sent electronically to a Juno Subscriber by means of any of
the Juno Services. Ad Bundles include, without limitation, e-mails, banner
advertisements, pop-up ads, interstitial ads, Web click-through ads, the
interactive forms and screens that support such advertising, and advertising
media that may be developed by Juno in the future. Each Ad Bundle will consist
of a minimum of [****] scheduled Impressions (it being understood that a
particular Juno subscriber may not use the Juno Services with sufficient
frequency to have all [****] impressions per Ad Bundle actually displayed),
unless both parties agree to a lower number. Ad Bundles do not include any
portion of an Internet site managed solely by The Hartford.
1.2. "Co-Developed Program" shall mean any program in which Juno and The
Hartford participate jointly and which displays the trademarks, names, logos, or
other identifiers
- ------------------
[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
<PAGE>
of each of Juno and The Hartford. Co-Developed Programs include (without
limitation) any jointly developed Ad Bundle, Internet site, e-mail application,
toll free number or other process.
1.3. "Hartford Products" shall mean, collectively, The Hartford's Personal
Lines policies.
1.4. "Impression" shall mean a single showing of a Material or aggregation
of Materials transmitted to and displayed to a Juno Subscriber as a single
screen or portion of a screen displayed on a Juno Service or as part of a
Co-Developed Program.
1.5. "Juno Services" shall mean the online services provided by Juno to the
Juno Subscribers, including without limitation electronic mail, Juno Gold, Juno
Web, and such future services that support advertising as may be developed by
Juno.
1.6. "Juno Subscriber" shall mean any individual who subscribes to one or
more of the Juno Services.
1.7. "Materials" shall mean any text, images, software, multimedia
elements, or any other items provided by a Party in connection with the
development or implementation of any Co-Developed Program.
1.8. "Minimum Payment" shall have the meaning set forth in Section 5.2 of
this Agreement.
1.9. "New Policyholder" shall mean an individual who purchases a Hartford
Product after viewing and responding through the Co-developed Program to an
Impression, an Ad Bundle, or any portion of a Co-Developed Program.
1.10. "Personal Lines" shall mean each of the following Hartford policies:
automobile insurance, homeowners' insurance, home-based business insurance,
personal umbrella insurance, and such future Personal Lines insurance products
as by mutual agreement of the Parties may be offered by The Hartford through the
Co-Branded Program.
1.11. "Relationship" shall mean the relationship between Juno and The
Hartford created by this Agreement.
1.12. "Response Rate" shall mean the number of Juno Subscribers receiving a
premium quote for a Hartford Product during a given period, divided by the
number of Juno Subscribers who receive and have had displayed to them at least
one Impression of a Hartford/Juno Ad Bundle or any other Co-Developed Program
during that same period.
1.13. "Subscriber Data" shall mean all data, information, and records
collected and/or maintained by Juno regarding the Juno Subscribers.
2
<PAGE>
1.14. "Variable Payment" shall have the meaning set forth in Section 5.3 of
this Agreement.
1.15. "Active Juno Subscriber" shall mean any Juno Subscriber who has used
any of the Juno Services during the previous [****] days.
1.16. "Joint Materials" shall mean any text, images, software, multimedia
elements, or any other items that have been jointly developed by the parties in
connection with the development or implementation of any Co-Developed Program,
but shall not include (i) any software, technology, or other intellectual
property developed for, or used in connection with, the provision of the Juno
Services, or (ii) shall not include any software, technology, or other
intellectual property developed for, or used in conjunction with, the provision
of The Hartford's insurance products and services, whether or not developed and
used with input from Juno.
2. SERVICES. DURING THE TERM OF THIS AGREEMENT, JUNO SHALL DO THE FOLLOWING
(COLLECTIVELY, THE "MARKETING SERVICES"):
2.1. AD BUNDLES. Subject to the provisions of Section 5.6 herein, develop
[****] mutually acceptable Ad Bundles per year in accordance with the schedule
set forth on Attachment A to this Agreement, including developing mutually
acceptable ad creatives and campaign initiatives. The Hartford will have a right
of final approval over all ad creatives. The Hartford will provide reasonable
support regarding the design and development of the Ad Bundles, including
coordination with The Hartford's advertising agency or agencies, assistance in
creative themes, and assistance with analysis of results.
2.2. ANNOUNCEMENT TO JUNO SUBSCRIBERS. Subject to the provisions of Section
3.2 herein, announce and advertise the Relationship, with a goal of enhancing
Juno's affinity relationship with the Juno Subscribers.
2.3. SEGMENTATION. Work with a mutually agreeable third party to allow The
Hartford to analyze the Subscriber Data according to The Hartford's segmentation
rules and screening criteria ("Segmentation") in a manner that protects the
privacy of the Juno Subscribers, complies with Juno's privacy policies, and
complies with The Hartford's confidentiality obligations hereunder. Upon mutual
agreement of the Parties, either Party may perform Segmentation in lieu of a
third party. Segmentation will be performed four times per year according to a
schedule to be mutually agreed upon by the Parties in writing, and The Hartford
shall be solely responsible for all costs associated with Segmentation.
- ------------------
[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
3
<PAGE>
2.4. TARGETED AD BUNDLE DELIVERY.
(a) Commencing in 1999, deliver, for planning purposes, an average of
[****] Ad Bundles in each full calendar quarter of the Term to Juno Subscribers
targeted by The Hartford based on the results of the Segmentation (and/or other
targeting methods employed by the parties), it being understood that Juno
Subscribers who are subscribers for less than a full calendar year will have a
proportionately smaller number of Ad Bundles delivered to them.
(b) Upon reasonable notice from The Hartford, use commercially
reasonable efforts to coordinate delivery of Ad Bundles with The Hartford's call
center capacity, including specifically increasing delivery of Ad Bundles if The
Hartford informs Juno that call center capacity is available and decreasing
capacity if The Hartford informs Juno that call center capacity is unavailable.
2.5. BANNERS. Provide [****] banners or flags displaying the Juno logo to
be placed in The Hartford's call centers and offices to promote awareness of the
Relationship. The Hartford agrees that it will prominently display these banners
in its call centers and offices throughout the entire Term of this Agreement.
3. RELATIONSHIP OF THE PARTIES.
3.1 ROLE OF JUNO. The parties agree that Juno is not authorized on behalf
of The Hartford to sell insurance, and shall not engage, in the business of
selling insurance on behalf of The Hartford, nor is it authorized to act in any
manner as an insurance agent, broker, solicitor or in any related capacity on
behalf of The Hartford. The parties agree that Juno's function as contemplated
by this Agreement shall be limited solely to providing an advertising medium for
conveying information about Hartford Products to Juno Subscribers. It is further
understood that Juno is not an agent of The Hartford and that Juno shall perform
no agency functions related to the sale, processing or underwriting of insurance
policies that are the subject of this Agreement.
3.2 EXCLUSIVITY. For the duration of the Term (as defined in Section 10 of
this Agreement), The Hartford shall have the exclusive right to advertise
Personal Lines insurance in connection with the Juno Services. With regard to
the Juno Services and the Juno Subscribers, Juno shall refrain from displaying
advertisements, promoting or participating in e-mail campaigns, or providing
other support for these types of insurance on behalf of any other company.
Without limitation of this Section 3.2, if any third party proposes to Juno to
enter into an exclusive advertising relationship for the purposes of promoting
life insurance products by means of the Juno Services, Juno will provide The
Hartford with a right of first refusal concerning such exclusive advertising
relationship. Pursuant to such right of first refusal, The
- ------------------
[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
4
<PAGE>
Hartford will have ten (10) business days from Juno's notice of such proposal,
in which to present to Juno an alternative proposal. Nothing herein shall
obligate Juno to accept or negotiate The Hartford's alternative proposal.
3.3 PUBLICITY; USE OF MARKS.
(a) The timing and content of any press release regarding any aspect
of this Agreement (whether in electronic, print, or other media) shall be
subject to the prior written approval of both Parties.
(b) Except as explicitly provided in this Agreement, neither Party
shall, without the other Party's prior written approval, use in any advertising,
public announcement, press release or any other promotional endeavor any mark,
name, trademark, logo, or identifier (collectively, "Marks") or represent,
directly or indirectly, that any product or service provided by such Party has
been approved or endorsed by the other Party. No provision of this Agreement
shall be deemed to grant either Party any rights in the other Party's Marks.
(c) The Parties agree that Juno will specifically be permitted to
share summaries of the Relationship with potential investors who have executed a
non-disclosure agreement with Juno, and that The Hartford will specifically be
permitted to share summaries of the Relationship with business entities which
have executed a non-disclosure agreement with the Hartford and are not
"competitors" of Juno (defined as any company who provides e-mail service or
dial-up ISP service), except with the express written permission of Juno.
(d) Juno may show depictions of any of the Materials and identify The
Hartford in connection with Juno's own marketing materials during the Term.
3.4 COMPLIANCE WITH INSURANCE LAWS. For aspects of the Relationship that
may be subject to insurance regulation or law, Juno agrees to use its reasonable
commercial efforts to adhere to The Hartford's policies; provided that Juno
receives prior written notice of each such policy. Without limitation of the
foregoing, each Party agrees that it will comply with all laws, rules, and
regulations applicable to performance of such Party's obligations under this
Agreement. Prior to the commencement of the first transmission by Juno of any
Materials under the Co-Developed Program, Hartford will deliver to Juno a
written legal opinion, in form and substance reasonably satisfactory to Juno,
that the transmission of Materials by Juno as contemplated under the Agreement
and the receipt of One-Time Acquisition Fees and Ongoing Royalties by Juno as
contemplated under the Agreement do not require Juno to be registered or
licensed by the applicable insurance regulatory authority in any state or
jurisdiction in which the Parties intend to advertise the Co-Developed Program.
The parties agree that any failure by Juno to satisfy any such registration or
licensing requirements shall not be considered a violation of a law, rule, or
regulation that gives rise to Juno's obligations to The Hartford under Section
8.1 of the Agreement.
3.5. MANAGEMENT OF THE RELATIONSHIP. In order to facilitate decision-making
with
5
<PAGE>
respect to the Relationship, each of the parties shall select one officer at the
level of Vice President or higher who shall be designated as that party's
relationship manager with respect to the Relationship (the "Relationship
Manager"). The parties agree that the Relationship Managers will consult with
each other on certain matters, including technical and support issues, sales
development and support, marketing and public relations, and product development
by The Hartford, to the extent that such matters relate to the Relationship. The
parties agree that, during the term of this Agreement, the Relationship Managers
shall meet at such times, and in such locations (or by telephone), as they may
mutually agree, but not less frequently than once per quarter unless both of the
Relationship Managers agree that such a quarterly meeting is not necessary. Each
party may replace its Relationship Manager with another officer at the level of
Vice President or higher at any time upon written notice to the other party.
Within ten business days following execution of the Agreement, each of the
parties will deliver written notice to the other Party designating its
Relationship Manager. The Hartford's Relationship Manager or his designated
representative shall have final approval rights on all Ad Bundles. The
Relationship Managers shall work together to determine the timing, production,
and delivery of Ad Bundles.
3.6 PRODUCTS OFFERED. Juno agrees that The Hartford may change its Personal
Lines product offerings or its pricing and underwriting standards at any time,
it being understood that the inclusion of any new insurance policy products not
falling within the defined parameters indicated by the definition of "Personal
Lines" contained herein shall not be subject to the terms set forth by this
Agreement, including but not limited to Exclusivity (as per Section 3.2).
3.7 Confidentiality
a. Definition of "Confidential Information"
In order to meet their respective responsibilities under this
Agreement, each party may supply the other with certain "Confidential
Information." As used herein, "Confidential Information" means all existing
customer names, coverages and expirations, underwriting criteria and objectives,
technological data and processes, data, reports, interpretations, forecasts and
records, including analyses, compilations, studies or other reviews, containing
or otherwise reflecting information and concerning the internal affairs of The
Hartford and Juno, which has been or may be acquired or developed by each of the
respective parties and is not available to the general public.
Notwithstanding the foregoing, the following will not constitute
"Confidential Information" for purposes of this Agreement: (i) information that
was already in the possession of a party prior to the date of this Agreement,
was not acquired or obtained from the other party during the course of
negotiations with respect to the subject matter of this Agreement, and was not
obtained in violation of a confidentiality agreement; (ii) information which is
obtained or was previously obtained by a party from a third person who, insofar
as was known, was not prohibited from transmitting the information by a
contractual, legal or fiduciary obligation to the other party; (iii) information
which is or becomes generally available to the public other than as a result of
a breach of this Agreement by the party or its agents or employees (collectively
6
<PAGE>
hereinafter its "Agents").
b. Duty to Preserve Confidentiality
Hartford and Juno agree that the Confidential Information of each
party will be held and treated by the other and its Agents in confidence and
will not, except as hereinafter provided, without the prior written consent of
the affected party, be disclosed by the other party or its Agents in any manner
whatsoever, in whole or in part to any person. Moreover, each party further
agrees (i) to disclose Confidential Information of the other party only to its
Agents who need to know the Confidential Information to further the objectives
of this Agreement and who will be advised of this Agreement and agree to be
bound by the terms of the Agreement; (ii) that the disclosing party shall be
satisfied that such Agents will act in accordance herewith; and (iii) that, in
any event, each party shall be responsible for any breach of this Agreement by
its Agents. The Hartford further acknowledges that the service agreement
pursuant to which Juno provides the Juno Services to the Juno Subscribers (as
such may be amended from time to time, the "Service Agreement") embodies certain
terms and conditions governing the use of and disclosure by Juno of information
relating to the Juno Subscribers. The Hartford acknowledges that,
notwithstanding any other term of this Agreement, under no circumstances can
Juno be required to provide information to The Hartford about Juno Subscribers
in a manner that would violate the restrictions set forth in the Service
Agreement or that would violate applicable law or regulation.
4. ADDITIONAL MARKETING EFFORTS.
4.1 IDENTIFICATION OF NEW POLICYHOLDERS. In order to permit Juno to measure
Response Rates under this Agreement, and to permit Juno to receive appropriate
credit and payments for New Policyholders under this Agreement, The Hartford
will during the Term of this Agreement and for a period of 6 months thereafter
(i) implement one or more separate 800 or other toll-free number as a means for
response to the Co-Developed Program; (ii) implement one or more e-mail address
or postal addresses for responses to the Co-Developed Program to the extent that
e-mail and/or postal mail might be utilized as a response mechanism; (iii) take
other steps (including without limitation instructing customer service
representatives to record whether telephone callers to The Hartford's general
call center learned of The Hartford's Products as a result of the Co-Developed
Program) designed to identify those policyholders who might be New
Policyholders.
4.2 ADDITIONAL TARGETED SUBSCRIBERS. The Parties acknowledge their desire
to (i) advertise [****]-endorsed Personal Lines to Juno Subscribers who are also
members of the [****]; and (ii) advertise Personal Lines to Juno Subscribers who
state a preference to work with an independent agent. The Parties agree to use
good faith efforts to reach mutually acceptable terms
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[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
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under which such marketing would be included in the Relationship. Both parties
understand that the One-Time Acquisition Fee and Ongoing Royalty may differ for
such policies.
4.3 INSURANCE MALL. Upon mutual agreement of Juno and The Hartford or if,
at any time after five calendar quarters, the cumulative Response Rate is less
than [****]%, The Hartford may establish a program in which it sells insurance
products, substantially similar to the Personal Lines, from multiple carriers to
Juno Subscribers (such facility, the "Insurance Mall"). Sales of insurance
products by means of the Insurance Mall will be subject to the terms and
conditions of this Agreement. If the Insurance Mall is established, The Hartford
or any other mutually acceptable participating carrier shall pay Juno any
One-Time Acquisition Fees and Ongoing Royalties due hereunder. The Hartford
agrees to cause each participating carrier that is mutually acceptable to the
Parties to execute an agreement with Juno which is substantially similar in form
and substance to this Agreement. Juno will have approval rights of all
participating carriers, but agrees not to unreasonably withhold approval of
insurance companies rated equal to or better The Hartford's rating as of the
date of execution of this Agreement. Juno will have sole approval and control
over the branding and artistic and editorial content of any such Insurance Mall.
5. FEES AND PAYMENTS.
5.1. PAYMENT AND REPORTS. By the day before the first day of each fiscal
quarter during the Term, the Hartford shall pay to Juno the Guaranteed
Advertising Commitment and the Marketing Allowance for such quarter on a
non-refundable basis. Thirty days after the end of each fiscal quarter during
the Term, The Hartford shall pay to Juno the Ad Transmission Allowance, and the
amount, if any, by which the Variable Payment for such quarter exceeds the
Minimum Payment for such quarter. Together with such payment, The Hartford will
provide Juno with the number of New Policyholders acquired during each such
calendar quarter, together with a detailed calculation of applicable amounts
payable as described herein (including without limitation, a calculation of the
Minimum Payment and Variable Payment for such quarter) and such other
information as Juno may reasonably request.
5.2. MINIMUM PAYMENT. The non-refundable Minimum Payment for each calendar
quarter shall be the sum of the following:
(a) A guaranteed advertising commitment (the "Guaranteed Advertising
Commitment") of $[****], calculated by dividing $[****] into [****] equal
quarterly payments; plus
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[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
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(b) An allowance (the "Marketing Allowance") which is an advance
against the One-Time Acquisition Fees and the Ongoing Royalty Fees, of $[****]
per quarter, plus any applicable Additional Bundle Fees for any Additional
Bundles (as defined in Section 5.5 of this Agreement) developed during any such
quarter less any discount on Ad Bundles (as described in Section 5.6 of this
Agreement), to defray any and all marketing and creative media development costs
(specifically including Juno advertising media developed during the Term)
including but not limited to creative design, market testing, data analysis, and
modification of ads; plus
(c) The Ad Transmission Allowance, to cover Juno's ad transmission
costs, shall be mutually agreed upon by the Parties for each calendar year by
October 31 of the preceding year. For calendar years 1998 and 1999, the Ad
Transmission Allowance shall be $[****] per 1,000 transmissions. In subsequent
calendar years, the parties will equitably and proportionally quarterly adjust
the Ad Transmission Allowance to reflect any changes in the planned number of
recipients of Ad Bundles and/or Juno's data transmission costs. The initial
e-mail to Juno Subscribers announcing the Relationship does not constitute
transmission of an Ad Bundle, and therefore such initial e-mail shall be at
Juno's expense.
5.3. VARIABLE PAYMENTS. The Variable Payment for each quarter will be the
sum of (i) all One-Time Acquisition Fees (as defined in Section 5.3(a)) earned
by Juno from the Effective Date through such calendar quarter, and (ii) all
Ongoing Royalties (as defined in Section 5.3(b)) generated by Juno from the
Effective Date through such calendar quarter, it being understood that no
Variable Payment shall be owed to Juno with respect to a New Policyholder until
such New Policyholder makes his first payment to The Hartford. The Hartford
represents and warrants to Juno that The Hartford's standard business practice
is to solicit such first payment within thirty days of the effective date of a
new insurance policy to a New Policyholder.
(a) One-Time Acquisition Fees are as follows:
(i) For each New Policyholder purchasing automobile insurance, a
One-Time Acquisition Fee of $[****]. No additional One-Time Acquisition fee
shall be paid to Juno if such New Policyholder also purchases another Personal
Lines product, whether coincident with or subsequent to the purchase of an
automobile insurance policy.
(ii) For each New Policyholder purchasing a Personal Lines
product other than automobile insurance ("Non-Auto"), a One-Time Acquisition Fee
of $[****]. If such New Policyholder subsequently purchases automobile insurance
from The Hartford as a result of a Co-Developed Program, Juno will receive an
additional One-Time Acquisition Fee of $[****].
(iii) The foregoing One-Time Acquisition Fees are based on the
assumption that New Policyholders who purchase only Non-Auto products will
comprise less than [****]% of all New Policyholders. In the event that this
proportion becomes greater than
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[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
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15%, Juno and The Hartford will then agree in good faith on increased One-Time
Acquisition Fees for New Policyholders who purchase Non-Auto products; provided,
however, that in no event will such increased One-Time Acquisition Fee exceed
$[****].
(b) Ongoing Royalty Fees are as follows: For each New Policyholder who
purchases any Personal Lines policy, The Hartford will pay Juno a royalty of
[****]% of written premiums on each Personal Lines policy purchased by such
person for as long as he retains such Personal Line policy or seven years
following the expiration or termination of this Agreement. This royalty will be
increased by [****]% for each calendar year for which the Response Rate from
Juno Subscribers exceeds [****]% (e.g. if the 1999 Response Rate exceeds
[****]%, then Juno receives a royalty of [****]% on the Personal Line premiums
paid by New Policyholders in 1999, regardless of Response Rates in future
years).
(c) In the event that Juno agrees to advertise insurance products and
services of The Hartford other than or in addition to the current Hartford
Products, the Parties will mutually agree on an equitable adjustment of the
One-Time Acquisition Fees and Ongoing Royalties. The structure and approach used
for other portions of the Relationship may serve as a model for such
discussions.
5.4 ADJUSTMENT OF GUARANTEED ADVERTISING COMMITMENT. Following the
occurrence of a "Shortfall Event" (as defined below), the amount of the
Guaranteed Advertising Commitment shall be adjusted in accordance with this
Section 5.4.
(a) A "Shortfall Event" shall be deemed to have occurred with respect
to a calendar quarter only if (i) the aggregate number of Active Juno
Subscribers during that calendar quarter is less than [****] AND (ii) during a
"Cure Period" comprising the following two successive calendar quarters, the
aggregate number of Active Juno Subscribers is less than [****] during each of
such two successive calendar quarters. The last day of the Cure Period shall be
referred to as the "Shortfall Effective Date". The difference between (i) [****]
and (ii) the aggregate number of Active Juno Subscribers during the calendar
quarter in question shall be referred to as the "Shortfall Amount."
(b) If a Shortfall Event has occurred, the Guaranteed Advertising
Commitment of $[****] for all calendar quarters beginning after the Shortfall
Effective Date shall be reduced (but in no event below zero) by [****]% for
every [****] Active Juno Subscribers in the Shortfall Amount. (Solely for
purposes of illustration, if the aggregate number of Active Juno Subscribers
were 1.9 million during a particular calendar quarter, the Guaranteed
Advertising Commitment of $[****] for all calendar quarters after the Shortfall
Effective Date would be reduced by $[****], or [****]%.)
(c) Notwithstanding subsection (b) above, if, during any two
consecutive calendar quarters commencing after the Effective Date, the aggregate
number of Active Juno
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[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
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Subscribers equals or exceeds [****] during each of such two calendar quarters,
then the Guaranteed Advertising Commitment shall be restored to $[****] for the
remainder of the Term, commencing on the first calendar quarter thereafter.
(d) For the avoidance of doubt, the adjustments described in this
Section 5.4 shall apply only to the Guaranteed Advertising Commitment, and shall
not affect or reduce The Hartford's obligations with respect to the Marketing
Allowance, the Ad Transmission Allowance or any of the Variable Payments.
5.5 NO PAYMENTS ON PRIOR POLICYHOLDERS. In no event shall any provision of
this Agreement obligate The Hartford to pay the One-Time Acquisition Fees or
Ongoing Royalties as described in Section 5.3 (a) and 5.3 (b) to Juno in
connection with (a) any Juno Subscriber who purchased an automobile insurance
policy or Personal Line policy of The Hartford prior to the Effective Date of
this Agreement, which policy remains in effect; or (b) any Juno Subscriber who
becomes a New Policyholder through a distribution channel other than a
Co-Developed Program. Examples of other distribution channels of The Hartford
include [****], other Affinity programs, and Independent Agents. However, should
such a Juno Subscriber subsequently purchase any Hartford Product as a result of
a Co-Developed Program, the Ongoing Royalties set forth in this Agreement will
apply to each such purchase.
5.6 TERMINATED POLICIES. All earned One-Time Acquisition Fees will be due
and payable to Juno regardless of whether the New Policyholder cancels a
Hartford Product, and applicable Ongoing Royalties will be due and payable until
such cancellation.
5.7 FEES FOR ADDITIONAL AD BUNDLES. In the event that The Hartford desires
more than [****] Ad Bundles in any calendar year, Juno will provide creative
design, market testing, data analysis, and modifications for such additional Ad
Bundles ("Additional Bundles") in exchange for an additional Marketing Allowance
of [****] dollars for each additional Ad Bundle (the "Additional Bundle Fee").
5.8 DISCOUNT ON AD BUNDLES. On an average basis and for planning purposes,
Juno and The Hartford agree to develop three Ad Bundles per quarter and twelve
Ad Bundles per calendar year. Juno and The Hartford agree that should The
Hartford provide its own ad bundle or portion thereof; or if both parties agree
to reduce the number of quarterly Ad Bundles that a reasonable discount to the
applicable fees may be determined at that time by both parties in good faith.
5.9 AUDITS. The Hartford shall maintain complete, detailed and accurate
records of all transactions related to the subject matter of this Agreement.
Juno or its authorized representative shall have the right to conduct a
reasonable inspection of portions of such records for the purpose of verifying
amounts payable to Juno hereunder. The Hartford shall promptly pay to Juno any
underage determined by or as a result of such audit. Such inspection shall be
conducted upon reasonable notice to The Hartford, and in such a manner as to
minimize disruption to The
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[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
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Hartford. The Hartford agrees that Juno or its representative shall have the
right to make copies of relevant records for further review. If any such audit
reveals that The Hartford has underpaid Juno by five percent (5%) of the fees
owed to Juno, The Hartford shall immediately pay such fees to Juno together with
the costs of the audit. Juno shall maintain complete, detailed and accurate
records of all transactions related to the subject matter of this Agreement. The
Hartford or its authorized representative shall have the right to conduct a
reasonable inspection of portions of such records for the purpose of verifying
amounts payable to Hartford hereunder. Juno shall promptly reimburse to The
Hartford any overage determined by or as a result of such audit. Such inspection
shall be conducted upon reasonable notice to Juno, and in such a manner as to
minimize disruption to Juno. Juno agrees that The Hartford or its representative
shall have the right to make copies of relevant records for further review. If
any such audit reveals that Juno has underpaid The Hartford by five percent (5%)
of any fees owed to The Hartford, Juno shall immediately pay such fees to The
Hartford together with the costs of the audit.
6. PROPRIETARY RIGHTS.
6.1 (a) OWNERSHIP OF MATERIALS. Each Party will maintain sole ownership of
all its Materials and any intellectual property rights therein, including
without limitation any Materials purchased or licensed from a third party, and
the other Party shall have no right, title, or interest therein. Notwithstanding
the foregoing, either Party will have the right to use the other Party's
Materials only pursuant to the terms and conditions of this Agreement.
6.1 (b) To the extent that the parties have developed any Joint Materials,
the parties agree that ownership of such Joint Materials and any intellectual
property rights therein shall belong solely to Juno, but that Juno shall provide
to The Hartford a perpetual, non-exclusive, worldwide, non-transferable,
royalty-free license to reproduce and distribute such Joint Materials provided
that such license to reproduce and distribute such Joint Materials (A) shall be
limited to the transmission of advertisements or other marketing or promotional
materials for The Hartford Products, and (B) shall not include the right to use
the Joint Materials in a manner that is competitive with Juno's business of
providing Internet services and e-mail functionality.
6.2 RESIDUAL RIGHTS. Subject to the provisions of Article 3 governing
exclusivity, and the provisions of Article 10 governing post-termination
marketing, Juno will have the right to re-use any Materials developed or
provided by Juno, on behalf of any other relationship entered into by Juno
during the Term or following expiration or termination of this Agreement.
6.3 RIGHTS CLEARANCE. Each Party shall be responsible for obtaining at its
own expense any rights, licenses, or permissions necessary to copy, transmit,
distribute, or otherwise use any text, images, software, multimedia elements, or
other content provided by such Party (including without limitation for use in
any Co-Developed Program, including without limitation Ad Bundles.
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7. WARRANTIES.
7.1. YEAR 2000. Juno represents and warrants to the Hartford that any Juno
Services on which Ad Bundles shall be transmitted as part of the Co-Developed
Program shall during or after the calendar year 2000 be "Year 2000 Compliant"
(as defined below). A Juno Service shall be Year 2000 Compliant if it is capable
of doing the following: (i) manage and manipulate data involving dates,
including single-century formulas and multi-century formulas, without causing an
abnormally ending scenario within the application or result in the generation of
incorrect values involving such dates, (ii) ensure that date-related user
interface functions and data fields include the indication of century, and (iii)
ensure that all date-related functions related to the operation of that Service
will include the indication of century.
7.2. INTELLECTUAL PROPERTY. Each party represents and warrants to the other
party that all Materials provided by such party do not now and will not infringe
on any third party intellectual property or contractual right.
7.3. ADDITIONAL MUTUAL REPRESENTATIONS AND WARRANTIES. Each of Juno (with
respect to itself) and the Hartford (with respect to The Hartford Fire Insurance
Company and its affiliated property and casualty insurers) represents and
warrants to the other party hereto as of the date hereof as follows:
A. Organization and Authority; No Violation of Other Instruments
It (in the case of Juno) is a limited partnership duly organized,
validly existing and in good standing under the laws of the state of
Delaware. They (in the case of the Hartford) are corporations duly
organized, validly existing and in good standing under the laws of
their respective states of domicile. The parties have all requisite
power and authority to execute and deliver this Agreement and to
perform the duties contemplated hereby. This Agreement constitutes the
legal, valid and binding obligations of the parties enforceable
against each party in accordance with its terms, except as enforcement
of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally, and by the availability of equitable
remedies and defenses.
The execution and delivery of this Agreement and the performance of
the duties contemplated hereby will not (i) violate any provision of
the respective certificate of limited partnership or limited
partnership agreement (in the case of Juno) or Certificate of
Incorporation or bylaws (in the case of the Hartford), (ii) violate
any
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provision of, or result in the termination of, or the acceleration of
(or entitle any party to exercise a right to terminate or accelerate)
any obligation under any mortgage, note, lien, lease, franchise,
license, permit, agreement, instrument, order, arbitration award,
judgment or decree to which either party, singularly or jointly, is a
party or by which it is bound, or require the consent of any party
thereto or (iii) violate or conflict with any other material
restriction of any kind or character to which either party may be
subject.
B. Judgments, Decrees and Orders
Neither party is a party to, or subject to, any judgment, decree or
order entered in any suit or proceeding brought by a governmental
agency, or by any other person, enjoining it in respect of any
business practice, the acquisition of any property or the conduct of
any business that would have a material adverse effect on their
ability to perform their respective obligations under this Agreement.
C. Compliance with Laws
Neither party has been charged or threatened, to the best knowledge of
the undersigned officers, with a charge or violation, or is under
investigation with respect to a possible violation, of any provision
of any laws relating to any aspect of their businesses that would have
a material adverse impact on their ability to perform their respective
duties under this Agreement. There have been no claims, inquiries,
citations, penalties assessed or other proceedings of federal, state
or local governmental agencies in respect of either party which relate
to any provision of any laws that would have a material adverse effect
on their ability to perform their respective duties under this
Agreement.
D. Completeness of Disclosures
The representations and warranties of each party contained herein or
in any document delivered pursuant hereto are true and correct and do
not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein, in
light of the circumstances under which they were made, truthful.
7.4. DISCLAIMER OF WARRANTY. EXCEPT FOR THE WARRANTIES SET FORTH IN THIS
ARTICLE 7, JUNO MAKES NO WARRANTY, WHETHER EXPRESS OR IMPLIED, AND SPECIFICALLY
DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
FOR ANY OF THE JUNO SERVICES. SPECIFICALLY, THE HARTFORD ACKNOWLEDGES AND
UNDERSTANDS THAT JUNO MAY ENCOUNTER TEMPORARY TECHNICAL OR OTHER DIFFICULTIES
WHICH MAKE PROVIDING THE JUNO SERVICE UNFEASIBLE OR REQUIRE JUNO TO
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ALTER THE CONTENT OR STRUCTURE OF THE JUNO SERVICE IN ITS CURRENT FORM.
8. INDEMNIFICATION.
8.1. BY JUNO. Juno will indemnify, defend, and hold harmless The Hartford
and its officers, agents, employees, and affiliates from any third party claims,
damages, liabilities, costs and expenses, including without limitation
reasonable legal fees and expenses, arising out of or related to any claim that
Juno has (a) breached any warranty set forth in this Agreement, or(b) violated
any law, rule, or regulation applicable to Juno's performance of its obligations
hereunder except as specifically provided for in this Agreement.. The Hartford
shall have the right, but not the obligation to participate in such defense and
to review all documents prepared in connection therewith. The Hartford shall not
be bound by any settlement to which it has not consented in writing.
8.2. BY THE HARTFORD. The Hartford will indemnify, defend, and hold
harmless Juno and its partners, officers, agents, employees, and affiliates from
any third party claims, damages, liabilities, costs and expenses, including
without limitation reasonable legal fees and expenses, arising out of or related
to any claim (a) that The Hartford has breached any warranty set forth in this
Agreement, (b) that The Hartford has violated any law, rule, or regulation
applicable to The Hartford's performance of its obligations hereunder, or (c)
arising out of or otherwise related to any Materials, any Hartford Product, or
any other product or any related services or information offered, sold,
distributed, or otherwise provided by The Hartford. Juno shall have the right,
but not the obligation to participate in such defense and to review all
documents prepared in connection therewith. Juno shall not be bound by any
settlement to which it has not consented in writing.
9. LIMITATION ON LIABILITY.
Juno's entire liability for direct damages for any claim arising under or
related to this Agreement will be limited to amounts actually received by Juno
from The Hartford in the six (6) consecutive months immediately prior to the
date on which such claim arose. IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE
OTHER FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR
EXEMPLARY DAMAGES (INCLUDING WITHOUT LIMITATION LOST PROFITS), EVEN IF THE PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, THAT THE
FOREGOING LIMITATIONS, INCLUDING THE LIMITATION ON LIABILITY FOR DIRECT DAMAGES,
SHALL NOT APPLY TO (1) EITHER PARTY'S INDEMNIFICATION OBLIGATIONS UNDER THIS
AGREEMENT; OR (2) EITHER PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. The
Hartford agrees that any obligation or liability of Juno arising under or
relating to this Agreement shall be without recourse to any partner of Juno, any
controlling person thereof and any successor to any such partner or person, and
no such partner, controlling person or successor shall have any liability in
such capacity for
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the obligations of Juno. For the avoidance of doubt, each such partner,
controlling person and successor is a third party beneficiary of this Agreement.
10. TERM AND TERMINATION.
10.1. TERM. The term of this Agreement (the "Term") shall commence on
October 1,1998 (the "Effective Date") and continue for [****] calendar quarters
thereafter, unless sooner terminated hereunder.
10.2. TERMINATION WITHOUT CAUSE. Either party may terminate this Agreement
at any time with at least ninety (90) days' written notice for any reason or no
reason. In the event of such termination, neither Party shall have any liability
to the other except as follows:
(a) If Juno terminates the Agreement pursuant to this Section 10.2,
within thirty (30) days following such termination Juno will refund to The
Hartford any unearned portion of the Guaranteed Advertising Commitment (but not
any Marketing Allowances or Ad Transmission Allowances), and The Hartford's only
additional payments to Juno will be the Ongoing Royalties and One-Time
Acquisition Fees earned prior to termination.
(b) If The Hartford terminates this Agreement pursuant to this Section
10.2, then, (a), The Hartford will pay Juno the Guaranteed Advertising
Commitment per Section 5.2 for all quarters remaining in the original [****]
term, and such payments shall continue to be made on a quarterly basis, but The
Hartford will have no obligation to continue paying the Marketing Allowance or
Ad Transmission Allowance; (b) within thirty (30) days following such
termination, The Hartford will continue to pay to Juno all One-Time Acquisition
Fees that were earned prior to termination; (c) The Hartford will continue to
pay to Juno all Ongoing Royalties contemplated under Section 5.3 (b); and (d)
within thirty (30) days following such termination, The Hartford shall pay Juno
for any Ad Bundles that have been developed, but for which Juno has not yet been
actually paid, and any Ad Transmission Allowance costs which Juno has incurred
but for which it has not been compensated .
10.3. TERMINATION FOR CAUSE.
(a) Either Party may terminate this Agreement upon thirty (30) days'
written notice if the other Party materially breaches any of the terms of this
Agreement provided, however, that this Agreement will not terminate if the
non-terminating party has cured the breach within the thirty (30) day period.
(b) Either Party may terminate this Agreement, effective immediately
upon written notice, if: (i) all or a substantial portion of the assets of the
other Party are transferred to an assignee for the benefit of creditors, to a
receiver or trustee in bankruptcy; (ii) a proceeding is commenced by or against
the other Party for relief under bankruptcy or similar laws and such
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[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
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proceeding is not dismissed within sixty (60) days; or (iii) the other Party is
adjudged bankrupt or insolvent.
10.4. POST TERMINATION MARKETING. In the event of termination of this
Agreement, regardless of cause, Juno agrees that it will not allow a future
personal lines insurance partner to advertise to the Juno Subscribers who have
policies in force with The Hartford (and who signed up for at least one of those
policies through a Co-Developed Program) for a minimum of [****] years after the
date of termination or expiration. The Hartford may sell additional products to
such Juno Subscribers at the request of such Juno Subscribers. Juno will receive
any One-Time Acquisition Fees and Ongoing Royalties on such sales, as if they
occurred prior to termination. The Hartford will provide to Juno quarterly a
list of Juno Subscribers who have signed up for and/or cancelled policies with
The Hartford.
11. GENERAL.
11.1. GOVERNING LAW; VENUE. This Agreement and its enforcement shall be
governed by, and construed in accordance with, the laws of the State of New
York, without regard to conflicts-of-law principles. Each party irrevocably
consents to the exclusive jurisdiction of the courts of the State of New York
and the federal courts situated in the State of New York in connection with any
action arising under this Agreement.
11.2. FORCE MAJEURE. Neither party shall be liable for failure to perform
any obligation under this Agreement where such failure is due to fire, flood,
labor dispute, natural calamity, or acts of the government or if such causes are
otherwise beyond the control of such party.
11.3. SEVERABILITY. If any provision of this Agreement is deemed by a court
of competent jurisdiction to be unenforceable or contrary to any applicable law
or regulation, such provision shall be enforced to the maximum extent permitted
by law and to effect the parties' fundamental intentions hereunder, and the
remainder of this Agreement shall continue in full force and effect.
11.4. ASSIGNMENT. This Agreement is not assignable by either party without
the prior written consent of the other party, except that this Agreement may be
assigned by Juno to any of its now current direct or indirect general partners.
All the terms and provisions of this Agreement shall be binding upon, shall
inure to the benefit of, and shall be enforceable by the respective successors
and assigns of the Parties.
11.5. NOTICES. Notices and other communications hereunder shall be sent to
the parties at their respective addresses set forth beneath their signatures
below or to such other address as a party shall notify the other in writing.
Notices and communications shall be sent by overnight mail or facsimile
transmission and shall be deemed delivered only when received by the intended
recipient.
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[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
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11.6. NO WAIVER. The failure of either Party to partially or fully exercise
any right or the waiver by either Party of any breach, shall not prevent a
subsequent exercise of such right or be deemed a waiver of any subsequent breach
of the same or any other term of this Agreement.
11.7. ENTIRE AGREEMENT. This Agreement, including the Attachment hereto,
sets forth the entire agreement between the Parties on this subject and
supersedes all prior negotiations, understandings and agreements between the
Parties concerning the subject matter. No amendment or modification of this
Agreement shall be made except by a writing signed by the Party to be bound
thereby or the successor or assign of such Party.
11.8. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same document.
11.9. Non-Hiring or Solicitation of Employees. During the term of this
Agreement and for a period of two (2) years following termination or expiration
of this Agreement, neither Party shall solicit or offer employment to any
employee of the other Party who was substantially involved in the Relationship
between the Parties without the prior written consent of the other Party.
11.10. SURVIVAL. The following provisions shall survive the termination or
expiration of this Agreement for any reason: Article 1 (DEFINITIONS); Section
3.3 (PUBLICITY; USE OF MARKS); Section 3.7 (CONFIDENTIALITY); Section 5.2
(MINIMUM PAYMENT FEE); Section 5.3 (VARIABLE PAYMENT FEE); Article 6
(PROPRIETARY RIGHTS); Article 7 (WARRANTIES); Article 8 (INDEMNIFICATION);
Article 9 (LIMITATION ON LIABILITY); Section 10.2 (TERMINATION WITHOUT CAUSE);
Section 10.4 (POST TERMINATION MARKETING); and this Article 11.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed below
by their duly authorized signatories.
JUNO ONLINE SERVICES, L.P.
By: /s/ Charles Ardai
-------------------------------
Title: President
----------------------------
THE HARTFORD FIRE INSURANCE COMPANY, on behalf of itself and its affiliated
property/casualty insurance companies
By: /s/ The Hartford Fire Insurance Company
---------------------------------------
Title: President
-----------------------------
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EXHIBIT 10.5
MARKETING SERVICES AGREEMENT
THIS AGREEMENT (the "Agreement") is effective as of the 11th day of
December, 1998 (the "Effective Date"), by and between Juno Online Services, L.P.
("Juno"), a Delaware limited partnership, having an address at 120 West 45th
Street, 15th Floor, New York, New York 10036, and AT&T Wireless Services, Inc.
("AT&T"), a Delaware corporation, having an address at 5000 Carillon Point,
Kirkland, WA 98033, on behalf of its wireless operating affiliates (each
referred to herein as a "Party", and both collectively referred to as the
"Parties").
WHEREAS, Juno provides certain branded online services to subscribers; and
WHEREAS, Juno provides advertising space in the form of "impressions" to
third-party advertisers on its online services; and
WHEREAS, AT&T desires to purchase advertising impressions for AT&T's
wireless products and services to be transmitted to Juno's subscribers, and to
engage Juno to provide certain marketing services incidental thereto, all on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the Parties agree as follows:
1. DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the following
meanings:
1.1. "Advance Payment" shall have the meaning set forth in Section 5.1(a)
of this Agreement.
1.2. "Co-Marketing Program" shall mean any marketing initiative using the
Marketing Materials to promote any of the AT&T Services to the Juno Subscribers
through the Juno Service. Co-Marketing Programs include, without limitation, any
jointly developed Ad Bundle, interstitial advertisement, banner advertisement,
pop-up advertisement, click-through advertisement, direct e-mail, toll free
number or other process, and the interactive forms and screens that support such
advertising, all as more fully described in the Marketing Plan.
1.3. "Existing AT&T Subscriber" shall mean a then-current subscriber to
AT&T Services (as defined below) who purchases an AT&T Service in response to
any portion of a Co-Marketing Program and remains a subscriber to such AT&T
Service for at least [****] thereafter.
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1.4. "Juno Eligible Member Base" shall mean Juno Subscribers who maintain a
billing address within the coverage area of AT&T's wireless network.
1.5. "Juno Service" shall mean the free electronic mail service provided by
Juno.
1.6. "Juno Subscriber" shall mean any individual who uses the Juno Service.
1.7. "Marks" shall mean the trademarks, service marks, names, logos, or
other identifiers of Juno and AT&T.
1.8. "Marketing Development Costs" shall have the meaning set forth in
Section 5.1(b) and Exhibit A of this Agreement.
1.9. "Marketing Materials" shall mean any text, images, software,
multimedia elements, or any other items provided by a Party in connection with
the development or implementation of any Co-Marketing Program.
1.10. "Marketing Plan" shall mean the marketing plan set forth as Exhibit A
hereto, as may be amended in accordance with this Agreement .
1.11. "New AT&T Subscriber" shall mean an individual who is not a
subscriber to any AT&T Services at the time such individual purchases an AT&T
Service in response to any portion of a Co-Marketing Program, has not been a
subscriber to any AT&T-offered service at any time in the thirty (30) day period
prior to the date such subscriber activates AT&T Service in response to any
portion of a Co-Marketing Program, and remains an AT&T subscriber to such AT&T
Service for at least [****] days thereafter.
1.12. "Subscriber Data" shall mean all data, information, and records
collected and/or maintained by Juno regarding the Juno Subscribers or their use
of the Juno Service.
1.13. "AT&T Services" shall mean, collectively, AT&T's wireless products
and services identified on Exhibit B hereto, promoted through a Co-Marketing
Program.
1.14. "AT&T Subscriber Revenues" shall mean all monthly revenues collected
by AT&T from Existing AT&T Subscribers and New AT&T Subscribers, as the case may
be, from access fees and home airtime.
1.15. "AT&T Subscriber Royalties" shall mean the amounts set forth in
Sections 5.1(c) and 5.1(d) of this Agreement.
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2. JUNO'S RESPONSIBILITIES.
2.1. CO-MARKETING PROGRAMS. In accordance with development and
implementation schedules to be mutually agreed upon from time to time during the
Term, Juno shall provide to AT&T the advertising impressions on the Juno Service
and the other promotions and services related thereto that are described as
"Co-Marketing Programs" in the Marketing Plan. If so requested by AT&T, Juno
shall assist AT&T in the creation, development, testing and implementation of
any Co-Marketing Program proposed by AT&T. AT&T will provide final approval over
the design of all Co-Marketing Programs (such approval processes to be conducted
on a prompt basis) and (subject to Section 5.5 of this Agreement) shall have the
right to modify the components of the Marketing Plan from time to time in AT&T's
discretion, including the targeted Juno Eligible Member Base, details of AT&T
Services offers, and the frequency of transmission of Ad Bundles. AT&T
acknowledges any such modifications may alter campaign schedules and such
alterations must be agreed to by the Parties.
2.2. CUSTOMER RESPONSE. Juno shall provide a mechanism for either an 800#
or for an on-line transmission of subscription information by Juno Subscribers
for the AT&T Services.
2.3. COMPLIANCE WITH APPLICABLE LAW. Juno shall comply with all applicable
laws and regulations in respect of the conduct of its business, including,
without limitation, any laws and regulations that relate to the practice of
"spamming" or the transmission of advertising impressions generally.
Additionally, Juno shall comply with its obligations under its Service Agreement
with its subscribers.
3. AT&T'S RESPONSIBILITIES.
3.1. CUSTOMER ACCOUNT ADMINISTRATION. AT&T shall be solely responsible for
the administration of all customer orders and accounts with respect to the offer
and sale of the AT&T Services, including but not limited to order fulfillment,
provisioning, activation, billing and equipment management (inventory returns
and processing of warranty claims) of telephone devices and services.
3.2. MARKETING MATERIALS. AT&T shall prepare and provide to Juno certain
materials to be incorporated into the Marketing Materials, all of which shall be
subject to Juno's review and approval in accordance with Juno's regular
procedures for approval of advertisements on the Juno Service. In the event AT&T
requests Juno to prepare any Marketing Materials on AT&T's behalf and/or if Juno
creates any of its own Marketing Materials in connection with this Agreement,
such Marketing Materials will be subject to final review and approval by AT&T.
The Marketing Materials shall not (and AT&T shall not utilize the customer order
or order fulfillment processes to) promote services of AT&T other than the AT&T
Services without Juno's prior written consent, which may be granted or denied in
Juno's sole discretion.
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3.3. CREDITWORTHINESS.
(a) AT&T may determine, in its sole discretion, whether it desires to
have Ad Bundles transmitted and AT&T Services marketed solely to those
members of the Juno Eligible Member Base who meet certain creditworthiness
criteria established (or to be established) by AT&T. If AT&T desires to
limit the extension of offers under the Marketing Plan to those members of
the Juno Eligible Member Base who satisfy the creditworthiness criteria
established by AT&T, Juno will use its reasonable commercial efforts to
transmit Ad Bundles as so requested by AT&T.
(b) Responsibility for the selection, engagement, and acts (or
omissions) of any third-party data-matching firm and/or credit reporting
agency necessary for the application of such creditworthiness criteria (or
for the determination of which Juno Subscribers come within the definition
of the "Juno Eligible Member Base") shall, as between the Parties, reside
solely with AT&T, including, without limitation, responsibility for costs
and expenses relating thereto. If requested by AT&T to assist AT&T in
connection with the activities described in this subsection, Juno shall use
its reasonable commercial efforts to provide assistance, but shall act
solely in the capacity of AT&T's agent.
3.4. COMPLIANCE WITH APPLICABLE LAW. AT&T shall comply with all applicable
laws and regulations (including, without limitation, the Fair Credit
Reporting Act and any rules, regulations and interpretations relating
thereto) in respect of the conduct of its business, including, without
limitation, in the obtaining or use of credit information for purposes of
establishing or applying creditworthiness criteria as it may elect under
this Article 3 and in the design and implementation of Marketing Materials
and marketing strategies based thereon. AT&T further represents and
warrants that (i) it shall not obtain, or attempt to obtain, credit
information through the employment of deceptive or false pretenses; and
(ii) that creditworthiness information, if any, obtained or used by AT&T
that relates to Juno Subscribers shall be used solely in connection with a
firm offer of credit (as such term is defined in the Fair Credit Reporting
Act) and not for any other purpose.
4. RELATIONSHIP OF THE PARTIES.
4.1. EXCLUSIVITY.
(A) EXCLUSIVE MARKETING. For the duration of the Term, AT&T will have
the right to be the exclusive wireless communications provider marketed by
Juno through the Juno Service. In the event this Agreement is terminated or
expires (other than Juno's termination of this Agreement for cause pursuant
to Section 11.3 or AT&T's termination for convenience pursuant to Section
11.2), Juno will agree to refrain from knowingly soliciting any current or
former Existing AT&T Subscriber or New AT&T Subscriber for the purpose of
offering any competitive wireless service for a period of [****] days
following
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such termination or expiration.
(B) RIGHT OF FIRST NEGOTIATION. In the event that this Agreement is
terminated at any time (other than by
Juno pursuant to Section 11.3 herein) or expires at the end of the Term
without renewal, Juno shall grant AT&T a right of first negotiation to
continue the promotion of AT&T Services through the Juno Service, as
described below. This right of first negotiation shall commence on the date
of the termination or expiration of this Agreement and shall continue for
sixty (60) consecutive days thereafter (the "First Negotiation Period").
During the First Negotiation Period, Juno will not enter into a
"Competitive Agreement" (as defined below) with a third party, unless Juno
has provided to AT&T in writing a summary of the material terms and
conditions contained in a bona fide offer by such third party (the "Juno
Summary") and provided AT&T a period of at least thirty (30) days from the
date such Juno Summary was received by AT&T in which to respond to such
Juno Summary. Upon an expression of interest by AT&T, the parties will, in
good faith, commence negotiations for a new marketing agreement. In the
event that the parties have not agreed on the terms of a new marketing
agreement or AT&T has not agreed in writing within such thirty (30) day
period, to match substantially all of the material terms of the Juno
Summary, then Juno may enter into the Competitive Agreement as described in
the Juno Summary. Any change to or addition of a material term in the Juno
Summary shall constitute a new offer and require a new Juno Summary to be
submitted in accordance with the terms of this section. As used above, a
"Competitive Agreement" shall be defined as either (i) an exclusive
agreement for the promotion over the Juno Service of wireless
communications services offered by any company other than AT&T, or (ii) an
advertising agreement under which Juno is contractually guaranteed to
receive an amount greater than $[***] for the sale on the Juno Service of
advertising of wireless communications services offered by any company
other than AT&T. After the expiration of the First Negotiation Period and
any required negotiating period trigged by the submission of a Juno
Summary, Juno shall be free to enter into any agreement with any third
party (including without limitation a Competitive Agreement) without
providing AT&T with any notice or opportunity to negotiate.
4.2. PUBLICITY; USE OF MARKS. The timing and content of any press release
regarding any aspect of this Agreement (whether in electronic, print, or other
media) shall be subject to the prior written approval of both Parties. Except as
explicitly provided in this Agreement, neither Party shall, without the other
Party's prior written approval, use in any advertising, public announcement,
press release or any other promotional endeavor any Mark or represent, directly
or indirectly, that any product or service provided by such Party has been
approved or endorsed by the other Party. All uses by one Party of the other
Party's Marks must be reviewed and approved by such other Party and must comply
with the other Party's guidelines. No provision of this Agreement shall be
deemed to grant either Party any rights in the other Party's Marks.
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4.3. OTHER JUNO SERVICES. Nothing herein shall apply to any service or
product offered by Juno other than the Juno Service, and AT&T acknowledges and
agrees that to the extent AT&T desires to extend this or any other relationship
to any other Juno product or service, such extension may be subject to a
distinct set of applicable terms and conditions.
5. FEES AND PAYMENTS.
5.1. PAYMENT. In consideration of the services to be provided by Juno
hereunder, and in accordance with the payment terms contained in Section 5.3,
AT&T shall pay to Juno the following fees during the Term:
(a) ADVANCE PAYMENT. Upon execution of this Agreement, AT&T shall pay
to Juno a non-refundable (except as set forth in Section 11) advance of
$[***] (the "Advance Payment");
(b) MARKETING DEVELOPMENT COSTS. Commencing upon execution of this
Agreement, Juno shall send AT&T a quarterly invoice for marketing expenses
incurred by Juno in marketing the AT&T Services during the prior quarter,
and AT&T shall pay such invoices within forty-five (45) days after the date
of each such invoice. These costs will include creative Ad Production Costs
and operational Ad Transmission Costs as set forth in the Marketing Plan.
The amount of these expenses shall not exceed the amounts set forth in
Exhibit A without prior written approval from AT&T. These payments shall
not be recouped against the Advance Payment;
(c) EXISTING AT&T SUBSCRIBERS. The AT&T Subscriber Royalties set out
herein shall be due to Juno on a quarterly basis and recouped against the
Advance Payment until such time as the cumulative fees due pursuant to this
Section 5.1(c) and Section 5.1(d) below exceed the Advance Payment, at
which time such AT&T Subscriber Royalties in excess of the Advance Payment
will become payable to Juno on a quarterly basis:
(i) AT&T SUBSCRIBER ROYALTIES. [***] per each Existing AT&T
Subscriber generated during such quarter; and
(d) NEW AT&T SUBSCRIBERS. The AT&T Subscriber Royalties set out herein
shall be due to Juno on a quarterly basis and recouped against the Advance
Payment until such time as the cumulative fees due pursuant to this Section
5.1(d) and Section 5.1(c) above exceed the Advance Payment, at which time
such AT&T Subscriber Royalties in excess of the Advance Payment will become
payable to Juno on a quarterly basis:
(i) AT&T SUBSCRIBER ROYALTIES. [***] per each New AT&T Subscriber
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generated during such quarter; and
(II) AT&T SUBSCRIBER REVENUES. For each New AT&T Subscriber,
[***] percent ([***]%) of the AT&T Subscriber Revenues attributable to
such New AT&T Subscribers' first twelve (12) months of service.
5.2. EXPENSES. Except as otherwise set forth in this Agreement, each of
the Parties shall pay its own costs and expenses associated with
performing its respective obligations under this Agreement.
5.3. PAYMENT. Except as otherwise specified herein, all undisputed fees
shall be payable within forty-five (45) days after the end of each calendar
quarter. All payments shall be accompanied by a report describing the basis for
the payments made.
5.4. AUDITS.
(a) JUNO AUDIT. AT&T shall maintain records regarding transactions
related to the subject matter of this Agreement that are sufficient to
document and confirm the accuracy and completeness of any amounts paid or
payable to Juno hereunder. No more than once per calendar year, Juno or its
authorized representative may conduct a reasonable inspection of such
records for the sole purpose of verifying amounts payable to Juno
hereunder. AT&T shall promptly pay to Juno any underage determined as a
result of such audit. Such inspection shall be conducted upon reasonable
prior notice to AT&T, and shall be conducted, during regular business hours
on AT&T's premises in such a manner as to minimize disruption to AT&T. If
any such audit reveals that AT&T has underpaid Juno by five percent (5%) of
the fees owed to Juno, AT&T shall promptly pay such fees to Juno together
with the costs of the audit.
(B) AT&T AUDIT. Juno shall maintain complete, detailed and accurate
records regarding transactions related to the subject matter of this
Agreement that are sufficient to document and confirm the accuracy and
completeness of any amounts charged by Juno to AT&T hereunder
for Ad Transmissions. No more than once per calendar year, AT&T or its
authorized representative may conduct a reasonable inspection of such
records for the sole purpose of verifying that the amounts charged by Juno
to AT&T for Ad Transmissions accurately reflect the number of Ad Downloads
that occurred. Such inspection shall be conducted upon reasonable prior
notice to Juno and shall be conducted during regular business hours on
Juno's premises in such a manner as to minimize disruption to AT&T. If such
audit reveals that Juno has overcharged AT&T, Juno shall promptly refund
the amounts overcharged to AT&T. If any such audit reveals that Juno has
overcharged AT&T by five percent (5%) of the amounts charged by Juno, Juno
shall promptly pay such amounts to AT&T together with the costs of the
audit.
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5.5. MODIFICATION TO THE MARKETING PLAN. AT&T shall have the right, in its
sole discretion, to modify the terms and conditions of the Marketing Plan set
forth in Exhibit A (it being understood, however, that AT&T shall not have the
right to modify the unit price per Ad Bundle, or the price for ad transmission,
or any other terms related to the rates at which Juno provides marketing
services under the Marketing Plan, unless Juno has provided its consent in
writing to such modifications, which such consent may be granted or denied in
Juno's sole discretion).
6. PROPRIETARY RIGHTS.
6.1. OWNERSHIP. Each Party will maintain sole ownership of all its
Marketing Materials and any intellectual property rights therein, including
without limitation any Marketing Materials purchased or licensed from a third
party, and the other Party shall have no right, title, or interest therein.
Notwithstanding the foregoing, either Party will have the right to use the other
Party's Marketing Materials only pursuant to the terms and conditions of this
Agreement. Without limitation of the foregoing, subject to the provisions of
Section 4.1 governing exclusivity, Juno will have the right to re-use any Juno
Marketing Materials on behalf of any other relationship entered into by Juno
during the Term or following expiration or termination of this Agreement. Juno
will maintain sole ownership of the (i) Juno Service, (ii) the Juno Subscriber
Data. AT&T will maintain sole ownership of (i) the AT&T Service, (ii) all
subscriber data regarding the use of AT&T Services, and (iii) all materials and
information developed by AT&T in connection with the Marketing Materials
developed or used in connection with the Co-Marketing Programs, and any
intellectual property rights therein.
6.2. RIGHTS CLEARANCE. Each Party shall be responsible for obtaining at its
own expense any rights, licenses, or permissions necessary to copy, transmit,
distribute, or otherwise use any text, images, software, multimedia elements, or
other content provided by such Party (including without limitation for use in
any Co-Marketing Program).
7. CONFIDENTIALITY.
The parties have executed a Non-Disclosure agreement, attached hereto as
Exhibit C.
8. WARRANTIES.
8.1. MUTUAL WARRANTIES. Each Party represents and warrants to the other
that (a) such Party has all rights and authority necessary to enter into this
Agreement and perform its obligations hereunder; (b) such Party will perform its
obligations hereunder in a workmanlike manner; and (c) all Marketing Materials
provided by such Party do not now and will not infringe on any third party
intellectual property or contractual right.
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8.2. DISCLAIMER OF WARRANTY. EXCEPT FOR THE WARRANTIES SET FORTH IN THIS
ARTICLE 8, JUNO MAKES NO WARRANTY, WHETHER EXPRESS OR IMPLIED, AND SPECIFICALLY
DISCLAIMS ANY WARRANTY WITH RESPECT TO THE JUNO SERVICE OF MERCHANTABILITY,
NONINFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE. SPECIFICALLY, AT&T
ACKNOWLEDGES AND UNDERSTANDS THAT JUNO MAY ENCOUNTER TECHNICAL OR OTHER
DIFFICULTIES WHICH MAKE PROVIDING THE JUNO SERVICE UNFEASIBLE OR REQUIRE JUNO TO
ALTER THE CONTENT OR STRUCTURE OF THE JUNO SERVICE IN ITS CURRENT FORM. IN THE
EVENT THAT JUNO ENCOUNTERS SUSTAINED TECHNICAL DIFFICULTIES WHICH HAVE A
MATERIAL ADVERSE EFFECT ON THE ABILITY OF JUNO TO PROVIDE ADVERTISING
IMPRESSIONS TO AT&T AS CONTEMPLATED UNDER THIS AGREEMENT, THEN AT&T SHALL HAVE
THE RIGHT TO TERMINATE THIS AGREEMENT UPON FIFTEEN DAYS PRIOR WRITTEN NOTICE,
WITH NO FURTHER OBLIGATION TO JUNO (EXCEPT THAT AT&T SHALL PAY TO JUNO ANY
MARKETING DEVELOPMENT COSTS, AT&T SUBSCRIBER REVENUES AND AT&T SUBSCRIBER
ROYALTIES INCURRED OR ACCRUED THROUGH THE DATE OF TERMINATION).
9. INDEMNIFICATION.
9.1. BY JUNO. Juno will indemnify, defend, and hold harmless AT&T and its
parent, subsidiaries and affiliates, and the officers, agents, employees, and
representatives of each of them, from any third party claims, damages,
liabilities, costs and expenses, including without limitation reasonable legal
fees and expenses, arising out of or related to any claim related to (a) a
breach by Juno of any warranty set forth in this Agreement, (b) a violation by
Juno of any law, rule, or regulation applicable to Juno's performance of its
obligations hereunder (including, but not limited to, any claims that the
transmission of advertising impressions to Juno Subscribers as contemplated by
this Agreement constitutes an unlawful practice of "spamming"), or (c) any
negligent act or omission or willful misconduct of Juno or any of its
representatives. In addition to, and not in limitation of, the foregoing, Juno
will indemnify, defend, and hold harmless AT&T and its parent, subsidiaries and
affiliates, and the officer, agents, employees, and representatives of each of
them, from any third party claims, damages, liabilities, costs and expenses,
including without limitation reasonable legal fees and expenses, that arise out
of or are related to Juno's compliance (or failure to comply) with its
obligations under Section 2.3 of this Agreement or any breach of Juno's
representations or warranties thereunder. AT&T shall have the right, but not the
obligation to participate in such defense and to review all documents prepared
in connection therewith. AT&T shall not be bound by any settlement to which it
has not consented in writing.
9.2. BY AT&T. AT&T will indemnify, defend, and hold harmless Juno and its
affiliates and their respective partners, officers, agents, and employees from
any third party claims, damages, liabilities, costs and expenses, including
without limitation reasonable legal fees and expenses, arising out of or related
to any claim (a) that AT&T has breached any warranty set forth in this
Agreement, (b) that AT&T has violated any law, rule, or regulation
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applicable to AT&T's performance of its obligations hereunder, or (c) arising
out of or otherwise related to any AT&T Service sold as a result of this
Agreement. In addition to, and not in limitation of, the foregoing, AT&T will
indemnify, defend, and hold harmless Juno and its affiliates and their
respective partners, officers, agents, and employees from any claims, damages,
liabilities, costs and expenses, including without limitation reasonable legal
fees and expenses, that arise out of or are related to AT&T's compliance (or
failure to comply) with its obligations under Section 3.4 of this Agreement or
any breach of AT&T's representations or warranties thereunder. Juno shall have
the right, but not the obligation to participate in such defense and to review
all documents prepared in connection therewith. Juno shall not be bound by any
settlement to which it has not consented in writing.
10. LIMITATION ON LIABILITY.
10.1. Each party's entire liability for direct damages to the other party
for any claim arising under or related to this Agreement will be limited to
amounts actually received by Juno from AT&T in the six (6) consecutive months
immediately prior to the date on which such claim arose. (The foregoing
limitation shall not apply to (i) either party's liability to the other party
for amounts due to the other party under Article 5 of this Agreement, or (ii)
AT&T's liability to Juno for amounts due to Juno under Article 11 of this
Agreement.) IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES
(INCLUDING WITHOUT LIMITATION LOST PROFITS), EVEN IF THE PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
11. TERM AND TERMINATION.
11.1. TERM. The term of this Agreement (the "Term") shall commence on the
Effective Date of this Agreement and continue for [***] months thereafter,
unless sooner terminated hereunder.
11.2. TERMINATION FOR CONVENIENCE. Either Party may terminate this
Agreement at any time with at least thirty (30) days written notice for any
reason or no reason. In the event of such termination, neither Party shall have
any further obligations or liability to the other except as follows:
(a) If Juno terminates the Agreement pursuant to this Section 11.2,
Juno will refund to AT&T any unearned portion of the Advance Payment and
AT&T, upon invoice from Juno, shall immediately remit to Juno payment for
all approved Marketing Development Costs incurred by Juno prior to the
effective date of such termination, as
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well as the amount of any AT&T Subscriber Royalties then due and payable
to the extent they exceed the Advance Payment.
(b) If AT&T terminates this Agreement pursuant to this Section 11.2,
Juno will retain the Advance Payment and AT&T, upon invoice from Juno,
shall immediately remit to Juno payment for all approved Marketing
Development Costs incurred by Juno prior to the effective date of such
termination, as well as the amount of any AT&T Subscriber Royalties then
due and payable to the extent they exceed the Advance Payment.
(c) If AT&T terminates this Agreement pursuant to this Section 11.2,
AT&T shall be obligated to continue making payments for all AT&T Subscriber
Royalties and AT&T Subscriber Revenues due and payable to Juno hereunder
prior to the effective date of such termination, and AT&T will continue to
pay AT&T Subscriber Revenues with respect to the period from the date of
termination until the date [***] months from the Effective Date of this
Agreement.
11.3. TERMINATION FOR CAUSE.
(a) Either Party may terminate this Agreement upon thirty (30) days
written notice if the other Party materially breaches any of the terms of
this Agreement provided, however, that this Agreement will not terminate if
the non-terminating Party has cured the breach within the thirty (30) day
period.
(b) Upon termination by Juno pursuant to this Section 11.3, Juno will
retain the Advance Payment and AT&T shall immediately remit to Juno (i)
payment for all undisputed and approved Marketing Development Costs
incurred by Juno prior to the effective date of such termination, and (ii)
the amount of any AT&T Subscriber Royalties then due and payable to the
extent they exceed the Advance Payment. AT&T shall also be obligated to
continue making payments for all AT&T Subscriber Royalties and AT&T
Subscriber Revenues due and payable to Juno hereunder prior to the
effective date of such termination, and AT&T will continue to pay AT&T
Subscriber Revenues with respect to the period from the date of termination
until the date 12 months from the Effective Date of this Agreement.
(c) If AT&T terminates the Agreement pursuant to this Section 11.3,
Juno will refund to AT&T any unearned portion of the Advance Payment and
AT&T, upon invoice from Juno, shall immediately remit to Juno payment for
all undisputed and approved Marketing Development Costs incurred by Juno
prior to the effective date of such termination, as well as the amount of
any AT&T Subscriber Royalties then due and payable to the extent they
exceed the Advance Payment.
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11.4. OBLIGATIONS UPON TERMINATION OR EXPIRATION. Without limitation of any
other obligation under this Agreement, upon termination or expiration of this
Agreement, each Party shall immediately return to the other Party all copies of
the other Party's Marketing Materials or other Confidential Information.
Further, except as set forth in Section 11.3(b) and Section 11.2(c), any
obligation of AT&T to pay AT&T Subscriber Revenues with respect to periods after
the date of termination shall cease immediately upon termination or expiration
of this Agreement unless otherwise agreed in writing by the parties.
12. GENERAL.
12.1. GOVERNING LAW; VENUE. This Agreement and its enforcement shall be
governed by, and construed in accordance with, the laws of the State of New
York, without regard to conflicts-of-law principles. Each Party irrevocably
consents to the exclusive jurisdiction of the courts of the State of New York
and the federal courts situated in the State of New York in connection with any
action arising under this Agreement.
12.2. FORCE MAJEURE. Neither Party shall be liable for failure to perform
any obligation under this Agreement where such failure is due to fire, flood,
labor dispute, natural calamity, or acts of the government or if such causes are
otherwise beyond the control of such Party.
12.3. SEVERABILITY. If any provision of this Agreement is deemed by a court
of competent jurisdiction to be unenforceable or contrary to any applicable law
or regulation, such provision shall be enforced to the maximum extent permitted
by law and to effect the Parties' fundamental intentions hereunder, and the
remainder of this Agreement shall continue in full force and effect.
12.4. ASSIGNMENT. This Agreement is not assignable by either Party without
the prior written consent of the other Party, except (a) this Agreement may be
assigned by Juno to any of its direct or indirect general partners without the
consent of AT&T provided that such assignee assumes all of the obligations of
Juno hereunder, (b) this Agreement may be assigned by AT&T to one of its
affiliates without the consent of Juno provided that such assignee assumes all
of the obligations of AT&T hereunder, and (c) either Party may assign this
Agreement or any rights or obligations under this Agreement to any successor of
such Party by way of merger, consolidation, reorganization or the acquisition of
all or substantially all of its business and/or assets relating to this
Agreement upon written notice to the other Party. All the terms and provisions
of this Agreement shall be binding upon, shall inure to the benefit of, and
shall be enforceable by the respective successors and assigns of the Parties.
12
<PAGE>
12.5. NOTICES. Notices and other communications hereunder shall be sent to
the Parties at the following addresses or to such other address as a Party shall
notify the other in writing. Notices and communications shall be sent by
overnight mail or facsimile transmission and shall be deemed delivered only when
received by the intended recipient.
If to Juno: Juno Online Services, L.P.
120 West 45th Street
New York, NY 10036
Attention: President
with a copy to the Legal Department at the foregoing
address.
If to AT&T: AT&T Wireless Services, Inc.
5000 Carillon Point
Kirkland, WA 98033
Attn: Director - On-Line Distribution
with a copy to the Legal Department at the foregoing
address.
12.6. NO WAIVER. The failure of either Party to partially or fully exercise
any right or the waiver by either Party of any breach, shall not prevent a
subsequent exercise of such right or be deemed a waiver of any subsequent breach
of the same or any other term of this Agreement.
12.7. ENTIRE AGREEMENT. This Agreement, including the Exhibits hereto, sets
forth the entire agreement between the Parties on this subject and supersedes
all prior negotiations, understandings and agreements between the Parties
concerning the subject matter. No amendment or modification of this Agreement
shall be made except by a writing signed by the Party to be bound thereby or the
successor or assign of such Party.
12.8. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same document.
13
<PAGE>
12.9. SURVIVAL. The following provisions shall survive the termination or
expiration of this Agreement for any reason: Article 1 (DEFINITIONS); Section
4.2 (PUBLICITY; USE OF MARKS); Article 5 (FEES AND PAYMENTS); Article 6
(PROPRIETARY RIGHTS); Article 7 (CONFIDENTIALITY); Article 8 (WARRANTIES);
Article 9 (Indemnification); Article 10 (LIMITATION ON LIABILITY); Section 11.2
(TERMINATION FOR CONVENIENCE); Section 11.4 (OBLIGATIONS UPON TERMINATION OR
EXPIRATION); and this Article 12.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed below
by their duly authorized signatories.
JUNO ONLINE SERVICES, L.P. AT&T WIRELESS SERVICES, INC.
By: /s/ CHARLES ARDAI By: /s/ ANNE GORDON
------------------------------- ---------------------------------
Name: Charles Ardai Name: Anne Gordon
----------------------------- -------------------------------
Title: President Title: VP-National Marketing
---------------------------- ------------------------------
14
<PAGE>
EXHIBIT A
MARKETING PLAN
THIS MARKETING PLAN REFERS TO THE MARKETING SERVICES AGREEMENT DATED AS OF
DECEMBER 11, 1998 BETWEEN JUNO ONLINE SERVICES, L.P. AND AT&T WIRELESS SERVICES,
INC. (THE "AGREEMENT"). DEFINED TERMS USED IN THIS MARKETING PLAN ARE USED AS
DEFINED IN THE AGREEMENT.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CO-MARKETING PROGRAMS:
AT&T will advertise the AT&T Services to at least [***]% of the Juno Eligible
Member Base every full calendar month of the Term of the Agreement, except for
those months in which the parties mutually agree to target a smaller percentage
of the Juno Eligible Member Base for the purposes of testing.
Juno has developed, tested, and campaigned various marketing strategies designed
to maximize member response and profitability on behalf of its partners. These
strategies identify three main components to each incremental campaign of an
ongoing marketing relationship: a) the ad "bundle," b) the ad "testing," and c)
the ad "rollout." (Please reference the Advertising Key below for full
descriptions of the types of advertisements mentioned below.)
A) THE AD BUNDLE
Initially, Juno will transmit on behalf of AT&T an introductory e-mail and an
introductory Interstitial Ad to announce the initiation of a relationship
between Juno and AT&T, endorsing AT&T Services and establishing AT&T as the
"official wireless provider of Juno Online Services."
Subsequently, Juno will utilize the following formula for each incremental
campaign:
[***] Interstitial Ad (displayed [***] times per member) [***] Banner
Ad (displayed [***] times per member) [***] Pop-up Ad (displayed [***]
times per member)
B) THE AD TESTING
Juno has found that by testing various components of an individual campaign, it
is able to identify a preferred mix of such components, thereby enabling it to
roll out on a larger scale with an effective campaign. Campaign components
suitable for testing include product offer, creative, copy, order form/response
page, premium/promotion, targeting, Web click-through capability, and
re-solicitation.
- --------------------
[***] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
15
<PAGE>
Juno recommends running approximately [***] test campaigns per year to maximize
response.
C) THE AD ROLLOUT
Based on the results of such Ad Testing, AT&T will be able to identify the
campaign(s) that should be rolled out to the portion of the Juno Eligible Member
Base targeted each month.
D) MARKETING DEVELOPMENT COSTS
There are two main Marketing Development Costs that Juno incurs as a result of
marketing on behalf of its strategic partners: Ad Production Costs (fixed cost)
and Ad Transmission Costs (variable cost).
1. AD PRODUCTION COSTS. To cover Juno's ad production costs, AT&T will pay
Juno $[***] per Ad Bundle. For each test campaign, it will be necessary for
Juno to construct a new Ad Bundle. Assuming that AT&T decides to run 12
test campaigns per year, the annual fixed cost of ad production for AT&T
would be equal to $[***].
2. AD TRANSMISSION COSTS. To cover Juno's ad transmission costs, AT&T will pay
Juno $[***] for each member to whom the campaign is transmitted. The
following table illustrates such variable transmission charges:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
---------------- ---------------- --------------- --------------- ---------------- ---------------
[***] [***] [***] [***] [***] [***]
members members members members members members
---------------- ---------------- --------------- --------------- ---------------- ---------------
$[***] $[***] $[***] $[***] $[***] $[***]
---------------- ---------------- --------------- --------------- ---------------- ---------------
</TABLE>
Given that the number of Juno Subscribers targeted on a monthly basis will be
directly proportional to both the total size of the Juno Eligible Member Base
and the activity rates of the Juno Eligible Member Base, aggregate transmission
payments cannot be definitively determined at this date.
3. TOTAL DIRECT COSTS. By combining fixed Ad Production Costs with variable Ad
Transmission Costs, AT&T can identify the level at which it would
compensate Juno for Juno Marketing Development Costs.
ADVERTISING KEY
1. INTERSTITIAL ADVERTISEMENTS. Interstitial Ads represent an excellent
branding opportunity, as these full-sized ads (which cover the entire
interface) are present for the entire duration of a Juno Subscriber's
connection to Juno's servers. Said connections usually last 30-45 seconds,
- --------------------
[***] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
16
<PAGE>
and typically occur twice in any given Juno session (at the beginning and
end of each session). For the purposes of this ongoing marketing program,
Interstitial Ads shall be utilized to support the interactive Banner,
Pop-Up, and Click-Through Ads (as described below) by calling Juno
Subscribers' attention to the upcoming opportunities from AT&T, by
providing a few key selling points for the AT&T Services, and (if AT&T is
inclined to pursue) by providing 800# telephone service to those customers
interested in responding by phone.
2. BANNER ADVERTISEMENTS. Banner Ads, which are displayed to Juno Subscribers
during their e-mail session, are interactive, graphical ads that allow
users to click through to off-line "micro-sites." These micro-sites can
contain multiple pages, allowing users to navigate between them, providing
members both more information about products and services and an ability to
make a purchase or request more information.
3. POP-UP ADVERTISEMENTS. Pop-Up Ads may appear in one of six "slots" during
an e-mail session (two in the beginning, two during, and two at the end of
a given session), and, covering the entire interface, require a member to
"close" or "cancel" the advertisement. Like Banner Ads, Pop-Up Ads are
interactive, may contain multiple off-line micro-site pages, and allow
customers to purchase or request more information on a given product or
service.
4. CLICK-THROUGH ADVERTISEMENTS. Click-Through Ads are banner and pop-up
advertisements that provide online access to a selected Web site(s) for a
pre-specified amount of time. Rather than viewing off-line micro-sites,
Juno Subscribers who click on a Click-Through Ad will launch a browser and
access the Web.
5. DIRECT E-MAILS. Direct E-mails are all-text messages sent directly from
Juno to its Subscribers. For the purposes of this marketing program, Juno
will send a Direct E-mail to announce the Juno/AT&T relationship and
promote the AT&T Services.
17
<PAGE>
EXHIBIT B
AT&T SERVICES
- - DESCRIPTION OF THE SERVICES TO BE OFFERED BY AT&T
- Handsets sold through this channel will be dual-band, tri-mode
phones-only (850 MHz digital, 1900 MHz-digital, 850 MHz AMPs).
- Rate Plans offered will be selected by AT&T and the Parties currently
contemplate the inclusion of AT&T Digital One Rate calling plan in the
offer. The offer will be made to the Juno Eligible Member Base. The
terms and conditions of the offer will be determined by AT&T in its
sole discretion.
- A specific offer incentive for Juno Subscribers is to be determined
and will be mutually agreed upon by the Parties.
18
<PAGE>
EXHIBIT C
NON-DISCLOSURE AGREEMENT
19
<PAGE>
MUTUAL NONDISCLOSURE AGREEMENT
This Nondisclosure Agreement (this "Agreement") is dated as of July 9, 1998,
between AT&T Wireless Services, Inc. ("AT&T Wireless") with a place of
business at 5000 Carillon Point, Kirkland, Washington, and Juno Online
Services, L.P. ("Company"), with a place of business at 120 West 45th Street,
15th Floor, New York, NY 10036.
AT&T WIRELESS AND COMPANY HEREBY AGREE AS FOLLOWS:
1. CONFIDENTIAL INFORMATION. As used in this Agreement, "Confidential
Information" means all information of either party that is not generally
known to the public, whether of a technical, business or other nature
(including, without limitation, trade secrets, knowhow and information
relating to the technology, customers business plans, promotional and
marketing activities, finances and other business affairs of such party),
that is disclosed by one party (the "Disclosing Party") to the other party
(the "Receiving Party") or that is otherwise learned by the Receiving Party
in the course of its discussions or business dealings with, or its physical
or electronic access to the premises, of, the Disclosing Party, and that has,
in the case of documents or other tangible materials, been marked as being
proprietary and/or confidential and, in the case of oral or intangible
materials, been identified in reasonable detail as being proprietary and/or
confidential in a writing delivered to the Receiving Party with 15 days after
the disclosure thereof.
2. USE AND OWNERSHIP OF CONFIDENTIAL INFORMATION. The Receiving Party,
except as expressly provided in this Agreement, will not disclose
Confidential Information to anyone without the Disclosing Party's prior
written consent. In addition, the Receiving Party will not use, or permit
others to use, Confidential Information for any purpose other than the
following:
to discuss the distribution of AT&T products & services via online services
provided by Juno.
The Receiving Party will take all reasonable measures to avoid disclosure,
dissemination or unauthorized use of Confidential Information, including, at
a minimum, applying those measures its takes to protect its own confidential
information of a similar nature. All Confidential Information will remain the
exclusive property of the Disclosing Party, and the Receiving Party will have
no rights, by license or otherwise, to use the Confidential Information
except as expressly provided herein.
3. EXCEPTIONS. The provisions of Section 2 will not apply to any
information that (i) is or becomes publicly available without breach of this
Agreement; (ii) was known to the Receiving Party prior to its receipt from
the Disclosing Party; (iii) is rightfully received from a third party who did
not acquire or disclose such information by a wrongful or tortious act; or
(iv) was independently developed by the Receiving Party without reference to
any Confidential Information.
4. DISCLOSURES TO GOVERNMENTAL ENTITIES. If the Receiving Party becomes
legally obligated to disclose Confidential Information by any government
entity with jurisdiction over it, the Receiving Party will give the
Disclosing Party prompt written notice to allow the Disclosing Party to seek
a protective order or other appropriate remedy. Such notice must include,
without limitation, identification of the information to be so disclosed and
a copy of the order. The Receiving Party will disclose only such information
as is legally required and will use its commercially reasonable efforts to
obtain confidential treatment for any Confidential Information that is so
disclosed.
5. COMPLIANCE WITH LAWS; EXPORTATION/TRANSMISSION OF CONFIDENTIAL
INFORMATION. Both parties will comply with all applicable federal, state,
and local statutes, rules and regulations, including, but not limited to,
United States export control laws and regulations as they currently exist and
as they may be amended from time to time.
6. RECEIVING PARTY PERSONNEL. The Receiving Party will restrict the
possession, knowledge, development and use of Confidential Information to its
employees, agents, subcontractors and entities controlled by or controlling
it (collectively, "Personnel") who Receiving Party reasonably believes have a
need to know Confidential Information in connection with the purposes set
forth in Section 2. The Receiving Party's Personnel will have accress only to
the Confidential Information they need for such purposes. The Receiving Party
will ensure that its Personnel comply with this Agreement and will promptly
notify the Disclosing Party of any breach of this Agreement.
7. RETURN OF CONFIDENTIAL INFORMATION. Upon the Disclosing Party's written
request, the Receiving Party promptly will return or destroy (or, in the case
of electronic embodiments, permanently erase) all tangible material embodying
Confidential Information (in any form and including, without limitation, all
summaries, copies and excerpts of Confidential Information) in its possession
or under its control
8. INDEPENDENT DEVELOPMENT. The Disclosing Party acknowledges that the
Receiving Party may currently or in the future be developing information
internally, or receiving information from other parties, that is similar to
the Confidential Information. Accordingly, nothing in this Agreement will be
construed
<PAGE>
as a representation or agreement that the Receiving Party will not develop or
have developed for it products, concepts, systems or techniques that are
similar to or compete with the products, concepts, systems or techniques
contemplated by or embodied in the Confidential Information, provided that
the Receiving Party does not violate any of its obligations under this
Agreement in connection with such development.
9. INJUNCTIVE RELIEF. The Receiving Party acknowledges that disclosure or
use of Confidential Information in violation of this Agreement could cause
irreparable harm to the Disclosing Party for which monetary damages may be
difficult to ascertain or an inadequate remedy. The Receiving Party therefore
agrees that the Disclosing Party will have the right, in addition to its
other rights and remedies, to injunctive relief for any violation of this
Agreement without posting bond, or by posting bond at the lowest amount
required by law.
10. LIMITED RELATIONSHIP. This Agreement will not create a joint venture,
partnership or other formal business relationship or entity of any kind, or
an obligation to form any such relationship or entity. Each party will act as
an independent contractor and not as an agent of the other party for any
purpose, and neither will have the authority to bind the other.
11. CUMULATIVE OBLIGATIONS. Each party's obligations hereunder are in
addition to, and not exclusive of, any and all of its other obligations and
duties to the other party, whether express, implied, in fact or in law.
12. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire
agreement between the parties relating to the matters discussed herein and
supercedes all prior oral and written understandings with respect to any
information disclosed or received under this Agreement. This Agreement may be
amended or modified only with the mutual written consent of the parties.
13. TERM AND TERMINATION. This Agreement is intended to cover Confidential
Information disclosed or received by either party prior or subsequent to the
date of this Agreement. Unless otherwise earlier terminated, this Agreement
automatically will expire three (3) years from the date first written above;
provided, however, that each party's obligations with respect to the other
party's Confidential Information disclosed or received prior to termination
or expiration will survive for three (3) years following the expiration or
termination of this Agreement. Either party may terminate this Agreement upon
written notice to the other party.
14. NONWAIVER. Any failure by either party to enforce the other party's
strict performance of any provision of this Agreement will not constitute a
waiver of its right to subsequently enforce such provision or any other
provision of this Agreement.
15. ATTORNEY FEES. In the event any court action is commenced by one party
against the other arising under or relating to this Agreement, the
substantially prevailing party is entitled to recover its out-of-pocket and
court costs and reasonable attorney fees. The cost of in-house legal staff
will be valued at market rates for comparable services from private
practitioners.
16. GOVERNING LAW; ETC. This Agreement will be governed by internal laws
of the State of New York, without reference to its choice of law rules, may
be executed in counterpart copies, and, in the absence of an original
signature, faxed signatures will be considered the equivalent of an original
signature. Each party hereby waives its right to a jury trial for any claims
that may arise out of this Agreement. If a provision of this Agreement is
held invalid under any applicable law, such invalidity will not affect any
other provision of this Agreement that can be given effect without the
invalid provision. Further, all terms and conditions of this Agreement will
be deemed enforceable to the fullest extent permissible under applicable law,
and, when necessary, the court is requested to reform any and all terms or
conditions to give them such effect.
The parties have executed this Agreement on the date first above written.
AT&T WIRELESS SERVICES, INC.
By: /s/ ANNE GORDON
------------------------
Print Name: Anne Gordon
Title: VP National Marketing
JUNO ONLINE SERVICES, L.P.
By: /s/ CHARLES ARDAI
-----------------------
Print Name: Charles Ardai
Title: President
<PAGE>
EXHIBIT 10.6
DISTRIBUTOR AGREEMENT
THIS DISTRIBUTOR AGREEMENT (the "Agreement") is made and entered into this 12th
day of 1998 (the "Effective Date") by and between LCI International Telecom
Corp., a corporation organized and existing under the laws of the State of
Delaware, with its principal place of business located at 8180 Greensboro Drive,
McLean, Virginia 22102 ("LCI") and Juno Online Services, L.P., a limited
partnership organized and existing under the laws of the State of Delaware, with
its principal place of business located at 120 West 45th Street, New York, NY
10036 ("Juno").
WHEREAS, LCI offers certain local and long-distance telecommunications services
identified on Exhibit A attached hereto and incorporated herein (each
individually referred to as a "Marketed Service" and cumulatively referred to as
the "Marketed Services"); and
WHEREAS, Juno offers an Internet based electronic mail service (the "Juno
Network"); and
WHEREAS, Juno and LCI desire to enter into an agreement to facilitate the
marketing of Marketed Services and other mutually agreed upon services over the
Juno Network;
NOW, THEREFORE, in consideration of the mutual promises contained herein as well
as other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Juno and LCI (each individually referred to as a "Party"
and cumulatively referred to as the "Parties") agree as follows:
ARTICLE 1 - APPOINTMENT
1.1 APPOINTMENT. In accordance with the terms and subject to the conditions set
forth in this Agreement, LCI agrees to offer and Juno agrees to promote, market
and sell (through advertising transmitted and displayed on the Juno Network) the
Marketed Services and other mutually agreed upon services to individuals and
entities that utilize the Juno Network ("Juno Subscribers").
1.2 EXCLUSIVITY. Except as otherwise set forth herein, Juno agrees that it shall
market and sell the Marketed Services over the Juno Network on an exclusive
basis for the term of this Agreement. Accordingly, Juno agrees that, during the
term of this Agreement, it shall not, directly or indirectly, through
advertising transmitted and displayed on the Juno Network, represent, sell,
market, or promote any Marketed Services or services materially similar thereto
to be sold within the United States of America on behalf of any party other than
LCI. The foregoing exclusivity obligation with regard to a particular Marketed
Service shall be enforceable between the Parties only to the extent that LCI
begins marketing that Marketed Service over the Juno Network within six (6)
months of when Juno provides LCI with the capability to sell any of the Marketed
Services over the Juno Network and that LCI does not cease marketing the
Marketed Service over the Juno Network for a period greater than six (6) months
once the marketing of that Marketed Service has begun.
1.3 ADDITIONAL SERVICES. If, during the term of the Agreement, LCI desires to
market additional telecommunications products or services ("Additional
Services") over the Juno Network that are not Marketed Services, then Juno and
LCI shall mutually have the right to determine (by the consent of both Parties,
which may be given or withheld in each Party's sole discretion) (a) whether
those Additional Services shall be marketed over the Juno Network and, if so,
(b) whether such Additional Services shall be subject to advertising and
marketing exclusivity. In the event any Additional Services are marketed over
the Juno Network, and the Parties agree that such Additional Services shall be
subject to advertising and marketing exclusivity equivalent to the exclusivity
provisions accorded to Marketed Services hereunder, then they shall, for
purposes of this Agreement, thereafter be referred to as Marketed Services,
except as otherwise agreed to in writing by the Parties. In the event that Juno
elects not to have such Additional Services marketed over the Juno Network, LCI
shall in no way be precluded from using other marketing
<PAGE>
media and devices to reach persons who became new subscribers to the Marketed
Services initially via the subscription mechanism authorized by LCI pursuant to
Section 2.5 hereof ("Users") through the Juno Network, and the commission
schedule set forth in Article 3 shall not apply to those telecommunications
products or services that were not marketed over the Juno Network. Within twenty
(20) business days of Juno's receipt of LCI's written request for the right to
market certain Additional Services over the Juno Network, Juno shall provide LCI
with a written response detailing whether or not, and on what terms, it would
permit the marketing of such Additional Services over the Juno Network (the
"Proposal"). LCI shall have twenty (20) business days from receipt of Juno's
response to advise Juno whether or not it will accept the terms of the Proposal.
1.4 RIGHT OF FIRST REFUSAL. Prior to entering into an agreement with any third
party for the sale or marketing of any Third Party Service (as defined in
Section 1.5 below), Juno shall provide LCI a right of first refusal on the same
terms and conditions as proposed by the third party and accepted by Juno
(contingent only upon LCI's first refusal of same as detailed herein), provided
that LCI can provide such service competitively to Juno Subscribers and provided
that the terms and conditions as proposed by the third party and accepted by
Juno fall within the parameters specified in this Section 1.4. Juno shall advise
LCI of the particulars of the proposed Third Party Service in writing and shall
allow LCI at least twenty (20) business days to respond if the terms of the
Third Party Service would create an exclusive arrangement between the third
party and Juno or the value to Juno of selling and/or advertising such Third
Party Service will be more than [***] U.S. Dollars ($[****]) in the aggregate.
1.5 THIRD PARTY SERVICE. If Juno permits the marketing of any telecommunications
product or service other than Marketed Services over the Juno Network by a third
party ("Third Party Service"), Juno shall not transmit or display any
advertising, marketing or other messages for such Third Party Service to Users
brought to LCI hereunder. Nothing shall prevent the marketing of World Wide Web
access or any other computer-based or Internet-based service by Juno to any Juno
subscribers, including Users; provided, however, that no such computer-based or
Internet-based service shall be materially similar to or replicate a Marketed
Service (e.g., long distance voice service over the Internet).
1.6 INDEPENDENT CONTRACTORS. Juno agrees that it shall operate as an independent
contractor, and neither it nor its employees, agents, or contractors, shall be
deemed to be, or treated as, employees, agents, or franchisees of LCI. Nothing
in this Agreement or in the activities contemplated by the Parties pursuant to
this Agreement shall be deemed to create an agency, partnership, employment, or
joint venture relationship between the Parties. Each Party shall be deemed to be
acting solely on its own behalf and, except as expressly stated herein, has no
authority to pledge the credit, incur any obligation, or perform any acts, or
make any statement on behalf of the other Party. Neither Party shall represent
to any person or permit any person to act upon the belief that it has any such
authority from the other Party. Neither Party's officers or employees, agents or
contractors shall be deemed officers, employees, agents or contractors of the
other Party for any purpose. Juno further agrees that its employees and sales
agents shall not be treated as employees of LCI for purposes of the Federal
Insurance Contribution Act, Social Security Act, the Federal Unemployment Tax
Act, Income Tax Withholding or any laws covering employees whatsoever.
1.7 NON-HIRING OR SOLICITATION OF EMPLOYEES. During the term of this Agreement
and for a period of two (2) years following termination or expiration of this
Agreement, neither Party shall solicit or offer employment to any employee of
the other Party who was substantially involved in the relationship between the
Parties without the prior written consent of the other Party.
ARTICLE 2 OBLIGATIONS OF DISTRIBUTOR
2.1 AD DEVELOPMENT. Prior to the anticipated date for beginning to use an
advertisement or marketing message to sell Marketed Services on the Juno Network
(the "Launch Date" of such advertisement or marketing message), LCI shall submit
the content of a proposed marketing message, promotion, sales
- --------------------------
[***] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
2
<PAGE>
campaign and/or solicitation (the "Content") it desires to run over the Juno
Network to Juno for reduction to a creative format compatible with the Juno
Network requirements and consistent with the Content. Juno shall also make
available to LCI such creative services and consultation as it normally makes
available to its major advertisers to aid in the marketing of the Marketed
Services. Juno shall submit a full-color version of the proposed final
embodiment of the Content (the "Ad") to LCI for approval at least five (5)
business days prior to the Launch Date in such hard-copy or electronic form as
the Parties may mutually agree upon; provided, however, if LCI submits Content
for more than [***] Ads at any one time, Juno shall have such additional time as
is reasonably necessary and agreed upon by the Parties to submit the additional
Ads to LCI for approval. In the event LCI deems the proposed Ad to be
inconsistent with the intended Content, Juno shall revise the Ad to accommodate
LCI's Content specifications. All Ads must meet commercially reasonable
standards for truthfulness and accuracy. Notwithstanding the foregoing, Juno
reserves the right to approve or object to specific Content; provided, however,
that Juno shall not unreasonably withhold or delay such approval and further
provided that Juno shall provide any objections to any Content within five (5)
business days of receipt of same from LCI. Juno acknowledges and agrees that the
fact that certain Content might compete with other advertisers on the Juno
Network shall not be the basis for Juno rejecting any Content except where
transmission of such competitive Content would conflict with Juno's then
existing advertising exclusivity obligations and that Juno shall not
unreasonably use the review process to preclude LCI from using any particular
type of Content. Juno shall not advertise, market or solicit orders for the
Marketed Services or any other LCI service, using any format other than that
which is expressly agreed to in writing by LCI. JUNO SHALL MAKE NO
REPRESENTATIONS OR WARRANTIES RELATING TO THE MARKETED SERVICES EXCEPT AS SET
FORTH IN WRITING BY LCI.
2.2 TRANSMISSION AND DISPLAY OF ADS. As soon as is reasonably practicable
following receipt of LCI's approval of an Ad (as often as possible, within one
(1) business day), Juno shall schedule such Ad to be transmitted and displayed
to Juno Subscribers at such a per-subscriber impression rate during such period
(as governed by Section 2.3), and within such targeting constraints, as are
established by LCI. No later than the tenth day of every month during the term
of this Agreement, Juno shall submit a report to LCI detailing the specific Ads
that were run on the Juno Network during the preceding month, the number and key
demographic particulars (i.e., age, gender, income and education) of Juno
Subscribers who received such Ads, the average number of impressions displayed
per Juno Subscriber who received such Ads, the portion of the Allotment (as
defined in Section 2.3 below) exhausted during the month in question and that
which is remaining, as well as the number and nature of responses to the Ads
from Juno Subscribers. Upon request by LCI, Juno shall cease transmitting a
particular Ad to Juno Subscribers immediately, and shall expire the display of
such Ad as soon as possible for each Juno Subscriber who has already received
such Ad prior to such Ad's transmission being ceased.
2.3 IMPRESSIONS. Juno shall allow LCI to target all Juno Subscribers and
shall allot Ads at a rate of [****] impressions per Juno Subscriber per year
(the "Allotment"); provided, however, that Juno shall have the right to limit
transmission of Ads such that no more than [***] of the total of all
marketing/advertising messages sent to each Juno Subscriber in any month will
be LCI Ads. LCI acknowledges that any individual Juno Subscriber who uses the
Juno Network for less than a full year may have displayed to him or her fewer
than [***] impressions as a result of same. Notwithstanding the foregoing
provisions of this Section 2.3, LCI shall be guaranteed a minimum of [***]
impressions to be transmitted and displayed to Juno Subscribers each full
year for the first three (3) years of the Agreement.
On the Effective Date of this Agreement and thereafter every [****] days,
Juno shall submit to LCI the number of Juno Subscribers who used the Juno
Network at least once during the preceding [****] days, the number of Juno
Subscribers who received at least one LCI Ad during the preceding [****]
days, and the total number of LCI Ad impressions displayed in the preceding
[****] days. Juno's obligations under this Agreement shall not apply to users
of "private label" and/or international versions of Juno's electronic-mail
service (if any) as might be created in the future; provided, however that
such
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"private label" versions shall not be populated with Juno Subscribers
deliberately transferred from the current Juno Network. Juno shall not deploy
"private label" versions of Juno's electronic-mail service to divert customers
from Juno's electronic-mail service to said "private label" service or otherwise
undermine Juno's obligations under this Agreement.
2.4 LETTERS OF AUTHORIZATION. LCI will provide Juno with a Letter of Agency
and/or Letter of Authorization (each, a "LOA") and/or such additional or
different subscription authorization documents ("Order Forms") to be transmitted
and displayed over the Juno Network in connection with certain Ads, as directed
by LCI. Except as may be prohibited or restricted by applicable law or
regulation, Juno shall ensure that the LOA and Order Forms are disseminated to
all Juno Subscribers who receive the Ads with which the LOA and Order Forms are
associated in such a way as to provide a convenient method for signing up for
the Marketed Services. The LOA and Order Forms, which may be amended by LCI from
time to time, shall include specific language required for authorizing the
change in a User's primary intraLATA, interLATA, and/or local service carrier to
LCI.
2.5 ORDER PROCESSING. No less than once per business day, Juno shall forward to
LCI for order processing and via modem in a file format reasonably prescribed by
LCI, any completed LOAs and Order Forms it has received from potential Users
that day. In the event the laws of a particular jurisdiction prohibit either
electronic subscription or electronic transmission of LOAs, Juno and LCI shall
work together in good faith to ensure compliance with law(s) while also
preserving LCI's ability to sell Marketed Services over the Juno Network in such
jurisdiction. Juno acknowledges and agrees that LCI shall have the absolute and
discretionary right to accept or reject all orders for Marketed Services, to
establish and revise at any time the prices of the Marketed Services, to
establish and revise at any time the terms and conditions of offering the
Marketed Services (except where such revision would conflict with an obligation
of LCI to a User established by LCI when accepting an order for a Marketed
Service) and to discontinue offering or selling any Marketed Service, without
incurring any liability or obligation to Juno beyond those described in Section
5 of this Agreement, if and to the extent, such terms are applicable.
2.6 QUESTIONNAIRE. LCI shall have the right to include up to two (2) questions
relating to telecommunications usage, the text of which is subject to Juno's
approval, which approval shall not be unreasonably delayed or denied, in the
Juno Subscriber questionnaire as new software versions are released starting
with version 2.0 of the Juno software which is currently scheduled for release
in the Second Quarter of 1998 or as soon as reasonably practicable. In the
interim and until version 2.0 is deployed on the Juno Network, Juno shall use
"pop-up" advertisements or other means to pose LCI's questions to Juno
Subscribers (the reply to which shall be optional to the Juno subscribers) prior
to the release of version 2.0 and shall share the aggregate information so
collected with LCI on a timely basis. Such questions shall be for the purpose of
identifying and compiling information about Juno Subscribers' telecommunications
services usage patterns (e.g. identification of long distance carrier and
monthly spending). LCI shall have the ability to target Juno Subscribers based
on the response to the questions.
2.7 USE OF LCI SERVICES. Subject to Juno's need for redundant systems and LCI's
ability and willingness to offer telecommunications services on a "meet or beat"
basis compared to rates, services and quality offered by the carriers currently
used by or hereafter made available to Juno, Juno shall, subject to existing
contractual obligations, use LCI's local and long distance telecommunications
services for voice and data applications during the term of this Agreement as
well as any period that LCI is obligated to continue to pay commissions to Juno.
Juno shall have the right to evaluate such services and quality using Juno's
usual and customary methods for such evaluations. [***] Juno's evaluation of
LCI's ability to "meet or beat" its competitors' terms will include an
assessment of LCI's technical ability to capture reciprocal compensation
payments available to competitive local exchange carriers ("CLECs"), and LCI's
ability to factor such payments into its overall pricing of services, as well as
any volume discounts offered to Juno by LCI's competitor(s).
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2.8 JUNO SUBSCRIBERS. Juno shall, subject to the restrictions set forth in
Juno's service agreement with Juno Subscribers, and by applicable law or
regulation, cooperate in providing LCI with information about Juno Subscribers
in the aggregate and in delivering to Juno Subscribers suich occasional
non-electronic direct mail and/or telemarketing solicitations on LCI's behalf as
LCI may choose to undertake; provided, however, that LCI shall bear the costs of
any such marketing campaign and Juno shall have the right to approve any such
marketing in accordance with Section 2.1 above. Prior to launching each such
direct mail and/or telemarketing campaign, LCI and Juno shall test market the
intended campaign to a pool of up to [***] Juno Subscribers. LCI and Juno shall
cooperate to assess the response of the targeted Juno Subscribers to each test
campaign and based upon same, shall (i) mutually agree to move forward with
advertising the campaign to additional Juno Subscribers identified by LCI (a
"Full Campaign"); (ii) mutually agree to modify the campaign to address any
material issues raised by the test and then undertake a Full Campaign; or (iii)
drop the campaign. Once initiated, a Full Campaign may not be unilaterally
terminated by Juno. Except as expressly provided for herein, nothing in this
Agreement shall obligate Juno to undertake any direct mail, telemarketing or
similar activities on behalf of LCI. During the term of this Agreement, Juno
shall not license, offer, sell, loan or give access to Juno Subscriber lists to
any other third party for the purpose of marketing or selling any service
materially similar to the Marketed Services.
2.9 BILLING AND COLLECTION OPTIONS AND ADDITIONAL INFORMATION. From time to
time, LCI may elect to make available information and/or additional billing and
collection options to its Users. In such event, Juno shall make good faith
efforts to cooperate with and facilitate LCI's efforts to advise its Users of
such information and/or options and, to the extent applicable and technically
practical for Juno, sign them up for same. Such cooperation may include, by way
of example, sending electronic-mail messages to Users and forwarding the
responses of Users to LCI or accommodating such ways for Users to use electronic
payment of LCI invoices.
2.10 PARTNER MARKETING. Juno shall encourage and use good faith efforts to
facilitate LCI's partnering, cross-promoting, and marketing with other entities
that advertise to Juno Subscribers and to introduce LCI to its advertising and
marketing partners. Juno will not be under any obligation to negotiate the deals
between LCI and the entities and such deals shall not impose any obligation on
Juno without its written consent.
2.11 CUSTOMER SERVICE. Juno shall allow, and in some or all Ads, promote the use
of electronic mail to enable LCI Users to communicate directly with LCI customer
service for the purpose of answering and responding to customer service issues.
LCI shall have the sole responsibility for receiving and responding to such
communications and, as between LCI and Juno, shall bear all expenses related
thereto, except for those related to the transmission of such electronic mail
messages.
ARTICLE 3- COMMISSION COMPENSATION
3.1 BILLED REVENUE. During the term of this Agreement, LCI shall pay to Juno a
commission based on billed revenue less a percentage related to estimated
uncollectibles, unbillables, and local exchange carrier ("LEC") holdbacks
("Percent"), which Percent is currently [***] ("Billed Revenue"). In the event
that a "True-Up" (as described in Section 3.2 below) indicates that the then
current Percent no longer accurately reflects LCI's actual uncollectibles,
unbillables, LEC holdbacks ("Charges"), LCI will, within thirty (30) days of
receipt of the True-Up results, adjust the Percent to reflect its actual Charges
as indicated by the True-Up.
3.2 TRUE-UP
At least once a year during the term of this Agreement, LCI will perform a
"True-Up" to determine if the Percent accurately reflects the actual
uncollectibles, unbillables and LEC holdbacks ("Actual Percent") deducted from
the revenue collected by LCI for its entire customer base for the prior twelve
(12) month
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period. In the event of a discrepancy between the Percent and the Actual
Percent, the Percent will be revised to reflect the Actual Percent for the
twelve (12) month period following the True-Up. Notwithstanding the foregoing,
LCI's obligation to perform a True-Up in any year of the Agreement is
conditioned upon LCI being in receipt of the third-party information necessary
to perform such a True-Up.
3.3 COMMISSION GUARANTEE.
(a) Juno will be advanced [***] Dollars ($[****]) against future commissions
("Commission Guarantee"), with payments to be made as follows:
(i) $[***] paid within ten (10) business days of full execution of this
Agreement; and
(ii) $[***] paid within ten (10) business days following the first twelve
(12) month period; and
(iii) $[***] paid within ten (10) business days following the second twelve
month period of this Agreement.
(b) The Commission Guarantee shall be earned as follows:
[***] percent ([****]%) of the Billed Revenue shall be acknowledged
as being earned commission and shall be deducted from the Commission
Guarantee detailed in Section 3.3 (a) until same is exhausted.
However, Juno will keep [***] percent ([****]%) of the Commission
Guarantee regardless of whether the Commission Guarantee is fully
earned over the course of this Agreement, except as otherwise
provided in this Agreement.
3.4 FUTURE COMMISSIONS/COMMISSION TAIL. At the point when the Commission
Guarantee or the portion paid to date has been fully earned by Juno as described
in Section 3.3 (b) above, LCI shall begin paying Juno a monthly commission of
[***] of the Billed Revenue of Users. LCI shall also pay a residual commission
of [***] percent, respectively, during the three-year period immediately
following expiration or termination of this Agreement (the "Commission Tail").
3.5 PAYMENT. Commissions payable pursuant to Section 3.4 will be paid by LCI
within forty-five (45) days following the end of the month in which the Billed
Revenue is billed. Within twenty-one (21) days following the end of each month,
LCI shall deliver to Juno a report that provides actual (or, if actual is
unavailable, estimated) information concerning (i) the gross revenue by ANI and
the Percent for such month, plus, if available, data concerning the actual
unbillable, uncollectible and LEC holdback amounts for such period; and (ii)
such other information available to LCI as Juno may reasonably request in order
to permit Juno to confirm the calculation of commissions due under this
Agreement.
3.6 EXCLUDED ACCOUNTS. Juno acknowledges and agrees that no commission shall be
paid on existing LCI accounts, new accounts that contact LCI directly, accounts
that LCI contacts to subscribe to LCI services through means other than
advertising in connection with Juno, or accounts that were, at any time in the
thirty (30) days preceding their subscription via an LOA or Order Form
hereunder, an existing LCI account.
ARTICLE 4 - INTELLECTUAL PROPERTY
4.1 (A) JUNO INTELLECTUAL PROPERTY. LCI acknowledges and agrees that, as between
LCI and Juno, Juno is the owner of all right, title, and interest in and to (i)
the Juno Network (including, without limitation, any related materials, computer
software programs and related documentation, and any new services, upgrades,
enhancements, new releases, or new versions thereof that Juno may release), (ii)
the name "Juno", the "Juno" logo, and any other names, trademarks, trade names,
service marks or service names used by it in connection therewith, and (iii) any
and all copyright, trade secret, patent or other intellectual property
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rights appurtenant to the foregoing (collectively "Juno Intellectual Property").
Except as otherwise expressly set forth in this Agreement, Juno does not give
LCI any additional rights in, and as between Juno and LCI (and except as
otherwise set forth in this Article 4. and Article 6 of this Agreement), Juno
shall retain ownership of the Juno Intellectual Property and any software,
know-how, technology or other intellectual property used in connection with
operation of the Juno Network.
4.1 (B) LCI INTELLECTUAL PROPERTY. Juno acknowledges and agrees that LCI
is the owner of all right, title, and interest in and to the name "LCI,", the
"LCI" logo, and any other names, trademarks, trade names, service marks or
service names used by it in connection therewith, and any and all copyright,
trade secret, patent or other intellectual property rights appurtenant to the
foregoing (collectively "LCI Intellectual Property"). This Agreement does not
give Juno any rights in, and as between Juno and LCI, LCI shall retain ownership
of the LCI Intellectual Property as well as any software, know-how, technology
or other intellectual property appurtenant to or used in connection with, the
LCI Intellectual Property.
4.2 WORK MADE FOR HIRE/LIMITED LICENSE. As specified in Section 2.1 of this
Agreement, it is expected that LCI will provide to Juno certain Content so that
Juno may assist in reducing such Content to a creative format, and that Juno
will make available to LCI such creative services and consultation as Juno
normally makes available to major advertisers. Whenever Juno assists in the
development of such Content, or provides such creative services, the tangible
product of such assistance (including, but not limited to, text, graphics, logos
(other than the "Juno" logo), language, photographs or other images used in such
Ads ("LCI Graphical Images") shall, to the extent permitted under the United
States Copyright Act, be deemed to be "works made for hire" and the exclusive
property of LCI, with all copyright, trademark, tradename, trade secret, patent
and all other intelletual property rights appurtenant thereto vested in and
assignable by LCI. Notwithstanding the foregoing, Juno shall have an ongoing
right to utilize any of the technical processes it created or developed in the
course of creating the LCI Graphical Images. Futher, in consideration of a One
Dollar ($1.00) license fee, the receipt and sufficiency of which is hereby
acknowledged, Juno hereby grants LCI a perpetual, non-exclusive,
non-transferable (except to an Affiliate or successor in interest of LCI)
license to use the Juno Intellectual Property embedded in the Ads themselves
(the "Ad Code") in order to allow LCI to use and distribute its Ads. In the
event this Agreement is terminated for any of the causes listed in 5.5 (a) -
(g), Juno shall deliver to LCI one copy of the source code to the Ad Code.
4.3 TRANSFER. In the event that, notwithstanding Sections 4.1 and 4.2, either
Party shall acquire any right in the other Party's Intellectual Property, said
Party shall, without charge, immediately convey all such acquired rights to the
proper Party (the "Owner) or its designee and shall execute and deliver to the
Owner or its designee written evidence of such transfer in such form as is
reasonably required by the Owner.
4.4 EMPLOYEE COMPLIANCE. Each Party shall take reasonable steps necessary to
ensure that its employees, agents and subcontractors are aware of this Article
and to obtain their agreement to comply with same.
ARTICLE 5 - TERM, TERMINATION AND CONSEQUENCES OF TERMINATION
5.1 TERM. The term of this Agreement shall begin on the Effective Date and
terminate [***] years later, unless terminated earlier by either Party as
provided herein.
5.2 TERMINATION FOR BREACH. Either Party may terminate this Agreement if the
other Party is in material breach of any of its obligations hereunder and fails
to cure such material breach within thirty (30) business days of receiving
written notice of such breach. Neither Party shall contrive to create or cause a
material breach by the other Party.
5.3 TERMINATION FOR CONVENIENCE. Either Party may terminate this Agreement for
convenience upon ninety (90) days' prior written notice to the other Party.
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[***] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
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5.4 TERMINATION REMEDIES.
(a) If Juno terminates this Agreement due to LCI's material breach
(including, without limitation, persistent or chronic outages on the LCI
network, lack of compliance with FCC regulations or other applicable law or
regulation that affects LCI's or Juno's ability to sell or market Marketed
Services (except for any law or regulation addressing the validity of
electronic LOAs and/or Order Forms, which instances shall be governed by
Section 14.11 of this Agreement), or persistent or chronic inability to
provide Marketed Services to Users, but not including the failure by LCI to
make any commission payment hereunder which is subject to a good faith
dispute), material breach of any representation, warranty, covenant or
commitment of LCI made herein, or any of the causes listed in Sections 5.5(a)
- -(g) below, or if LCI terminates for convenience, (i) LCI shall pay to Juno,
within [****] days following such termination, all previously unpaid
installments of the Commission Guarantee and (ii) for the first [****] months
following such termination, Juno shall continue to receive the [***]
commission on Billed Revenue (to the extent such commission payments are
payable as set forth in Section 3.4) . Following said [****]month period,
Juno will receive the residual Commission Tail over the subsequent [****]
year period as set forth in Section 3.3.
(b) If LCI terminates the Agreement due to Juno's material breach, (including,
without limitation, persistent or chronic Juno Network outages (except where
outages are due to outages of telecommunications services supplied to Juno by
LCI), or persistent or chronic inability to target Juno Subscribers based on
those subscribers' member profile information, or persistent or chronic
inability to send LCI Ads over the Juno Network to Juno Subscribers who use the
Juno Network, inability to send LOA and/or order information electronically
except where such inability is due to restrictions imposed by applicable law or
regulation (which instances shall be governed by Section 14.11 of this
Agreement), or display of advertising from LCI competitors for Marketed Services
in contravention of the terms of this Agreement), material breach of any
representation, warranty, covenant or commitment of Juno made herein, any of the
causes listed in 5.5 (a) - (g) below), or if Juno terminates this Agreement for
convenience, then:
(1) LCI shall be entitled to repayment of all paid installments (or portions
thereof, as applicable) of the Commission Guarantee which Juno has not earned as
of the date of termination and shall no longer be obligated to pay any unpaid
portion of the Commission Guarantee except that Juno shall have the right to
retain any commissions that have been earned by Juno as of the date of
termination (including, without limitation, Commission Tail payments paid or due
and payable as of the date of termination to Juno under Section 3.3), and LCI
shall pay to Juno upon termination any such amounts that have been earned by,
but not paid to, Juno. Additionally, LCI shall not be obligated to pay any
continuing commissions based on the usage of Marketed Services by Users
following such a termination, and Juno shall not solicit any User following
termination of the Agreement for the purpose of selling any Marketed Services
for a period of twelve (12) months from the date of termination.
(2) If, within twelve (12) months of termination of this Agreement pursuant to
5.4(b)(1), Juno enters into a substantially comparable business arrangement with
any other telecommunications services provider for the purpose of directly or
indirectly selling any Marketed Service or materially similar service to Juno
Subscribers (a "Conflict"), then Juno shall (i) pay LCI [***] prior to the
effective date of such Conflict, and (ii) Juno shall forfeit all future
compensation due from LCI pursuant to this Agreement.
5.5 INSOLVENCY AND OTHER TERMINATION GROUNDS. Either Party may terminate this
Agreement immediately at any time by written notice to the other Party if any of
the following occurs:
(a) The other Party ceases to do business as a going concern;
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[***] Confidential treatment has been requested for this portion pursuant to
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(b) The other Party makes a general assignment for the benefit of creditors;
(c) The other Party is unable, or admits in writing to its inability, to pay its
debts as they become due;
(d) The other Party is adjudicated to be insolvent, bankrupt, or is in
receivership;
(e) The other Party authorizes, applies for, or consents to the appointment of a
trustee or liquidator for the sale, transfer, or assignment of all or a
substantial portion of its assets, or has proceedings seeking such appointment
commenced against it which are not terminated within ninety (90) days of such
commencement;
(f) The other Party files a voluntary petition under any bankruptcy or
insolvency law or files a voluntary petition under the reorganization or
arrangement provisions of the laws of the United States of America pertaining to
bankruptcy or any similar law of any jurisdiction or has proceedings under any
such law instituted against it which are not terminated within ninety (90) days
of such commencement; or
(g) The other Party has any substantial part of its property subjected to any
levy, seizure, assignment or sale for or by an creditor or governmental agency
without such levy, seizure, assignment or sale being released, lifted, reversed
or satisfied within thirty (30) days.
5.6 SECURED CREDITOR. In the event LCI terminates this Agreement due to any one
of the causes listed in Subsections 5.5 (a)-(g) above, Juno hereby acknowledges
LCI's standing as a secured creditor with respect to that portion of the
Commission Guarantee which has been paid out by LCI but not yet earned by Juno
as of the date of termination. Juno further agrees to exert best efforts to
secure LCI's standing as a secured creditor in the course of any proceeding
related to any of the events listed in Subsections 5.5 (a)-(g).
ARTICLE 6 - CONFIDENTIALITY
6.1 NON-DISCLOSURE AGREEMENT. Prior to entering into this Agreement, the Parties
executed a Non-Disclosure Agreement (the "Non-Disclosure Agreement")
incorporated into this Agreement and attached hereto as Exhibit C.
6.2 CONFIDENTIAL INFORMATION. The Parties re-affirm their respective obligations
under the Non-Disclosure Agreement, as modified by this Section 6. Juno
acknowledges that, to effectively fulfill its obligations hereunder, it will be
necessary or desirable for LCI to disclose to Juno confidential and proprietary
information pertaining to LCI's past, current, future and proposed business
activities. It is further recognized that Juno may develop material and
information, including, but not limited to, Ads, which LCI will wish to maintain
as confidential and proprietary. Accordingly, Juno agrees to treat as
"Confidential Information" under the Non-Disclosure Agreement all information
obtained by Juno either directly or indirectly from LCI as well as information
and materials developed or created by Juno for LCI as a result of its
obligations hereunder ("Confidential Information"), provided that such
Confidential Information satisfies the provisions of Section 1.1 of the
Non-Disclosure Agreement.
6.3 MODIFICATION OF NON-DISCLOSURE AGREEMENT. The Parties agree to modify the
provisions of Section 2.2 of the Non-Disclosure Agreement by deleting the phrase
"two (2) years" appearing in the clause (ii) thereof, and inserting in lieu of
the phrase "five (5) years."
6.4 RETURN OF CONFIDENTIAL INFORMATION. Juno further agrees that all
Confidential Information disclosed to Juno under this Agreement in tangible form
and/or developed by Juno for LCI hereunder shall be and remain the property of
LCI. All such Confidential Information, including, but not limited to, Content,
Ads, and Ads under development, shall be returned to LCI promptly upon LCI's
request and shall not thereafter be retained, modified, sold, assigned or
revised in any form by Juno.
ARTICLE 7 - TRADEMARKS AND TRADENAMES
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Juno shall market and sell the Marketed Services under the trademarks,
tradenames, service marks and service names of LCI and/or its Affiliates only as
approved in writing in advance by LCI. Juno and its Affiliates shall not use, in
its business, trade or corporate name the name "LCI," the LCI trademark or
service mark of LCI or any LCI Affiliate, or any LCI or LCI Affiliate's symbol,
registered mark or other intellectual property without the prior, express and
written consent of LCI. Juno shall actively and promptly enforce the
requirements of this Section against any misuse or infringement. In addition,
upon reasonable request from LCI, Juno shall promptly cooperate with LCI in
connection with having any Juno Affiliate or Juno Subscriber discontinue any
unauthorized use of LCI's or LCI's Affiliates' trademarks or tradenames,
including, without limitation, unauthorized use of any LCI registered mark on
the Internet. For purposes of this Agreement, an "Affiliate" of a Party shall
mean, with respect to any Party, any natural person, group of persons or firm,
corporation, joint venture, partnership, association, trust or other person
which controls, is controlled by, or is under common control with the Party; a
natural person, group of persons or entity which controls an Affiliate under the
foregoing shall also be deemed to be an Affiliate. For purposes of this
definition, "control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of management and policies of any such
entity whether through the ownership of voting securities, by contract or
otherwise.
LCI shall use the trademarks, trade names, service marks and service names of
Juno only as approved in wiring in advance by Juno. LCI and its Affiliates shall
not use, in its business, trade or corporate name the name "Juno," the Juno
trademark or service mark of Juno or any Juno Affiliate, or any Juno or Juno
Affiliate's symbol or registered mark without the prior, express and written
consent of Juno.
ARTICLE 8 - WARRANTIES AND COVENANTS
8.1 GOOD STANDING. Each Party represents, warrants, covenants and agrees that it
has and shall retain the right to perform all of its obligations and
responsibilities as contemplated herein, and that it is an entity, duly
organized, validly existing and in good standing under the laws of its origin,
with all requisite power to enter into and perform its obligations under this
Agreement in accordance with its terms.
8.2 ELIGIBILITY REQUIREMENTS. Juno represents, warrants, covenants and agrees
that it shall sell the Marketed Services only to those Juno Subscribers who meet
all eligibility requirements determined by LCI (in accordance with LCI's
applicable state and federal tariffs (the "Tariffs")), provided that such
eligibility requirements are specified to Juno by LCI. Further, throughout the
term hereof, Juno shall use good faith efforts to ensure that the Marketed
Services sold by Juno are offered in accordance with the rates, term and
conditions set forth in any Tariffs of which Juno is notified by LCI and that
all sales representations and activities remain in full compliance with all
applicable laws, regulations and orders of any court or regulatory agency.
8.3 MARKETING METHODS. Juno represents, warrants, covenants and agrees that it
shall not use any means of marketing and selling the Marketed Services that is
not approved by LCI.
8.4 IMPROPER ACTIVITIES. Each Party represents, warrants, covenants and agrees
that it shall notify the other Party in writing within five (5) business days if
it becomes aware of any material actual or threatened investigation or
litigation of its own sales or marketing activities by any federal, state, or
local governmental body or agency or becomes subject to or enters into any
consent decree, judgment, injunction, restraining order, settlement agreement,
or agreement or order relating to the conduct of its marketing or sale of
Marketed Services.
8.5 COMPLIANCE WITH LAWS. Each Party represents, warrants, covenants and agrees
that all work rendered by it in connection with this Agreement shall be
designed, produced, installed, furnished and in all respects provided and
maintained in conformance and compliance with applicable federal, state and
local laws, administrative and regulatory requirements and any other authorities
having jurisdiction over the subject matter of this Agreement. Each Party
further represents, warrants, covenants and agrees that it shall be
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responsible for applying for, obtaining and maintaining, at its expense, all
registrations and certifications which may be required by such authorities and
shall provide evidence of same to the other Party upon the other Party's written
request.
8.6 PERFORMANCE SPECIFICATIONS. Juno represents, warrants, covenants and agrees
that it shall at all times comply with the Performance Specifications attached
hereto and incorporated herein as Exhibit B.
8.7 INTELLECTUAL PROPERTY. Juno represents, warrants, covenants and agrees that
the Juno Network and its applications shall not knowingly infringe upon the
rights of others, including, but not limited to, trademarks, copyrights, patents
and any other intellectual property rights. LCI hereby represents and warrants
to Juno and covenants and agrees that (i) the use, reproduction, or distribution
of the Ads approved by LCI for transmission to Juno Subscribers via the Juno
Network shall not knowingly violate any civil or criminal laws or any rights of
any third parties, including, but not limited to, such violation as infringement
or misappropriation of any copyright, patent, trademark, tradesecret, music,
image, or other proprietary or property right, false advertising, unfair
competition, defamation, invasion of privacy or rights of celebrity, violation
of any antidiscrimination law or regulation, or any other right of any person.
8.8 QUALITY. Each Party represents, warrants, covenants and agrees that its work
hereunder shall be of a professional quality consistent with the customary
standards in the industry and that it shall be performed in a professional and
timely fashion.
8.9 NO TAINT. Juno represents, warrants, covenants and agrees that Juno shall
not knowingly permit the Juno Network to be tainted by any computer "viruses" or
instructions, the purpose of which is to disrupt, damage or interfere with a
User's or LCI's use of its computers, and/or telecommunications facilities
and/or the Juno Network.
8.10 YEAR 2000. Juno represents, warrants, covenants and agrees that the
software and systems utilized to operate the Juno Network and fulfill its
obligations hereunder shall not incur or cause errors or defects as a result of
the century date change in the year 2000.
8.12 CAPABILITY. Juno represents, warrants, covenants and agrees that it has the
authority and capability to commit to fulfilling this Agreement, including,
without limitation electronically sending LCI advertising to all Juno
Subscribers who use the Juno Network during the term of this Agreement (except
as otherwise provided in Section 2.3 above), targeting specific subscriber
segments based on demographic information provided in Juno Subscribers' member
profiles, and accepting and delivering (subject to legal requirements), in a
compatible file format, an electronic LOA or order documentation needed to
subscribe to and/or purchase the Marketed Services.
ARTICLE 9 - AUDIT
Once per year, for the term of this Agreement and for a period of three (3)
years thereafter, each Party shall have the right in its sole discretion, by
itself or through any nationally-recognized certified public accountant of its
choice, to examine and audit all or part of the records, documents and materials
in the possession or under the control of the other Party (subject to any
applicable contractual obligation with respect to documents belonging to third
parties) that relate to the performance of the other Party's obligations under
this Agreement, including, but not limited to, those records addressing the
transmission and display of Ads to Juno Subscribers, use of the Allotment,
availability and performance of the Juno Network, Juno's compliance with its
performance obligations hereunder, provision of Marketed Services to Users, and
accuracy of LCI's estimates of Charges. In the event that an audit reveals a
discrepancy between the amount of Allotment debited due to LCI's usage and the
amount actually used and/or the number of impressions actually displayed to Juno
Subscribers in a year, Juno shall immediately rectify the error and credit LCI
for same. In the event that such discrepancy is greater than five percent (5%),
Juno shall pay for the reasonable and necessary costs of the audit. In the event
an audit reveals variances in excess of one-half of one percent (.5%) of the
commission payments made by LCI hereunder, Juno shall
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promptly reimburse LCI the difference between the amount paid by LCI and the
proper commission. In the event that an audit reveals a discrepancy between any
amount owed to Juno by LCI under this Agreement and the amount actually paid to
Juno by LCI under this Agreement, LCI shall immediately reimburse Juno for the
difference. In the event that the discrepancy is greater than five percent (5%),
LCI shall pay for the reasonable and necessary costs of the audit.
ARTICLE 10 - INDEMNIFICATION
10.1 INDEMNIFICATION BY LCI. LCI shall indemnify, defend and hold harmless Juno,
its Affiliates, employees, directors, officers, agents and contractors from and
against all claims, demands, actions, causes of actions, damages, liabilities,
losses, and expenses (including reasonable attorney's fees) incurred as a result
of:
(a) claims for intellectual property infringement relating to the Content of
LCI Ads and/or the provision of Marketed Services by LCI;
(b) claims for damage to property and/or personal injuries (including death)
arising out of the negligence or willful act or omission of LCI;
(c) LCI's breach of any warranties and/or failure to perform any obligations
hereunder.
10.2 INDEMNIFICATION BY JUNO. Juno shall indemnify, defend and hold harmless
LCI, its Affiliates, employees, directors, officers, agents and contractors from
and against all claims, demands, actions, causes of actions, damages,
liabilities, losses, and expenses (including reasonable attorney's fees)
incurred as a result of:
(a) claims for intellectual property infringement relating to the operation of
the Juno Network;
(b) claims for damages to property and/or personal injuries (including death)
arising out of the negligence or willful act or omission of Juno;
(c) Juno's breach of any warranties and/or the failure to perform any
obligations hereunder.
10.3 NOTICE. Upon the assertion of any claim or the commencement of any suit or
proceeding against an indemnified Party by any third party that may give rise to
liability of the indemnifying Party hereunder, the indemnified Party shall give
prompt notice to the indemnifying Party of the existence of such claim (unless
failure to give prompt notice shall not materially prejudice the indemnifying
Party's rights) and shall give the indemnifying Party reasonable opportunity to
defend and/or settle the claim at its own expense and with counsel of its own
choosing. The indemnified Party shall reasonably cooperate with the indemnifying
Party, shall at all times have the right to fully participate in such defense at
its own expense, and shall not be obligated, against its consent, to participate
in any settlement which it reasonably believes would have an adverse effect on
its business.
10.4 INTELLECTUAL PROPERTY INFRINGEMENT. In the event the Juno Network becomes
the subject of a claim of intellectual property infringement and an injunction
is consequently granted by a court of competent jurisdiction by request of a
third party such that LCI's full use and enjoyment of its Allotment and/or
rights under this Agreement are materially restricted, Juno, shall, at its
expense, (a) immediately procure for LCI the right to continue using the
Allotment, or, if that cure is not made available to Juno on commercially
reasonable terms following exertion of its reasonable efforts; (b) replace or
modify the infringing item so as to make it non-infringing; provided, however,
that the specifications set forth in this Agreement shall not be materially
compromised. In the event neither (a) nor (b) above may be accomplished by Juno
despite the exertion of reasonable efforts, such development shall be deemed to
be a material breach of this Agreement by Juno and LCI shall have the right to
terminate this Agreement.
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ARTICLE 11 - LIMITATION OF LIABILITY
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT,
CONSEQUENTIAL, SPECIAL, INCIDENTAL, RELIANCE OR PUNITIVE DAMAGES OF ANY KIND OR
NATURE WHATSOEVER (INCLUDING BUT NOT LIMITED TO ANY LOST PROFITS, LOST REVENUES,
LOST SAVINGS OR HARM TO BUSINESS), REGARDLESS OF THE FORESEEABILITY THEREOF. THE
FOREGOING LIMITATION SHALL NOT APPLY TO CLAIMS FOR INTELLECTUAL PROPERTY
INFRINGEMENT.
ARTICLE 12 - NOTICES
Any notices, notifications, or other communications required or permitted under
this Agreement shall be in writing and delivered by certified mail, return
receipt requested, or overnight express mail service, delivery confirmation
requested, to the persons whose names and business addresses appear below and
such notice shall be deemed received on the date of actual delivery or refusal
thereof by the receiving Party.
If to LCI: Senior Vice President of Consumer Sales
LCI International Telecom Corp.
8180 Greensboro Drive
McLean, Virginia 22102
With a copy to: LCI International Telecom Corp.
8180 Greensboro Drive
McLean, Virginia 22102
Attn: General Counsel
If to Juno: Juno Online Services, L.P.
120 West 45th Street
15th Floor
New York, NY 10036
Attn: President
With a copy to: Juno Online Services, L.P.
120 West 45th Street
15th Floor
New York, NY 10036
Attn: Legal Department
Each Party may change its address for notices by delivery of written notice to
the other Party.
ARTICLE 13 - ARBITRATION
Any dispute arising between Juno and LCI in connection with this Agreement,
which is not settled to the mutual satisfaction of LCI and Juno within thirty
(30) days (or such longer period as may be mutually agreed upon) from the date
that either Party informs the other in writing that such dispute or disagreement
exists, shall be resolved by arbitration conducted in Washington, D.C. in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect on the date that such notice is given. The decision
of the arbitrators shall be final and binding upon the Parties and judgment may
be obtained thereon by either Party in a court of competent jurisdiction. Each
Party shall bear the costs of preparing and presenting its case. The cost of
arbitration, including the fees and expenses of the arbitrator, will be shared
equally by the Parties unless the award otherwise provides. Notwithstanding the
foregoing,
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either Party may bring an action in a court of competent jurisdiction to avoid,
based on a well-founded belief, the expiration of any applicable statute of
limitations period applicable to a particular, non-frivolous claim; provided,
however, that once initiated, such claim proceeding shall be immediately stayed
via a Motion to Stay Pending Arbitration or its equivalent so as not to undercut
or otherwise potentially compromise any pending or anticipated arbitration
proceeding.
ARTICLE 14 - MISCELLANEOUS
14.1 NO THIRD PARTY BENEFICIARIES. The Parties agree that the obligations of
each Party arising under (or relating to) this Agreement shall be without
recourse to any Affiliate of said Party and any successor to any such Affiliate,
and no such Affiliate or successor shall have any liability in such capacity
under this Agreement, except to the extent the obligations of this Agreement are
expressly assigned to any such Affiliate or successor. Except as otherwise
expressly stated herein, this Agreement confers no rights of any kind upon any
third party.
14.2 ASSIGNMENT AND/OR DELEGATION. Neither Party shall assign or delegate its
rights hereunder without the prior written consent of the other Party, except
that either Party may assign its rights hereunder to an Affiliate.
This Agreement shall be binding on successors and assigns of the Parties.
14.3 NO WAIVER. A failure or delay in exercising any right in respect of this
Agreement will not be presumed to operate as a waiver, and a single or partial
exercise of any right will not be presumed to preclude any subsequent or further
exercise of that right or the exercise of any other right. Any modification or
waiver of any provision of this Agreement shall not be effective unless made in
writing. Any such waiver shall be effective only in the specific instance and
for the purpose given.
14.4 ENTIRE AGREEMENT. This Agreement sets forth the entire understanding of the
Parties and supersedes any and all prior agreements, arrangements or
understandings relating to the subject matter hereof. No subsequent agreement
among the Parties concerning the Service shall be effective or binding unless it
is made in writing by authorized representatives of the Parties.
14.5 SEVERABILITY. If any part of any provision of this Agreement or any other
agreement, document or writing given pursuant to or in connection with this
Agreement shall be invalid or unenforceable under applicable law, such provision
shall be ineffective to the extent of such invalidity only, without in any way
affecting the remaining parts of said provision or the remaining provisions of
this Agreement.
14.6 GOVERNING LAW. This Agreement shall be construed and enforced in accordance
with the laws in force in the State of New York, without regard to its conflict
of laws provisions.
14.7 NO PUBLICITY WITHOUT APPROVAL. Neither Party shall issue a news release,
public announcement, advertisement, or other form of publicity concerning the
existence of this Agreement or its content without obtaining the prior written
approval of the other Party. Both Parties agree to prepare and issue not fewer
than one news release, the content of which shall be subject to the approval of
both Parties (such approval not to be unreasonably delayed or withheld) within
thirty (30) days of execution of this Agreement.
14.8 FREEDOM TO ACCEPT INVESTMENT. Nothing in this Agreement shall restrict
either Party's ability to enter into a merger or acquisition transaction during
the term of this Agreement (including by means of a purchase of all or a
substantial portion of a Party's assets), or to enter into a sale by a Party or
its equityholders of an equity interest in said Party, or to engage in any form
of capital-raising activity. In the event Juno enters into any such merger,
acquisition, sale or other arrangement pursuant to which twenty percent (20%) or
more of Juno's assets and/or voting shares are controlled by a competitor of
LCI's (a "Competitive Transaction"), LCI, in its sole discretion, shall be
entitled to repayment of all paid installments (or portions thereof, as
applicable) of the Commission Guarantee which Juno has not earned as of the date
of termination and shall be relieved of its obligation to pay any unpaid portion
of the
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Commission Guarantee; provided, however, that Juno shall have the right to
retain any commissions that have been earned by Juno as of the date of the
Competitive Transaction (including, if applicable, any Commission Tail payments
due and payable as of said date). For purposes of this Section, a "competitor"
of LCI shall be any person or entity which, during the most recently concluded
fiscal year for which audited financial statements are available, derived more
than fifty percent (50%) of its revenues from the provision of Marketed
Services, as such term is defined herein.
14.9 OTHER DISTRIBUTORS. LCI hereby explicitly reserves the right, during the
term of this Agreement, at any time and for any reason, to retain other
distributors in addition to Juno to promote and sell the Marketed Services and
to enter into marketing and promotional arrangements with any third party.
14.10 HEADINGS. The Article and Section headings contained herein are for
convenience only and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
14.11 FORCE MAJEURE. In the event an act of God, fire, strike, war,
insurrection, riot, law, regulation or ruling makes it impossible for a Party to
perform hereunder (a "Force Majeure"), the Party prevented from performing
hereunder by such Force Majeure shall immediately notify the other Party in
writing of the imposition of the Force Majeure. In the event (i) the Force
Majeure isn't eliminated or removed within ten (10) days of its onset, or, (ii)
notwithstanding the foregoing, legislation is passed by any governmental body
which makes electronic LOAs and/or Order Forms invalid and/or non-binding upon
the consumer/"signer" and/or in the event a federal ruling, regulation or law is
imposed, the effect of which will impose material additional costs on LCI
thereby (in LCI's reasonable opinion) making it burdensome for LCI to market and
sell Marketed Services via advertising and/or fulfillment over the Juno Network,
and the Parties, after ten (10) days of negotiating in good faith to agree upon
an accommodation that will achieve the intentions of this Agreement without
imposing material additional costs upon either Party and satisfy applicable law,
have failed to reach agreement about how to do so; either Party may terminate
this Agreement. In the event of termination by LCI hereunder due to the
imposition of legislation by a governmental body which makes electronic LOAs
and/or Order Forms invalid and/or non-binding upon the consumer/signer, LCI
shall be obligated to make the payments specified in Section 5.4 (a) of this
Agreement, except that LCI shall be relieved from a paying a percentage of the
Commission Guarantee, which percentage shall be derived by identifying the
percentage of Juno Subscribers that LCI and Juno are precluded from subscribing
via electronic LOAs and/or Order Forms. For instance, in the event a particular
state passes such legislation and five percent (5%) of Juno Subscribers are
located in such state, Juno shall refund to LCI any paid but unearned portion of
five percent (5%) of the Commission Guarantee and LCI shall be relieved of its
obligation to pay five percent (5%) of any unpaid portion of the Commission
Guarantee. Juno hereby acknowledges and agrees that (i) if legislation is passed
by any federal legislative body such that no Juno Subscriber may subscribe to
Marketed Services via electronic LOAs and or Order Forms, and/or (ii) in the
event a federal ruling, regulation or law is imposed, the effect of which will
impose additional costs on LCI thereby (in LCI's reasonable opinion) making it
burdensome for LCI to market and sell Marketed Services via advertising and/or
fulfillment over the Juno Network, Juno shall refund to LCI, and LCI shall be
relieved from paying, one hundred percent (100%) of the Commission Guarantee. In
the event of any other termination under this Force Majeure provision, LCI shall
be entitled to repayment of all paid installments of the Commission Guarantee
which Juno has not earned as of the date of termination and shall be relieved of
its obligation to pay any unpaid portion of the Commission Guarantee; provided,
however, that Juno shall have the right to retain any commissions that have been
earned by Juno as of the date of the termination (including, if applicable, any
Commission Tail payments due and payable as of said date).
14.12 SURVIVAL. All provisions of this Agreement which by their nature must
survive termination in order to achieve their fundamental purposes, including
but not limited to, those addressing warranties, confidential information,
termination, intellectual property, limitations of liability, indemnification,
governing law, arbitration and audits shall survive any termination of this
Agreement.
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14.13 REMEDIES. The remedies under this Agreement shall be cumulative and not
exclusive, and the election of one remedy shall not preclude pursuit of any
other remedies.
14.14 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original but all of which shall
constitute one and the same instrument.
14.15 JOINT PRODUCT. The Parties have jointly participated in the negotiations
and drafting of this Agreement. In the event of an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring one Party by virtue of authorship of any of the
provisions of this Agreement.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
day and year first above written.
LCI INTERNATIONAL TELECOM CORP.
By: /S/ JOHN TAYLOR Date: 3/12/98
-------------------------------
John Taylor
Senior Vice President
JUNO ONLINE SERVICES, L.P.
By: /S/ CHARLES ARDAI Date: 3/2/98
-------------------------------
Charles Ardai
President
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EXHIBIT A
MARKETED SERVICES
The Marketed Services shall include the following LCI telecommunications
services:
1) Long Distance Telephone Services (including 1+ consumer and business,
domestic and international
2) Calling Cards (including prepaid and stand alone cards)
3) Casual Calling (including 10432 or any other CICs)
4) Collect Calling
5) Local Telephone Services
6) 800 Service (including Home 800)
All Marketed Services and rates will be provided in accordance with LCI's
tariffs and are subject to change at any time.
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EXHIBIT B
PERFORMANCE SPECIFICATIONS
1. Order Accuracy
All LOAs and Order Forms submitted by Juno pursuant to Section 2.5 of the
Agreement shall be accurate and error-free. In no event shall the number of
Order Forms and LOAs in error in any given month exceed five percent (5%) of the
total number of all Order Forms and LOAs submitted in that month. Juno shall
immediately rectify any errors noted on LOAs and/or Order Forms.
2. Order Dropout
Juno shall submit all of the LOAs and Order Forms it receives to LCI.
3. Network Uptime and Availability.
Juno shall provide access to its service on a level which is reasonable and
customary within the industry for nationally recognized providers of dial-up
e-mail services. Juno will take commercially reasonable steps to ensure that
such access is provided at all times in a workmanlike manner and to eliminate
any downtime. Juno intends that, subject to required maintenance, such services
will be available to end users 24 hours per day seven days per week, but makes
no warrantees or guarantees with respect thereto. Juno will make reasonable
efforts to ensure that prolonged system-wide service outages, which are defined
as periods of 24 hours or longer during which no Juno subscriber is able to
connect to Juno's central computers, do not occur more than 3 times in any
calendar year, not counting prolonged system-wide service outages that are the
result of an act of God or other Force Majeure.
4. Response to LOAs.
Juno and LCI shall work together to send a confirmatory e-mail to each
Subscriber who transmits an electronic LOA within two days of receiving such
electronic LOA.
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EXHIBIT C
NON-DISCLOSURE AGREEMENT
AGREEMENT, dated as of the date set forth last below (this "Agreement"), between
the undersigned counterparty (the "Counterparty") and Juno Online Services, L.P.
("Juno").
In consideration for the mutual agreements contained herein and the other
provisions of this Agreement, the parties hereto agree as follows:
SCOPE OF CONFIDENTIAL INFORMATION
1.1 "Confidential Information" means, subject to the other provisions
of this Section: (i) all information disclosed by one party hereto to the other
party hereto that is described in Schedule A under "Description of Confidential
Information: if (A) for written and other tangible information, the information
is marked as confidential or proprietary or (B) for oral information, the
information is contained or set forth in reasonable detail in writing (marked as
confidential or proprietary) and provided to Recipient no later than 15 calendar
days after disclosure. Confidential Information may relate to the activities or
property of a party disclosing information hereunder ("Discloser") or any of the
Discloser's partners, directors, officers, employees, agents, representatives or
affiliated entities (collectively, "Associated Persons"); and (ii) any written
material prepared by a party receiving information hereunder ("Recipient") or
Recipient's Associated persons containing other Confidential Information.
1.2 "Confidential Information" does not include information that: (i)
was available to Recipient (free of any confidentiality obligation in favor of
Discloser known to Recipient at the time of disclosure) prior to Disclosure of
such information by Discloser to Recipient; (ii) is made available to recipient
from a third party not known by Recipient (at the time of such availability) to
be subject to a confidentiality obligation in favor of Discloser; (iii) is made
available to third parties by Discloser without restriction on the disclosure of
such information; (iv) is or becomes available to the public on or after the
date of this Agreement (other than as a result of disclosure by Recipient or its
Associated Persons prohibited by this Agreement); (v) is disclosed to Recipient
on or after the Termination Date; or (vi) is developed independently by
Recipient or its Associated Persons.
USE AND DISCLOSURE OF CONFIDENTIAL INFORMATION
2.1 Recipient agrees: (i) to preserve the confidentiality of
Confidential Information; (ii) to disclose Confidential Information to, and to
permit the use of Confidential Information by, only Recipient and such of
Recipient's Associated Persons who are (or would be) involved in the
contemplated business relationship between the parties, who are consulted in
connection with the contemplated business relationship between the parties or
who Recipient determines otherwise need to know such information; and (iii) to
use reasonable care to maintain the confidentiality of Confidential Information,
provided that such care shall be at least as great as the precautions taken by
Recipient to protect its own Confidential Information.
2.2 Notwithstanding anything to the contrary herein, recipient is free
to make (and this Agreement does not restrict) (i) disclosure of any
Confidential Information in a judicial, legislative or administrative
investigation or proceeding or to a governmental or other regulatory agency;
provided that, to the extent permitted by, and practical under, the
circumstances, Recipient provides to Discloser (A) prior notice of the intended
disclosure or (B) if prior notice is not permitted or practical under the
circumstances, prompt notice of such disclosure; or (ii) disclosure or use of
Confidential Information two (2) years after the date of this Agreement.
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CERTAIN RIGHTS AND LIMITATIONS
3.1 All Confidential Information shall remain the property of
Discloser. The provision of Confidential Information hereunder shall not
transfer any right, title or interest in such information to Recipient.
Discloser does not grant any express or implied right to Recipient to or under
Discloser's patents, copyrights, trademarks, trade secret information or other
proprietary rights.
3.2 Each party agrees to adhere to all applicable laws and regulations
relating to the export of technical data.
3.3 It is understood that the parties hereto and their Associated
Persons may have performed, and may continue to perform, independent development
relating to the matters described under "Description of Confidential
Information" in Schedule A. The parties hereto agree that neither this Agreement
nor the receipt of any Confidential Information shall limit either party's (or
its Associated Persons') independent development or marketing of products or
services involving technology or ideas similar to those disclosed, nor will this
Agreement or the receipt of Confidential Information prevent either party from
undertaking similar efforts or discussions with third parties.
3.4 This Agreement imposes no obligations on either party to purchase,
sell, license, transfer or otherwise transact in any technology, services or
products. This Agreement does not create any agency or partnership relationship
between the parties hereto.
REMEDIES
4.1 Upon Discloser's reasonable request, Recipient agrees to use good
faith efforts to return promptly to Discloser all Confidential Information that
is in writing and in the possession of Recipient and to certify the return or
destruction of all Confidential Information, provided that Recipient may retain
a summary description of Confidential Information for the purpose of fulfilling
its obligations hereunder.
4.2 Recipient agrees that monetary damages may not be an adequate
remedy for improper disclosure or use of Confidential Information, that
Discloser shall be entitled to seek upon breach of this contract, to such
injunctive or equitable relief as may be deemed proper by a court of
competent jurisdiction, without waiving any other right or remedy.
MISCELLANEOUS
5.1 By sending written notice to the other party specifying its desire
not to receive further information hereunder, either party hereto shall
terminate its obligations hereunder with respect to information furnished by
either party on and after the fifth calendar day after the weekday on which such
other party receives such notice (such fifth calendar day being the "Termination
Date"). Such notice shall be effective only as to information received on or
after the Termination Date, shall not be effective as to any information
received prior to the Termination date and shall not affect any rights or
obligations of the parties hereto with respect to information received prior to
the Termination Date.
5.2 The Counterparty agrees that the obligations of either party
arising under (or relating to) this Agreement shall be without recourse to any
partner of either party, any controlling person thereof and any successor to any
such partner or person, and no such partner, controlling person or successor
shall have any liability in such capacity for the obligations of either party.
For the avoidance of doubt, each such partner, controlling person and successor
is a third party beneficiary of this Agreement.
5.3 Except where expressly indicated otherwise, the words "written" or
"in writing" shall include, but not be limited to, written or printed documents,
electronic and facsimile transmissions and computer disks or tapes (whether
machine or user readable).
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5.4 If any provision of this Agreement is held invalid, illegal or
unenforceable by a court of competent jurisdiction it shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
5.5 No amendment or alteration of the terms of this Agreement shall be
effective unless made in writing and executed by both parties hereto.
5.6 A failure or delay in exercising any right in respect of this
Agreement will not be presumed to operate as a waiver, and a single or partial
exercise of any right will not be presumed to preclude any subsequent or further
exercise of that right or the exercise of any other right. Any modification or
waiver of any provision of this Agreement shall not be effective unless made in
writing. Any such waiver shall be effective only in the specific instance and
for the purpose given.
5.7 This Agreement and its enforcement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to conflicts-of-law principles.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed below by their duly authorized signatories.
LCI INTERNATIONAL MANAGEMENT SERVICES, INC. JUNO ONLINE SERVICES, L.P.
("Counterparty")
By: /s/ JAMES ERICKSON By: /s/ CHARLES ARDAI
------------------------------- --------------------------
Name: JAMES ERICKSON Name: CHARLES ARDAI
------------------------------- --------------------------
Title: SR. MANAGER Title: PRESIDENT
------------------------------- --------------------------
Date: 3-28-97 Date: 3-28-97
------------------------------- --------------------------
ADDRESS FOR NOTICES TO DISTRIBUTOR: ADDRESS FOR NOTICES TO JUNO:
LCI International Worldwide Telecommunications Juno Online Services, L.P.
LCI International Tower 45, 39th Floor
8180 Greensboro 120 West 45th Street
8th Floor New York, New York 10036
McLean, Virginia 22102 Attention: President
Attention: Mr. Jim Erickson
with a copy of any written
notice to:
Juno Online Services, L.P.
Tower 45, 39th Floor
120 West 45th Street
New York, New York 10036
Attention: Legal Department
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SCHEDULE A
DESCRIPTION OF CONFIDENTIAL INFORMATION
Disclosed by Counterparty:
terms and conditions of agreement between Juno and/or its affiliated entities
and Counterparty, including all documents referenced thereunder; terms and
conditions of any agreements between Counterparty and online service providers
other than Juno; plans for online business; and plans for forthcoming
business promotions.
Disclosed by Juno
plans for on-line business, financial results, financial condition, financial
projections or other financial information concerning such plans or such
business (including without limitation projected profits, projected costs,
expected sources and methods of financing and information concerning rates
and costs of customer acquisition and retention), descriptions of such
business (including without limitation features of any product or service and
details of implementation of any such business (including without limitation
all algorithms, computer programs, processes or formulas that relate to
development process, data flow, computer and network security,
authentication, logging, accounting, and distribution).
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EXHIBIT 10.7
CONFIDENTIAL
FINANCIAL SERVICES MARKETING AGREEMENT
THIS AGREEMENT, made this 17th day of February, 1999, (the "Effective
Date"), by and between JUNO ONLINE SERVICES, L.P., a Delaware limited
partnership having its principal office at 120 West 45th Street, 39th Floor, New
York, New York 10036 (the "Company") and FIRST USA BANK, N.A., a national
banking association, having an office at Three Christina Centre, 201 North
Walnut Street, Wilmington, Delaware, 19801 ("FUSA"), (referred to collectively
as the "Parties" and each referred to individually as a "Party").
RECITALS:
WHEREAS, the Company is in the business of providing certain electronic
mail, Internet access and related services;
WHEREAS, FUSA desires to market, issue and service those specific
credit products, loans, mortgage products and retail banking products provided
by it and set forth on Exhibit D (hereinafter collectively referred to as
"Products"), subject to the Company's pre-existing contractual limitations and
obligations under its current agreement with Lycos (or any successor agreement
or agreements effecting the delivery of advertising through the site located at
http://home.juno.com, in lieu of the current Lycos Agreement), to the Company
Subscribers as defined below;
WHEREAS, the Company is willing to help FUSA in the marketing
and offering of Product(s) to and among the Company Subscribers subject to the
terms and conditions hereinafter contained; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the Parties herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties hereby
agree as follows:
1. DEFINITIONS.
(a) "Account" shall mean both (i) any account opened with FUSA for
any Product (I.E., a checking account, savings account, CD, or
IRA) and (ii) any issuance of a Product by FUSA I.E., any
credit card, loan, mortgage.
(b) "Ad Bundle" shall mean a set of materials (including without
limitation text, images, multimedia elements, and/or software)
promoting any FUSA Product by means of a Company Service. Ad
Bundles include, without limitation, e-mails, banner
advertisements, pop-up ads, interstitial ads, Web
click-through ads, and the interactive forms and screens that
support such advertising. Each Ad Bundle will consist of a
minimum of [***] Impressions, unless the Parties agree to a
lower number.
(c) "Company Services" shall mean the electronic mail and World
Wide Web access services provided, maintained, co-brokered,
produced, co-produced, and/or owned by Company to or on behalf
of the Company Subscribers as of the Effective Date and as may
be altered during the term of the Agreement. The Parties agree
that the Company Services
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do not include the Juno Web sites currently located at
http://www.juno.com or http://home.juno.com, or any successor
pages thereto.
(d) "Company Subscriber" shall mean any individual who as of the
Commencement Date is a registered user of any Company Service,
or who registers for such Company Service at any point
thereafter during the Term of this Agreement.
(e) "Commencement Date" shall mean May 2, 1999.
(f) "Contract Year" shall mean each consecutive twelve (12) month
period commencing on the Commencement Date of this Agreement.
(g) "Impression" shall mean a single advertising exposure rendered
by any banner, button, text link, window, e-mail, "pop-up",
interstitial, transitional, or other form of advertisement
displayed by Company, as part of any Ad Bundle, by means of
any Company Service.
(h) "Initial Term" shall mean the period beginning on the
Effective Date and continuing through the first [***] Contract
Years following the Commencement Date.
(i) "Program" shall mean the Company's distribution of Impressions
as part of any Ad Bundles and FUSA's marketing, issuance and
servicing of its Products as contemplated by this Agreement.
(j) "Renewal Term" shall mean any extension following the Initial
Term which is mutually agreed upon in writing by the Parties.
(k) "Term" shall mean, collectively, the Initial Term and any
Renewal Term.
2. LICENSE TO USE MARKS.
(a) During the Term of this Agreement, FUSA shall have the right
and license to use the names, trademarks, service marks,
copyrights and logos of the Company (the "Company Marks") set
forth in Exhibit "C" , subject to the terms and conditions of
this Section 2(a). Such Company Marks may be used by FUSA
solely in connection with the Company's displaying of
Impressions as part of an Ad Bundle to Company Subscribers
under the Program and on merchandise used to encourage
individuals to apply for or use Products ("Premiums"). The
Company may at any time modify such Company Marks, in its sole
discretion. Such right and license is restricted to use
pursuant to the terms of this Agreement in connection with the
products and services described herein and shall not apply or
extend to any other product or service offered by FUSA. Any
use of the Company Marks shall require the express approval of
the Company, which approval shall not be unreasonably withheld
or delayed. Subject to the foregoing, the Parties agree that
once FUSA has obtained approval for a specific
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use of the Marks that FUSA will not be obligated to obtain
secondary approval for the same use.
(b) Notwithstanding the foregoing, each of the Parties hereto is
and shall remain the owner of all rights in and to its name
and logos, domain name(s), and any other identifiers of such
Party, as the same now exist or as they may hereafter be
modified, including all rights in and to any copyright,
trademark, service mark and/or like rights pertaining thereto.
Any and all rights to Company Marks not herein specifically
licensed to FUSA are reserved to Company. Upon the termination
of this Agreement, all rights conveyed by Company to FUSA with
respect to the use of Company Marks shall cease, and all such
rights shall revert to Company. Nothing contained herein shall
require FUSA to cancel any Account or to terminate any cards
or Products issued in connection with this Agreement, provided
that FUSA's rights to issue, or re-issue, new or replacement
cards or other Products that bear any Company Marks shall
terminate upon the termination of this Agreement.
3. OFFERING AND ISSUANCE OF PRODUCTS. FUSA shall offer Product(s) to
Company Subscribers in accordance with the following provisions:
(a) Subject to Section 2(a) above and 3(c) below, FUSA shall
design, develop, and provide to Company in a format compatible
with the Company's format for transmission by means of the
Company Services such marketing, promotion and solicitation
materials (the "FUSA Materials") as FUSA deems appropriate to
promote the Program among Company Subscribers, and the Company
shall reasonably assist FUSA with the administration of such
promotional and solicitation activities. The Parties agree
that FUSA shall have the right to select and promote the
marketing and solicitation efforts to be utilized for this
Program. Furthermore, the Parties agree that FUSA, in
consultation with the Company for the purpose of assuring
compliance with the Company's commercially reasonable business
objections relating to the timing, duration and displaying of
Impressions, has the right to determine the schedule of the
transmission of Impressions as part of any Ad Bundles to
Company Subscribers. Additionally, the Parties agree that
FUSA, subject to the Company's consent which shall not be
unreasonably withheld, shall have the right to select the
Premiums to be offered to promote the Program. The Parties
acknowledge that FUSA reserves the right to limit its
solicitation materials to those persons deemed to be
creditworthy in accordance with FUSA's normal credit criteria
and credit practices. FUSA shall have the right to designate
on all Product(s) issued pursuant to this Program such
information (other than Company Marks or other information
describing the Company) as FUSA shall, in its sole discretion,
deem appropriate.
(b) FUSA shall provide a tracking system for the purpose of
calculating the Products purchased by Company Subscribers as a
result of the Program, and implement this system in connection
with the marketing, issuing and servicing of the Accounts and
Products pursuant to this Agreement.
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(c) FUSA reserves the right to communicate information to Account
holders, Account members, or other Product purchasers, which
it normally sends its other Account holders, Account members,
or Product purchasers provided the information communicated
does not utilize the Company Marks, without having to obtain
the prior approval of Company. FUSA shall be solely
responsible for the timeliness and content of all
communications with Account holders regarding the Accounts and
purchasers of Products, and all associated cost therewith.
(d) FUSA shall submit to Company, for its prior approval, samples
of all marketing, promotional or solicitation materials,
printed or otherwise, which FUSA intends to utilize to market
the Program to and among Company Subscribers. Company shall
review such materials and respond to FUSA's requests for
approval on a timely basis, such approval shall not be
unreasonably withheld. The Parties agree that FUSA shall
utilize its best effort to continue to market this Program
during the Term.
(e) Products issued and Accounts opened by FUSA pursuant to the
Program shall be governed by applicable laws, rules, and
regulations, and the terms of the applicable Account holder or
Account member agreement to be entered into between such
persons and FUSA. Notwithstanding any other limitations
contained in this Agreement, FUSA shall have the right to
amend such Account holder or Account member agreement at any
time in accordance with applicable law such as changing the
basic pricing on individual Accounts at anytime in the event
of late payments, non-payments, delinquency, payment by checks
which fail to clear default, bankruptcy, or other consistent
or substantial failure to perform by any Account holder of
Account member pursuant to the terms of the Account holder of
Account member agreement. FUSA shall be solely responsible for
the development, administration and compliance with applicable
laws, rules, and regulation of all such Account holder,
Account member or similar agreements entered or to be entered
between FUSA and any Company Subscribers.
(f) The Parties shall use their good faith efforts to test new
types of Impressions or strategies designed to increase the
efficiency of the marketing program, provided that no such new
types of Impressions or new strategies shall be introduced
into Ad Bundles or otherwise adopted without the mutual
agreement of the Parties. Including but not limited to and by
way of example of such new types of strategies, the Parties
will use their good faith efforts to develop a marketing and
solicitation strategy designed to reach new Company
Subscribers at the earliest practical time after a Subscriber
completes the sign up process, as further clarified in
subsection (i) (iv). In addition to the foregoing, FUSA agrees
to test the viability of activation premiums pursuant to
Exhibit "B" attached hereto and incorporated herein.
(g) Company shall not possess any ownership interest in Products
sold, issued and Accounts established pursuant to this
Agreement. (For the avoidance of doubt, the foregoing sentence
shall not affect the Company's ownership interest in
information about or relating to its
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subscribers that was developed or obtained independently
by Company.) Subject to the terms of Section 5 of this
Agreement, any and all outstanding balances with respect
thereto (including, without limitation, all amounts
owing for the payments of goods and services, periodic finance
charges, late and other charges) and all records developed and
retained by FUSA in connection with such outstanding balances
shall be the sole property of FUSA or its assigns and Company
shall have no rights or interests therein.
(h) Company shall, during the Term of this Agreement, provide FUSA
with the following advertising services:
(i) During each Contract Year, the Company shall produce
up to [***] unique Ad Bundles based on the FUSA
Materials. FUSA shall be responsible for (i)
delivering to the Company the FUSA Materials in order
to permit production of the Ad Bundles; (ii) in
consultation with the Company for the purpose of
assuring compliance with the Company's commercially
reasonable business objections relating to the
timing, duration and displaying of Impressions,
determining the schedule of Impressions throughout
each Contract Year and the constraints of the
targeting (if any) that FUSA desires the Company to
undertake in the transmission of such Ad Bundles.
Commencing on the Commencement Date, and during each
Contract Year thereafter, the Company shall, on
behalf of FUSA, transmit such Ad Bundles to Company
Subscribers by means of the Company Services, in
accordance with the scheduling and targeting requests
of FUSA as contemplated by this Agreement. Prior to
actually displaying the Ad Bundles, the Company shall
submit the final Ad Bundles to FUSA for approval.
FUSA's approval of the Ad Bundles shall not be
unreasonably delayed. If FUSA does not approve an Ad
Bundle, the Company shall, upon receipt of FUSA's
written comments, use reasonable commercial efforts
to implement any and all changes proposed by FUSA,
provided that such changes do not materially increase
the cost of development or distribution, or conflict
with the terms and conditions of this Agreement, the
terms and conditions of the agreements between the
Company and the Company's Subscribers, and/or the
Company's then current commercially reasonable
advertising practices relating to the content of
advertisements. The Company shall have no obligation
to transmit any Ad Bundles prior to the Commencement
Date.
(ii) The Parties shall have the right to vary, in their
mutual discretion, for the purpose of maximizing the
response rate any and all variables affecting
Impressions and the transmission of the same through
as part of an Ad Bundle, including the duration,
time-of-day, physical placement and design. Subject
to Company's commercially reasonable policies, the
Parties will leverage technologies and information
which may include databases and targeting
capabilities such as
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keywords, Company Subscriber registration
information, payment areas and payment mechanisms to
maximize the Products sold and the Accounts generated
from the Program.
(iii) During a Contract Year, the Company shall not be
obligated to make an aggregate of more than [***]
transmissions of Ad Bundles (which number of
transmissions shall include production of up to [***]
different distinct Ad Bundles for such Contract Year)
to the hard drives of then-current Company
Subscribers' computers. During a Contract Year, the
Company shall not be obligated to display more than a
total of [***] Impressions. The Parties agree that
each transmitted Ad Bundle shall contain the
following Impressions: [***] "pop-ups", [***]
interstitials and [***] banners. The Parties further
agree that as a result of the testing of the
Impressions served pursuant to this Agreement, the
Parties may (subject to their mutual written
agreement) vary the allotment in order to maximize
the Program's performance. Subject to Section 3 (i)
(ii) and item 6 of Exhibit A. The Parties agree that
the Impression commitment above is a maximum
commitment based on the maximum number of Ad Bundles
to be transmitted pursuant to this Agreement. If FUSA
desires to exceed the maximum number of Impressions
or Ad Bundles scheduled for a particular Contract
Year, the Parties will negotiate in good faith to
determine satisfactory compensation to be paid to
Company (and other satisfactory terms, as necessary),
for the provision of such additional Impressions or
Ad Bundles. The Parties specifically represent that
they are under no obligation to reach an agreement,
and until and unless such agreement is reached, FUSA
shall be under no obligation to provide additional
compensation to Company for the given Contract Year
and Company shall be under no obligation to provide
additional Impressions or Ad Bundles for the given
Contract Year.
(iv) The Parties agree that the Company's provision of
Impressions as part of any Ad Bundle and the
placement of the same as designated by FUSA for the
purpose of maximizing the response rate, including
but not limited to the placement of Impressions which
are displayed to new Subscribers as part of the first
set of advertisements viewed, is material to FUSA's
entering into this Agreement.
(i) The Parties agree that if at the end of any Contract Year
during the Initial Term or any applicable Renewal Term, the
Program has not attained the annual Account Goals as
established within Exhibit "A" attached hereto and
incorporated herein, then, either Party shall have the right
to terminate this Agreement by delivering to the other Party,
at least thirty (30) days prior to its intended effectiveness
(but in no event later than 30 days after the end of such
Contract Year), a written statement of such Party's intention
to terminate (a "Notice of Intention to Terminate"), in
accordance with the provisions described
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below in (i) and (ii). Upon the effectiveness of such a
termination, the parties shall not have any further obligation
to each other (including the obligation to pay Advances
relating to future Contract Years and obligations to serve
Impressions and attain Account Goals). Notwithstanding any
other provision of this Agreement, and for the avoidance of
doubt, if, in any given Contract Year, this Agreement is
terminated pursuant to this subsection regardless of the
reason, then Company will have no obligation to refund to FUSA
any unearned Advance Payments and any unearned portion of the
Subscriber Growth Advance with respect to the preceding
Contract Year, essentially the Contract Year in which the
Account Goal was not met. The Company will have an obligation
to refund any unearned Advance Payments and any unearned
portion of the Subscriber Growth Advance with respect to the
current Contract year, essentially the year in which notice of
termination is rendered.
(i) If Company delivers a Notice of Intended Termination
to FUSA, then FUSA shall have the right to reject
such termination by (i) providing written notice (a
"Notice of Rejection") to the Company within 10 days
of FUSA's receipt of the Notice of Intended
Termination, such Notice of Rejection to be
accompanied by payment of the Advance for the next
Contract Year. If FUSA delivers a Notice of Rejection
to the Company, FUSA shall be deemed to have waived
any remedy it might have under this Agreement with
respect to the non-performing Contract Year,
including without limitation any further obligation
of the Company to transmit additional Ad Bundles or
Impressions to achieve the Account Goal related to
such Contract Year. If FUSA delivers a Notice of
Rejection to the Company, Company will be deemed to
have earned all Fees which would have been due and
payable if Company had attained all Account Goals
during the prior Contract Year, and all such Fees
shall be due and payable to Company. If FUSA does not
deliver a Notice of Rejection within 10 days of
FUSA's receipt of a Notice of Intended Termination,
then the Company shall have the option of permitting
the Notice of Intended Termination to become
effective on the termination date stated therein or
to revoke the Notice of Intended Termination and
permit this Agreement to remain in full force and
effect.
(ii) If FUSA delivers a Notice of Intended Termination to
the Company, then Company shall have the right to
reject such termination by (i) providing written
notice (a "Notice of Rejection") to FUSA within 10
days of Company's receipt of the Notice of Intended
Termination. If the Company delivers such a Notice of
Rejection, then the current Contract Year shall be
extended and the Company shall cause the display of
additional Impressions (at no additional charge to
FUSA) until such time as the Company has achieved the
Account Goals for such Contract Year (the "Account
Goal Shortfall"). The Parties agree that if the
Account Goal is not attained within three (3) months
of the Company's election to extend, then the Company
has the right, in its sole and absolute discretion,
to
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terminate this Agreement along with all obligations
therein. If however, the Account Goals are attained
then the next Contract Year shall convene at the time
the Account Goal Shortfall is met. Upon the convening
of the next Contract Year, FUSA will be obligated to
pay to the Company the Advance with respect to the
next Contract Year in accordance with Exhibit A. The
Parties agree that if the Company's Impression
delivery to make good on the Account Goal Shortfall
is increased by more than [***] of the given Contract
Years' commitment, then the Company's Impression
commitment for the next Contract Year shall increase
by the actual percentage increase necessary to reach
the Account Goal in the given Contract Year.
Furthermore, the Parties agree that each following
Contract Years' Impression commitment shall be
increased proportionately in addition to any other
increase. If Company does not deliver a Notice of
Rejection within 10 days of Company's receipt of a
Notice of Intended Termination , then FUSA shall have
the option of permitting the Notice of Intended
Termination to become effective on the termination
date stated therein or to revoke the Notice of
Intended Termination and permit this Agreement to
remain in full force and effect.
(iii) If neither Party exercises its right to terminate,
then, this Agreement will remain in force and the
Advance with respect to the next Contract Year shall
be reduced pro-rata by the amount that the Account
Goal Shortfall bears to the Account Goal with respect
to that Contract Year and the Impression commitment
for the next Contract Year shall also be reduced by
the equivent of [***] percent of the above referenced
pro-rata Advance Payment reduction.
4. FEES.
(a) To Company. During the Term of this Agreement FUSA shall pay
to Company certain Account Fees, Renewal Fees, Marketing Fees,
Payment Advances, and Subscriber Growth Advances
(collectively, the "Fees") as set forth on Exhibit "A"
attached hereto.
(b) Account Fees and Renewal Fees shall be payable during the Term
upon the purchase of a Product or opening of an Account (or,
as applicable, renewal of such Product or Account) by a
Company Subscriber by means of the Company Service. A Product
will be deemed purchased, and an Account will be deemed
opened, upon FUSA's approval of such Company Subscriber's
application. FUSA agrees to apply its standard credit policies
and procedures in approving Company Subscriber Applications.
The Parties agree that an Account Fee and/or Renewal Fee shall
be payable during the Term in connection with (i) each
separate Account opened or Product purchased, even if by a
single Company Subscriber; and (ii) any Account or Product
retained by any individual after such individual ceases to be
a Company Subscriber, provided that the Account was
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opened or the Product was purchased while the individual was
still a Company Subscriber. Notwithstanding the forgoing, FUSA
shall not be obligated to pay to the Company any duplicate
Fees described in Exhibit "A" in the event that the Accounts
on which such Fees are calculated represent substitute
Accounts, including, but not limited to, Accounts which are
established due to the loss or theft of an Account holder's or
Account member's existing Account or Accounts which were
established as a result of former joint Account holders or
Account members requesting individual Accounts.
(c) FUSA shall provide Company with a reconciliation report within
thirty (30) days following the end of each calendar quarter
setting forth the amount of Fees earned by Company during such
calendar quarter, together with payment in full of any amounts
owing to Company and payable pursuant to the terms of this
Section 4. FUSA shall pay the Marketing Fee, and (as
applicable) the Subscriber Growth Advance, if any, on the
Commencement Date and on the first day of each Contract Year
thereafter; except that FUSA shall pay the first Marketing Fee
on the Effective Date of the Agreement. FUSA shall pay
quarterly installments of the Advance Payments as set forth in
Exhibit A on the first date of each calendar quarter of each
Contract Year, beginning on the Commencement Date and
continuing on the first day of each calendar quarter
thereafter. The Parties agree that the Marketing Fee for each
Contract Year is non-refundable, except as expressly provided
in this Agreement.
(d) FUSA's obligation to pay any of the aforementioned Fees to the
Company shall cease immediately upon the termination of this
Agreement for any reason whatsoever, provided that any Fees
that have accrued to the Company shall be reconciled and paid
to the date of termination.
5. RECORDS.
(a) During the Term of this Agreement and for a period of [***]
years thereafter, FUSA agrees that it will maintain full and
accurate records with respect to all Accounts established and
Products sold pursuant to this Agreement. During such time,
upon no less than ten (10) business days prior notice, such
records shall be open for inspection by representatives of
Company at such reasonable times as shall be agreed upon by
FUSA, provided that any inspection shall be subject to such
security procedures as FUSA may reasonably impose and subject
to such limitations as may be required under applicable rules,
regulations or statutes governing the conduct of FUSA's
business.
(b) During the Term of this Agreement and for a period of [***]
years thereafter, Company agrees that it shall keep full and
accurate records with respect to the annual Impressions
delivered and Ad Bundles transmitted during the Program
pursuant to this Agreement. During such time, upon no less
than ten (10) business days prior notice, such records shall
be open for inspection by representatives of FUSA at such
reasonable times as shall be agreed upon by Company, provided
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that any inspection shall be subject to such security
procedures as Company may reasonably impose and subject to
such limitations as may be required under applicable rules,
regulations or statutes governing the conduct of Company's
business.
6. RELATIONSHIP. Nothing in this Agreement is intended to or shall be
construed to constitute or establish an agency, joint venture,
partnership or fiduciary relationship between the Parties, and neither
Party shall have the right or authority to act for or on behalf of the
other Party.
7. CONFIDENTIALITY.
(a) The Parties acknowledge and agree that the terms of this
Agreement and all information provided to or in connection
with either Party's performance under this Agreement shall be
considered confidential and proprietary information
("Confidential Information") and shall not be disclosed to any
third party without the prior written consent of the Party
providing the Confidential Information ("Disclosing Party").
Confidential Information shall include, without limitation:
(i) names, addresses, and demographic, behavioral, and credit
information relating to Company Subscribers, FUSA Account
holders or Account members or potential FUSA Account holders
or Account members; (ii) Company Subscriber, Account holder or
Account member communication materials and issuance strategies
or methods developed or implemented by either Party; (iii)
each Party's business objectives, assets and properties; and
(iv) each Party's programming techniques and technical,
developmental, cost and processing information.
(b) The Party receiving such Confidential Information ("Receiving
Party") shall use Confidential Information only for the
purpose of performing the terms of this Agreement and shall
not accumulate in any way or make use of Confidential
Information for any other purpose. The Receiving Party shall
ensure that only its employees, authorized agents, or
subcontractors who need to know Confidential Information to
perform this Agreement will receive Confidential Information
and that such persons agree to be bound by the provisions of
this Section 7 and maintain the existence of this Agreement
and the nature of their obligations hereunder strictly
confidential.
(c) The obligations with respect to Confidential Information shall
not apply to Confidential Information that: (i) either Party
or its personnel already know at the time it is disclosed;
(ii) is publicly known without breach of this Agreement; (iii)
either Party received from a third party authorized to
disclose it without restriction; (iv) either Party, its agents
or subcontractors, developed independently without use of
Confidential Information; or (v) either Party is required by
law, regulation or valid court or governmental agency order or
request to disclose, in which case the Party receiving such an
order or request, to the extent practicable, must give notice
to the other Party, allowing them to seek a protective order.
(d) Each Party agrees that any unauthorized use or disclosure of
Confidential Information may cause immediate and irreparable
harm
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to the Disclosing Party for which money damages may not
constitute an adequate remedy. In that event, each Party
agrees that injunctive relief may be warranted in addition to
any other remedies the Disclosing Party may have. In addition,
the Receiving Party agrees promptly to advise the Disclosing
Party in writing of any unauthorized misappropriation,
disclosure or use by any person of the Confidential
Information which may come to its attention and to take all
steps at its own expense reasonably requested by the
Disclosing Party to limit, stop or otherwise remedy such
misappropriation, disclosure or use.
(e) Upon either Party's demand, or upon the termination of this
Agreement, the Parties shall comply with each other's
reasonable instructions regarding the disposition of
Confidential Information which may include return of any and
all Confidential Information (including any copies or
reproductions thereof). Upon request, such compliance shall be
certified in writing, including a statement that no copies of
confidential information have been kept.
(f) Except as necessary for its performance under this Agreement,
neither Party shall use the name of the other, its affiliates
or subsidiaries in connection with any representation,
publication or advertisement, or make any public statement
relating to the other Party, its affiliates or subsidiaries,
without the prior full disclosure of the same to the other
Party, and the prior written consent of the other Party.
(g) Except as may be required by law, regulation or any
governmental authority, neither Party, nor any of its
affiliates, shall issue a press release or make public
announcement or any disclosure to any third party related to
the transactions contemplated by this Agreement without the
prior consent of the other Party, which consent shall not be
unreasonably withheld or delayed. The Parties agree to issue
no less than one press release (the timing and content of
which is subject to the approval of both Parties) announcing
this Agreement and summarizing certain of its principal terms.
(h) Notwithstanding the foregoing, it is additionally agreed that
the Parties may disclose the terms of this Agreement to
potential investors as well as their representatives and
agents for the sole purpose of advising such parties in
connection with such investment. The Party disclosing may
disclose the terms of this agreement to the extent reasonably
necessary for the purpose of raising capital so long as the
investor enter into an obligation of confidentiality. The
Party disclosing the Confidential Information agrees that it
will take reasonable measures to protect the secrecy of and
avoid disclosure or use of Confidential Information in order
to prevent it from falling into the public domain or into the
possession of persons other than those persons authorized
hereunder. Such measures shall include those measures utilized
to protect ones own Confidential Information of a similar
nature, but in any event no less than a reasonable degree of
care. The Parties agree that the Confidential Information
shall be provided on a need-to-know basis only and provided
only if the party to whom the Confidential Information is
provided to is made aware of the confidential nature of the
information and further provided that the
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Confidential Information shall not be disclosed, either
directly or indirectly, to a competitor of FUSA (it being
understood that the Company's obligation shall be conditioned
on FUSA's providing Company with a list of its competitors for
the purposes of this Section at the time of execution of this
Agreement with FUSA maintaining the right to reasonably
supplement the list from time to time) in any manner
whatsoever except as permitted herein without FUSA's express
prior consent, which consent shall not be unreasonably
withheld. Third party recipients of this Agreement pursuant to
this provision are hereby advised and placed on notice of the
confidential nature of this Agreement and all information
contained herein and that the Confidential Information
provided is to be utilized solely in conformity with this
Section and this Agreement. Any information obtained as a
result of such notice, shall be subject to the confidentiality
provisions of this Section.
(i) The obligations of this Section 7 shall survive the
termination of this Agreement for a period of [***] years.
8. Representations and Warranties.
(a) FUSA represents, warrants, and covenants that: (i) it is a
national banking association duly organized, validly existing
and in good standing under the laws of the United States; (ii)
the execution and delivery by FUSA of this Agreement, and the
performance by FUSA of the transactions contemplated hereby,
are within FUSA's corporate powers, have been duly authorized
by all necessary corporate action, do not require any consent
or other action by or in respect of, or filing with, any third
party or governmental body or agency (other than informational
filings required by MasterCard or Visa), and do not
contravene, violate or conflict with, or constitute a default
under, any provision of applicable law or regulation or of the
charter or by-laws of FUSA or of any agreement, judgment,
injunction, order, decree or other instrument binding upon
FUSA; (iii) it has the right, power and authority to execute
this Agreement and act in accordance herewith; (iv) all FUSA
Material provided to Company for incorporation into any Ad
Bundle does not infringe the intellectual property rights of
any third party, including without limitation copyright,
patent, trademark, trade secret, or right of publicity, or any
contractual right of any third party; (v) its performance
under this Agreement and all Products distributed via the
Company Service by FUSA will conform to all laws and
governmental rules and regulations applicable to FUSA's
business; and (vi) it is not currently aware of any claims,
and is not currently involved in any litigation, challenging
its rights to market its Products in the manner contemplated
under this Agreement or that would have a material adverse
impact on FUSA's ability to perform its obligations
contemplated herein;
(b) Company represents, warrants and covenants that: (i) it is a
Delaware limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(ii) the execution and delivery by Company of this Agreement,
and the performance by
- --------------------------
[***] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
12
<PAGE>
Company of the transactions contemplated hereby, are within
Company's powers, have been duly authorized by all necessary
action, do not require any consent or other action by or in
respect of, filing with, any third party or any governmental
body or agency, and do not contravene, violate or conflict
with, or constitute a default under, any provision of
applicable law, regulation, or under any governing documents,
charter or bylaw, or any agreement, judgment, injunction,
order, decree or other instrument binding on Company; (iii) it
is not currently aware of any claims, and is not currently
involved in any litigation, challenging Company's ownership of
the Company Marks that would have a material adverse impact on
Company's ability to perform its obligations contemplated
herein; (iv) it is not aware of any claims, and is not
currently involved in any litigation, challenging the
Company's access to the Web and/or the Internet that would
have a material adverse impact on Company's ability to perform
its obligations contemplated herein; and (v) it has the right,
power and authority to execute this Agreement and act in
accordance herewith.
(c) EXCEPT AS SPECIFIED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
WARRANTY IN CONNECTION WITH THE SUBJECT MATTER OF THIS
AGREEMENT AND HEREBY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES,
INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE REGARDING SUCH SUBJECT
MATTER. THE FOREGOING WAIVER SHALL NOT BE CONSTRUED TO LIMIT
OR PROHIBIT EITHER PARTY HEREUNDER FROM PURSUING THE REMEDIES
SET FORTH ELSEWHERE IN THIS AGREEMENT OR AS OTHERWISE
AVAILABLE AT LAW OR IN EQUITY FOR A BREACH BY THE OTHER PARTY
HEREUNDER OF ANY CONTRACTUAL OBLIGATION UNDER THIS AGREEMENT.
9. INDEMNIFICATION; LIMITATIONS ON LIABILITY.
(a) FUSA shall not be responsible in any way for any
misrepresentation, negligent act or omission or willful
misconduct of Company, its affiliates, officers, directors,
agents, or employees in connection with the entry into or
performance of any obligation of Company under this Agreement.
Further, Company shall indemnify, defend and hold FUSA
harmless from and against all third-party claims, actions,
suits or other proceedings, and any and all losses, judgments,
damages, expenses or other costs (including reasonable counsel
fees and disbursements), arising from or in any way relating
to: (i) any actual or alleged violation or inaccuracy of any
representation or warranty of Company contained in Section 8
above; (ii) any actual or alleged infringement of any
trademark, copyright, trade name relating to the use by FUSA
of the Company Marks as contemplated by this Agreement; and/or
(iii) any negligent act or omission or willful misconduct of
Company or its directors, officers, employees, agents or
assigns in connection with the entry into or performance of
this Agreement.
13
<PAGE>
(b) Company shall not be responsible in any way for any
misrepresentation, negligent act or omission or willful
misconduct of FUSA, its affiliates, officers, directors,
agents, or employees in connection with the entry into or
performance of any obligation of FUSA under this Agreement.
Further, FUSA shall indemnify, defend and hold Company
harmless from and against all third-party claims, actions,
suits or other proceedings, and any and all losses, judgments,
damages, expenses or other costs (including reasonable counsel
fees and disbursements), arising from or in any way relating
to: (i) any actual or alleged violation or inaccuracy of any
representation or warranty of FUSA contained in Section 8
above; (ii) any actual or alleged infringement of any
trademark, copyright, trade name or other proprietary
ownership interest resulting from the use by FUSA of any
rights held or purported to be held by FUSA for the purpose of
fulfilling its obligations pursuant to this Agreement; (iii)
any act or omission of FUSA in connection with the issuance of
Product(s) and/or the administration of Accounts (iv) the
content of any FUSA Material that was provided to the Company
by FUSA for display through any Impressions delivered on
behalf of FUSA under this Agreement; and (v) any negligent act
or omission or willful misconduct of FUSA or its directors,
officers, employees, agents or assigns in connection with the
entry into or performance of this Agreement.
(c) Each Party's obligations to provide indemnification under this
Agreement shall be contingent upon the Party seeking
indemnity: (i) providing the indemnifying Party with prompt
written notice of any claim for which indemnification is
sought (provided, however, that the indemnifying party shall
be relieved from its indemnification obligations, as a result
of failure to render notice, only to the extent that it is
prejudiced by the failure to receive prompt notice), and (ii)
cooperating fully with the indemnifying Party (at the
indemnifying Party's expense). Each Party's obligations under
this Section 9 shall survive expiration or termination of this
Agreement.
(d) If any claim, action, suit or other proceeding covered under
Section 9(a) or 9(b) of this Agreement ("Claim") is asserted
against a Party entitled to indemnification under such Section
9(a) or 9(b) ("Indemnified Party"), then: (i) the Party
obligated to indemnify ("Indemnifying Party") shall assume, at
its cost and expense, the sole defense of such Claim, provided
that an Indemnified Party may at its option and expense select
and be represented by separate counsel; (ii) the Indemnifying
Party shall maintain control of such defense, provided that
the Indemnifying Party may settle a claim as to the
Indemnified Party only with the prior written consent of the
Indemnified Party, which consent shall not be unreasonably
withheld; and (iii) the Indemnified Party may, at its option
and expense, participate in such defense.
(e) EXCEPT WITH RESPECT TO EACH PARTY'S INDEMNIFICATION
OBLIGATIONS AS SET FORTH IN SECTION 9 HEREIN, IN NO EVENT WILL
EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES,
14
<PAGE>
WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING
NEGLIGENCE) OR OTHERWISE, WHETHER OR NOT THAT PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THE LIABILITY OF
THE PARTIES FOR DAMAGES HEREUNDER, WHETHER IN CONTRACT, TORT
OR ANY OTHER LEGAL THEORY, IS LIMITED TO, AND WILL NOT EXCEED,
THE FOLLOWING APPLICABLE AMOUNTS: FUSA'S LIABILITY SHALL NOT
EXCEED THE GREATER OF (A) TOTAL AMOUNTS DUE AND UNPAID BY FUSA
TO COMPANY HEREUNDER; OR (B) TOTAL AMOUNTS TO BE PAID BY FUSA
TO COMPANY DURING THE CONTRACT YEAR IN WHICH THE EVENT GIVING
RISE TO THE DAMAGE OCCURS (OR IF PRIOR TO THE COMMENCEMENT
DATE, THE FIRST CONTRACT YEAR); AND COMPANY'S LIABILITY SHALL
NOT EXCEED THE LESSER OF: (A) AMOUNTS RECEIVED BY COMPANY FROM
FUSA DURING THE CONTRACT YEAR IN WHICH THE EVENT GIVING RISE
TO THE DAMAGE OCCURS (OR IF PRIOR TO THE COMMENCEMENT DATE,
THE FIRST CONTRACT YEAR); OR (B) TOTAL AMOUNTS TO BE PAID BY
FUSA TO COMPANY DURING THE CONTRACT YEAR IN WHICH THE EVENT
GIVING RISE TO THE DAMAGE OCCURS (OR IF PRIOR TO THE
COMMENCEMENT DATE, THE FIRST CONTRACT YEAR). HOWEVER, THE
FOREGOING LIMITATION OF LIABILITY SHALL NOT PRECLUDE EITHER
PARTY FROM SEEKING EQUITABLE RELIEF IN THE EVENT OF DEFAULT BY
THE OTHER PARTY HEREUNDER UNDER THE TERMS OF THIS AGREEMENT.
(f) The Parties agrees that any obligation or liability arising
under or relating to this Agreement shall be without recourse
to any partner of either Party, any controlling person thereof
and any successor to any such partner or person, and no such
partner, controlling person or successor shall have any
liability in such capacity for the obligations of a Party to
this Agreement.
10. TERM/TERMINATION.
(a) Subject to each Party's right to terminate pursuant to Section
3 (i) of this Agreement, and subsection 10 (b), (c), (d), (e),
(f), and (g) below, this Agreement shall be effective as of
the Effective Date hereof and shall continue for an Initial
Term that ends [***] years from the Commencement Date.
Notwithstanding the foregoing, the Parties agree that at any
time after the first thirty (30) months following the
Commencement Date, either Party has the right to terminate
this Agreement and all obligations contained herein provided
that it has given no less than ninety ( 90) days prior written
notice to the other Party. Provided that this Agreement is not
terminated prior to the expiration of the Initial Term, this
Agreement shall be automatically renewed upon the expiration
of the Initial Term for successive
- --------------------------
[***] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
15
<PAGE>
Renewal Terms of two (2) years each from the date of
expiration of the previous Initial Term or Renewal Term, as
applicable. Such renewal shall not be effective if, at least
ninety (90) days prior to the termination of the Initial Term
or the then current Renewal Term, either Party shall have
notified the other in writing of its decision not to renew
this Agreement. If the terms hereof are to be amended in
connection with any Renewal Term, an appropriate addendum
shall be executed by both Parties and added hereto reflecting,
as applicable, the revised terms hereof.
(b) If there is a material default by either Party in the
performance of the terms and conditions of this Agreement, and
such default shall continue for a period of thirty (30) days
after receipt by the defaulting Party of written notice
thereof from the non-defaulting Party (setting forth in detail
the nature of such default), then this Agreement shall
terminate at the option of the non-defaulting Party as of the
thirty-first (31st) day following the receipt of such written
notice. If, however, the default cannot be remedied within
such thirty (30) day period, such time period shall be
extended for an additional period of not more than thirty (30)
days, so long as the defaulting Party has notified the
non-defaulting Party in writing and in detail of its plans to
initiate substantive steps to remedy the default and
diligently thereafter pursues the same to completion within
such additional thirty (30) day period.
(c) This Agreement shall be deemed terminated, without the
requirement of further action or notice by either Party, in
the event that either Party, or a direct or indirect holding
company of either Party, shall become subject to voluntary or
involuntary bankruptcy, insolvency, receivership,
conservatorship or like proceedings (including, but not
limited to, the takeover of such Party by the applicable
regulatory agency) pursuant to applicable state or federal law
and such proceedings are not dismissed within sixty (60) days
of initiation thereof.
(d) In the event that Company divests itself of its on-line
business(es), FUSA shall have the right to immediately
terminate this Agreement and all of its obligations contained
herein upon notice to Company.
(e) In the event that any material change in any federal, state or
local law, statute, operating rule or regulation, or any
material change in any operating rule or regulation of either
MasterCard or Visa makes the continued performance of this
Agreement under the then current terms and conditions
demonstratively economically infeasible or illegal, then FUSA
shall have the right to terminate this Agreement upon ninety
(90) days advance written notice. Such written notice shall
include a detailed explanation and evidence of the
demonstratively economically infeasible condition imposed.
(f) In the event that the Company enters into any merger,
acquisition, transfer of control or sale of substantially all
of its assets to, or any similar transaction with, (a) any
competitor of FUSA or any entity that owns a competitor of
FUSA, or (b) any entity that due to its products, services
and/or reputation creates a demonstrable and
16
<PAGE>
material conflict of interest for FUSA, then, FUSA shall have
the right to terminate this Agreement upon thirty (30) days
notice.
(g) In the event that the Company enters into any merger,
acquisition, transfer of control or sale of substantially all
of its assets to, or any similar transaction with, a primary
competitor of FUSA which due to the primary competitor's
products and services creates a economically infeasible
material conflict of interest for the Company, then, the
Company shall have the right to terminate this Agreement upon
no less than one hundred and eighty (180) days written notice,
which written notice shall (if permissible) include an
explanation of the circumstances surrounding such termination.
Notwithstanding the foregoing, in no event shall the
termination be effective during the first Year following the
Commencement Date of this Agreement. If, upon the consummation
of such a transaction, the party with whom Company has entered
into such transaction does not request an exclusive
relationship with the Company, then FUSA shall have the right
to purchase advertising at the Company's then commercially
reasonable standard rate, quality, quantity, and terms as for
the Products offered pursuant to this Agreement.
(h) In the event that any representation or warranty set forth in
Section 7 of this Agreement is breached, then the
non-breaching Party shall have the right to immediately
terminate this Agreement and all of its obligations contained
herein by notice to the breaching Party.
(i) Upon termination of this Agreement:
(i) Company and FUSA shall work together toward an
orderly termination of this Program;
(ii) Each Party shall promptly return to the other any
materials that have been supplied by such Party, if
any, including without limitation all Confidential
Information;
(iii) All Accounts which have been opened pursuant to the
terms hereof, together with all Accounts for which
applications have been received but not yet processed
by FUSA as of the effective date of such termination,
shall remain the sole and exclusive property of FUSA;
(iv) FUSA shall have the right, but not the obligation,
prior to the expiration date inscribed on the
Products, to reissue cards or Products previously
issued to Account holder or Account members pursuant
to this Agreement and to issue card or Products to
applicants whose applications are received after the
effective date of such termination, in its own name
and without any reference to Company on such cards or
Products;
(v) Notwithstanding any other provision of this
Agreement, and for the avoidance of doubt, if, in any
given Contract Year, this Agreement is terminated
pursuant to Section 3 (i), regardless of the reason,
then Company will have no obligation to refund to
FUSA any unearned Advance Payments and any unearned
17
<PAGE>
portion of the Subscriber Growth Advance with respect
to the preceding Contract Year, essentially the
Contract Year in which the Account Goal was not met.
The Company will have an obligation to refund any
unearned Advance Payments and any unearned portion of
the Subscriber Growth Advance with respect to the
current Contract Year, essentially the Year in which
notice of termination is rendered;
(vi) If this Agreement is terminated by FUSA pursuant to
Sections 10 (b), (d), (f), or by the Company pursuant
to Section 10 (a) or (g), then, Company shall be
required to remit to FUSA any unearned portion of the
Advance Payments and any unearned portion of the
Subscriber Growth Advance payment relating to that
Contract Year as of the effective date of
termination, if any.
(vii) If this Agreement is terminated by Company pursuant
to Section 10 (b), Section 10 (c), Section 10 (e), or
any other provision hereof, or by FUSA pursuant to
Section 10 (a) or Section 10 (e) then, Company shall
have the right to retain the entire amount of any
Advance Payments and any Subscriber Growth Advance
paid made as of the day notice of termination was
rendered;
(vii) Except those provisions which by their terms shall
survive, all obligations to Company shall cease after
the effective date of termination.
11. EXCLUSIVITY.
(a) During the term of this Agreement, FUSA shall have the
exclusive right to perform the issuing, marketing and
servicing of Accounts and Products by means of the Company
Services as contemplated by this Agreement, and Company agrees
that during the term hereof it shall not by itself, or in
conjunction with others, directly or indirectly, offer or
endorse Products, or provide Company Subscribers with on-line
processing of Products or enter into any agreement with others
for the provision or endorsement of Products to Company
Subscribers.
(b) Notwithstanding the foregoing Section 11(a), Company shall
have the right to develop, transmit, and provide
advertisements specifically for the Bankcard Associations
currently known as Visa or MasterCard, provided that such
advertisements do not allow direct registration by means of
the Company Services and further provided that Visa and
MasterCard are not representing, or otherwise working on
behalf of, a bankcard association member.
12. NON-COMPETITION. With respect to all Accounts established pursuant to
this Agreement, Company agrees that it shall not, directly or
indirectly, during the term of this Agreement (including any Renewal
Term) and for a period of one(1) year following the termination of this
Agreement for any reason whatsoever, specifically target any offer of a
Product to cardmembers possessing an Account. Nothing to the contrary
withstanding, Company may,
18
<PAGE>
after termination of this Agreement, offer current account holders the
opportunity to participate in another credit card program endorsed by
Company, provided Company does not specifically target Account holders
but rather targets as a part of a general solicitation of Company
Subscribers. Furthermore, provided no existing Account holder is
directly or indirectly identified as a cardmember of FUSA, or offered
incentives different from that offered to of Company Subscribers.
13. NOTICES. Any and all notices or other communications required or
permitted under this Agreement shall be in writing and shall be
delivered either by personal delivery; by telex, telegram, mailgram or
telecopy; by nationally recognized overnight courier service; or by
certified or registered mail, return receipt requested, addressed as
follows:
If to FUSA, to:
FIRST USA BANK, N.A.
Three Christina Centre
201 North Walnut Street
Wilmington, DE 19801
Attention: Kurt Campisano
Senior Vice President
with a copy to:
General Counsel
Fax No. (302) 884-8361
If to Company, to:
JUNO ONLINE SERVICES, L.P.
120 West 45th Street, 39th Floor
New York, NY 10036
Attention: Jordan Birnbaum
Senior Vice President
with copies to:
General Counsel
Fax No. (212) 597-9000
or to such other person or address as either Party shall have
previously designated to the other by written notice given in the
manner set forth above. Where notice requires a response in ten (10) or
fewer business days, the notice should be sent by hand delivery or
telecopy. Notices shall be deemed given one day after sent, if sent by
telex, telegram, mailgram, telecopy or by overnight courier; when
delivered and receipted for, if hand delivered; or when receipted for
(or upon the date of attempted delivery where delivery is refused) if
sent by certified or registered mail, return receipt requested.
14. ALTERNATIVE DISPUTE RESOLUTION. Company and FUSA hereby waive their
rights to resolve disputes through any court proceeding or litigation
and acknowledge that all disputes shall be resolved pursuant to Section
15 and 16 below, except that equitable relief may be sought pursuant to
Section 7 and any claims alleging violations or infringement of
intellectual property rights from any court of competent jurisdiction.
Both Parties represent to the other
19
<PAGE>
that this waiver is made knowingly and voluntarily after consultation
with and upon the advice of counsel and is a material part of this
Agreement.
15. INFORMAL DISPUTE RESOLUTION. Any controversy or claim between Company,
on the one hand, and FUSA on the other hand, arising from or in
connection with this Agreement or the relationship of the Parties under
this Agreement whether based on contract, tort, common law, equity,
statute, regulation, order or otherwise ("Dispute") shall be resolved
as follows:
(a) Upon written request of either Company, on the one hand, or
FUSA on the other hand, a duly appointed representative(s) of
each Party will meet for the purpose of attempting to resolve
such Dispute. Should they be unable to resolve the Dispute,
the designated executive representative of JUNO ONLINE
SERVICES, L.P., will meet with FUSA's Executive Vice President
of Marketing (the "Executives") in an effort to resolve the
Dispute. Said meeting shall be in person or by telephone.
(b) The Executives shall meet as often as the Parties agree to
discuss the problem in an effort to resolve the Dispute
without the necessity of any formal proceeding.
(c) Formal proceedings for the resolution of a Dispute may not be
commenced until the earlier of:
(i) resolution through the procedures set forth in
subsections (a)-(b) hereof does not appear likely; or
(ii) the expiration of the thirty-five (35) day period
immediately following the initial request to
negotiate the Dispute;
provided, however, that this Section will not be construed to
prevent a Party from instituting formal proceedings earlier to
avoid the expiration of any applicable limitations period, to
preserve a superior position with respect to other creditors
or to seek temporary or preliminary injunctive relief. The
commencement of a proceeding pursuant to this provision does
not relieve a Party from the executive consultation
requirement contained in this Section.
16. ARBITRATION. If the Parties are unable to resolve any Dispute as
contemplated above, such Dispute shall be submitted to mandatory and
binding arbitration at the election of either Company, on the one hand,
or FUSA on the other hand (the "Disputing Party"). Any disputes arising
out of or relating to this Agreement shall be submitted to arbitration
in accordance with the rules of the American Arbitration Association
then in effect in Washington, D.C. and the award rendered by the
arbitrators shall be binding as between the Parties and judgment on
such award may be entered in any court having jurisdiction thereof.
Three arbitrators familiar with the financial services, online services
and advertising industries shall be appointed: one by FUSA, one by
Company, and a third selected by the two arbitrators selected by FUSA
and Company. In the event the first two arbitrators can not agree on
the selection of a third, such third arbitrator shall be appointed by
the American Arbitration Association. All decisions and awards shall be
made by a majority of the three arbitrators. Notice of a demand for
arbitration of any
20
<PAGE>
dispute subject to arbitration by one Party shall be filed in writing
with the other party and with the American Arbitration Association.
Each Party shall advise the other of its selected arbitrator within ten
(10) days of the date of notice. A stenographic record shall be made of
all arbitration hearings. The Parties shall share all costs of
arbitration. The Parties shall each be responsible for their respective
attorneys fees and costs.
17. FORCE MAJEURE. In the event that a Party fails to perform its
obligations under this Agreement in whole or in part as a consequence
of events beyond its reasonable control (including, without limitation,
acts of God, fire, explosion, public utility failure, floods,
embargoes, epidemics, war or nuclear disaster), such failure to perform
shall not be considered a breach of this Agreement during the period of
such disability. In the event of any force majeure occurrence as set
forth in this Section, the disabled Party shall use its best efforts to
meet its obligations as set forth in this Agreement. The disabled Party
shall promptly and in writing advise the other Party if it is unable to
perform due to a force majeure event, the expected duration of such
inability to perform and of any developments (or changes therein) that
appear likely to affect the ability of that Party to perform any of its
obligations hereunder in whole or in part.
18. ENTIRE AGREEMENT/AMENDMENT. This Agreement, including exhibits,
constitutes the entire understanding between the Parties with respect
to the subject matter, and supersedes all prior written and oral
proposals, understandings, agreements and representations, all of which
are merged herein. Neither this Agreement, nor any amendment or
modification of this Agreement, shall be effective unless it is in
writing and executed by all of the Parties hereto.
19. NON-WAIVER OF DEFAULT. The failure of either Party to insist, in any
one or more instances, on the performance of any terms or conditions of
this Agreement shall not be construed as a waiver or relinquishment of
any rights granted hereunder or of the future performance of any such
term or condition, and the obligations of the non-performing Party with
respect thereto shall continue in full force and effect.
20. SEVERABILITY. In the event that any provision of this Agreement shall,
for any reason, be deemed to be invalid and unenforceable, the
remaining provisions of this Agreement shall remain in full force and
effect.
21. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware without
regard to its conflict of law principles.
22. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall
constitute one and the same document.
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the day and year first above written.
21
<PAGE>
JUNO ONLINE SERVICES, L.P.
By: /S/ CHARLES ARDAI
--------------------------------------
Charles Ardai, President
FIRST USA BANK, N.A.
By: /S/ KURT CAMPISANO
--------------------------------------
Kurt Campisano, Senior Vice President
22
<PAGE>
EXHIBIT A
FEES
During the term of this Agreement and any renewal terms
thereof, and provided that Company fulfills its obligations hereunder and
continues to provide Impressions as provided in this Agreement, FUSA shall pay
to Company, during the term of this Agreement the following Fees for marketing
and promoting the Program:
1. The Company shall be paid a [***] dollar fee (the "Account
Fee") for every Account opened or Product purchased for which
the application was generated on-line or otherwise (e.g.,
dedicated telephone line, customer reference to Company's
advertising) by marketing programs conducted through the
Company Services during the Term of this Agreement and during
any Renewal Term thereof. If FUSA and Company mutually agree
to undertake direct marketing and solicitation activities that
are not through the Company's Services, then the Parties agree
to negotiate in faith the method by which the marketing and
solicitation efforts shall be conducted.
2. A [***] dollar fee for each existing Account or Product on
such Account's or Product's annual anniversary date, unless
each such Account has been canceled prior to such anniversary
date (the "Renewal Fee").
3. Marketing and Promotional Fee: Upon the Effective Date of this
Agreement and upon each anniversary of the Commencement Date
thereafter (starting with the first anniversary of the
Commencement Date), FUSA shall pay to the Company an annual
payment of [***] which will be an annual non-refundable
guaranteed marketing and promotional production fee as a
result of the good will associated with this Program and for
use in developing the Ad Bundles (the "Marketing Fee"). The
Marketing Fee is due and payable each Contract Year regardless
of whether Company has achieved the Subscriber Growth Advance
(as defined below) for the previous Contract Year.
Notwithstanding the foregoing, the Parties agree that if this
Agreement is terminated by either Party during a Contract Year
in accordance with Section 10 (a) or by FUSA in accordance
with Section 10(i)(v) then, any Marketing Fee paid for the
given Contract Year shall be refunded pro rata.
Notwithstanding the forgoing, the Parties agree that if the
Agreement is terminated during the first [***] months of
the Term that Company shall not be obligated to refund any
portion of the Marketing Fee paid.
4. So long as this Agreement is in effect, FUSA shall pay the
Company Yearly advances against earnings that accrue to the
Company pursuant to items 1 and 2 above (the "Advance
Payment"). FUSA shall pay the Company the Advance Payment in
equal quarterly payments (at the start of each quarter)
provided that Company is not in material breach of the
Agreement:
- ---------------------------------
[***] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
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<PAGE>
The Advance Payments shall be paid as follows:
[***] through [***]: Annual payments of [***] via
equal quarterly payments of [***], the first quarterly
payment to be due upon the Commencement Date and paid
thereafter in accordance with the Agreement. Each
subsequent quarterly payment shall be due on the
first day of the calendar quarter thereafter. To the
extent the Account Fees and Renewal Fees earned by
Company with respect to a given Contract Year exceed
the Advance Payment made with respect to such
Contract Year, FUSA shall pay such Account Fees and
Renewal Fees to Company within 30 days following the
quarter in which such Account Fees and Renewal Fees
were earned.
5. For each of the first [***] Contract Years of the Term, the
applicable New Account Goal for each such Contract Year shall
be as follows:
<TABLE>
<CAPTION>
Contract Year: New Account Goal*
--------------- -------------------
<S> <C>
--------------- -------------------
[***] [***] New Accounts
--------------- -------------------
[***] [***] New Accounts
--------------- -------------------
[***] [***] New Accounts
--------------- -------------------
[***] [***] New Accounts
--------------- -------------------
[***] [***] New Accounts
--------------- -------------------
</TABLE>
The Account Goals are not cumulative but rather are intended
to equal no less than [***] Accounts by the [***] anniversary
of this Agreement. Notwithstanding the forgoing, the Parties
agree that if a Subscriber Growth Advance is paid pursuant to
item 6 below, that the next Contract Years' Account Goal shall
increase in proportion to the Subscriber Growth Advance paid.
Essentially, the Parties shall look to the Subscriber Growth
Advance paid and divide that by [***] which number shall
represent the increase to the Account Goals for the given
Contract Year. So long as this Agreement remains in effect,
FUSA shall pay the Company as an additional advance against
Account Fees and Renewal Fees that accrue to the Company
pursuant to items 1 and 2, based on the aggregate growth in
number of Company Subscribers at the beginning of each new
Contract Year under the Agreement from the prior Contract Year
(the "Subscriber Growth Advance"). FUSA shall pay to the
Company annually in quarterly payments commencing within
forty-five (45) days of the beginning of each Contract Year
and quarterly thereafter during the applicable Contract Year
for the duration of the Initial Term, a Subscriber Growth
Advance equal to [***] for each [***] incremental active
subscribers that the Company has on the first day of such
Contract Year in excess of the "Expected Beginning Subscriber
Count" set forth below:*
- ---------------------------------
[***] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
24
<PAGE>
<TABLE>
<CAPTION>
Respective The Total Company Subscribers as of the
Contract Year: Commencement Date plus the below respective
Contract Year expected Subscriber increase
(Expected Subscriber Count):
-------------------- --------------------------------------------
<S> <C>
[***] [***] [***]
-------------------- --------------------------------------------
[***] [***] [***]
-------------------- --------------------------------------------
[***] [***] [***]
-------------------- --------------------------------------------
[***] [***] [***]
-------------------- --------------------------------------------
</TABLE>
* The Parties agree that if a Subscriber Growth Advance is
paid, Company shall increase the maximum number of Ad Bundles
and Impressions as set forth in the Agreement for such
Contract Year, in proportion to the Subscriber Growth Advance
paid.
- ---------------------------------
[***] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
25
<PAGE>
EXHIBIT B
ACTIVATION PREMIUMS
TO BE PROVIDED BY COMPANY
-------------------------
Pursuant to this Agreement and during the term of this Agreement,
Company agrees that it will provide Account holders or Account members an
Activation Premium to be determined by mutual agreement of the Parties.
FUSA agrees to test various activation premiums to be sent to Account
holders or Account members generated as a result of this Program for the purpose
of encouraging the Account holders or Account member to activate their FUSA
Product. FUSA agrees to pay Company up to [***] dollars, per Product holder,
towards the premium (the "Premium Reimbursement").
Company agrees that it will cooperate with FUSA to test Premium levels
that FUSA may suggest provided that the Company shall not be obligated to bear
any costs associated with such Premiums.
Following expiration and/or termination of this Agreement for any
reason, Company agrees that it will redeem all Premium benefits which have been
earned by any Account prior to such expiration and/or termination for a period
of time of at least twelve (12) months after expiration and/or termination of
the Agreement or the expiration of the last point, certificate, voucher or such
other vehicle as is designated by the Program and that is earned within this
Program, which ever is earlier, provided FUSA continues to pay Company the
Premium Reimbursement, and provided that the Company is not obligated to bear
any costs associated with providing such Premium Reimbursement.
- ---------------------------------
[***] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
26
<PAGE>
EXHIBIT C
COMPANY'S MARKS
---------------
<TABLE>
<CAPTION>
Mark USPTO Reg. No. (if Applicable)
<S> <C>
"JUNO" 2,164,956
JUNO & DESIGN 2,165,016
JUNOWEB N/A
JUNOGOLD N/A
</TABLE>
FUSA'S MARKS
<PAGE>
EXHIBIT D
FUSA PRODUCTS AND RELATED SERVICES
checking accounts
savings accounts/time deposits
certificates of deposit (CDs)
individual retirement accounts (IRAs)
consumer loans
auto loans
student loans
home mortgages
home equity loans and lines of credit
credit cards and credit card products
28
<PAGE>
EXHIBIT 10.8
SOFTBANK
MASTER SERVICE AGREEMENT
- --------------------------------------------------------------------------------
CONFIDENTIAL
- --------------------------------------------------------------------------------
This Master Service Agreement is made this 1st day of August, 1998, between Juno
Online Services, L.P., a Delaware Limited Partnership, with offices located at
120 West 45th Street, New York, New York 10036 (hereinafter referred to as
"CLIENT") and Upgrade Corporation of America d/b/a SOFTBANK Services Group, a
Delaware Corporation, with offices located at 699 Hertel Avenue, Buffalo, New
York 14207-2398 (hereinafter referred to as "SOFTBANK").
RECITALS
WHEREAS, CLIENT desires to have certain technical support services provided
to its user base; and
WHEREAS, SOFTBANK has certain experience and capabilities in handling the
tasks involved in providing technical support services; and
WHEREAS, CLIENT wishes to obtain the benefit of such experience and
capabilities by utilizing certain technical support services of SOFTBANK; and
WHEREAS, SOFTBANK agrees to supply CLIENT with the Services of its staff to
perform the Services described in this Agreement and CLIENT agrees to use such
Services of SOFTBANK's staff for such purposes;
NOW, THEREFORE, in consideration of the covenants derived hereunder the
parties agree as follows:
1. SOFTBANK SCOPE OF SERVICES
SOFTBANK agrees to use its best efforts to provide one or more of the
following Services, as mutually agreed upon and further set forth in the Service
Fee & Responsibilities Attachment and detailed Specifications Form mutually
agreed upon between SOFTBANK and the CLIENT ("the Services").
2. SOFTBANK RESPONSIBILITIES
SOFTBANK will provide to CLIENT its Services in a professional workmanlike
and timely manner and as set forth in the Service Fee & Responsibilities
Attachment and detailed Specifications Form.
3. CLIENT RESPONSIBILITIES
In order for SOFTBANK to fulfill its obligations under this Agreement, it
is necessary that CLIENT reasonably cooperate and assist SOFTBANK in SOFTBANK's
performance of its obligations under this Agreement by timely performing its
responsibilities set forth in the Service Fee & Responsibilities Attachment. In
the event either party fails to perform its Responsibilities in a timely manner
and such failure causes either party to incur additional cost, that party shall
reimburse the other party for such additional costs, provided they are
reasonable and documented and provided there has been notice by the other party
of a failure that will cause such costs to be incurred.
4. DEDICATED REPRESENTATIVES
SOFTBANK shall appoint one qualified staff member ("SOFTBANK ACCOUNT
SERVICE REPRESENTATIVE"), who will (i) have authority to act for SOFTBANK and to
make binding decisions with respect to this Agreement, unless otherwise limited
herein; (ii) submit material and information requests to CLIENT; (iii) provide
access to SOFTBANK's staff to answer questions; and (iv) provide schedules and
plans to CLIENT for CLIENT's review and/or approval.
CLIENT shall appoint one qualified staff member ("CLIENT ACCOUNT SERVICE
REPRESENTATIVE"), who will (i) have authority to act for CLIENT and to make
binding decisions with respect to this Agreement; (ii) review promptly
information supplied by SOFTBANK; (iii) provided and assume responsibilities for
accuracy of CLIENT's information and data required by this Agreement; and (iv)
provide access to CLIENT staff to answer questions, and provide training to
SOFTBANK as more fully described in the Service Fee & Responsibilities
Attachment.
CONFIDENTIAL & PROPRIETARY
Page 1
<PAGE>
(THIS SECTION HAS BEEN INTENTIONALLY REMOVED)
6. CONFIDENTIALITY
Both parties acknowledge that each party will be disclosing to the other
confidential and proprietary information relating to their past, present and
future activities, products, services, customer lists, customer profiles,
business plans, business practices and other information designated as
confidential ("CONFIDENTIAL INFORMATION"). The Confidential Information may be
disclosed orally or in writing, and all information, unless otherwise indicated,
shall be deemed to be confidential and proprietary. Confidential Information,
however, does not include information that: (i) is now or subsequently becomes
generally available to the public through no fault or breach on the part of
recipient; (ii) recipient can demonstrate to have had Confidential Information
rightfully in its possession prior to disclosure; (iii) is independently
developed by recipient without the use of any Confidential Information (other
than Properties defined in Section 7); or (iv) recipient rightfully obtains from
a third party who has the right to transfer or disclose it. In addition, both
parties agree that (a) all information disclosed or learned from CLIENT's
end-users; and (b) the properties shall be considered CLIENT Confidential
Information for all purposes hereunder.
Both parties agree to hold the Confidential Information confidential and
will not disclose it to any unauthorized employee of CLIENT and/or SOFTBANK, and
will prevent dissemination to any unauthorized person who is not an employee of
CLIENT or SOFTBANK without the prior written consent of the other party. Both
parties agree not to use the Confidential Information of the other party for any
purpose other than the fulfillment of its obligation under this Agreement.
Notwithstanding anything to the contrary herein, recipient is permitted to make,
and this Agreement does not restrict, disclosure of Confidential Information of
the other party in a judicial, legislative or administrative investigation or
proceeding or to a government or other regulatory agency, provided that, to the
extent permitted by, and practical under, the circumstances, recipient provides
to discloser (i) prompt notice prior to any such disclosure hereunder; or (ii)
if prompt notice is not permitted or practical under the circumstances, prompt
notice after such disclosure.
SOFTBANK acknowledges that it has all employees enter into an agreement
whereby they agree not to disclose or use the Confidential Information.
SOFTBANK agrees that as a result of SOFTBANK's performance of the Services,
SOFTBANK enhances or improves the CLIENT's customer lists, such enhancements or
improvements will be the property of CLIENT and shall be considered CLIENT
Confidential Information for all purposes hereunder.
All Confidential Information remains the property of the disclosing party
and no license or other rights in the Confidential Information are granted
hereby to the other party. Further, both parties agree to return all
Confidential Information of the other party regardless of the media in which it
is stored, including, but not limited to, records released to either party for
marketing and distribution Services, immediately upon either party's written
request and in the case of termination or expiration of this Agreement, within
thirty (30) days of such event.
Both parties acknowledge that unauthorized disclosure or use of
Confidential Information could cause irreparable harm and significant injury
which may be difficult to ascertain. Accordingly, both parties agree that the
aggrieved party will have the right to seek immediate injunctive relief from
breaches of this Agreement, in addition to any other rights and remedies it may
have.
7. PROPRIETARY RIGHTS
CLIENT shall own all right, title and interest in and to hard copy
materials or information resulting from Services, including without limitation,
suggestions and solutions proposed by SOFTBANK to resolve problems raised by
CLIENT's end-users (collectively, the "Properties"). SOFTBANK acknowledges that
the Properties shall be "work made for hire". CLIENT shall be considered the
author of the Properties for the purpose of copyright. If the Properties or any
portion thereof is determined not to be "work made for hire", then SOFTBANK
hereby irrevocably assigns, transfers, releases and conveys to CLIENT all right,
title and interest in and to the Properties. SOFTBANK shall, upon CLIENT's
request, enter into any further assignments or waivers of the Properties or the
intellectual property rights related to the Properties as CLIENT deems necessary
or appropriate. As between SOFTBANK and CLIENT, CLIENT shall have the exclusive
rights to the Properties. For all purposes hereunder, the Properties shall be
deemed the Confidential Information of CLIENT.
SOFTBANK shall be the sole and exclusive owner of any technology created by
SOFTBANK which is intended for use among its clients, and any modifications or
derivative works to said technology that are created by SOFTBANK in connection
with its performance of this Agreement. CLIENT acquires no right to use,
transfer, assign, license or otherwise
CONFIDENTIAL & PROPRIETARY
Page 2
<PAGE>
exploit in any manner any portion thereof for any purpose whatsoever, unless
CLIENT shall have first negotiated and obtained on terms acceptable to SOFTBANK
and CLIENT an agreement stating otherwise to be incorporated herein.
8. WARRANTIES; WARRANTY DISCLAIMERS
SOFTBANK WARRANTS AND REPRESENTS THAT IT HAS ALL RIGHTS, LICENSES AND
AUTHORIZATIONS REQUIRED TO ENTER INTO AND PERFORM THIS AGREEMENT AND THE
PERFORMANCE BY SOFTBANK OF ITS OBLIGATIONS PURSUANT TO THIS AGREEMENT WILL NOT
VIOLATE ANY FEDERAL, STATE OR LOCAL LAW, RULE OR REGULATION.
EXCEPT AS PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS OF EITHER PARTY'S WORK OR PRODUCT FOR ANY PARTICULAR
PURPOSE. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL,
INCIDENTAL, OR SPECIAL DAMAGES (INCLUDING WITHOUT LIMITATION LOST PROFITS)
INCURRED BY EITHER PARTY AS A RESULT OF ANY BREACH BY EITHER PARTY ARISING FROM
OR RELATED TO THIS AGREEMENT, EXCEPT AS PROVIDED IN SECTION 9 (INDEMNIFICATIONS)
HEREOF OR BREACHES OF A PARTY OF ITS CONFIDENTIALITY OBLIGATIONS HEREUNDER.
The end-user will receive the benefits and warranties contained in the
Client software license agreement that accompanies each and every copy of the
product.
9. INDEMNIFICATIONS
Notwithstanding any of the following, CLIENT will not be liable to
indemnify SOFTBANK under the terms of any provision to the extent SOFTBANK's
liability is in any way the result of SOFTBANK's error.
a) CLIENT shall indemnify and hold SOFTBANK harmless from any demands,
claims or suits from third parties for damages or expenses, including attorneys'
fees, arising out of the use of CLIENT's products by end-users or SOFTBANK's use
of CLIENT provided resources or information including, but not limited to, suits
or proceedings based upon (i) a claim of infringement or wrongful use of any
patent, copyright, trade secret or other right of any third party; or (ii) a
claim of product defect or failure to conform to published specifications; or
(iii) claims related to SOFTBANK's providing technical support assistance to
CLIENT's customers based upon information provided by CLIENT; or (iv) SOFTBANK's
authorized use of CLIENT's Confidential Information, in SOFTBANK's performance
of this Agreement as provided herein; or (v) a claim of an unfair or deceptive
act and practice of the CLIENT; or (vi) any acts, which do not comply with
applicable State or Federal law and were performed by SOFTBANK at the direction
of the CLIENT.
b) In the event the CLIENT decides to obtain its own telephone carrier to
be used by SOFTBANK, the CLIENT shall not hold SOFTBANK liable and shall
indemnify and hold SOFTBANK harmless from any demands, claims or suits for
damages or expenses, including attorneys' fees and costs arising from suits or
proceedings based upon a claim resulting from any disruption of telephone
service to SOFTBANK which renders SOFTBANK unable to perform its services as
stated in this Agreement.
SOFTBANK shall indemnify and hold CLIENT harmless from any demands, claims
or suits from third parties for damages or expenses, including attorneys' fees,
arising out of (i) any and all claims that the Services provided under this
Agreement infringe any patent, copyright, trade secret or other right of any
third party; or (ii) any and all claims related to SOFTBANK's providing
technical support assistance to CLIENT's customers which is not based upon
information provided by CLIENT; or (iii) SOFTBANK's unauthorized use of CLIENT's
Confidential Information; or (iv) any and all claims of unfair or deceptive acts
and practices of SOFTBANK; or (v) any and all acts which do not comply with
applicable State or Federal law and were performed by SOFTBANK.
10. REMITTANCE PROCESSING
(THIS SECTION HAS BEEN INTENTIONALLY REMOVED)
11. SOFTBANK FEES
CLIENT agrees to pay SOFTBANK for the performance of its Services in
accordance with the Service Fee & Responsibilities Attachment.
Within fifteen (15) days from the end of each calendar month, SOFTBANK will
submit an invoice to CLIENT for Services performed through the end of the
calendar month. Upon approval from CLIENT, SOFTBANK may submit an invoice, on a
weekly basis, to CLIENT for services performed in accordance with the fee
schedule set forth in the Service Fee
CONFIDENTIAL & PROPRIETARY
Page 3
<PAGE>
& Responsibilities Attachment if the monthly transaction fees exceed [****]
dollars ($[****]). Said invoice will be representative of services performed for
the week prior to the previous week. SOFTBANK will provide prior written notice
of said change. All undisputed amounts on SOFTBANK invoices to CLIENT are
payable within thirty (30) days of receipt of invoice.
SOFTBANK reserves the right, without further notice, to assess a one
percent (1%) finance charge (12% per annum) on any unpaid balances not paid
within thirty (30) days. In the event of a dispute between CLIENT and SOFTBANK
concerning fees, CLIENT agrees to make payment on the balance of fees that are
not in dispute in accordance with the terms of this section. CLIENT must provide
a reasonable justification for any invoice disputes within one hundred twenty
(120) days from the date of invoice.
All amounts payable to SOFTBANK by CLIENT or to CLIENT by SOFTBANK shall be
in United States currency, unless otherwise specifically provided in accordance
with this Agreement.
Set-up Fees and deposits must be paid prior to SOFTBANK's Services being
provided. A minimum monthly volume commitment fee, as set forth in the Service
Fee & Responsibilities Attachment, is charged per program for each calendar
month or portion of a calendar month that a program is active.
12. COMMENCEMENT OF SERVICES
SOFTBANK shall provide Services to CLIENT by the start date set forth in
the Specifications Form. It is understood by the parties that if SOFTBANK
assigns CLIENT a toll free number, toll number, P.O. box or fax number prior to
the commencement of SOFTBANK Services (for use in mailers, ads or other
announcements) such numbers will only be activated upon SOFTBANK's receipt of a
fully executed contract and applicable set-up fees and deposits. Following the
termination of this Agreement, SOFTBANK shall transfer SOFTBANK provided
telephone numbers to CLIENT, if CLIENT so requests, provided all undisputed
outstanding invoices have been paid. This provision shall not apply to CLIENT
owned lines.
13. MODIFICATIONS
Definitions: "Material Change" is defined as any addition or alteration
of the terms of this Agreement that
(i) materially alters the original intent of the parties
as expressed in this Agreement; or
(ii) is materially inconsistent with any provision of this
Agreement; or
(iii) adds services or fees not included in this
Agreement; or
(iv) materially alters services or fees included in this
Agreement.
"Non-Material Change" is defined as a change that
(i) curtails Services and appropriate fees as included in
this Agreement; or
(ii) affects product additions or deletions; or
(iii) affects product price, weight, shipping and handling
or product release date to SOFTBANK; or
(iv) other change which does not constitute a Material
Change as defined above.
Modification: A material change shall be executed in writing and signed by
a duly authorized representative of each party. A non-material change shall be
agreed to by the CLIENT's Account Representative. Such Representative will have
the authority and will execute a Specifications Form or Set-Up Billing Form. Any
of the above executed documents shall be incorporated as part of this Agreement
and shall be binding upon both parties. Any changes will be implemented as per
CLIENT's request, upon SOFTBANK's receipt of an executed addendum or appropriate
form and at a time mutually agreed upon by both parties.
14. TERM OF AGREEMENT
The term of this Agreement shall be for [****] years from the date of this
Agreement except as earlier terminated or extended pursuant to the terms herein.
At such time the parties shall have the opportunity to renew and/or renegotiate
this Agreement. However, either party may renegotiate pricing, at any time after
the first anniversary date of this Agreement, but no more frequently than once
in any twelve (12) month period by giving written notice of the intent to
renegotiate along with a written revised pricing schedule. If the parties cannot
agree upon pricing modifications within sixty (60) days of notification, either
party may terminate this Agreement in accordance with the default remedy (i),
set forth below. The parties shall mutually agree upon renewal terms. If no new
Agreement is made and the initial two (2) year term or the then current term
should expire, this Agreement shall remain in force and continue on a month to
month basis.
- ---------------------------
[****]Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
CONFIDENTIAL & PROPRIETARY
Page 4
<PAGE>
Notwithstanding the above, either party by written notice can terminate
this Agreement during its term, (i) for default if such party has previously
given written notice including a detailed description of the default by the
other party and the other party has not cured such default within sixty (60)
days of receipt of written notice; or (ii) for default due to non-payment of
fees under this Agreement, fifteen (15) days after written notice is provided to
recipient, except for bonafide disputes; or (iii) without cause if such party
has previously given written notice of termination which termination shall be
effective sixty (60) days after such written notice by CLIENT and ninety (90)
days by SOFTBANK. If this Agreement is terminated by Client without cause, the
parties agree that, with respect to only the last month during the Agreement,
Client shall waive the [****]% fee reduction that would otherwise apply (as
specified in Section C of the Service Fee and Responsibilities Attachment) if
SOFTBANK failed to satisfy its service level obligations during that month and
the previous month. In the event of default, the parties shall have all remedies
provided in this Agreement or otherwise available under law.
Upon termination, each party shall return any Confidential Information
of the other party. Upon request and at the direction of the CLIENT, SOFTBANK
agrees to transfer SOFTBANK provided toll free number phone lines accordingly,
provided that all undisputed amounts due SOFTBANK are paid and CLIENT has met
all obligations pursuant to this Agreement. This provision shall not apply to
CLIENT owned lines.
15. GENERAL PROVISIONS
a) CLIENT grants SOFTBANK permission to install CLIENT's product on
SOFTBANK's internal network solely for SOFTBANK internal training purposes only
in connection with the Services provided hereunder.
b) CLIENT acknowledges that SOFTBANK will retain a copy of the customer
order database as support for all transactions processed by SOFTBANK for a
period of four (4) years. CLIENT agrees to cooperate and comply with any
applicable laws or regulations which otherwise require SOFTBANK to retain copies
of CLIENT's records. SOFTBANK acknowledges that such records are Confidential
Information of the CLIENT.
c) SOFTBANK reserves the right to pass on any unanticipated price increases
from its suppliers that directly affect the pricing of this Agreement and are
effective during the term of this Agreement. This includes pass through costs
which may include freight, telephone, credit card fees and postal rates. Said
price increases shall be effective upon implementation of the price change by
the supplier. SOFTBANK will endeavor to provide prior written notice of such
price increases.
d) This Agreement is not intended to create any relationship other than
CLIENT as consignor and SOFTBANK as consignee of the product covered by this
Agreement and SOFTBANK as independent contractor performing Services covered by
this Agreement. Neither party is a partner or legal representative of the other
for any purpose whatsoever. It is understood between the parties that SOFTBANK
is not authorized to make any contract, agreement or warranty on behalf of the
CLIENT.
e) This Agreement contains the entire agreement between the parties with
the exception of the Attachments, Addendum or forms provided for in this
Agreement, which are incorporated herein. This Agreement shall supersede all
prior agreements and understandings between the parties with respect to the
subject matter hereof. To the extent that any provision contained in any other
document incorporated as part of this Agreement is inconsistent or conflicts
with this Agreement, the provisions of this Agreement shall control. This
Agreement may be amended only in writing signed by both parties or as otherwise
provided for in this Agreement.
f) CLIENT shall have the right, at its own expense, during normal business
hours and between the sixteenth day and the last day of the month and in a
reasonable manner, not to exceed twice in any twelve (12) month period and on
fifteen (15) days prior written notice, to audit SOFTBANK's billing records for
CLIENT to ascertain the accuracy of the fees charged hereunder to CLIENT by
SOFTBANK.
g) Both parties agree to comply with all federal, state, local laws and
regulations that are applicable to the Services to be provided herein.
h) In the event CLIENT initiates an action, this Agreement shall be
governed, interpreted and enforced in accordance with the laws of the State of
New York and the venue shall be Buffalo, New York. In the event SOFTBANK
initiates an action, this agreement shall be governed, interpreted and enforced
by the laws of the State of New York and the venue shall be New York, New York.
i) Failure of either party to exercise its rights under this Agreement
shall not be construed as a waiver thereof and shall not prevent said party from
thereafter enforcing strict compliance with any of the terms thereof
j) Any notice which may be or is required to be given under this Agreement
shall be written. Any written notices shall be sent by registered mail or
certified mail, postage prepaid, return receipt requested or by other prepaid
delivery method which is traceable. A fax notice does not constitute receipt of
written notice and must be followed by written notice. All such notices shall be
deemed to have been given when received and properly addressed as set forth
below. Either party may change its address by giving notice to the other party
pursuant to this Section.
- ---------------------------
[****]Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
CONFIDENTIAL & PROPRIETARY
Page 5
<PAGE>
All notices must be sent to:
SOFTBANK: CLIENT:
UPGRADE CORPORATION OF AMERICA JUNO ONLINE SERVICES, L.P.
D/B/A SOFTBANK SERVICES GROUP 120 WEST 45TH STREET
699 HERTEL AVENUE NEW YORK, NEW YORK 10036
BUFFALO, NEW YORK 14207 ATTENTION: ARLENE VILLAREAL
ATTENTION: PRESIDENT VICE-PRESIDENT MEMBER SERVICES
FAX NUMBER (716) 871-6668 FAX NUMBER (212)782-2650
CC: CONTRACT ADMINISTRATOR CC: LEGAL DEPARTMENT
k) SOFTBANK agrees that the obligations of CLIENT arising under (or
relating to) this Agreement shall be without recourse to any partner of CLIENT,
any controlling person thereof and any successor to any such partner or person,
and no such partner, controlling person or successor shall have any liability in
such capacity for the obligations of CLIENT. For the avoidance of doubt, each
such partner, controlling person and successor is a third party beneficiary of
this Agreement.
l) Except for the payment of money, neither party shall be liable to the
other for any failure to perform or a delay in the performance of its
obligations caused by circumstances beyond its reasonable control.
m) Neither party may assign this Agreement without prior written consent of
the other party. No Assignment of this Agreement shall release CLIENT or change
CLIENT's primary responsibility to make payments under this Agreement. Upon
occurrence of any default under this Agreement, SOFTBANK may proceed directly
against CLIENT without the necessity of exhausting any remedies against any
assignee.
n) Both parties agree that they will not, without prior written consent of
the other party in each instance (i) use in advertising, publicity or otherwise
the name of the other party, or any parent, subsidiary or affiliate of the other
party or any director, officer, employee or agent of the other party nor any
trade name, trademark, trade devise, service mark, symbol or any abbreviation,
contraction or simulation thereof owned by the other party or its parent,
subsidiaries or affiliates; (ii) represent directly or indirectly that any
product or service provided by the other party has been approved or endorsed by
the other party; or (iii) refer to the existence of this Agreement in press
releases, advertising or materials distributed to prospective customers or
clients.
o) The terms and conditions of Sections 6, 7, 8, 9, 11, 14 and
15(b)(d)(h)(j)(n) will survive any termination or expiration of this Agreement.
Acceptance:
JUNO ONLINE SERVICES, L.P.:
By: /S/ CHARLES ARDAI Date 8/4/98
--------------------------------------------------
Name & Title: CHARLES ARDAI, PRESIDENT
--------------------------------------------------
Acceptance:
UPGRADE CORPORATION OF AMERICA D/B/A SOFTBANK SERVICES GROUP:
By: /S/ GARY M. CROSBY Date 8/10/98
--------------------------------------------------
Name & Title: Gary M. Crosby, Executive Vice President and CFO
--------------------------------------------------
CONFIDENTIAL & PROPRIETARY
Page 6
<PAGE>
SOFTBANK
MASTER SERVICE AGREEMENT
SERVICE FEE & RESPONSIBILITIES ATTACHMENT
JUNO ONLINE SERVICES, L.P.
FEES EFFECTIVE UPON THE FIRST DAY OF THE MONTH
FOLLOWING EXECUTION OF THIS AGREEMENT
All services performed by SOFTBANK shall be
rendered in accordance with the fees defined herein:
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES SOFTBANK FEE
<S> <C>
A. SET-UP FEES PAYABLE UPON EXECUTION OF CONTRACT
SET-UP FEE Set-Up Fees for future campaigns
to be quoted based on specific needs
and set forth in the Set-Up Billing Form
(30000)DEPOSITS (REFUNDABLE UPON TERMINATION WAIVED
OF THE CONTRACT, PROVIDED OUTSTANDING INVOICES
HAVE BEEN PAID.)
B. CAMPAIGN/PROGRAM MANAGEMENT:
(20400) Monthly Campaign/Program Management fee $[****] per month Provide campaign or program specific information as
Includes: requested by the SOFTBANK Account Service Representative
Juno Billable Services and as requested in the Specifications Form
Juno Core Email Service
Participate in development of Telemarketing Call Guides,
providing information including but not limited to:
Product capabilities & technical requirements
Marketing research questions (if required)
Sales and technical objections
Help desk issues
"End of Call" coding
</TABLE>
- ---------------------------
[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
CONFIDENTIAL & PROPRIETARY
Page 7
<PAGE>
SOFTBANK
MASTER SERVICE AGREEMENT
SERVICE FEE & RESPONSIBILITIES ATTACHMENT
JUNO ONLINE SERVICES, L.P.
FEES EFFECTIVE UPON THE FIRST DAY OF THE MONTH
FOLLOWING EXECUTION OF THIS AGREEMENT
All services performed by SOFTBANK shall be
rendered in accordance with the fees defined herein:
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES SOFTBANK FEE
C. TECHNICAL SUPPORT SERVICES:
<S> <C> <C>
(3160,3170, Level I Technical Specialist ACROSS ALL CAMPAIGNS
3140, 3150) Includes information gathering, problem definition Billable
and resolution, call backs, add new records, database MINUTES PER MONTH PER MINUTE
edits, marketing/demographic surveys, e-mail technical [****]* -[****]* $[****]*
support, fraud investigation, and after call work (ACW), [****]* -[****]* $[****]*
if applicable [****]* -[****]* $[****]*
[****]* -[****]* $[****]*
HOURS OF OPERATION AND HOLIDAYS . [****]* -[****]* $[****]*
[****]* + $[****]*
Same as hours of operation for Billable Services Technical + phone charges, if applicable
Support
Hours of operation - Juno Billable Services: ACROSS ALL CAMPAIGNS
TECHNICAL SUPPORT Billable Hours
8:00 am - 2:00 am (EST) - Monday through Friday PER MONTH PER HOUR
10:00 am - 12:00 am (EST) - Saturday [****]*- [****]* $[****]*
10:00 am - 12:00 am (EST) - Sunday [****]*- [****]* $[****]*
[****]*- [****]* $[****]*
Hours of operation - Juno Billable Services: [****]*-[****]* $[****]*
CUSTOMER SERVICE [****]* [****]* $[****]*
8:00 am - 12:00 am (EST) - Monday through Friday [****]*+ $[****]*
10:00 am - 8:00 pm (EST) - Saturday + phone charges, if applicable
10:00 am - 8:00 pm (EST) - Sunday
HOLIDAYS NOTE: E-MAIL AND FRAUD INVESTIGATION ACTIVITY
New Years Day Labor Day TO BE BILLED PER AGENT HOUR. PER MINUTE
Memorial Day Thanksgiving PRICING ASSUMES NON-DEDICATED AGENTS. PER
4th of July Christmas HOUR PRICING INDICATES ONE HUNDRED PERCENT
(100%) DEDICATED AGENTS. HOURLY PRICING
BILLED IN FIFTEEN (15) MINUTE INCREMENTS.
SERVICE LEVEL - CUSTOMER SERVICE
</TABLE>
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES CLIENT RESPONSIBILITIES
<S> <C>
(3160,3170, Level I Technical Specialist Work with SOFTBANK to define and refine service levels
3140, 3150) Includes information gathering, problem definition throughout the term of the Agreement.
and resolution, call backs, add new records, database
edits, marketing/demographic surveys, e-mail technical Provide all CLIENT products, manuals, product information
support, fraud investigation, and after call work (ACW), and literature necessary to support the relationship.
if applicable
Provide a copy of all supported software for each Agent
HOURS OF OPERATION AND HOLIDAYS . supporting CLIENT's products.
Same as hours of operation for Billable Services Technical CLIENT to deploy call tracking and customer service
Support applications to agent desktops.
Hours of operation - Juno Billable Services:
TECHNICAL SUPPORT
8:00 am - 2:00 am (EST) - Monday through Friday
10:00 am - 12:00 am (EST) - Saturday
10:00 am - 12:00 am (EST) - Sunday
Hours of operation - Juno Billable Services:
CUSTOMER SERVICE
8:00 am - 12:00 am (EST) - Monday through Friday
10:00 am - 8:00 pm (EST) - Saturday
10:00 am - 8:00 pm (EST) - Sunday
HOLIDAYS
--------
New Years Day Labor Day
Memorial Day Thanksgiving
4th of July Christmas
SERVICE LEVEL - CUSTOMER SERVICE
</TABLE>
- ---------------------------
[****]Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
CONFIDENTIAL & PROPRIETARY
Page 8
<PAGE>
SOFTBANK
MASTER SERVICE AGREEMENT
SERVICE FEE & RESPONSIBILITIES ATTACHMENT
JUNO ONLINE SERVICES, L.P.
FEES EFFECTIVE UPON THE FIRST DAY OF THE MONTH
FOLLOWING EXECUTION OF THIS AGREEMENT
All services performed by SOFTBANK shall be
rendered in accordance with the fees defined herein:
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES SOFTBANK FEE
<S> <C>
If SOFTBANK fails to meet the Service Level for any
consecutive two (2) month period, in addition to
increasing the number of dedicated Specialists and
On a monthly basis, [****] percent ([****]%) of all incoming Technical Specialists assigned to handle CLIENT end-user
Customer service calls shall be answered by a SOFTBANK calls from the previous month, the fees associated with
Specialist within forty (40) seconds ("Service Level"). providing agent minutes and attributable
to the second month shall be reduced by
SERVICE LEVEL - BASIC [****] percent ([****]%) The service level penalties
On a monthly basis, [****] percent ([****]%)of all incoming stated above shall not apply if volume increases
calls shall be answered by a SOFTBANK by more than twenty-five percent (25%)
Technical Specialist prior to during any given month from the prior month.
it being Forced Disconnected ("Service Level").
"Forced Disconnected" shall mean the system
automatically Disconnecting the call after [****]Confidential treatment has
the end-user remains on hold twenty-five (25) been requested for this portion pursuant
seconds following the CLIENT preamble message and to Rule 406 promulgated under the
SOFTBANK's quality message. Securities Act of 1933, as amended.
SERVICE LEVEL - TECHNICAL SUPPORT WEB
On a monthly basis, [****] percent ([****]%) of all
incoming technical support calls shall be answered
by a SOFTBANK Technical Specialist within one hundred
twenty (120) seconds ("Service Level").
SERVICE LEVEL - GOLD TECHNICAL SUPPORT
On a monthly basis, [****] percent ([****]%) of all
incoming calls shall be answered by a SOFTBANK Technical
Specialist prior to it being Forced Disconnected
("Service Level"). "Forced Disconnected" shall mean the
system automatically disconnecting the call after the
end-user remains on hold twenty-give (25) seconds
following the CLIENT preamble message and SOFTBANK's
quality message.
</TABLE>
CONFIDENTIAL & PROPRIETARY
Page 9
<PAGE>
SOFTBANK
MASTER SERVICE AGREEMENT
SERVICE FEE & RESPONSIBILITIES ATTACHMENT
JUNO ONLINE SERVICES, L.P.
FEES EFFECTIVE UPON THE FIRST DAY OF THE MONTH
FOLLOWING EXECUTION OF THIS AGREEMENT
All services performed by SOFTBANK shall be
rendered in accordance with the fees defined herein:
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES SOFTBANK FEE
<S> <C>
Minimum Monthly Volume Commitment Forecasted billable units of measure per month
shall be billed at the appropriate volume tier
and CLIENT's payment of fees shall be equal to
[****] percent ([****]%) of the forecast.
For the months of August and September and
October of 1998, the forecasting criteria for
the CLIENT Billable Services campaign (Ember)
will be lowered from [****]% to [****]%, and
for this period, the service level penalty
shall not apply.
A "BILLABLE UNIT OF MEASURE" IS THE UNIT OF TIME
UPON WHICH FEES ARE LEVIED, E.G. MINUTES OR HOURS.
A SEPARATE FORECAST AND MINIMUM MONTHLY VOLUME
COMMITMENT WILL PREVAIL FOR EACH OF THE ABOVE
FEE SCALES.
(25920) KnowledgeCenter(TM)Remote Access to # OF WORKSTATIONS ACCESS FEE
SolutionBase LICENSE PER MONTH
With Direct Data Connect 1-5 licenses $[****]
(Builder Workstation Only) 6-10 licenses $[****]
Includes: 11+ licenses TBD
- Access to one SOFTBANK external
SolutionBase application server
and one user account.
- Available access to a domain where
data resides.
- Technical support assistance from
9:00am - 5:00pm (EST)
- Organization of SolutionBases are
at SOFTBANK's discretion
in regard to formatting standards.
- Provide training to all approved users.
Additional Builder Workstation Licenses $[****] one-time fee per license#
(beyond the initial license) $[****]annual maintenance version per license
</TABLE>
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES CLIENT RESPONSIBILITIES
<S> <C>
Minimum Monthly Volume Commitment In the event CLIENT's actual volume does not meet the minimum
forecasted volume commitments, CLIENT is responsible for
payment of fees as set forth under the "SOFTBANK Fee"
column. CLIENT shall make monthly payments based on the
foregoing commitments and said payments shall be reflected in
CLIENT's invoice. CLIENT must provide SOFTBANK with a ninety
(90) day rolling forecast to be submitted to SOFTBANK on the
CLIENT Forecast Form, attached hereto. In the event SOFTBANK
does not receive said forecast, it shall be entitled to rely
upon the previous forecast for minimum monthly volume
commitment purposes.
CLIENT agrees to sign an end-user license agreement to use
and install Primus' SolutionBase software.
Appoint one designated representative as a contact for all
SolutionBase technical support.
Attend all appropriate training at SOFTBANK site and attain
(25920) KnowledgeCenter(TM)Remote Access to certification for each authorized user.
SolutionBase
Maintain computer systems to support remote access to
With Direct Data Connect SolutionBase.
(Builder Workstation Only)
Includes:
- Access to one SOFTBANK external Install and maintain a reliable dedicated communication
SolutionBase application server data link between CLIENT and SOFTBANK facilities (with
and one user account. direct data connect only).
- Available access to a domain where
data resides.
- Technical support assistance from CLIENT agrees to assist with and share new and
9:00am - 5:00pm (EST) modified solutions as a part of the quality review
- Organization of SolutionBases are
at SOFTBANK's discretion
in regard to formatting standards.
- Provide training to all approved users.
Additional Builder Workstation Licenses
(beyond the initial license)
</TABLE>
- ---------------------------
[****]Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
CONFIDENTIAL & PROPRIETARY
Page 10
<PAGE>
SOFTBANK
MASTER SERVICE AGREEMENT
SERVICE FEE & RESPONSIBILITIES ATTACHMENT
JUNO ONLINE SERVICES, L.P.
FEES EFFECTIVE UPON THE FIRST DAY OF THE MONTH
FOLLOWING EXECUTION OF THIS AGREEMENT
All services performed by SOFTBANK shall be
rendered in accordance with the fees defined herein:
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES SOFTBANK FEE
<S> <C>
process.
D. TELECOMMUNICATIONS:
(9311) T-1 Voice Interface Set-Up $[****] one time fee per T-1
T-1 Maintenance Fee $[****] per month per T-1
Telecom Maintenance Fee $[****] per hour
(9311) T-1 Data Interface Set-Up $[****] one time fee per T-1
T-1 Data Maintenance Fee $[****] per month per T-1
Real-time CMS Access of VDN Data $[****] per month per login
(?) Network Charges Pass-through if applicable
E. ADMINISTRATIVE:
(19500) Custom reporting/additional data imports/specialized data $[****]/hour
(19550) transfers billed in fifteen (15) minute increments,
(19560) (beyond initial set up and/or standard activity reporting [****] hour minimum
options) + fee per transfer (CLIENT to be notified of
(19570) fee in advance), if applicable
(19510) Campaign/program modifications beyond initial set-up $[****]/hour
(e.g. CLIENT requested changes or additions, call guide billed in fifteen (15) minute increments,
billed in fifteen (15) minute increments, updates, [****] hour minimum
telecommunications programming, prompt changes,
(CLIENT to supply artwork), additional fax documents, etc.)
(14510)Training (includes training provided by CLIENT or by
SOFTBANK and includes agent and/or trainer time)
(CLIENT WILL NOT BE CHARGED FOR AGENT TRAINING HOURS THAT
ARE RELATED TO SOFTBANK'S ATTRITION AND/OR AGENT QUALITY
ISSUES.) $[****] per agent/trainer hour
Training $[****] per agent/trainer hour
Overtime training (Prior written notice is required)
</TABLE>
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES CLIENT RESPONSIBILITIES
<S> <C>
D. TELECOMMUNICATIONS:
(9311) T-1 Voice Interface Set-Up
T-1 Maintenance Fee
Telecom Maintenance Fee
(9311) T-1 Data Interface Set-Up
T-1 Data Maintenance Fee
Real-time CMS Access of VDN Data
(?) Network Charges
E. ADMINISTRATIVE:
(19500) Custom reporting/additional data imports/specialized data
(19550) transfers billed in fifteen (15) minute increments,
(19560) (beyond initial set up and/or standard activity reporting
options)
(19570)
Provide training to SOFTBANK trainers or appropriate
training information or documentation covering specifics of the
product and details of the campaign/program for SOFTBANK to
provide training to its employees.
Provide additional training to SOFTBANK trainers as needed on
an ongoing basis to support any additions or modifications to
</TABLE>
- ---------------
[****]Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
CONFIDENTIAL & PROPRIETARY
Page 11
<PAGE>
SOFTBANK
MASTER SERVICE AGREEMENT
SERVICE FEE & RESPONSIBILITIES ATTACHMENT
JUNO ONLINE SERVICES, L.P.
FEES EFFECTIVE UPON THE FIRST DAY OF THE MONTH
FOLLOWING EXECUTION OF THIS AGREEMENT
All services performed by SOFTBANK shall be
rendered in accordance with the fees defined herein:
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES SOFTBANK FEE
<S> <C>
((20200) Photocopies $0.10 per page
(requested by CLIENT/Customer)
(10050) Envelopes, stationery, other out-of-pocket Cost
(8100- Postage Cost
8250)
F. END OF CAMPAIGN/PROGRAM:
(19495) Reporting/analysis (Quote based on specific needs)
(20230) Data transfer (Quote based on specific needs)
</TABLE>
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES CLIENT RESPONSIBILITIES
<S> <C>
All related training expenses for such
SOFTBANK trainers, such as travel, shall
be the responsibility of the CLIENT.
</TABLE>
*ON A MONTHLY BASIS, THE PARTIES AGREE TO REASSESS THE PER MINUTE/PER HOUR
PRICING ("HYBRID PRICING") TO EVALUATE THE COSTS FOR BOTH PARTIES AND TO WORK
TOWARDS A MUTUALLY ACCEPTABLE SOLUTION BASED UPON A COST ANALYSIS.. # THE
INITIAL BUILDER WORKSTATION LICENSE SHALL BE INCLUDED AS A COURTESY LICENSE,
HOWEVER THE ACCESS FEE SHALL APPLY TO THE INITIAL LICENSE AND ANY ADDITIONAL
LICENSES REQUESTED BY THE CLIENT. ANY ADDITIONAL SOLUTIONBUILDER OR EXPLORER
LICENSES REQUESTED BY THE CLIENT, SHALL BE CHARGED TO THE CLIENT AS SET FORTH IN
THIS SECTION. SOFTBANK RESERVES THE TO MAKE THESE LICENSES AVAILABLE AND THE
RIGHT TO ADJUST PRICING, UNTIL SUCH TIME NEGOTIATIONS WITH ITS VENDOR ARE
COMPLETED AND SOFTBANK SHALL NOTIFY CLIENT UPON COMPLETION OF SAID NEGOTIATIONS
AND OF PRICE CHANGES, IF ANY.
CONFIDENTIAL & PROPRIETARY
Page 12
<PAGE>
CLIENT FORECAST FORM
*IMPORTANT INFORMATION: In the event the actual volume for a particular period
does not meet the forecasted volume commitments (as such may be modified or
updated by the most recent Client Forecast Form submitted to SOFTBANK 15 days
prior to the commencement of such period) you are providing below, you will be
responsible for payment of minimum monthly fees as set forth in the agreement
between you and SOFTBANK. You shall make payments based on the agreed upon
commitments and said charges for said commitments shall be reflected in your
monthly invoice. You must provide SOFTBANK with a ninety (90) day rolling
forecast to be submitted to SOFTBANK on this CLIENT Forecast Form. In the event
SOFTBANK does not receive an ongoing forecast, it shall be entitled to rely upon
the previous forecast for minimum monthly volume commitment purposes and
charges.
Client ID Number: Client Name:
------------ ----------------------------------
Campaign Number: Start Date:
------------ ----------------------------------
/ / Initial Forecast (Minimum ninety (90) days)
/ / Ongoing Forecast (thirty (30) day minimum forecasted time period, to be
provided at least thirty (30) days prior to the start of the billing
period covered by the forecast)
/ / Revised Forecast (thirty (30) day minimum forecasted time period, to be
provided at least fifteen (15) days prior to the start of the billing
period covered by the forecast)
<TABLE>
<CAPTION>
90 DAY FORECAST
1st Period 2nd Period 3rd Period
(PERIOD MUST BE EQUIVALENT TO A BILLING/REPORTING
PERIOD.)
FORECAST PERIOD DATE
<S> <C>
INBOUND Talk Minutes/Hours
ACW Minutes/Hours
OUTBOUND Agent Hours
MFRP Mail Orders
Fax Orders
ETS Cases
</TABLE>
The foregoing is the undersigned's forecast of volume under the services
agreement between CLIENT and SOFTBANK Services Group.
UPGRADE CORPORATION OF AMERICA
D/B/A SOFTBANK SERVICES GROUP
----------------------------------
Client Name
- ---------------------------------------- ----------------------------------
SIGNATURE SIGNATURE
- ---------------------------------------- ----------------------------------
PRINT NAME PRINT NAME
- ---------------------------------------- ----------------------------------
TITLE TITLE
- ---------------------------------------- ----------------------------------
DATE DATE
<PAGE>
ADDENDUM NUMBER (1) ("ADDENDUM")
TO THE
MASTER SERVICE AGREEMENT
BETWEEN
UPGRADE CORPORATION OF AMERICA D/B/A SOFTBANK SERVICES GROUP ("SOFTBANK")
AND
JUNO ONLINE SERVICES, L.P. ("CLIENT")
WHEREAS, SOFTBANK and CLIENT have entered into a Master Service Agreement
("Agreement") dated August 1, 1998; and
WHEREAS, SOFTBANK and CLIENT desire to add new services and fees; and
WHEREAS, SOFTBANK and CLIENT desire to modify the Agreement by way of this
Addendum effective as set forth herein;
NOW, THEREFORE, SOFTBANK and CLIENT agree as follows:
1. MODIFY TO ADD THE FOLLOWING SERVICES AND FEES:
(See attached Service Fee & Responsibilities Attachment)
2. NO OTHER MODIFICATIONS: Except as provided above, the terms of the Agreement
are unmodified by this Addendum.
3. OTHER AGREEMENTS: The service fees set forth in the Agreement between the
parties constitute master pricing which shall apply to present and future
services provided to the CLIENT. The pricing included in this Addendum shall be
in addition to those fees set forth in the Agreement or any previous document
incorporated as a part of the Agreement. To the extent that any provision or
service fee contained in the Agreement or any previous document incorporated as
part of the Agreement conflicts with this Addendum, the provisions of this
Addendum shall control.
IN WITNESS WHEREOF, the parties have caused this Addendum to be duly
executed and effective as of the date and year indicated by the last signator,
unless otherwise indicated herein.
UPGRADE CORPORATION OF AMERICA JUNO ONLINE SERVICES, L.P.
D/B/A SOFTBANK SERVICES GROUP
BY: /S/ CHARLES ARDAI BY: /S/ GARY M. CROSBY
----------------------------- -----------------------------
NAME: Gary M. Crosby NAME: Charles Ardai
TITLE: Executive Vice President TITLE: President
and CFO
DATE: 9/1/98 DATE: 8/12/98
CONFIDENTIAL & PROPRIETARY
Page 1
<PAGE>
ADDENDUM NUMBER (1)
SERVICE FEE & RESPONSIBILITIES ATTACHMENT
JUNO ONLINE SERVICES, L.P.
FEES EFFECTIVE UPON COMMENCEMENT OF SERVICES
All services performed by SOFTBANK shall be
rendered in accordance with the fees defined
herein and shall be in addition to services
and fees set forth in the Master Service
Agreement or any previously incorporated
Addendum.
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES SOFTBANK FEE
<S> <C>
IVR (INTERACTIVE VOICE RESPONSE) SERVICES:
Inbound call fee: PER CAMPAIGN
(3100) Call Routing
(3230) MINUTES PER MONTH FEE PER MINUTE
(3210) [****] - [****] $[****]
(3210) [****] - [****] $[****]
[****] - [****] $[****]
[****] - [****] $[****]
[****] + $[****]
+ phone charges (See TELECOMMUNICATIONS)
(20480)
See ORDER PROCESSING - INBOUND SERVICE
(Quote based on specific needs)
(?) Custom voice talent
TELECOMMUNICATIONS:
(18100) Additional Toll Free lines $35.00 per line per month
(BEYOND THREE (3) ON SALES PROGRAMS AND/OR ONE (1) ON
AUTOMATED TECHNOLOGY OR TECHNICAL SUPPORT PROGRAMS)
Phone charges: (applies to all services provided)
(9001) Toll Free inbound - SOFTBANK lines Carrier rates*
(includes line/access charges + taxes)
(n/a) Toll inbound CUSTOMER pays toll charges*
</TABLE>
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES CLIENT RESPONSIBILITIES
<S> <C>
IVR (INTERACTIVE VOICE RESPONSE) SERVICES:
Inbound call fee: Provide first draft of script.
(3100) Call Routing
(3230) Provide sign-off for script and call-flow in timely manner
(3210) before SOFTBANK begins to program.
(3210)
Provide Closed and Holiday Schedule.
(20480) Provide SOFTBANK with required edits and modifications in a
format acceptable to SOFTBANK.
(?) Custom voice talent
</TABLE>
- ---------------------
[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
CONFIDENTIAL & PROPRIETARY
Page 2
<PAGE>
ADDENDUM NUMBER (1)
SERVICE FEE & RESPONSIBILITIES ATTACHMENT
JUNO ONLINE SERVICES, L.P.
FEES EFFECTIVE UPON COMMENCEMENT OF SERVICES
All services performed by SOFTBANK shall be
rendered in accordance with the fees defined
herein and shall be in addition to services
and fees set forth in the Master Service
Agreement or any previously incorporated
Addendum.
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES SOFTBANK FEE
<S> <C>
Toll Free inband SOFTBANK Lines Carrier rates*
(includes line/access charges + taxes)
Toll inbound CUSTOMER pays toll charges*
(9210) Toll outbound calls and call backs Carrier rates*
(includes toll charges + taxes)
*charges incurred only if back-up
telecom lines are utilized.
</TABLE>
- -----------------
[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
CONFIDENTIAL & PROPRIETARY
Page 3
<PAGE>
ADDENDUM NUMBER (2) ("ADDENDUM")
TO THE
MASTER SERVICE AGREEMENT
BETWEEN
UPGRADE CORPORATION OF AMERICA D/B/A SOFTBANK SERVICES GROUP ("SOFTBANK")
AND
JUNO ONLINE SERVICES, L.P. ("CLIENT")
WHEREAS, SOFTBANK and CLIENT have entered into a Master Service Agreement
("Agreement") dated August 1, 1998; and
WHEREAS, SOFTBANK and CLIENT desire to add new services and fees; and
WHEREAS, SOFTBANK and CLIENT desire to modify the Agreement by way of this
Addendum effective as set forth herein;
NOW, THEREFORE, SOFTBANK and CLIENT agree as follows:
1. MODIFY SECTION 5, CLIENT PRODUCT/LITERATURE: change to read as follows;
"CLIENT, at its expense, will from time to time provide SOFTBANK on a
consignment basis such quantities of product inventory or literature as
CLIENT deems advisable in order that SOFTBANK can fulfill its obligations
under this Agreement. The title to all such consigned inventory shall at
all times remain with CLIENT until title passes to a purchaser, and
SOFTBANK shall have no right, title or interest in such inventory, the
accounts receivable from any sale of such inventory, or in any proceeds of
such inventory or accounts receivable. SOFTBANK shall have no right to
pledge, mortgage or otherwise encumber, and SOFTBANK shall keep free of any
pledge, mortgage or other encumbrance, all of the inventory received by
SOFTBANK, the accounts receivable from any sale of such inventory, and any
proceeds of such inventory or accounts receivable and any other property of
CLIENT that SOFTBANK may from time to time possess. Without the prior
written consent of CLIENT, SOFTBANK will not store or hold any of the
consigned inventory at any location other than the SOFTBANK facility to
which CLIENT ships such inventory and SOFTBANK will not locate its
executive offices outside the United States. SOFTBANK shall keep all
inventory segregated from all other goods and property held by SOFTBANK.
SOFTBANK shall be authorized to make deliveries of inventory only to
purchasers that have completed purchases from CLIENT pursuant to this
Agreement or otherwise in writing by the CLIENT Account Service
Representative. Upon receipt of written instructions from CLIENT, SOFTBANK
shall immediately return to CLIENT, at CLIENT's expense, such quantities of
product inventory as CLIENT may direct.
CLIENT will ship product inventory or literature, freight prepaid, to
SOFTBANK F.O.B. destination, at 3357H SouthPark Place, Grove City, Ohio
43123. CLIENT is responsible for all shipping costs and bears all risks of
loss to its product. CLIENT agrees to provide SOFTBANK with a packing slip
and consignment invoice for each shipment of product to SOFTBANK. A copy of
the packing slip must accompany each product delivery. CLIENT agrees to
include product description and unique SKU number for each product on each
packing slip to ensure accurate inventory receipt and reporting. SOFTBANK
cannot receive product which arrives at SOFTBANK Distribution Center
without a packing slip.
CLIENT further agrees to provide product with a unique SKU number
affixed to each unit. In instances where no SKU number is affixed to each
unit, SOFTBANK will advise CLIENT, providing a quote to prepare and affix
such labels. In instances where CLIENT does not use unique SKU numbers,
SOFTBANK will work with CLIENT to create such numbers, providing a quote to
prepare and affix required labels. In all instances labels will be prepared
and affixed only after CLIENT has approved quoted costs.
CLIENT shall maintain personal property insurance to cover "all risks"
to CLIENT's inventory and shall be responsible for all risks of loss to
product while such inventory is on consignment with SOFTBANK. SOFTBANK will
use all reasonable precautions with its staff and facilities to prevent
unauthorized access to and removal of CLIENT's product. On a monthly basis,
SOFTBANK will provide a reconciliation of product inventory received,
shipped and current balances.
All product returned to SOFTBANK by customers that is deemed damaged
based on CLIENT provided guidelines and cannot be returned to stock, will
be accounted for and destroyed or returned to CLIENT at its direction and
expense, at least every ninety (90) days. SOFTBANK will invoice CLIENT the
cost of such disposal in the
CONFIDENTIAL & PROPRIETARY
Page 1
<PAGE>
month following disposal (billable as special warehouse work), providing a
certificate of destruction which includes product description, SKU number
and unit counts.
When product inventory is to be returned to CLIENT or transferred to
another location at the request of CLIENT, CLIENT is responsible for making
arrangements with shipper of their choice on a "freight-prepaid" basis only
and bears all risks. SOFTBANK cannot ship "freight collect". Upon request
of product return or transfer by CLIENT, SOFTBANK will prepare product for
shipping (billable as special warehouse work) in a timely manner, including
a packing slip which notes product description, SKU number and unit counts.
CLIENT's shipper will coordinate product pick up with SOFTBANK Distribution
contact."
2. MODIFY SECTION 15(O), GENERAL PROVISIONS: add Section 5 as a section that
will survive any termination or expiration of the Agreement.
3. MODIFY SECTION C. OF THE SERVICE FEE AND RESPONSIBILITIES ATTACHMENT,
"TECHNICAL SUPPORT SERVICES", SERVICES/SOFTBANK RESPONSIBILITIES COLUMN,
EFFECTIVE AUGUST 10, 1998, TO READ AS FOLLOWS:
Hours of operation - Juno Billable Services:
TECHNICAL SUPPORT
8:00 am - 2:00 am (ET) - Monday through Friday
10:00 am - 12:00 am (ET) - Saturday
10:00 am - 12:00 am (ET) - Sunday
CUSTOMER SERVICE
8:00 am - 12:00 am (ET) - Monday through Friday
10:00 am - 8:00 pm (ET) - Saturday
10:00 am - 8:00 pm (ET) - Sunday
4. MODIFY TO ADD THE FOLLOWING SERVICES AND FEES:
(See attached Service Fee & Responsibilities Attachment)
5. NO OTHER MODIFICATIONS: Except as provided above, the terms of the
Agreement are unmodified by this Addendum.
6. OTHER AGREEMENTS: The service fees set forth in the Agreement between the
parties constitute master pricing which shall apply to present and future
services provided to the CLIENT. The pricing included in this Addendum
shall be in addition to those fees set forth in the Agreement or any
previous document incorporated as a part of the Agreement. To the extent
that any provision or service fee contained in the Agreement or any
previous document incorporated as part of the Agreement conflicts with this
Addendum, the provisions of this Addendum shall control.
IN WITNESS WHEREOF, the parties have caused this Addendum to be duly
executed and effective as of the date and year indicated by the last signator,
unless otherwise indicated herein.
UPGRADE CORPORATION OF AMERICA JUNO ONLINE SERVICES, L.P.
D/B/A SOFTBANK SERVICES GROUP
BY: /S/ GARY M. CROSBY BY: /S/ CHARLES ARDAI
------------------------------------ -----------------------------
NAME: Gary M. Crosby NAME: Charles Ardai
TITLE: Executive Vice President and CFO TITLE: President
DATE: 1/5/99 DATE: 1/5/99
CONFIDENTIAL & PROPRIETARY
Page 2
<PAGE>
ADDENDUM NUMBER (2)
SERVICE FEE & RESPONSIBILITIES ATTACHMENT
JUNO ONLINE SERVICES, L.P.
FEES EFFECTIVE UPON COMMENCEMENT OF SERVICES
All services performed by SOFTBANK shall be
rendered in accordance with the fees defined
herein and shall be in addition to services
and fees set forth in the Master Service
Agreement or any previously incorporated
Addendum.
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES SOFTBANK FEE
<S> <C>
ORDER PROCESSING:
TELEMARKETING (NOTE: SOFTBANK DOES NOT ACCEPT PURCHASE
ORDERS, CHECK ORDERS OR TAX EXEMPT ORDERS
VIA TELEPHONE.)
(1)(10) Inbound service - (24 hours a day, 7 days a week, 365 days a ACROSS ALL CAMPAIGNS
year) Includes order entry, customer inquiries and call Billable Talk
back, add new records, database edits, marketing/demographic MINUTES PER MONTH FEE PER MINUTE
surveys, if applicable [****] - [****] $[****]
[****] - [****] $[****]
[****] - [****] $[****]
[****] - [****] $[****]
[****] - [****] $[****]
[****]+ $[****]
+ phone charges (See TELECOMMUNICATIONS)
(50,60,70) Outbound service - 8:30 am - 8:00 pm (ET), $[****] per agent hour
Monday through Friday except for these holidays: + phone charges (See TELECOMMUNICATIONS)
New Years Day Labor Day
Memorial Day Thanksgiving
4th of July Christmas
Includes order entry, customer inquiries and call backs,
add new records, database edits, marketing/demographic
surveys, if applicable
(25950) Minimum Monthly Volume Commitment Forecasted billable unit of measure per month
shall be billed at the corresponding fee set
forth in this Agreement and CLIENT's payment of
fees shall be equal to eighty percent (80%) of
the forecast.
</TABLE>
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES CLIENT RESPONSIBILITIES
<S> <C>
<S>
ORDER PROCESSING:
TELEMARKETING
(1)(10) Inbound service - (24 hours a day, 7 days a week, 365 days a Produce, mail and/or insert direct marketing promotions
year) Includes order entry, customer inquiries and call (mails pieces or ads) for product(s) or service(s) to its
back, add new records, database edits, marketing/demographic registered or prospective user base. Such promotions should
surveys, if applicable include: Assigned toll free number(s), fax number(s),
mailing address, previously defined product
or service pricing, customer shipping &
handling charges and sales tax instructions.
CLIENT will submit promotions to
SOFTBANK for review before final
printing or publication. CLIENT
will also provide samples of final
pieces for reference by SOFTBANK Associates
(50,60,70) Outbound service - 8:30 am - 8:00 pm (ET), working on CLIENT's behalf.
Monday through Friday except for these holidays:
New Years Day Labor Day
Memorial Day Thanksgiving
4th of July Christmas
Includes order entry, customer inquiries and call backs,
add new records, database edits, marketing/demographic
surveys, if applicable
(25950) Minimum Monthly Volume Commitment In the event CLIENT's actual volume does not meet the minimum
forecasted volume commitments, CLIENT is responsible for
payment of fees as set forth under the "SOFTBANK Fee"
column. CLIENT shall make monthly payments based on the
foregoing commitments and said payments shall be reflected in
CLIENT's invoice. CLIENT must provide SOFTBANK with a ninety
(90) day rolling forecast to be submitted to SOFTBANK on the
CLIENT
</TABLE>
[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
CONFIDENTIAL & PROPRIETARY
Page 3
<PAGE>
ADDENDUM NUMBER (2)
SERVICE FEE & RESPONSIBILITIES ATTACHMENT
JUNO ONLINE SERVICES, L.P.
FEES EFFECTIVE UPON COMMENCEMENT OF SERVICES
All services performed by SOFTBANK shall be
rendered in accordance with the fees defined
herein and shall be in addition to services
and fees set forth in the Master Service
Agreement or any previously incorporated
Addendum.
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES SOFTBANK FEE
<S> <C>
(20220) Tracers $[****] per tracer
MAIL/FAX/INTERNET/EMAIL RESPONSE PROCESSING
(20100) Exception processing mail/fax responses $[****] per mail/fax/manual response - one letter
(NO DISK SIZE, NO PAYMENT TYPE, MISSING
PROOF OF PURCHASE, CREDIT CARD REJECTS, ETC.)
FULFILLMENT:
(2700) All shipped product $[****] per shipment (first unit only)
$[****] per additional unit on a shipment
Fulfillment Surcharges:
(19350) International shipments (INCLUDES CANADA) $[****] per shipment
(11000- Packaging fee
11022) Shippable $[****] per shipment
Packable $[****] per shipment
(8000) Freight/Postage:
Airborne program $[****] up to 4 lbs., $[****] for 5 lbs.++
Airborne over five pounds (5 lbs.) Carrier rates
+ all other carriers Cost
Postage
(19371= Back order notification and management $[****] per notice + postage
card)
(19380) Special warehouse work at CLIENT's request $[****] per hour per person
(19412, Receiving/Storage:
19410) Receiving charge $[****] per pallet
Monthly storage - pallet location $[****] per pallet
(20075) Product Return Handling $[****] per unit
</TABLE>
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES CLIENT RESPONSIBILITIES
<S> <C>
FORECAST FORM, attached hereto. In the event
SOFTBANK does not receive said forecast,
it shall be entitled to rely upon the
previous forecast for minimum monthly
volume commitment purposes.
(20220) Tracers
MAIL/FAX/INTERNET/EMAIL RESPONSE PROCESSING
(20100) Exception processing mail/fax responses
(NO DISK SIZE, NO PAYMENT TYPE, MISSING
PROOF OF PURCHASE, CREDIT CARD REJECTS, ETC.)
FULFILLMENT:
(2700) All shipped product Provide sufficient product and/or literature to meet customer
demand. Provide a consignment invoice for each shipment of
product to SOFTBANK.
Fulfillment Surcharges:
(19350) International shipments (INCLUDES CANADA)
(11000- Packaging fee Provide shipping or mailing container (unless CLIENT requests
11022) Shippable SOFTBANK to order on CLIENT's behalf).
Packable
</TABLE>
[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
CONFIDENTIAL & PROPRIETARY
Page 4
<PAGE>
ADDENDUM NUMBER (2)
SERVICE FEE & RESPONSIBILITIES ATTACHMENT
JUNO ONLINE SERVICES, L.P.
FEES EFFECTIVE UPON COMMENCEMENT OF SERVICES
All services performed by SOFTBANK shall be
rendered in accordance with the fees defined
herein and shall be in addition to services
and fees set forth in the Master Service
Agreement or any previously incorporated
Addendum.
<TABLE>
<CAPTION>
SERVICE/SOFTBANK RESPONSIBILITIES SOFTBANK FEE
<S> <C>
TELECOMMUNICATIONS:
Phone charges: (applies to all services provided)
(9001) Toll Free inbound - SOFTBANK lines
U.S. calls $[****] per minute (includes line/access fees &
taxes)
Canadian calls $[****] per minute (includes line/access fees
& taxes)
(9311) Telecom Access Charges
For cross corporation routing enabling traffic $[****] per minute (includes access fees & taxes)
from Worldcom to be routed to CustomerONE MCI T-1s.
(n/a) Toll inbound CUSTOMER pays toll charges
(9210) Toll outbound calls and call backs Carrier rates (includes toll charges & taxes)
</TABLE>
[****] Confidential treatment has been requested for this portion pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
CONFIDENTIAL & PROPRIETARY
Page 5
<PAGE>
CLIENT FORECAST FORM
*IMPORTANT INFORMATION: In the event the actual volume does not meet the
forecasted volume commitments you are providing below, you will be responsible
for payment of minimum monthly fees as set forth in the agreement between you
and SOFTBANK. You shall make payments based on the agreed upon commitments and
said charges for said commitments shall be reflected in your monthly invoice.
You must provide SOFTBANK with a ninety (90) day rolling forecast to be
submitted to SOFTBANK on this CLIENT Forecast Form. In the event SOFTBANK does
not receive an ongoing forecast, it shall be entitled to rely upon the previous
forecast for minimum monthly volume commitment purposes and charges.
Client ID Number: Client Name: Juno Online Services
------------ --------------------------------
Campaign Number: Start Date:
------------ --------------------------------
/ / Initial Forecast (Minimum ninety (90) days)
/ / Ongoing Forecast (thirty (30) day minimum forecasted time period, to be
provided at least thirty (30) days prior to the start of the billing
period covered by the forecast)
/ / Revised Forecast (thirty (30) day minimum forecasted time period, to be
provided at least fifteen (15) days prior to the start of the billing
period covered by the forecast)
<TABLE>
<CAPTION>
90 DAY FORECAST
1st Period 2nd Period 3rd Period
(PERIOD MUST BE EQUIVALENT TO A BILLING/REPORTING
PERIOD.)
FORECAST PERIOD DATE
<S> <C>
INBOUND Talk Minutes
ACW Minutes
OUTBOUND Agent Hours
MFRP Mail Orders
Fax Orders
ETS Cases
</TABLE>
The foregoing is the undersigned's forecast of volume under the services
agreement between CLIENT and SOFTBANK Services Group.
UPGRADE CORPORATION OF AMERICA
D/B/A SOFTBANK SERVICES GROUP Juno Online Services, L.P.
---------------------------------
CLIENT NAME
- ----------------------------------- ---------------------------------
SIGNATURE SIGNATURE
- ----------------------------------- ---------------------------------
SIGNATOR'S PRINTED NAME SIGNATOR'S PRINTED NAME
- ----------------------------------- ---------------------------------
SIGNATOR'S TITLE SIGNATOR'S TITLE
- ----------------------------------- ---------------------------------
DATE DATE
<PAGE>
Exhibit 10.9
INDIA SERVICES AGREEMENT
THIS AGREEMENT (this "Agreement") is made effective as of November 1,
1997 between Juno Online Services, L.P., a Delaware limited partnership
("Juno"), and D. E. Shaw & Co., L.P., a Delaware limited partnership ("DESCO,
L.P.").
W I T N E S S E T H:
WHEREAS, Juno desires to receive certain consulting services from
DESCO, L.P., through its wholly-owned subsidiary D.E. Shaw India Software
Private Ltd. ("DESIS") or its other India-based affiliates, and DESCO, L.P. has
agreed to provide (or cause to be provided) such services to Juno, on the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the consulting arrangement
described herein and for other good and valuable consideration, the receipt and
sufficiency of which are expressly acknowledged hereby, it is agreed as follows:
1. SERVICES.
(a) Pursuant to the terms of this Agreement, DESCO, L.P. shall provide,
or shall cause to be provided, for the benefit of Juno, the services described
in Schedule A hereto (the "Services"), which schedule may be amended from time
to time as provided in Section 12. DESCO, L.P. shall perform the Services in
good faith in a commercially reasonable manner and in accordance with applicable
law and the express terms of this Agreement. Specifically, DESCO, L.P. shall
provide the Services with that degree of skill, attention and care that DESCO,
L.P. exercises with respect to furnishing comparable services to itself. DESCO,
L.P. shall be an independent contractor as to Juno in performing Services
hereunder and shall have exclusive authority to control and direct the
performance of any and all Services performed by DESCO, L.P. for Juno.
(b) Juno shall provide all data and information required by DESCO, L.P.
in connection with the performance of the Services at the time and in the manner
which DESCO, L.P. reasonably requests.
2. COMPENSATION.
(a) Juno agrees to pay to DESCO, L.P. the fees, if any, for each of the
Services as set forth on Schedule A hereto. Except as specifically provided in
Schedule A hereto, Juno shall not be required to reimburse DESCO, L.P. for costs
and expenses incurred in connection with the performance of the Services. DESCO,
L.P. agrees to invoice Juno on a monthly basis for such costs and expenses, and
Juno agrees to pay all such charges within 30 days of receipt of invoice.
(b) In the event that either Juno or DESCO, L.P. requests a material
change in the amount or the type of Services to be provided hereunder, the
parties agree that they shall negotiate in good faith to modify the Agreement
(including Schedule A hereto) to adjust the fees hereunder accordingly.
<PAGE>
3. TERM AND TERMINATION.
(a) This Agreement shall continue in effect for the period commencing
on the effective date of this Agreement and extend on a month to month basis
until terminated by either party, as provided in this Section.
(b) This Agreement may be terminated by Juno (i) at any time upon
written notice to DESCO, L.P. upon a material default in DESCO, L.P.'s
performance of the Services, which has not been cured within thirty (30) days
after written notice thereof has been given to DESCO, L.P. by Juno or (ii) at
Juno's convenience at any time upon thirty (30) days written notice to DESCO,
L.P.
(c) This Agreement may be terminated by DESCO, L.P. (i) at any time
upon written notice to Juno upon a material default in Juno's performance of its
obligations under this Agreement (including, without limitation, if Juno fails
to pay any amounts that may be due for the Services) and such default has not
been cured within thirty (30) days after written notice thereof has been given
to Juno by DESCO, L.P. or (ii) at DESCO, L.P.'s convenience at any time upon
ninety (90) days written notice to Juno.
4. LIMITATION OF LIABILITY; DAMAGES.
DESCO, L.P. shall not be liable for failure to perform an obligation
under this Agreement where such failure is due to fire, flood, labor dispute,
natural calamity, or acts of the government or for any other reason if resulting
from conditions beyond the reasonable control of DESCO, L.P. If DESCO, L.P. is
liable for any failure to perform under this Agreement, DESCO, L.P.'s liability
to Juno is limited to correction of errors and the reimbursement to Juno of any
monies paid by Juno to third parties, which are paid as a result of the error
caused by DESCO, L.P. DESCO, L.P. shall not be liable for any special,
incidental, indirect, or consequential damages, damages from loss of use, data,
or profits, or cost or procurement of substitute goods or services, arising out
of or in connection with this Agreement or the Services provided hereunder.
5. CONFIDENTIALITY.
(a) Each of the parties hereto shall hold, and shall cause its
respective officers, directors, employees, agents, consultants and other
representatives to hold confidential all documents and confidential or
proprietary information or data furnished to it by the other party or such other
party's officers, directors, employees, agents, consultants or representatives
in connection with this Agreement or the Services contemplated hereunder, except
where such information (i) was available to recipient on a non-confidential
basis prior to disclosure to recipient hereunder; (ii) is made available to
recipient on a non-confidential basis from a third party; (iii) is made
available on a non-confidential basis to third parties by disclosure; (iv)
enters the public domain on or after the date of this Agreement; (v) is
disclosed to recipient on or after the Termination Date; (vi) is developed
independently by recipient; (vii) is disclosed by mutual
-2-
<PAGE>
agreement of the parties hereto; or (viii) is requested or required pursuant to
law or regulation, government authority, duly authorized subpoena or court
order.
(b) It is understood that the parties hereto may have performed, and
may continue to perform, independent development relating to the confidential or
proprietary information received hereunder. The parties hereto agree that
neither this Agreement nor the receipt of any confidential or proprietary
information shall limit either party's such independent development nor will
this Agreement or the receipt of confidential information prevent either party
from undertaking similar efforts or discussions with third parties.
(c) All the obligations of the parties hereto pursuant to this Section
5 shall survive the termination of this Agreement.
6. OWNERSHIP OF INTELLECTUAL PROPERTY.
All right, title, and interest in and to any intellectual property,
including without limitation any ideas, inventions (whether or not patentable),
designs, improvements, discoveries, innovations, patents, trademarks, service
marks, trade dress, trade names, trade secrets, works of authorship, copyrights,
films, audio and video tapes, other audio and visual works of any kind, scripts,
sketches, models, formulas, tests, analyses, software, firmware, computer
processes, computer and other applications, creations, properties, and any
documentation or other memorialization containing or relating to the foregoing,
in each case discovered, invented, created, written, developed, taped, filmed,
furnished, or produced by DESCO, L.P. (or by DESIS or other India-based
affiliates of DESCO, L.P.) in the course of rendering services to Juno under
this Agreement shall be and remain the sole and exclusive property of Juno.
DESCO, L.P. makes, and agrees to make and execute, any assignment or agreement
necessary to perfect Juno's right, title, and interest to such intellectual
property, and agrees to perform any act reasonably requested by Juno in
furtherance thereof.
7. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of both
DESCO, L.P. and Juno and their respective successors and assigns; provided,
however, that neither party may assign this Agreement or any right hereunder in
whole or in part without the prior written consent of the other party.
8. NOTICES.
Any notice, request, instruction or other communication at any time
hereunder required or permitted to be given or furnished by either party hereto
to the other shall be deemed sufficiently given or furnished if in writing and
actually delivered to the party to be notified at the following addresses:
-3-
<PAGE>
(a) for Juno:
Juno Online Services, L.P.
120 West 45th Street
15th Floor
New York, NY 10036-4041
Attn: Charles Ardai, President
(b) for DESCO, L.P.:
D. E. Shaw & Co., L.P.
120 West 45th Street
New York, NY 10036
Attn: Suzanne Mannell, SVP & Corporate Controller
In each case, with a copy to its general counsel at the address set
forth above.
9. NO RECOURSE.
Each party agrees that the obligations of the other party arising under
(or relating to) this Agreement shall be without recourse to any partner of the
other party, any controlling person thereof and any successor to any such
partner or person, and no such partner, controlling person or successor shall
have any liability in such capacity for the obligations of the other party. For
the avoidance of doubt, each such partner, controlling person and successor is a
third party beneficiary of this Agreement.
10. GOVERNING LAW.
This Agreement and its enforcement shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to
conflicts-of-law principles.
11. SEVERABILITY.
If any provision of this Agreement is held invalid, illegal or
unenforceable by a court of competent jurisdiction, that provision shall not
affect any other provision of this Agreement, which shall remain in full force
and effect.
-4-
<PAGE>
12. AMENDMENT.
No term or provision of, this Agreement (including the Schedules
attached hereto) may be modified, waived, or amended except by an agreement in
writing, executed by each of the parties hereto.
13. ENTIRE AGREEMENT.
This Agreement constitutes the entire understanding between the parties
hereto, and supersedes any prior understandings or written or oral agreements
between them respecting the subject matter of this Agreement.
14. WAIVERS
A failure or delay in exercising any right in respect of this Agreement
will not be presumed to operate as a waiver, and a single or partial exercise of
any right will not be presumed to preclude any subsequent or further exercise of
that right or the exercise of any other right. Any modification or waiver of any
provision of this Agreement shall not be effective unless made in writing. Any
such waiver shall be effective only in the specific instance and for the purpose
given.
15. HEADINGS.
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. COUNTERPARTS.
This Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Juno and DESCO, L.P. have duly executed this
Agreement effective as of the day and year first above written.
D. E. Shaw & Co., L.P.
By: /s/ Stuart Steckler
-------------------
Name: Stuart Steckler
Title: Managing Director
-5-
<PAGE>
Juno Online Services, L.P.
By: /s/Charles Ardai
----------------
Name: Charles Ardai
Title: President
-6-
<PAGE>
SCHEDULE A TO INDIA SERVICES AGREEMENT
SERVICES TO BE PROVIDED:
DESCO, L.P. will provide the following services (the "Services") to Juno:
A. Technical consulting services, including, without limitation,
design, programming and testing of hardware and software
B. Non-technical consulting services, including, without limitation,
advertising production services, technical and customer support,
statistical data analysis and reporting, documentation of
technical services and various administrative functions
C. Such additional consulting services as may be agreed upon from
time to time by Juno and DESCO, L.P.
STAFFING:
DESCO, L.P. shall, in consultation with Juno, determine the staffing it requires
in order to perform the Services. DESCO, L.P. shall categorize its staff as
being "Technical Consultants" and "Non-technical Consultants" for purposes of
this Agreement. Personnel who perform the services described in Subsection A.
above under the caption "Services to be Provided" shall be considered Technical
Consultants. All personnel who are not Technical Consultants are to be
considered Non-technical Consultants. Juno shall reserve the right to review the
categorization of consultants by DESCO, L.P.
COMPENSATION:
For each Technical Consultant providing Services to Juno in accordance with this
Agreement, Juno shall compensate DESCO, L.P. at the rate of $3,650 per month (or
fraction thereof), it being understood that any amounts shall be prorated to the
extent that any such Technical Consultant spends less than 100% of his time
performing Services for Juno.
For each Non-technical Consultant providing Services to Juno in accordance with
this Agreement, Juno shall compensate DESCO, L.P. at the rate of $2,300 per
month (or fraction thereof), it being understood that any amounts shall be
prorated to the extent that any such Non-technical Consultant spends less than
100% of his time performing Services for Juno.
<PAGE>
SCHEDULE A TO INDIA SERVICES AGREEMENT
EXPENSES:
All costs and expenses associated with providing the services (including without
limitation overhead and infrastructure expenses, personnel expenses and normal
and recurring operating expenses) shall be for the account of DESCO, L.P. Juno
shall reimburse DESCO, L.P. (or, at its option, shall make remittances directly
to the applicable vendor) for the following costs and expenses not specifically
addressed in "Compensation" above:
- International travel or domestic travel within India in excess of
100 miles, if the travel has been requested or approved by Juno
(requires an itemized listing including receipts)
- The U.S. portion of the satellite link connecting DESIS to Juno
- Any other cost or expense that the parties, each acting in its
sole discretion, agree should properly be for Juno's account, it
being understood that no such request shall be considered by Juno
unless DESIS submits and Juno approves a Standard Juno Purchase
Order prior to the incurrence of such cost or expense.
<PAGE>
Exhibit 10.10
SERVICES AGREEMENT
THIS AGREEMENT (this "Agreement") is made effective as of January 1,
1998 between Juno Online Services, L.P., a Delaware limited partnership
("Juno"), and D. E. Shaw & Co., L.P., a Delaware limited partnership ("DESCO,
L.P.").
W I T N E S S E T H:
WHEREAS, Juno desires to receive certain administrative and other
services from DESCO, L.P. and DESCO, L.P. has agreed to provide such services to
Juno, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the service arrangement described
herein and for other good and valuable consideration, the receipt and
sufficiency of which are expressly acknowledged hereby, it is agreed as follows:
1. SERVICES.
(a) Pursuant to the terms of this Agreement, DESCO, L.P. shall provide,
or shall cause to be provided, for the benefit of Juno, the services described
in Schedule A hereto (the "Services"), which schedule may be amended from time
to time as provided in Section 12. The Services specifically exclude all items
mentioned in Section 1(c) below. DESCO, L.P. shall perform the Services in good
faith in a commercially reasonable manner and in accordance with applicable law
and the express terms of this Agreement. Specifically, DESCO, L.P. shall provide
the Services with that degree of skill, attention and care that DESCO, L.P.
exercises with respect to furnishing comparable services to itself. DESCO, L.P.
shall be an independent contractor as to Juno in performing Services hereunder
and shall have exclusive authority to control and direct the performance of any
and all Services performed by DESCO, L.P. for Juno.
(b) Juno shall provide all data and information required by DESCO, L.P.
in connection with the performance of the Services at the time and in the manner
which DESCO, L.P. reasonably requests.
(c) Pursuant to a separate agreement, DESCO, L.P. provides certain
consulting services to Juno through its India-based affiliates. Such services
are not included in the Services covered by this Agreement.
2. COMPENSATION.
(a) Juno agrees to pay to DESCO, L.P. the fees, if any, for each of the
Services as set forth on Schedule A hereto. Except as specifically provided in
Schedule A hereto, Juno shall not be required to reimburse DESCO, L.P. for costs
and expenses incurred in connection with the performance of the Services. DESCO,
L.P. agrees to invoice Juno on a monthly basis for such costs and expenses, and
Juno agrees to pay all such charges within 30 days of receipt of invoice.
(b) In the event that either Juno or DESCO, L.P. requests a material
change in the amount or the type of Services to be provided hereunder, the
parties agree that they shall
<PAGE>
negotiate in good faith to modify the Agreement (including Schedule A hereto)
to adjust the fees hereunder accordingly.
3. TERM AND TERMINATION.
(a) This Agreement shall continue in effect for the period commencing
on the effective date of this Agreement and extend on a month to month basis
until terminated by either party, as provided in this Section.
(b) This Agreement may be terminated by Juno (i) at any time upon
written notice to DESCO, L.P. upon a material default in DESCO, L.P.'s
performance of the Services, which has not been cured within thirty (30) days
after written notice thereof has been given to DESCO, L.P. by Juno or (ii) at
Juno's convenience at any time upon ninety (90) days written notice to DESCO,
L.P.
(c) This Agreement may be terminated by DESCO, L.P. (i) at any time
upon written notice to Juno upon a material default in Juno's performance of its
obligations under this Agreement (including, without limitation, if Juno fails
to pay any amounts that may be due for the Services) and such default has not
been cured within thirty (30) days after written notice thereof has been given
to Juno by DESCO, L.P. or (ii) at DESCO, L.P.'s convenience at any time upon
ninety (90) days written notice to Juno.
4. LIMITATION OF LIABILITY; DAMAGES.
DESCO, L.P. shall not be liable for failure to perform an obligation
under this Agreement where such failure is due to fire, flood, labor dispute,
natural calamity, or acts of the government or for any other reason if resulting
from conditions beyond the reasonable control of DESCO, L.P. If DESCO, L.P. is
liable for any failure to perform under this Agreement, DESCO, L.P.'s liability
to Juno is limited to correction of errors and the reimbursement to Juno of any
monies paid by Juno to third parties, which are paid as a result of the error
caused by DESCO, L.P. DESCO, L.P. shall not be liable for any special,
incidental, indirect, or consequential damages, damages from loss of use, data,
or profits, or cost or procurement of substitute goods or services, arising out
of or in connection with this Agreement or the Services provided hereunder.
5. CONFIDENTIALITY.
(a) Each of the parties hereto shall hold, and shall cause its
respective officers, directors, employees, agents, consultants and other
representatives to hold confidential all documents and confidential or
proprietary information or data furnished to it by the other party or such other
party's officers, directors, employees, agents, consultants or representatives
in connection with this Agreement or the Services contemplated hereunder, except
where such information (i) was available to recipient on a non-confidential
basis prior to disclosure to recipient hereunder; (ii) is made available to
recipient on a non-confidential basis from a third party; (iii) is made
available on a non-confidential basis to third parties by disclosure; (iv)
enters the public domain on or after the date of this Agreement; (v) is
disclosed to recipient on or after
-2-
<PAGE>
the Termination Date; (vi) is developed independently by recipient; (vii) is
disclosed by mutual agreement of the parties hereto; or (viii) is requested or
required pursuant to law or regulation, government authority, duly authorized
subpoena or court order.
(b) It is understood that the parties hereto may have performed, and
may continue to perform, independent development relating to the confidential or
proprietary information received hereunder. The parties hereto agree that
neither this Agreement nor the receipt of any confidential or proprietary
information shall limit either party's such independent development nor will
this Agreement or the receipt of confidential information prevent either party
from undertaking similar efforts or discussions with third parties.
(c) All the obligations of the parties hereto pursuant to this Section
5 shall survive the termination of this Agreement.
6. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of both
DESCO, L.P. and Juno and their respective successors and assigns; provided,
however, that neither party may assign this Agreement or any right hereunder in
whole or in part without the prior written consent of the other party.
7. NOTICES.
Any notice, request, instruction or other communication at any time
hereunder required or permitted to be given or furnished by either party hereto
to the other shall be deemed sufficiently given or furnished if in writing and
actually delivered to the party to be notified at the following addresses:
(a) for Juno:
Juno Online Services, L.P.
120 West 45th Street
15th Floor
New York, NY 10036-4041
Attn: Charles Ardai, President
(b) for DESCO, L.P.:
D. E. Shaw & Co., L.P.
120 West 45th Street
New York, NY 10036
Attn: Suzanne Mannell, SVP & Corporate Controller
-3-
<PAGE>
In each case, with a copy to its general counsel at the address set
forth above.
8. NO RECOURSE.
Each party agrees that the obligations of the other party arising under
(or relating to) this Agreement shall be without recourse to any partner of the
other party, any controlling person thereof and any successor to any such
partner or person, and no such partner, controlling person or successor shall
have any liability in such capacity for the obligations of the other party. For
the avoidance of doubt, each such partner, controlling person and successor is a
third party beneficiary of this Agreement.
9. GOVERNING LAW.
This Agreement and its enforcement shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to
conflicts-of-law principles.
10. SEVERABILITY.
If any provision of this Agreement is held invalid, illegal or
unenforceable by a court of competent jurisdiction, that provision shall not
affect any other provision of this Agreement, which shall remain in full force
and effect.
11. AMENDMENT.
No term or provision of, this Agreement (including the Schedules
attached hereto) may be modified, waived, or amended except by an agreement in
writing, executed by each of the parties hereto.
12. ENTIRE AGREEMENT.
This Agreement constitutes the entire understanding between the parties
hereto, and supersedes any prior understandings or written or oral agreements
between them respecting the subject matter of this Agreement.
13. WAIVERS
A failure or delay in exercising any right in respect of this Agreement
will not be presumed to operate as a waiver, and a single or partial exercise of
any right will not be presumed to preclude any subsequent or further exercise of
that right or the exercise of any other right. Any modification or waiver of any
provision of this Agreement shall not be effective unless made in writing. Any
such waiver shall be effective only in the specific instance and for the purpose
given.
-4-
<PAGE>
14. HEADINGS.
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
15. COUNTERPARTS.
This Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Juno and DESCO, L.P. have duly executed this
Agreement effective as of the day and year first above written.
D. E. Shaw & Co., L.P.
By: /s/Stuart Steckler
------------------
Name: Stuart Steckler
Title: Managing Director
Juno Online Services, L.P.
By: /s/Charles Ardai
----------------
Name: Charles Ardai
Title: President
-5-
<PAGE>
SCHEDULE A
ADMINISTRATIVE SERVICES AND FEES
<TABLE>
<CAPTION>
MONTHLY MONTHLY FEES
CATEGORY OF FEES: FOR POST NON-EXCLUSIVE DESCRIPTION OF TYPES
SERVICE 1/1/98-4/16/98 4/16/98 OF SERVICES INCLUDED
----------- -------------- --------- -----------------------------------
<S> <C> <C> <C>
COMMUNICATIONS: $ 30,000 $ 5,000 Represents various voice and data costs for Juno
employees including maintenance of equipment and
software.
PERSONNEL-RELATED: 17,000 14,600 Represents 401k fees and workers compensation
insurance for all Juno employees. Also includes
miscellaneous shared personnel costs for human
resources and strategic growth.
Occupancy: 57,000 0 Represents rent for Juno employees working in DESCO,
L.P. facilities through 4/16/98. Rent includes
charges for utilities, real estate taxes,
escalations, common area charges, etc.
ADMINISTRATION: 32,500 21,000 Represents various shared miscellaneous overhead
charges for Juno employees , including property,
casualty and general insurance and managing director
fees.
FINOP: 12,000 15,000 Represents miscellaneous services performed by DESCO,
L.P. employees for general accounting, legal, tax,
purchasing and payroll services.
I/T: 4,000 6,000 Represents miscellaneous services performed by DESCO,
L.P. employees for Information Technology.
TOTAL MONTHLY FEE $152,500 $61,600
</TABLE>
<PAGE>
Exhibit 10.11
News America Incorporated
1211 Avenue of the Americas
New York, New York 10036
March 1, 1999
Juno Online Services, Inc.
1540 Broadway
27th Floor
New York, New York 10036
Re: PREPAYMENT OF ADVERTISING SERVICES
Ladies and Gentlemen:
This letter shall serve to set forth the terms of the agreement between
Juno Online Services, Inc., a Delaware corporation (the "Company"), and News
America Incorporated, a Delaware corporation ("NAI"), relating to the prepayment
by the Company to NAI of $10.0 million (the "Prepayment") for Advertising
Services (as defined below).
In consideration and upon receipt of the Prepayment which the Company
shall make to NAI by wire transfer or bank check on the date hereof, which
payment obligation is evidenced by a note dated March 1, 1999, NAI shall
provide, to the Company, at no additional charge, such advertising inventory on
their respective media properties and other services ("Advertising Services") as
the Company requests, which Advertising Services shall be (i) equivalent in
value to the Prepayment, and (ii) utilized by the Company on or before the date
two (2) years after the date hereof. Any Advertising Services provided to the
Company by NAI or its Affiliates shall be (i) determined jointly and in good
faith by the Company and NAI and (ii) valued at then-current rates (less any
customary advertising agency commissions, where possible, to the extent that no
such commissions are due to any agency engaged by the Company), and no greater
than those customarily applied by NAI or its Affiliates to buyers of similar
amounts of comparable advertising services (taking into account customary
discounts from published rates, if any). NAI shall assist the Company in
structuring an integrated marketing program across all advertising inventory
made available by NAI and its Affiliates pursuant hereto, which marketing
program shall be determined jointly and in good faith by NAI and the Company in
writing.
<PAGE>
Please indicate your acceptance of the foregoing by signing below.
Very truly yours,
NEWS AMERICA INCORPORATED
By: /s/Janet Nova
---------------------
Name: Janet Nova
Title: Vice President
Agreed:
JUNO ONLINE SERVICES, INC.
By: /s/Charles Ardai
---------------------
Name: Charles Ardai
Title: President
2
<PAGE>
Exhibit 10.12
EMPLOYMENT AGREEMENT
AGREEMENT dated as of this 2nd day of September, 1998, by and
between Juno Online Services, Inc., a Delaware corporation, and Charles Ardai
(the "Employee").
For purposes of this Agreement, the term "D. E. Shaw Group" shall
include, individually and/or collectively, (a) Juno Online Services, Inc. and
Juno Online Services, L.P. (the sole shareholder of Juno Online Services, Inc.);
(b) D. E. Shaw & Co., L.P. and D. E. Shaw & Co., Inc. (D. E. Shaw & Co., L.P.'s
general partner); (c) any partnership, other entity or account that D. E. Shaw &
Co., L.P. or D. E. Shaw & Co., Inc. owns, in whole or in part, or for which they
act, directly or indirectly, as general partner, investment manager, or
management company, along with their respective subsidiaries; (d) any other
affiliate of D. E. Shaw & Co., L.P. or of D. E. Shaw & Co., Inc. for which the
Employee provides services in his capacity as an employee of Juno Online
Services, Inc.; and (e) any predecessor or successor entity to (i) Juno Online
Services, Inc. or (ii) any partnership, entity, or account described in (c) and
(d) above. The term "Company" shall include Juno Online Services, Inc., Juno
Online Services, L.P. and, as applicable, any predecessor or successor companies
in the D. E. Shaw Group that have served, serve, or may in the future serve as
the employer of the Employee. The term "Management Company" means D. E. Shaw &
Co., Inc. and its successor. References in this Agreement to any entity also
refer to any successor to that entity. The term "Capital" means (A) equity
financing, and/or (B) certain debt financing (other than bank financing, than
equipment leasing and than ordinary trade payables incurred in connection with
the purchase of goods or services by Juno Online Services, L.P. or its
subsidiaries), as identified by the Management Company in its sole discretion.
WHEREAS, the Company desires to retain (or to continue to retain) the
Employee on the terms and conditions hereinafter set forth, and the Employee is
willing to undertake (or to continue) employment by the Company upon such terms
and conditions;
NOW, THEREFORE, in consideration of the foregoing and in consideration
of their mutual promises and agreements contained herein, the parties hereto
agree as follows:
1. EMPLOYMENT
Employment shall commence (or has commenced) on January 13, 1992, and
may be terminated by either party at any time, for any reason, upon 30 days
notice (the "Notice Period"), which notice may be given either verbally or in
writing. Notwithstanding the foregoing, the Company may elect to terminate
immediately upon notice, except that in this event, the compensation and
benefits set forth in Section 2 shall be continued for the duration of the
Notice Period. The Employee acknowledges and agrees that he is an employee at
will, and that just as the Employee is free to resign at any time, the Company
has the right to terminate the employment relationship at any time for any
lawful reason. The Employee acknowledges and agrees that no representative of
the Company may verbally change the at will employment relationship between the
Employee and the Company. References to time periods in this Agreement shall not
be construed or interpreted as promising or guaranteeing employment for any
specific duration or until any specific date.
2. COMPENSATION
(a) BASE SALARY DURING THE COMPENSATION PERIOD. As compensation for the
Employee's services during the period beginning January 1, 1998 and ending on
December 31, 1998 (the "Compensation Period"), the Company shall pay the
Employee a base salary computed at an annual rate of $300,000 per year, prorated
to correspond to that portion of the Compensation Period during which the
Employee is actually employed with the Company, such base salary to be paid
semi-monthly.
(b) BASE SALARY AFTER THE COMPENSATION PERIOD. As of the end of the
Compensation Period, or as of the end of any subsequent calendar year, the
Employee's base salary may be increased or decreased, or the manner in which the
<PAGE>
Employee is compensated may be changed, in the sole discretion of the Chairman
of Juno Online Services, Inc., expressed in writing by the Chairman of Juno
Online Services, Inc.. Any such change in compensation shall be deemed to modify
only this Section 2 of this Agreement, and all other provisions of this
Agreement shall remain in effect following such change in compensation. In the
absence of any such change, the Employee's base salary shall remain the same as
it was during the Compensation Period.
(c) DISCRETIONARY YEAR-END BONUS. At the end of each calendar year that
includes one or more days falling within the Compensation Period, the Company
may (or may not, in the sole discretion of the Chairman of Juno Online Services,
Inc.) pay the Employee a year-end bonus. The award and amount of any such bonus
shall be determined in the sole discretion of the Chairman on Juno Online
Services, Inc., which date shall ordinarily be no later than March 15th of the
following calendar year, or as soon thereafter as is practicable.
(d) YEAR-END BONUS AFTER THE COMPENSATION PERIOD. As of the end of the
Compensation Period, or as of the end of any subsequent calendar year, the
Employee's year-end bonus, if any, and/or the non refundable advance against
such year-end bonus, if any, may be increased, decreased, or eliminated, or the
manner in which the Employee is compensated may be changed, in the sole
discretion of the Chairman of Juno Online Services, Inc., expressed in writing
by the Chairman of Juno Online Services, Inc. Any such change in compensation
shall be deemed to modify only this Section 2 of this Agreement, and all other
provisions of this Agreement shall remain in effect following such change in
compensation. Subsequent to the Compensation Period, the Company shall not have
any obligation to continue to pay a year-end bonus to the Employee unless such
an arrangement is explicitly agreed to in writing by the Chairman of Juno Online
Services, Inc.
(e) STANDARD COMPANY BENEFITS. In addition to the compensation outlined
elsewhere in this Section 2, the Company shall provide to the Employee all of
the benefits included in the Company's standard benefit package, which currently
include medical (hospitalization and major medical), dental, disability, life,
and accidental death and dismemberment insurance. Most of the cost of such
benefits shall be borne by the Company. However, in the case of coverage for the
Employee himself, the Employee contributes a nominal pre-tax amount to the cost
of the medical insurance; if the Employee wishes to obtain coverage for other
qualified family members, and arranges with the Company's insurance providers
(through the Company's Human Resources staff) to obtain such additional
coverage, the Employee will also be required to contribute part of the
incremental cost of such coverage. Individual and dependent medical insurance
contribution amounts are determined on a set scale, based on both the actual
cost of the insurance and on the Employee's base salary. The required
contribution will be borne by the Employee by means of a voluntary salary
reduction in the amount of the contribution implemented by the Company at the
request of the Employee.
The standard benefit package also currently includes a flexible
spending account plan and a 401(k) retirement plan, available to all qualified
full-time employees after a certain period of employment with the Company. The
401(k) retirement plan currently includes a matching program and a graded
vesting schedule; the Company does not contribute to the flexible spending
account plan, but the Employee may contribute pre-tax dollars. The Employee
agrees that the composition, providers, and all other aspects of the Company's
standard benefit package may be changed from time to time in the sole discretion
of the Management Company.
(f) EXCLUSIVE COMPENSATION. The compensation and benefits described in
this Section 2 shall be the exclusive compensation due to the Employee from the
Company or any of its affiliates during or on account of the services of the
Employee. If directed by the Company, the Employee shall provide the services
described in this Agreement to one or more affiliates of the Company without
compensation other than as specified in this Section 2.
3. DISCLOSURE TO THE COMPANY
(a) DISCLOSURE OF INFORMATION TO THE COMPANY. The Employee shall
promptly disclose and deliver over to the Company, without additional
compensation, to the extent that such disclosure could reasonably be expected to
be of interest to the D. E. Shaw Group, in writing, or in such form and manner
as the Company may reasonably require:
(i) any and all algorithms, procedures, methods or techniques
directly related to electronic communication and/or commerce or to the
Employee's work with the Company, and the essential ideas and principles
<PAGE>
underlying such algorithms, procedures, methods or techniques, conceived,
originated, discovered, developed, evaluated, tested, or applied by the Employee
while employed by the Company, whether or not such algorithms, procedures,
methods or techniques are embodied in a computer program;
(ii) any and all programming, marketing, advertising, or
financing strategies, the essential ideas and principles on which such
strategies are based, and any information that might reasonably be expected to
lead to the development of such strategies, conceived, originated, discovered,
developed, evaluated, tested, or employed by the Employee while employed by the
Company, whether or not such strategies are embodied in a computer program;
(iii) any and all Internet-related and other products and
services, and the essential ideas and principles underlying such products and
services, conceived, originated, adapted, developed, evaluated, tested, or
applied by the Employee while employed by the Company, whether or not such
products or services are embodied in a computer program, and whether or not
marketed, sold, or provided by the D. E. Shaw Group;
(iv) such information and data pertaining to the business,
operations, personnel, activities, financial status and affairs, current or
anticipated business or investment objectives or practices, current or
anticipated requirements for Internet-related or other products or services, and
other information relating to current or prospective investors, other current or
prospective funding sources, limited partners, shareholders, clients, customers,
accounts, joint venturers, or other business affiliates of the D. E. Shaw Group,
and of the officers, partners, principals, employees, and other persons
affiliated with such current or prospective investors, limited partners,
shareholders, clients, customers, accounts, joint venturers, or other business
affiliates, as is known to the Employee and as might reasonably be expected to
be of value to the D. E. Shaw Group in developing, maintaining, or expanding its
current or prospective business relationships with such current or prospective
investors, limited partners, shareholders, clients, customers, accounts, joint
venturers, or other business affiliates.
(b) PERIOD COVERED; INFORMATION EXCLUDED. The provisions of this
Section 3 shall apply to information acquired by the Employee at any time during
his employment with the Company, whether prior to or subsequent to the execution
of this Agreement.
The Employee agrees not to disclose to the D. E. Shaw Group any
confidential or proprietary information belonging to any previous employer of
the Employee that is not part of the D. E. Shaw Group, or belonging to any other
party, without first securing the written permission of such previous employer
or other party.
(c) DISCLOSURE UPON TERMINATION. Any information required to be
disclosed under this Section 3 that has not yet been disclosed by the Employee
to the Company at the time of the termination of the Employee's employment with
the Company, without regard to when or for what reason, if any, such employment
shall terminate, shall be disclosed to the Company in writing, or in such form
and manner as the Company may reasonably require, within 10 days of the
termination of the Employee's employment with the Company.
4. CONFIDENTIAL INFORMATION
(a) DEFINITION. The parties acknowledge that, in order to permit the
Employee to successfully perform and/or continue to perform the duties
associated with his employment with the Company, it is necessary for the Company
to entrust the Employee with certain valuable proprietary information and
knowledge of certain modes of business operation ("Confidential Information")
which are essential to the profitable operation of the D. E. Shaw Group, and
which give the D. E. Shaw Group a competitive advantage over other firms
pursuing related business activities. In the context of this Agreement, the term
"Confidential Information" shall be deemed to include
(i) computer software or data of any sort developed (in the
case of software) or compiled (in the case of data) by the D. E. Shaw Group;
(ii) the fact that the D. E. Shaw Group uses, has used, or has
evaluated for potential use a particular computer program or system, if the
disclosure of such fact to a competitor of the D. E. Shaw Group might reasonably
be expected to adversely affect the competitive position of the D. E. Shaw Group
relative to that of such a competitor; provided, however, that information about
the type of computers, computer peripherals, operating systems, database
systems, or other systems software which the D. E. Shaw Group uses, has used, or
has evaluated for potential use, but which is not specific to any financial or
Internet related application, shall not by reason of this Section 4(a)(ii) be
considered Confidential Information;
<PAGE>
(iii) algorithms, procedures, methods, or techniques, or the
essential ideas and principles underlying such algorithms, procedures, methods,
or techniques, developed by the D. E. Shaw Group (but excluding any public
domain algorithm, procedure, or technique), whether or not such algorithms,
procedures, methods, or techniques are embodied in a computer program;
(iv) the fact that the D. E. Shaw Group uses, has used, or has
evaluated for potential use any particular algorithm, procedure, or technique
developed by a party other than the D. E. Shaw Group, whether or not such
algorithm, procedure, or technique is embodied in a computer program, if the
disclosure of such information to a competitor of the D. E. Shaw Group might
reasonably be expected to adversely affect the competitive position of the D.
E. Shaw Group relative to that of such a competitor;
(v) the results of any programming, marketing, advertising,
financial, or other analysis conducted by the D. E. Shaw Group for its own
internal use (and not approved for dissemination to its customers, investors,
consultants, joint venturers, or other parties);
(vi) any information that would typically be included in the
D. E. Shaw Group's income statements, including, but not limited to the amount
of the D. E. Shaw Group's revenues, expenses, or net income;
(vii) any plans for the business of the Company or of other
members of the D. E. Shaw Group (whether or not such plans have been reduced to
writing); financial information concerning such plans (including without
limitation projected revenues, projected expenses, projected net income and
information concerning rates and costs of customer acquisition and retention);
descriptions of such business and technical aspects of or relating to the
operation of such business (including without limitation algorithms, computer
programs, processes or formulas that relate to computer and network security,
authentication, logging, accounting and distribution); and products and services
that the D. E. Shaw Group is considering offering to its subscribers and/or to
other persons;
(viii) any other information gained in the course of the
Employee's employment with the Company that could reasonably be expected to
prove deleterious to the D. E. Shaw Group if disclosed to third parties,
including without limitation any information that could reasonably be expected
to aid a competitor of the D. E. Shaw Group in making inferences regarding the
nature of the D. E. Shaw Group's proprietary and/or World Wide Web-related
activities, where such inferences could reasonably be expected to adversely
affect the competitive position of the D. E. Shaw Group relative to that of such
a competitor;
(ix) any other information gained in the course of or incident
to the Employee's employment with the Company that the D. E. Shaw Group has
received from a third party and is required to hold confidential in connection
with an agreement between the D. E. Shaw Group and such third party;
(x) any other information gained in the course of or incident
to the Employee's employment with the Company that the Company treats or
designates as Confidential Information and which is not publicly available.
(b) USE AND DISCLOSURE.
(i) The Employee acknowledges that he has acquired and/or will
acquire Confidential Information in the course of or incident to his employment
with the Company. Accordingly, the Employee agrees that he shall not, directly
or indirectly, at any time, during the term of his employment with the Company
or at any time thereafter, and without regard to when or for what reason, if
any, such employment shall terminate, use or cause to be used any such
Confidential Information, whether acquired prior to or subsequent to the
execution of this Agreement, in connection with any activity or business except
the business of the D. E. Shaw Group, and shall not disclose such Confidential
Information to any individual, partnership, corporation, or other entity unless
such disclosure has been authorized in writing by the Management Company, or
except as may be required by any applicable law or by order of a court of
competent jurisdiction, a regulatory or self-regulatory body, or a governmental
body.
(ii) The provisions of Section 4(b)(i) notwithstanding, the
Employee shall be free to disclose any information contained in any
non-confidential brochure or other promotional material which the D. E. Shaw
Group routinely makes available to the press and/or the general public
(including, but not limited to (A) the Company's public site on the World Wide
Web (www.juno.com); (B) the official "Company Profile," of the D. E. Shaw Group;
(C) the general overview brochure describing the D. E. Shaw Group's Third Market
operation; and (D) the general overview brochure describing D. E. Shaw
Securities International), and shall be free to disclose or use any information
which is in or which enters the public domain prior to the time of such
disclosure or use (except where such information enters the public domain as a
result of unauthorized actions of the Employee). The Employee acknowledges,
however, that (A) a large number of market inefficiencies and trading
strategies, and a large number of analyses, observations, and findings from
which such market inefficiencies and trading strategies might be derived, and
(B) a large number of programming techniques and programming strategies, and a
large number of analyses, observations and findings from which such
<PAGE>
computer programming techniques and strategies might be derived, have been or
may be reported in the open literature, or may otherwise have entered or may
enter the public domain, and that one of the Company's most valuable forms of
Confidential Information is its accumulated knowledge, based on research,
analysis, and experimentation not reported in the open literature or otherwise
falling within the public domain, of which of these market inefficiencies,
trading strategies, programming techniques, and programming strategies, and
which of these analyses, observations, and findings, are likely to form the
basis for practical, profitable business applications for the D. E. Shaw Group
("Confidential Applicability Information"). The Employee thus agrees that he
shall not, directly or indirectly, at any time, during the term of his
employment with the Company, or at any time thereafter, and without regard to
when or for what reason, if any, such employment shall terminate, use or cause
to be used any Confidential Applicability Information in connection with any
activity or business except the business of the D. E. Shaw Group, and shall not
disclose such Confidential Applicability Information to any individual,
partnership, corporation, or other entity, unless what would otherwise be deemed
to constitute Confidential Applicability Information is itself in or itself
enters the public domain by some means other than as a result of unauthorized
actions of the Employee, or unless such disclosure has been authorized in
writing by the Management Company, or except as may be required by any
applicable law or by order of a court of competent jurisdiction, a regulatory or
self-regulatory body, or a governmental body.
(iii) In the event that the Employee is required to disclose
Confidential Information or Confidential Applicability Information pursuant to
judicial or administrative process or other requirements of law, the Employee
will (A) notify the Company of his receipt of such process within 24 hours of
such receipt, and prior to any disclosure being made, (B) to the extent
reasonably practicable, consult with the Company on the advisability of taking
steps to resist or narrow such request provided that the ultimate decision shall
be that of the Employee, and (C) if disclosure is required or deemed advisable,
cooperate with the Company in any attempt that it may make in order to obtain an
order or other reliable assurance that confidential treatment will be accorded
to designated portions of such information. If no such order is obtained by the
Company, disclosure of such information by the Employee shall not be deemed a
violation of this Agreement. If such an order is obtained, then disclosure of
the information covered by such order in the manner described in the order shall
not be deemed a violation of this Agreement. The Employee shall be entitled to
reimbursement for his reasonable expenses, including the fees and expenses of
his counsel, in connection with action taken pursuant to this paragraph.
(iv) The provisions of Sections 4(b)(i), 4(b)(ii), and
4(b)(iii) notwithstanding, the Employee shall be free to disclose or use any
information which was obtained by the Employee prior to his employment with the
Company, or which is obtained by the Employee subsequent to and independent of
his relationship with the D. E. Shaw Group.
(v) The provisions of Section 4(b)(i), 4(b)(ii), and 4(b)(iii)
notwithstanding, the Employee shall, with the prior written permission of the
Management Company, be free to disclose selected Confidential Information and/or
Confidential Applicability Information to a limited number of parties for the
purpose of securing employment subsequent to the Employee's employment with the
Company or progressing professionally, provided further that where such
disclosure would not be harmful to the D. E. Shaw Group, such permission shall
not be unreasonably withheld. For purposes of this Section 4(b)(v), the
termination of the Employee's employment with the Company shall not in itself be
deemed harmful to the D. E. Shaw Group, even if such termination is voluntary.
(c) RETURN AND OWNERSHIP OF DOCUMENTS AND WORK PRODUCT. Upon the
termination of the Employee's employment with the Company for any reason, the
Employee promises and agrees to return immediately to the Company any and all
Confidential Information and all other materials or documents, including without
limitation mailing lists, rolodexes, computer print-outs, and computer disks and
tapes, belonging to the Company which contain information pertaining to the D.
E. Shaw Group's business, methods, clients, potential clients, customers,
potential customers, investors, potential investors, funding providers,
potential funding providers, or employees, unless the Company consents in
writing to the Employee's retention thereof.
(d) OWNERSHIP OF INTELLECTUAL PROPERTY. All right, title, and interest
of every kind and nature whatsoever, whether now known or unknown, in and to any
intellectual property ("Intellectual Property"), including without limitation
any ideas, inventions (whether or not patentable), designs, improvements,
discoveries, innovations, patents, trademarks, service marks, trade dress, trade
names, trade secrets, works of authorship, copyrights, films, audio and video
tapes, other audio and visual works of any kind, scripts, sketches, models,
formulas, tests, analyses, software, firmware, computer processes, computer and
other applications, creations, properties, and any documentation or other
memorialization containing or relating to the foregoing, in each case
discovered, invented, created, written, developed, taped, filmed, furnished,
produced, or disclosed by or to the Employee in the course of rendering services
to the
<PAGE>
Company shall, as between the parties hereto, be and remain the sole and
exclusive property of Juno Online Services, L.P. for any and all purposes and
uses whatsoever, and the Employee and his successors and assigns shall have no
right, title, or interest of any kind or nature therein or thereto, or in or to
any results and proceeds therefrom. Juno Online Services L.P. shall have all
right, title, and interest in such Intellectual Property, whether such
Intellectual Property is conceived by the Employee alone or with others and
whether conceived during regular working hours or other hours.
The Employee makes, and agrees to make and execute, any assignment
necessary to perfect Juno Online Services, L.P.'s right, title, and interest in
Intellectual Property, and agrees to perform any act reasonably requested by the
Company in furtherance of any such assignment, and/or of perfecting Juno Online
Services, L.P.'s rights in Intellectual Property.
(e) NO WAIVER OF TRADE SECRET PROTECTION. Nothing contained in this
Agreement shall be deemed to weaken or waive any rights related to the
protection of trade secrets or confidential business information that the
Company may have under common law or any applicable statutes or rules.
5. COMPETITION WHILE EMPLOYED
During the period of his employment with the Company, the Employee will
not, directly or indirectly, without the written consent of the President of
Juno Online Services, Inc., and whether or not for compensation, either for his
own account or as an employee, officer, agent, consultant, director, owner,
partner, joint venturer, shareholder, investor, or in any other capacity (except
in the capacity of an employee or officer of the Company acting for the benefit
of the D. E. Shaw Group):
(a) perform a function which is of the same nature as, or substantively
similar to, a function that the employee performs for the Company; or
(b) engage in any activity or business which is the same nature as, or
substantively similar to, an activity or business of the Company or an activity
or business which the Company is developing and of which the Employee has
knowledge.
(c)
6. INTERFERENCE WITH RELATIONSHIPS
(a) RESTRICTIONS ON INTERFERENCE. While employed by the Company, and
for a period of 18 months after the date the Employee ceases to be employed by
the Company, without regard to when or for what reason, if any, such employment
shall terminate (the "Termination Date"), the Employee shall not, directly or
indirectly, without the written consent of the President of Juno Online
Services, Inc., and whether or not for compensation, either on his own behalf or
as an employee, officer, agent, consultant, director, owner, partner, joint
venturer, shareholder, investor, or in any other capacity (except in the
capacity of an employee or officer of the Company acting for the benefit of the
Company or an employee or officer of another entity affiliated with David E.
Shaw), knowingly:
(i) interfere with an ongoing (as of the Termination Date)
relationship between the Company and one of its customers (except as permitted
under the provisions of Sections 6(b) and 6(c) below) by providing or offering
to provide a product or service to that customer which, as of the Termination
Date, was provided to that customer by a business unit of the Company in which
the Employee worked during his employment with the Company, if by so doing, the
Employee might reasonably be expected to cause the Company to suffer a loss of
profits from or other damage to its business relationship with that customer;
(ii) interfere with an ongoing (as of the Termination Date)
joint venture, strategic alliance, licensing agreement, distribution
relationship, advertising relationship, or similar agreement or relationship
between the Company and another business entity (the "Joint Venture
Relationship") by entering into or proposing to enter into a substantially
similar business relationship with that entity, if the Employee was directly
involved in that Joint Venture Relationship during his employment with the
Company, and if by so doing, the Employee might reasonably be expected to cause
the Company to suffer a loss of profits that would otherwise accrue to the
Company in connection with that Joint Venture Relationship, or to suffer other
damage to that Joint Venture Relationship;
(iii) employ, or retain as a consultant or contractor, or
cause to be so employed or retained, or enter into a partnership or business
venture with, any person (a "Related Person") who at the time of such action (A)
is an employee of the D. E. Shaw Group; (B) has been employed by the D. E. Shaw
Group at any time within the previous 18 months; (C) is a consultant, sales
agent, contract programmer, or other independent agent who is retained on a
full-
<PAGE>
time or substantially full-time basis by the D. E. Shaw Group; or (D) has been
retained on a full-time or substantially full-time basis by the D. E. Shaw Group
as a consultant, sales agent, contract programmer, or other independent agent at
any time within the previous 18 months;
(iv) solicit, persuade, encourage, or induce any employee of
the D. E. Shaw Group (or any consultant, sales agent, contract programmer, or
other independent agent who is retained on a full-time or substantially
full-time basis by the D. E. Shaw Group) to cease his employment with or
retention by the D. E. Shaw Group; or
(v) accept or solicit investment capital or debt financing
(directly or indirectly) from, or accept or solicit employment with, or accept
or solicit a consulting assignment with, any individual or entity, or an
officer, partner, principal, or affiliate of any entity, or another entity
managed by or otherwise affiliated with an officer, partner, principal, or
affiliate of any entity, that, as of the Termination Date or at any time within
the 18 months immediately preceding the Termination Date, provided or arranged
for the provision of more than 20 percent of the Capital of Juno Online
Services, L.P., Juno Online Services, Inc., D. E. Shaw Development, L.P. or any
other subsidiary of D. E. Shaw Development, L.P.
(b) EXCEPTIONS TO PREVENT UNDUE HARDSHIP. In the event that the
application of Section 6(a)(i) and/or Section 6(a)(ii) would, in the Company's
judgment, cause undue hardship to the Employee, the Management Company shall,
upon written request by the Employee, provide to the Employee a written
instrument authorizing such specific exceptions to the provisions of Section
6(a)(i) and/or Section 6(a)(ii) as the President of Juno Online Services, Inc.
shall determine are reasonably necessary to prevent such undue hardship, the
provisions of which instrument shall thereafter be deemed to supersede the
corresponding provisions of Section 6(a)(i) and/or Section 6(a)(ii).
(c) PRIOR RELATIONSHIPS. The provisions of Section 6(a)
notwithstanding, the Employee shall not by reason of Section 6(a) be restricted
from resuming, after the termination of his employment with the Company, any
employment or business relationship that preceded his employment with the
Company, or from providing or offering to provide any product or service to a
customer which the Employee provided to that customer at any time prior to his
employment by the Company; provided, however, that Section 4 and the other
provisions of this Section 6 shall continue to apply.
(d) EXCEPTION FOR UNRELATED ACTIVITIES. The provisions of Section 6(a)
notwithstanding, the Employee shall become free nine months after the
Termination Date to employ, retain, cause to be employed or retained, or enter
into a business relationship with any Related Person provided that neither the
Employee nor any Related Person directly or indirectly engages in business
activities competitive with the business activities of the Company in the course
of such employment, retention, or business relationship.
(e) EXCEPTION FOR D. E. SHAW GROUP. Nothing contained in this Agreement
shall prohibit the Employee from (i) at any time accepting employment with, or
entering into a consultant or contractor arrangement with, or becoming an
officer, agent, owner, or partner of, or becoming an investor in, any entity in
the D. E. Shaw Group; or (ii) at any time soliciting, persuading, encouraging or
inducing any other person (including without limitation a present employee of
the Company) to enter into such a relationship with an entity in the D. E. Shaw
Group; and the Company agrees that it shall not interfere with, or seek to
enjoin, any such activity.
(f) NO WAIVER OF COMMON LAW OR STATUTORY PROTECTION. Nothing contained
in this Agreement shall be deemed to weaken or waive any of the Company's rights
or protections that may be accorded by statute or common law as regards the
conduct of the Employee with respect to the Company's business, investors,
customers, clients, joint venture partners, employees, consultants, or
contractors. The Employee authorizes the Company and other D. E. Shaw Group
entities to disclose this Agreement to any person at any time, including without
limitation any employer or prospective employer of the Employee.
7. REASONABLENESS OF COVENANTS
(a) CERTAIN RECOGNITIONS. The Employee acknowledges that the
restrictions specified in Sections 4, 5, and 6 of this Agreement are reasonable
in view of the nature of the business in which the Company and/or the D. E. Shaw
Group is engaged, the Employee's position with the Company, and the Employee's
knowledge of the Company's and/or the D. E. Shaw Group's business.
<PAGE>
The Employee recognizes that the amount of his compensation reflects
his Agreement in Sections 4, 5, and 6, and acknowledges that he will not be
subject to undue hardship by reason of his agreements set forth in Sections 4,
5, and 6.
(b) MODIFICATION OF RESTRICTION. Notwithstanding anything contained in
Sections 4, 5, or 6 of this Agreement to the contrary, if a court of competent
jurisdiction should hold any restriction specified in Sections 4, 5, or 6 to be
unreasonable, unenforceable, illegal or invalid, then that restriction shall be
limited to the extent necessary to be enforceable, and only to that extent. In
particular, and without limitation on the foregoing, if any provision of
Sections 4, 5, or 6 should be held to be unenforceable as to scope or length of
time or geographical area involved, such provision shall be deemed to be
enforceable as to, and shall be deemed to be amended to cover, the maximum
scope, maximum length of time, or broadest area, as the case may be, which is
then lawful.
(c) SURVIVAL OF COVENANTS. The obligations of the Employee under
Sections 4 and 6 of this Agreement shall survive the termination of this
Agreement and of his employment with the Company.
8. REGULATORY COMPLIANCE
The Employee agrees to abide by all applicable securities laws and all
applicable rules and regulations of the Securities Exchange Commission, the
National Association of Securities Dealers, the Commodity Futures Trading
Commission, and all other applicable self-regulatory organizations, including
those regulations requiring the disclosure to the D. E. Shaw Group's management
of all securities transactions conducted for the Employee's own account.
9. REMEDIES/ARBITRATION
(a) INJUNCTIONS, RESTRAINING ORDERS, AND OTHER EQUITABLE RELIEF. The
Employee acknowledges that breach or threatened breach of Sections 4, 5, or 6 of
this Agreement will cause the D. E. Shaw Group irreparable harm for which there
is no adequate remedy at law, and as a result of this, the D. E. Shaw Group
shall be entitled to the issuance by a court of competent jurisdiction of an
injunction, restraining order, or other equitable relief in favor of itself,
without the necessity of posting a bond, restraining the Employee from
committing or continuing to commit any such violation. Any right to obtain an
injunction, restraining order, or other equitable relief hereunder shall not be
deemed a waiver of any right to assert any other remedy the D. E. Shaw Group may
have at law or in equity. The right of the D. E. Shaw Group to seek equitable
relief under this Agreement shall be in addition to (and not in derogation of)
the requirement imposed on each party hereto to arbitrate disputes as provided
in Section 9(b) below.
(b) MANDATORY ARBITRATION. The Employee and the Company agree that any
claim, controversy or dispute between the Employee and the Company (including
without limitation its affiliates, officers, employees, representatives, or
agents) arising out of or relating to this Agreement, the employment of the
Employee, the cessation of employment of the Employee, or any matter relating to
the foregoing shall be submitted to and settled by arbitration in a forum of the
American Arbitration Association ("AAA") located in New York County in the State
of New York and conducted in accordance with the National Rules for the
Resolution of Employment Disputes. In such arbitration: (i) each arbitrator
shall agree to treat as confidential evidence and other information presented by
the parties to the same extent as Confidential Information under this Agreement
must be held confidential by the Employee, (ii) the arbitrators shall have no
authority to amend or modify any of the terms of this Agreement, and (iii) the
arbitrators shall have ten business days from the closing statements or
submission of post-hearing briefs by the parties to render their decision. Any
arbitration award shall be final and binding upon the parties, and any court,
state or federal, having jurisdiction may enter a judgment on the award. The
foregoing requirement to arbitrate claims, controversies, and disputes applies
to all claims or demands by the Employee, including without limitation any
rights or claims the Employee may have under the Age Discrimination in
Employment Act of 1967 (which prohibits age discrimination in employment), Title
VII of the Civil Rights Act of 1964 (which prohibits discrimination in
employment based on race, color, national origin, religion, sex, or pregnancy),
the Americans with Disabilities Act of 1991 (which prohibits discrimination in
employment against qualified persons with a disability), the Equal Pay Act
(which prohibits paying men and women unequal pay for equal work) or any other
federal, state, or local laws or regulations pertaining to the Employee's
employment or the termination of the Employee's employment.
<PAGE>
(c) RECOVERY OF LEGAL FEES. If one of the parties to this Agreement
(the "Plaintiff") should bring a proceeding against the other party (the
"Defendant") in connection with an alleged breach or threatened breach of this
Agreement, and if such proceeding is ultimately resolved by an order or a
judgment in favor of the Defendant, by a voluntary discontinuance with prejudice
by the Plaintiff, or by an arbitration decision wholly in favor of the
Defendant, the Plaintiff will, upon presentation by the Defendant of appropriate
evidence of the amount and nature of the expense incurred, reimburse the
Defendant in an amount equal to the lesser of:
(i) the cost of all reasonable legal fees actually incurred by
the Defendant in connection with such litigation or arbitration; or
(ii) $100,000.
(d) FORUM. Each party submits to the jurisdiction of the courts, state
and federal, and arbitration forums (set forth in Section 9(b)) located in the
State of New York.
10. RELATIONSHIP OF THE PARTIES
The relationship between the Company and the Employee hereunder is
agreed to be solely that of employee and employer. Nothing contained herein and
no modification of responsibility or compensation made hereafter shall be
construed so as to constitute the parties as partners or joint venturers.
11. AMENDMENT OR ALTERATION
No amendment or alteration of the terms of this Agreement shall be
valid unless made in writing and signed by both of the parties hereto.
12. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS-OF-LAW
PRINCIPLES).
13. SEVERABILITY
The holding of any provision of this Agreement to be illegal, invalid,
or unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
14. WAIVER
The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion or occasions shall not be considered a waiver
thereof or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
15. ENTIRE AGREEMENT
This Agreement contains the entire agreement of the parties and shall
supersede any prior verbal or written agreement or understanding between the
Employee and the Company. The Employee acknowledges that in choosing to accept
the Company's offer of employment (and/or to continue such employment), he has
not relied on any warranties, representations, or promises by the Company, its
employees, or any other parties except as specifically set forth herein.
<PAGE>
16. ASSIGNMENT
Except as otherwise provided in this paragraph, this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective heirs, representatives, successors, and assigns. Neither this
Agreement nor any right or interest hereunder shall be assignable by the
Employee, his beneficiaries, or legal representatives without the Company's
prior written consent; provided, however, that nothing in this Section 16 shall
preclude the Employee from designating a beneficiary to receive any benefit
payable hereunder upon his death, or the executors, administrators, or other
legal representatives of the Employee or his estate from assigning any rights
hereunder to the person or persons entitled thereunto. This agreement shall be
assignable by the Company to a subsidiary or affiliate of the Company; to any
corporation, partnership, or other entity that may be organized by the Company,
its general partners, or its officers, as a separate business unit in connection
with the business activities of the Company or of its general partners or
officers; or to any corporation, partnership, or other entity resulting from the
reorganization, merger, or consolidation of the Company with any other
corporation, partnership, or other entity, or any corporation, partnership, or
other entity to or with which all or any portion of the Company's business or
assets may be sold, exchanged, or transferred. The Management Company, Juno
Online Services, L.P., and other members of the D. E. Shaw Group are third-party
beneficiaries of this Agreement.
17. NO ATTACHMENT
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null,
void, and of no effect.
18. NO COERCION OR DURESS
The Employee enters into this Agreement with full understanding of the
nature and extent of the restrictive covenants contained herein, and
acknowledges that because of the nature of the Company's business, this
Agreement would not be entered into without the restrictive covenants contained
herein.
The Employee acknowledges and agrees that he is entering into this
Agreement voluntarily and of his own free will in order to obtain the benefits
of employment, continued employment, and additional compensation by the Company.
The Employee acknowledges and agrees that he has not been coerced or suffered
any duress in order to induce him to enter into this Agreement.
19. HEADINGS
The Section headings appearing in this Agreement are used for
convenience of reference only and shall not be considered a part of this
Agreement or in any way modify, amend, or affect the meaning of any of its
provisions.
20. RULES OF CONSTRUCTION
Whenever the context so requires, the use of the masculine gender shall
be deemed to include the feminine and vice versa, and the use of the singular
shall be deemed to include the plural and vice versa. That this Agreement was
drafted by the Company shall not be taken into account in interpreting or
construing any provision of this Agreement.
21. ACKNOWLEDGMENT OF RECEIPT
By signing below, the Employee acknowledges receiving a copy of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.
JUNO ONLINE SERVICES, INC.
By: /s/ DAVID SHAW
----------------------------------
David E. Shaw
Chairman
Date: 9/2/98
EMPLOYEE
Signature: /s/ CHARLES ARDAI
---------------------------------
Name: Charles Ardai
Address: 251 East 51st Street
-----------------------------------
New York, New York 10022
-----------------------------------
Date: 4/9/98
-----------------------------------
<PAGE>
Exhibit 10.13
EMPLOYMENT AGREEMENT
AGREEMENT dated as of this 10th day of June, 1998, by and between
Juno Online Services, Inc., a Delaware corporation, and Robert Cherins (the
"Employee").
For purposes of this Agreement, the term "D. E. Shaw Group" shall
include, individually and/or collectively, (a) Juno Online Services, Inc. and
Juno Online Services, L.P. (the sole shareholder of Juno Online Services, Inc.);
(b) D. E. Shaw & Co., L.P. and D. E. Shaw & Co., Inc. (D. E. Shaw & Co., L.P.'s
general partner); (c) any partnership, other entity or account that D. E. Shaw &
Co., L.P. or D. E. Shaw & Co., Inc. owns, in whole or in part, or for which they
act, directly or indirectly, as general partner, investment manager, or
management company, along with their respective subsidiaries; (d) any other
affiliate of D. E. Shaw & Co., L.P. or of D. E. Shaw & Co., Inc. for which the
Employee provides services in his capacity as an employee of Juno Online
Services, Inc.; and (e) any predecessor or successor entity to (i) Juno Online
Services, Inc. or (ii) any partnership, entity, or account described in (c) and
(d) above. The term "Company" shall include Juno Online Services, Inc., Juno
Online Services, L.P. and, as applicable, any predecessor or successor companies
in the D. E. Shaw Group that have served, serve, or may in the future serve as
the employer of the Employee. The term "Management Company" means D. E. Shaw &
Co., Inc. and its successor. References in this Agreement to any entity also
refer to any successor to that entity. The term "Capital" means (A) equity
financing, and/or (B) certain debt financing (other than bank financing, than
equipment leasing and than ordinary trade payables incurred in connection with
the purchase of goods or services by Juno Online Services, L.P. or its
subsidiaries), as identified by the Management Company in its sole discretion.
WHEREAS, the Company desires to retain (or to continue to retain) the
Employee on the terms and conditions hereinafter set forth, and the Employee is
willing to undertake (or to continue) employment by the Company upon such terms
and conditions;
NOW, THEREFORE, in consideration of the foregoing and in consideration
of their mutual promises and agreements contained herein, the parties hereto
agree as follows:
1. EMPLOYMENT
Employment shall commence (or has commenced) on December 2, 1996, and
may be terminated by either party at any time, for any reason, upon 30 days
notice (the "Notice Period"), which notice may be given either verbally or in
writing. Notwithstanding the foregoing, the Company may elect to terminate
immediately upon notice, except that in this event, the compensation and
benefits set forth in Section 2 shall be continued for the duration of the
Notice Period. The Employee acknowledges and agrees that he is an employee at
will, and that just as the Employee is free to resign at any time, the Company
has the right to terminate the employment relationship at any time for any
lawful reason. The Employee acknowledges and agrees that no representative of
the Company may verbally change the at will employment relationship between the
Employee and the Company. References to time periods in this Agreement shall not
be construed or interpreted as promising or guaranteeing employment for any
specific duration or until any specific date.
2. COMPENSATION
(a) BASE SALARY DURING THE COMPENSATION PERIOD. As compensation for the
Employee's services during the period beginning January 1, 1998 and ending on
December 31, 1998 (the "Compensation Period"), the Company shall pay the
Employee a base salary computed at an annual rate of $150,000 per year, prorated
to correspond to that portion of the Compensation Period during which the
Employee is actually employed with the Company, such base salary to be paid
semi-monthly.
(b) BASE SALARY AFTER THE COMPENSATION PERIOD. As of the end of the
Compensation Period, or as of the end of any subsequent calendar year, the
Employee's base salary may be increased or decreased, or the manner in which the
<PAGE>
Employee is compensated may be changed, in the sole discretion of the President
of Juno Online Services, Inc., expressed in writing by the President of Juno
Online Services, Inc. Any such change in compensation shall be deemed to modify
only this Section 2 of this Agreement, and all other provisions of this
Agreement shall remain in effect following such change in compensation. In the
absence of any such change, the Employee's base salary shall remain the same as
it was during the Compensation Period.
(c) YEAR-END BONUS. At the end of each calendar year that includes one
or more days falling within the Compensation Period, and provided that the
Employee remains employed by the Company as of the end of such calendar year,
the Company shall pay the Employee a guaranteed year-end bonus computed at an
annual rate of no less than $300,000 per year, prorated to correspond to that
portion of the Compensation Period during which the Employee is actually
employed with the Company. The Company may (or may not), in the sole discretion
of the President of Juno Online Services, Inc., also pay the Employee an
additional discretionary year-end bonus. Any such bonus(es) relating to the
Compensation Period shall be paid to the Employee on a date to be determined by
the President of Juno Online Services, Inc., which date shall ordinarily be no
later than March 15th of the following calendar year, or as soon thereafter as
is practicable.
(d) NON-REFUNDABLE ADVANCE AGAINST BONUS. In addition to the base
salary specified in Section 2(a)the Employee shall, during the Compensation
Period, receive a non-refundable advance against the bonus specified in Section
2(c) computed at an annual rate of $200,000 per year, prorated to correspond to
that portion of the Compensation Period during which the Employee is actually
employed with the Company, such advance to be paid semi-monthly. In the event
that a year-end bonus is paid pursuant to the terms of Section 2(c), the amount
of such advance shall be deducted from such year-end bonus payment. The Employee
shall under no circumstances be required to repay any correctly computed sum
that has already been paid to the Employee as a non-refundable advance against
bonus pursuant to the terms of this Section 2(d).
(e) YEAR-END BONUS AFTER THE COMPENSATION PERIOD. As of the end of the
Compensation Period, or as of the end of any subsequent calendar year, the
Employee's year-end bonus, if any, and/or the non refundable advance against
such year-end bonus, if any, may be increased, decreased, or eliminated, or the
manner in which the Employee is compensated may be changed, in the sole
discretion of the President of Juno Online Services, Inc., expressed in writing
by the President of Juno Online Services, Inc. Any such change in compensation
shall be deemed to modify only this Section 2 of this Agreement, and all other
provisions of this Agreement shall remain in effect following such change in the
Compensation Period, the Company shall not have any obligation to continue to
pay a year-end bonus to the Employee unless such an arrangement is explicitly
agreed to in writing by the President of Juno Online Services, Inc.
(f) STANDARD COMPANY BENEFITS. In addition to the compensation outlined
elsewhere in this Section 2, the Company shall provide to the Employee all of
the benefits included in the Company's standard benefit package, which currently
include medical (hospitalization and major medical), dental, disability, life,
and accidental death and dismemberment insurance. Most of the cost of such
benefits shall be borne by the Company. However, in the case of coverage for the
Employee himself, the Employee contributes a nominal pre-tax amount to the cost
of the medical insurance; if the Employee wishes to obtain coverage for other
qualified family members, and arranges with the Company's insurance providers
(through the Company's Human Resources staff) to obtain such additional
coverage, the Employee will also be required to contribute part of the
incremental cost of such coverage. Individual and dependent medical insurance
contribution amounts are determined on a set scale, based on both the actual
cost of the insurance and on the Employee's base salary. The required
contribution will be borne by the Employee by means of a voluntary salary
reduction in the amount of the contribution implemented by the Company at the
request of the Employee.
The standard benefit package also currently includes a flexible
spending account plan and a 401(k) retirement plan, available to all qualified
full-time employees after a certain period of employment with the Company. The
401(k) retirement plan currently includes a matching program and a graded
vesting schedule; the Company does not contribute to the flexible spending
account plan, but the Employee may contribute pre-tax dollars. The Employee
agrees that the composition, providers, and all other aspects of the Company's
standard benefit package may be changed from time to time in the sole discretion
of the Management Company.
<PAGE>
(g) EXCLUSIVE COMPENSATION. The compensation and benefits described in
this Section 2 shall be the exclusive compensation due to the Employee from the
Company or any of its affiliates during or on account of the services of the
Employee. If directed by the Company, the Employee shall provide the services
described in this Agreement to one or more affiliates of the Company without
compensation other than as specified in this Section 2.
3. DISCLOSURE TO THE COMPANY
(a) DISCLOSURE OF INFORMATION TO THE COMPANY. The Employee shall
promptly disclose and deliver over to the Company, without additional
compensation, to the extent that such disclosure could reasonably be expected to
be of interest to the D. E. Shaw Group, in writing, or in such form and manner
as the Company may reasonably require:
(i) any and all algorithms, procedures, methods or techniques
directly related to electronic communication and/or commerce or to the
Employee's work with the Company, and the essential ideas and principles
underlying such algorithms, procedures, methods or techniques, conceived,
originated, discovered, developed, evaluated, tested, or applied by the Employee
while employed by the Company, whether or not such algorithms, procedures,
methods or techniques are embodied in a computer program;
(ii) any and all programming, marketing, advertising, or
financing strategies, the essential ideas and principles on which such
strategies are based, and any information that might reasonably be expected to
lead to the development of such strategies, conceived, originated, discovered,
developed, evaluated, tested, or employed by the Employee while employed by the
Company, whether or not such strategies are embodied in a computer program;
(iii) any and all Internet-related and other products and
services, and the essential ideas and principles underlying such products and
services, conceived, originated, adapted, developed, evaluated, tested, or
applied by the Employee while employed by the Company, whether or not such
products or services are embodied in a computer program, and whether or not
marketed, sold, or provided by the D. E. Shaw Group;
(iv) such information and data pertaining to the business,
operations, personnel, activities, financial status and affairs, current or
anticipated business or investment objectives or practices, current or
anticipated requirements for Internet-related or other products or services, and
other information relating to current or prospective investors, other current or
prospective funding sources, limited partners, shareholders, clients, customers,
accounts, joint venturers, or other business affiliates of the D. E. Shaw Group,
and of the officers, partners, principals, employees, and other persons
affiliated with such current or prospective investors, limited partners,
shareholders, clients, customers, accounts, joint venturers, or other business
affiliates, as is known to the Employee and as might reasonably be expected to
be of value to the D. E. Shaw Group in developing, maintaining, or expanding its
current or prospective business relationships with such current or prospective
investors, limited partners, shareholders, clients, customers, accounts, joint
venturers, or other business affiliates.
(b) PERIOD COVERED; INFORMATION EXCLUDED. The provisions of this
Section 3 shall apply to information acquired by the Employee at any time during
his employment with the Company, whether prior to or subsequent to the execution
of this Agreement.
The Employee agrees not to disclose to the D. E. Shaw Group any
confidential or proprietary information belonging to any previous employer of
the Employee that is not part of the D. E. Shaw Group, or belonging to any other
party, without first securing the written permission of such previous employer
or other party.
(c) DISCLOSURE UPON TERMINATION. Any information required to be
disclosed under this Section 3 that has not yet been disclosed by the Employee
to the Company at the time of the termination of the Employee's employment with
the Company, without regard to when or for what reason, if any, such employment
shall terminate, shall be disclosed to the Company in writing, or in such form
and manner as the Company may reasonably require, within 10 days of the
termination of the Employee's employment with the Company.
4. CONFIDENTIAL INFORMATION
(a) DEFINITION. The parties acknowledge that, in order to permit the
Employee to successfully perform and/or continue to perform the duties
associated with his employment with the Company, it is necessary for the Company
to entrust the Employee with certain valuable proprietary information and
knowledge of certain modes of business operation ("Confidential Information")
which are essential to the profitable operation of the D. E. Shaw Group, and
<PAGE>
which give the D. E. Shaw Group a competitive advantage over other firms
pursuing related business activities. In the context of this Agreement, the term
"Confidential Information" shall be deemed to include
(i) computer software or data of any sort developed (in the
case of software) or compiled (in the case of data) by the D. E. Shaw Group;
(ii) the fact that the D. E. Shaw Group uses, has used, or has
evaluated for potential use a particular computer program or system, if the
disclosure of such fact to a competitor of the D. E. Shaw Group might reasonably
be expected to adversely affect the competitive position of the D. E. Shaw Group
relative to that of such a competitor; provided, however, that information about
the type of computers, computer peripherals, operating systems, database
systems, or other systems software which the D. E. Shaw Group uses, has used, or
has evaluated for potential use, but which is not specific to any financial or
Internet related application, shall not by reason of this Section 4(a)(ii) be
considered Confidential Information;
(iii) algorithms, procedures, methods, or techniques, or the
essential ideas and principles underlying such algorithms, procedures, methods,
or techniques, developed by the D. E. Shaw Group (but excluding any public
domain algorithm, procedure, or technique), whether or not such algorithms,
procedures, methods, or techniques are embodied in a computer program;
(iv) the fact that the D. E. Shaw Group uses, has used, or has
evaluated for potential use any particular algorithm, procedure, or technique
developed by a party other than the D. E. Shaw Group, whether or not such
algorithm, procedure, or technique is embodied in a computer program, if the
disclosure of such information to a competitor of the D. E. Shaw Group might
reasonably be expected to adversely affect the competitive position of the D. E.
Shaw Group relative to that of such a competitor;
(v) the results of any programming, marketing, advertising,
financial, or other analysis conducted by the D. E. Shaw Group for its own
internal use (and not approved for dissemination to its customers, investors,
consultants, joint venturers, or other parties);
(vi) any information that would typically be included in the
D. E. Shaw Group's income statements, including, but not limited to the amount
of the D. E. Shaw Group's revenues, expenses, or net income;
(vii) any plans for the business of the Company or of other
members of the D. E. Shaw Group (whether or not such plans have been reduced to
writing); financial information concerning such plans (including without
limitation projected revenues, projected expenses, projected net income and
information concerning rates and costs of customer acquisition and retention);
descriptions of such business and technical aspects of or relating to the
operation of such business (including without limitation algorithms, computer
programs, processes or formulas that relate to computer and network security,
authentication, logging, accounting and distribution); and products and services
that the D. E. Shaw Group is considering offering to its subscribers and/or to
other persons;
(viii) any other information gained in the course of the
Employee's employment with the Company that could reasonably be expected to
prove deleterious to the D. E. Shaw Group if disclosed to third parties,
including without limitation any information that could reasonably be expected
to aid a competitor of the D. E. Shaw Group in making inferences regarding the
nature of the D. E. Shaw Group's proprietary and/or World Wide Web-related
activities, where such inferences could reasonably be expected to adversely
affect the competitive position of the D. E. Shaw Group relative to that of such
a competitor;
(ix) any other information gained in the course of or incident
to the Employee's employment with the Company that the D. E. Shaw Group has
received from a third party and is required to hold confidential in connection
with an agreement between the D. E. Shaw Group and such third party;
(x) any other information gained in the course of or incident
to the Employee's employment with the Company that the Company treats or
designates as Confidential Information and which is not publicly available.
(b) USE AND DISCLOSURE.
(i) The Employee acknowledges that he has acquired and/or will
acquire Confidential Information in the course of or incident to his employment
with the Company. Accordingly, the Employee agrees that he shall not, directly
or indirectly, at any time, during the term of his employment with the Company
or at any time thereafter, and without regard to when or for what reason, if
any, such employment shall terminate, use or cause to be used any such
Confidential Information, whether acquired prior to or subsequent to the
execution of this Agreement, in connection with any activity or business except
the business of the D. E. Shaw Group, and shall not disclose such Confidential
Information to any individual, partnership, corporation, or other entity unless
such disclosure has been authorized in writing by the Management Company, or
except as may be required by any applicable law or by order of a court of
competent jurisdiction, a regulatory or self-regulatory body, or a governmental
body.
<PAGE>
(ii) The provisions of Section 4(b)(i) notwithstanding, the
Employee shall be free to disclose any information contained in any
non-confidential brochure or other promotional material which the D. E. Shaw
Group routinely makes available to the press and/or the general public
(including, but not limited to (A) the Company's public site on the World Wide
Web (www.juno.com); (B) the official "Company Profile," of the D. E. Shaw Group;
(C) the general overview brochure describing the D. E. Shaw Group's Third Market
operation; and (D) the general overview brochure describing D. E. Shaw
Securities International), and shall be free to disclose or use any information
which is in or which enters the public domain prior to the time of such
disclosure or use (except where such information enters the public domain as a
result of unauthorized actions of the Employee). The Employee acknowledges,
however, that (A) a large number of market inefficiencies and trading
strategies, and a large number of analyses, observations, and findings from
which such market inefficiencies and trading strategies might be derived, and
(B) a large number of programming techniques and programming strategies, and a
large number of analyses, observations and findings from which such computer
programming techniques and strategies might be derived, have been or may be
reported in the open literature, or may otherwise have entered or may enter the
public domain, and that one of the Company's most valuable forms of Confidential
Information is its accumulated knowledge, based on research, analysis, and
experimentation not reported in the open literature or otherwise falling within
the public domain, of which of these market inefficiencies, trading strategies,
programming techniques, and programming strategies, and which of these analyses,
observations, and findings, are likely to form the basis for practical,
profitable business applications for the D. E. Shaw Group ("Confidential
Applicability Information"). The Employee thus agrees that he shall not,
directly or indirectly, at any time, during the term of his employment with the
Company, or at any time thereafter, and without regard to when or for what
reason, if any, such employment shall terminate, use or cause to be used any
Confidential Applicability Information in connection with any activity or
business except the business of the D. E. Shaw Group, and shall not disclose
such Confidential Applicability Information to any individual, partnership,
corporation, or other entity, unless what would otherwise be deemed to
constitute Confidential Applicability Information is itself in or itself enters
the public domain by some means other than as a result of unauthorized actions
of the Employee, or unless such disclosure has been authorized in writing by the
Management Company, or except as may be required by any applicable law or by
order of a court of competent jurisdiction, a regulatory or self-regulatory
body, or a governmental body.
(iii) In the event that the Employee is required to disclose
Confidential Information or Confidential Applicability Information pursuant to
judicial or administrative process or other requirements of law, the Employee
will (A) notify the Company of his receipt of such process within 24 hours of
such receipt, and prior to any disclosure being made, (B) to the extent
reasonably practicable, consult with the Company on the advisability of taking
steps to resist or narrow such request provided that the ultimate decision shall
be that of the Employee, and (C) if disclosure is required or deemed advisable,
cooperate with the Company in any attempt that it may make in order to obtain an
order or other reliable assurance that confidential treatment will be accorded
to designated portions of such information. If no such order is obtained by the
Company, disclosure of such information by the Employee shall not be deemed a
violation of this Agreement. If such an order is obtained, then disclosure of
the information covered by such order in the manner described in the order shall
not be deemed a violation of this Agreement. The Employee shall be entitled to
reimbursement for his reasonable expenses, including the fees and expenses of
his counsel, in connection with action taken pursuant to this paragraph.
(iv) The provisions of Sections 4(b)(i), 4(b)(ii), and
4(b)(iii) notwithstanding, the Employee shall be free to disclose or use any
information which was obtained by the Employee prior to his employment with the
Company, or which is obtained by the Employee subsequent to and independent of
his relationship with the D. E. Shaw Group.
(v) The provisions of Section 4(b)(i), 4(b)(ii), and 4(b)(iii)
notwithstanding, the Employee shall, with the prior written permission of the
Management Company, be free to disclose selected Confidential Information and/or
Confidential Applicability Information to a limited number of parties for the
purpose of securing employment subsequent to the Employee's employment with the
Company or progressing professionally, provided further that where such
disclosure would not be harmful to the D. E. Shaw Group, such permission shall
not be unreasonably withheld. For purposes of this Section 4(b)(v), the
termination of the Employee's employment with the Company shall not in itself be
deemed harmful to the D. E. Shaw Group, even if such termination is voluntary.
(c) RETURN AND OWNERSHIP OF DOCUMENTS AND WORK PRODUCT. Upon the
termination of the Employee's employment with the Company for any reason, the
Employee promises and agrees to return immediately to the Company any and all
Confidential Information and all other materials or documents, including without
limitation mailing lists, rolodexes, computer print-outs, and computer disks and
tapes, belonging to the Company which contain information pertaining to the D.
E. Shaw Group's business, methods, clients, potential clients, customers,
potential
<PAGE>
customers, investors, potential investors, funding providers, potential funding
providers, or employees, unless the Company consents in writing to the
Employee's retention thereof.
(d) OWNERSHIP OF INTELLECTUAL PROPERTY. All right, title, and interest
of every kind and nature whatsoever, whether now known or unknown, in and to any
intellectual property ("Intellectual Property"), including without limitation
any ideas, inventions (whether or not patentable), designs, improvements,
discoveries, innovations, patents, trademarks, service marks, trade dress, trade
names, trade secrets, works of authorship, copyrights, films, audio and video
tapes, other audio and visual works of any kind, scripts, sketches, models,
formulas, tests, analyses, software, firmware, computer processes, computer and
other applications, creations, properties, and any documentation or other
memorialization containing or relating to the foregoing, in each case
discovered, invented, created, written, developed, taped, filmed, furnished,
produced, or disclosed by or to the Employee in the course of rendering services
to the Company shall, as between the parties hereto, be and remain the sole and
exclusive property of Juno Online Services, L.P. for any and all purposes and
uses whatsoever, and the Employee and his successors and assigns shall have no
right, title, or interest of any kind or nature therein or thereto, or in or to
any results and proceeds therefrom. Juno Online Services L.P. shall have all
right, title, and interest in such Intellectual Property, whether such
Intellectual Property is conceived by the Employee alone or with others and
whether conceived during regular working hours or other hours.
The Employee makes, and agrees to make and execute, any assignment
necessary to perfect Juno Online Services, L.P.'s right, title, and interest in
Intellectual Property, and agrees to perform any act reasonably requested by the
Company in furtherance of any such assignment, and/or of perfecting Juno Online
Services, L.P.'s rights in Intellectual Property.
(e) NO WAIVER OF TRADE SECRET PROTECTION. Nothing contained in this
Agreement shall be deemed to weaken or waive any rights related to the
protection of trade secrets or confidential business information that the
Company may have under common law or any applicable statutes or rules.
5. COMPETITION WHILE EMPLOYED
During the period of his employment with the Company, the Employee will
not, directly or indirectly, without the written consent of the President of
Juno Online Services, Inc., and whether or not for compensation, either for his
own account or as an employee, officer, agent, consultant, director, owner,
partner, joint venturer, shareholder, investor, or in any other capacity (except
in the capacity of an employee or officer of the Company acting for the benefit
of the D. E. Shaw Group):
(a) perform a function which is of the same nature as, or substantively
similar to, a function that the employee performs for the Company; or
(b) engage in any activity or business which is the same nature as, or
substantively similar to, an activity or business of the Company or an activity
or business which the Company is developing and of which the Employee has
knowledge.
(c)
6. INTERFERENCE WITH RELATIONSHIPS
(a) RESTRICTIONS ON INTERFERENCE. While employed by the Company, and
for a period of 18 months after the date the Employee ceases to be employed by
the Company, without regard to when or for what reason, if any, such employment
shall terminate (the "Termination Date"), the Employee shall not, directly or
indirectly, without the written consent of the President of Juno Online
Services, Inc., and whether or not for compensation, either on his own behalf or
as an employee, officer, agent, consultant, director, owner, partner, joint
venturer, shareholder, investor, or in any other capacity (except in the
capacity of an employee or officer of the Company acting for the benefit of the
Company or an employee or officer of another entity affiliated with David E.
Shaw), knowingly:
(i) interfere with an ongoing (as of the Termination Date)
relationship between the Company and one of its customers (except as permitted
under the provisions of Sections 6(b) and 6(c) below) by providing or offering
to provide a product or service to that customer which, as of the Termination
Date, was provided to that customer by a business unit of the Company in which
the Employee worked during his employment with the Company, if by so doing, the
Employee might reasonably be expected to cause the Company to suffer a loss of
profits from or other damage to its business relationship with that customer;
<PAGE>
(ii) interfere with an ongoing (as of the Termination Date)
joint venture, strategic alliance, licensing agreement, distribution
relationship, advertising relationship, or similar agreement or relationship
between the Company and another business entity (the "Joint Venture
Relationship") by entering into or proposing to enter into a substantially
similar business relationship with that entity, if the Employee was directly
involved in that Joint Venture Relationship during his employment with the
Company, and if by so doing, the Employee might reasonably be expected to cause
the Company to suffer a loss of profits that would otherwise accrue to the
Company in connection with that Joint Venture Relationship, or to suffer other
damage to that Joint Venture Relationship;
(iii) employ, or retain as a consultant or contractor, or
cause to be so employed or retained, or enter into a partnership or business
venture with, any person (a "Related Person") who at the time of such action (A)
is an employee of the D. E. Shaw Group; (B) has been employed by the D. E. Shaw
Group at any time within the previous 18 months; (C) is a consultant, sales
agent, contract programmer, or other independent agent who is retained on a
full-time or substantially full-time basis by the D. E. Shaw Group; or (D) has
been retained on a full-time or substantially full-time basis by the D. E. Shaw
Group as a consultant, sales agent, contract programmer, or other independent
agent at any time within the previous 18 months;
(iv) solicit, persuade, encourage, or induce any employee of
the D. E. Shaw Group (or any consultant, sales agent, contract programmer, or
other independent agent who is retained on a full-time or substantially
full-time basis by the D. E. Shaw Group) to cease his employment with or
retention by the D. E. Shaw Group; or
(v) accept or solicit investment capital or debt financing
(directly or indirectly) from, or accept or solicit employment with, or accept
or solicit a consulting assignment with, any individual or entity, or an
officer, partner, principal, or affiliate of any entity, or another entity
managed by or otherwise affiliated with an officer, partner, principal, or
affiliate of any entity, that, as of the Termination Date or at any time within
the 18 months immediately preceding the Termination Date, provided or arranged
for the provision of more than 20 percent of the Capital of Juno Online
Services, L.P., Juno Online Services, Inc., D. E. Shaw Development, L.P. or any
other subsidiary of D. E. Shaw Development, L.P.
(b) EXCEPTIONS TO PREVENT UNDUE HARDSHIP. In the event that the
application of Section 6(a)(i) and/or Section 6(a)(ii) would, in the Company's
judgment, cause undue hardship to the Employee, the Management Company shall,
upon written request by the Employee, provide to the Employee a written
instrument authorizing such specific exceptions to the provisions of Section
6(a)(i) and/or Section 6(a)(ii) as the President of Juno Online Services, Inc.
shall determine are reasonably necessary to prevent such undue hardship, the
provisions of which instrument shall thereafter be deemed to supersede the
corresponding provisions of Section 6(a)(i) and/or Section 6(a)(ii).
(c) PRIOR RELATIONSHIPS. The provisions of Section 6(a)
notwithstanding, the Employee shall not by reason of Section 6(a) be restricted
from resuming, after the termination of his employment with the Company, any
employment or business relationship that preceded his employment with the
Company, or from providing or offering to provide any product or service to a
customer which the Employee provided to that customer at any time prior to his
employment by the Company; provided, however, that Section 4 and the other
provisions of this Section 6 shall continue to apply.
(d) EXCEPTION FOR UNRELATED ACTIVITIES. The provisions of Section 6(a)
notwithstanding, the Employee shall become free nine months after the
Termination Date to employ, retain, cause to be employed or retained, or enter
into a business relationship with any Related Person provided that neither the
Employee nor any Related Person directly or indirectly engages in business
activities competitive with the business activities of the Company in the course
of such employment, retention, or business relationship.
(e) EXCEPTION FOR D. E. SHAW GROUP. Nothing contained in this Agreement
shall prohibit the Employee from (i) at any time accepting employment with, or
entering into a consultant or contractor arrangement with, or becoming an
officer, agent, owner, or partner of, or becoming an investor in, any entity in
the D. E. Shaw Group; or (ii) at any time soliciting, persuading, encouraging or
inducing any other person (including without limitation a present employee of
the Company) to enter into such a relationship with an entity in the D. E. Shaw
Group; and the Company agrees that it shall not interfere with, or seek to
enjoin, any such activity.
(f) NO WAIVER OF COMMON LAW OR STATUTORY PROTECTION. Nothing contained
in this Agreement shall be deemed to weaken or waive any of the Company's rights
or protections that may be accorded by statute or common law as regards the
conduct of the Employee with respect to the Company's business, investors,
customers, clients, joint venture
<PAGE>
partners, employees, consultants, or contractors. The Employee authorizes the
Company and other D. E. Shaw Group entities to disclose this Agreement to any
person at any time, including without limitation any employer or prospective
employer of the Employee.
7. REASONABLENESS OF COVENANTS
(a) CERTAIN RECOGNITIONS. The Employee acknowledges that the
restrictions specified in Sections 4, 5, and 6 of this Agreement are reasonable
in view of the nature of the business in which the Company and/or the D. E. Shaw
Group is engaged, the Employee's position with the Company, and the Employee's
knowledge of the Company's and/or the D. E. Shaw Group's business.
The Employee recognizes that the amount of his compensation reflects
his Agreement in Sections 4, 5, and 6, and acknowledges that he will not be
subject to undue hardship by reason of his agreements set forth in Sections 4,
5, and 6.
(b) MODIFICATION OF RESTRICTION. Notwithstanding anything contained in
Sections 4, 5, or 6 of this Agreement to the contrary, if a court of competent
jurisdiction should hold any restriction specified in Sections 4, 5, or 6 to be
unreasonable, unenforceable, illegal or invalid, then that restriction shall be
limited to the extent necessary to be enforceable, and only to that extent. In
particular, and without limitation on the foregoing, if any provision of
Sections 4, 5, or 6 should be held to be unenforceable as to scope or length of
time or geographical area involved, such provision shall be deemed to be
enforceable as to, and shall be deemed to be amended to cover, the maximum
scope, maximum length of time, or broadest area, as the case may be, which is
then lawful.
(c) SURVIVAL OF COVENANTS. The obligations of the Employee under
Sections 4 and 6 of this Agreement shall survive the termination of this
Agreement and of his employment with the Company.
8. REGULATORY COMPLIANCE
The Employee agrees to abide by all applicable securities laws and all
applicable rules and regulations of the Securities Exchange Commission, the
National Association of Securities Dealers, the Commodity Futures Trading
Commission, and all other applicable self-regulatory organizations, including
those regulations requiring the disclosure to the D. E. Shaw Group's management
of all securities transactions conducted for the Employee's own account.
9. REMEDIES/ARBITRATION
(a) INJUNCTIONS, RESTRAINING ORDERS, AND OTHER EQUITABLE RELIEF. The
Employee acknowledges that breach or threatened breach of Sections 4, 5, or 6 of
this Agreement will cause the D. E. Shaw Group irreparable harm for which there
is no adequate remedy at law, and as a result of this, the D. E. Shaw Group
shall be entitled to the issuance by a court of competent jurisdiction of an
injunction, restraining order, or other equitable relief in favor of itself,
without the necessity of posting a bond, restraining the Employee from
committing or continuing to commit any such violation. Any right to obtain an
injunction, restraining order, or other equitable relief hereunder shall not be
deemed a waiver of any right to assert any other remedy the D. E. Shaw Group may
have at law or in equity. The right of the D. E. Shaw Group to seek equitable
relief under this Agreement shall be in addition to (and not in derogation of)
the requirement imposed on each party hereto to arbitrate disputes as provided
in Section 9(b) below.
(b) MANDATORY ARBITRATION. The Employee and the Company agree that any
claim, controversy or dispute between the Employee and the Company (including
without limitation its affiliates, officers, employees, representatives, or
agents) arising out of or relating to this Agreement, the employment of the
Employee, the cessation of employment of the Employee, or any matter relating to
the foregoing shall be submitted to and settled by arbitration in a forum of the
American Arbitration Association ("AAA") located in New York County in the State
of New York and conducted in accordance with the National Rules for the
Resolution of Employment Disputes. In such arbitration: (i) each arbitrator
shall agree to treat as confidential evidence and other information presented by
the parties to the same extent as Confidential Information under this Agreement
must be held confidential by the Employee, (ii) the arbitrators shall have no
authority to amend or modify any of the terms of this Agreement, and (iii) the
arbitrators shall have ten
<PAGE>
business days from the closing statements or submission of post-hearing briefs
by the parties to render their decision. Any arbitration award shall be final
and binding upon the parties, and any court, state or federal, having
jurisdiction may enter a judgment on the award. The foregoing requirement to
arbitrate claims, controversies, and disputes applies to all claims or demands
by the Employee, including without limitation any rights or claims the Employee
may have under the Age Discrimination in Employment Act of 1967 (which prohibits
age discrimination in employment), Title VII of the Civil Rights Act of 1964
(which prohibits discrimination in employment based on race, color, national
origin, religion, sex, or pregnancy), the Americans with Disabilities Act of
1991 (which prohibits discrimination in employment against qualified persons
with a disability), the Equal Pay Act (which prohibits paying men and women
unequal pay for equal work) or any other federal, state, or local laws or
regulations pertaining to the Employee's employment or the termination of the
Employee's employment.
(c) RECOVERY OF LEGAL FEES. If one of the parties to this Agreement
(the "Plaintiff") should bring a proceeding against the other party (the
"Defendant") in connection with an alleged breach or threatened breach of this
Agreement, and if such proceeding is ultimately resolved by an order or a
judgment in favor of the Defendant, by a voluntary discontinuance with prejudice
by the Plaintiff, or by an arbitration decision wholly in favor of the
Defendant, the Plaintiff will, upon presentation by the Defendant of appropriate
evidence of the amount and nature of the expense incurred, reimburse the
Defendant in an amount equal to the lesser of:
(i) the cost of all reasonable legal fees actually incurred by
the Defendant in connection with such litigation or arbitration; or
(ii) $100,000.
(d) FORUM. Each party submits to the jurisdiction of the courts, state
and federal, and arbitration forums (set forth in Section 9(b)) located in the
State of New York.
10. RELATIONSHIP OF THE PARTIES
The relationship between the Company and the Employee hereunder is
agreed to be solely that of employee and employer. Nothing contained herein and
no modification of responsibility or compensation made hereafter shall be
construed so as to constitute the parties as partners or joint venturers.
11. AMENDMENT OR ALTERATION
No amendment or alteration of the terms of this Agreement shall be
valid unless made in writing and signed by both of the parties hereto.
12. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS-OF-LAW
PRINCIPLES).
13. SEVERABILITY
The holding of any provision of this Agreement to be illegal, invalid,
or unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
14. WAIVER
The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion or occasions shall not be considered a waiver
thereof or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
<PAGE>
15. ENTIRE AGREEMENT
This Agreement contains the entire agreement of the parties and shall
supersede any prior verbal or written agreement or understanding between the
Employee and the Company. The Employee acknowledges that in choosing to accept
the Company's offer of employment (and/or to continue such employment), he has
not relied on any warranties, representations, or promises by the Company, its
employees, or any other parties except as specifically set forth herein.
16. ASSIGNMENT
Except as otherwise provided in this paragraph, this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective heirs, representatives, successors, and assigns. Neither this
Agreement nor any right or interest hereunder shall be assignable by the
Employee, his beneficiaries, or legal representatives without the Company's
prior written consent; provided, however, that nothing in this Section 16 shall
preclude the Employee from designating a beneficiary to receive any benefit
payable hereunder upon his death, or the executors, administrators, or other
legal representatives of the Employee or his estate from assigning any rights
hereunder to the person or persons entitled thereunto. This agreement shall be
assignable by the Company to a subsidiary or affiliate of the Company; to any
corporation, partnership, or other entity that may be organized by the Company,
its general partners, or its officers, as a separate business unit in connection
with the business activities of the Company or of its general partners or
officers; or to any corporation, partnership, or other entity resulting from the
reorganization, merger, or consolidation of the Company with any other
corporation, partnership, or other entity, or any corporation, partnership, or
other entity to or with which all or any portion of the Company's business or
assets may be sold, exchanged, or transferred. The Management Company, Juno
Online Services, L.P., and other members of the D. E. Shaw Group are third-party
beneficiaries of this Agreement.
17. NO ATTACHMENT
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null,
void, and of no effect.
18. NO COERCION OR DURESS
The Employee enters into this Agreement with full understanding of the
nature and extent of the restrictive covenants contained herein, and
acknowledges that because of the nature of the Company's business, this
Agreement would not be entered into without the restrictive covenants contained
herein.
The Employee acknowledges and agrees that he is entering into this
Agreement voluntarily and of his own free will in order to obtain the benefits
of employment, continued employment, and additional compensation by the Company.
The Employee acknowledges and agrees that he has not been coerced or suffered
any duress in order to induce him to enter into this Agreement.
19. HEADINGS
The Section headings appearing in this Agreement are used for
convenience of reference only and shall not be considered a part of this
Agreement or in any way modify, amend, or affect the meaning of any of its
provisions.
20. RULES OF CONSTRUCTION
Whenever the context so requires, the use of the masculine gender shall
be deemed to include the feminine and vice versa, and the use of the singular
shall be deemed to include the plural and vice versa. That this Agreement
<PAGE>
was drafted by the Company shall not be taken into account in interpreting or
construing any provision of this Agreement.
21. ACKNOWLEDGMENT OF RECEIPT
By signing below, the Employee acknowledges receiving a copy of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.
JUNO ONLINE SERVICES, INC.
By: /s/ CHARLES ARDAI
-----------------------------------
Charles Ardai
President
Date: 6/10/98
-----------------------------------
EMPLOYEE
Signature: /s/ ROBERT H. CHERINS
----------------------------------
Name: [FIRST NAME] [LAST NAME]
Address: 28 Ross Rd.
-----------------------------------
Livingston, N.J. 07039
-----------------------------------
Date: 6/10/98
-----------------------------------
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
AGREEMENT dated as of this 6th day of April, 1998, by and between D.
E. Shaw & Co., L.P., a Delaware limited partnership, and Mark Moraes
(the"Employee").
For purposes of this Agreement, the term "D. E. Shaw Group" shall
include, individually and/or collectively, (a) Juno Online Services, Inc. and
Juno Online Services, L.P. (the sole shareholder of Juno Online Services, Inc.);
(b) D. E. Shaw & Co., L.P. and D. E. Shaw & Co., Inc. (D. E. Shaw & Co., L.P.'s
general partner); (c) any partnership, other entity or account that D. E. Shaw &
Co., L.P. or D. E. Shaw & Co., Inc. owns, in whole or in part, or for which they
act, directly or indirectly, as general partner, investment manager, or
management company, along with their respective subsidiaries; (d) any other
affiliate of D. E. Shaw & Co., L.P. or of D. E. Shaw & Co., Inc. for which the
Employee provides services in his capacity as an employee of Juno Online
Services, Inc.; and (e) any predecessor or successor entity to (i) Juno Online
Services, Inc. or (ii) any partnership, entity, or account described in (c) and
(d) above. The term "Company" shall include Juno Online Services, Inc., Juno
Online Services, L.P. and, as applicable, any predecessor or successor companies
in the D. E. Shaw Group that have served, serve, or may in the future serve as
the employer of the Employee. The term "Management Company" means D. E. Shaw &
Co., Inc. and its successor. References in this Agreement to any entity also
refer to any successor to that entity. The term "Capital" means (A) equity
financing, and/or (B) certain debt financing (other than bank financing, than
equipment leasing and than ordinary trade payables incurred in connection with
the purchase of goods or services by Juno Online Services, L.P. or its
subsidiaries), as identified by the Management Company in its sole discretion.
WHEREAS, the Company desires to retain (or to continue to retain) the
Employee on the terms and conditions hereinafter set forth, and the Employee is
willing to undertake (or to continue) employment by the Company upon such terms
and conditions;
NOW, THEREFORE, in consideration of the foregoing and in consideration
of their mutual promises and agreements contained herein, the parties hereto
agree as follows:
1. EMPLOYMENT
Employment shall commence (or has commenced) on April 1, 1992, and may
be terminated by either party at any time, for any reason, upon 30 days notice
(the "Notice Period"), which notice may be given either verbally or in writing.
Notwithstanding the foregoing, the Company may elect to terminate immediately
upon notice, except that in this event, the compensation and benefits set forth
in Section 2 shall be continued for the duration of the Notice Period. The
Employee acknowledges and agrees that he is an employee at will, and that just
as the Employee is free to resign at any time, the Company has the right to
terminate the employment relationship at any time for any lawful reason. The
Employee acknowledges and agrees that no representative of the Company may
verbally change the at will employment relationship between the Employee and the
Company. References to time periods in this Agreement shall not be construed or
interpreted as promising or guaranteeing employment for any specific duration or
until any specific date.
2. COMPENSATION
(a) BASE SALARY DURING THE COMPENSATION PERIOD. As compensation for the
Employee's services during the period beginning January 1, 1998 and ending on
December 31, 1998 (the "Compensation Period"), the Company shall pay the
Employee a base salary computed at an annual rate of $150,000 per year, prorated
to correspond to that portion of the Compensation Period during which the
Employee is actually employed with the Company, such base salary to be paid
semi-monthly.
(b) BASE SALARY AFTER THE COMPENSATION PERIOD. As of the end of the
Compensation Period, or as of the end of any subsequent calendar year, the
Employee's base salary may be increased or decreased, or the manner in which the
<PAGE>
Employee is compensated may be changed, in the sole discretion of the President
of Juno Online Services, Inc., expressed in writing by the Management Company.
Any such change in compensation shall be deemed to modify only this Section 2 of
this Agreement, and all other provisions of this Agreement shall remain in
effect following such change in compensation. In the absence of any such change,
the Employee's base salary shall remain the same as it was during the
Compensation Period.
(c) DISCRETIONARY YEAR-END BONUS. At the end of each calendar year that
includes one or more days falling within the Compensation Period, the Company
may (or may not, in the sole discretion of the Management Company) pay the
Employee a year-end bonus. The award and amount of any such bonus shall be
determined in the sole discretion of the Management Company, which date shall
ordinarily be no later than March 15th of the following calendar year, or as
soon thereafter as is practicable.
(d) YEAR-END BONUS AFTER THE COMPENSATION PERIOD. As of the end of the
Compensation Period, or as of the end of any subsequent calendar year, the
Employee's year-end bonus, if any, and/or the non refundable advance against
such year-end bonus, if any, may be increased, decreased, or eliminated, or the
manner in which the Employee is compensated may be changed, in the sole
discretion of the Management Company, expressed in writing by the Management
Company. Any such change in compensation shall be deemed to modify only this
Section 2 of this Agreement, and all other provisions of this Agreement shall
remain in effect following such change in the Compensation Period, the Company
shall not have any obligation to continue to pay a year-end bonus to the
Employee unless such an arrangement is explicitly agreed to in writing by the
Management Company.
(e) STANDARD COMPANY BENEFITS. In addition to the compensation outlined
elsewhere in this Section 2, the Company shall provide to the Employee all of
the benefits included in the Juno Online Services, L.P.'s standard benefit
package, which currently include medical (hospitalization and major medical),
dental, disability, life, and accidental death and dismemberment insurance. Most
of the cost of such benefits shall be borne by the Company. However, in the case
of coverage for the Employee himself, the Employee contributes a nominal pre-tax
amount to the cost of the medical insurance; if the Employee wishes to obtain
coverage for other qualified family members, and arranges with the Company's
insurance providers (through the Company's Human Resources staff) to obtain such
additional coverage, the Employee will also be required to contribute part of
the incremental cost of such coverage. Individual and dependent medical
insurance contribution amounts are determined on a set scale, based on both the
actual cost of the insurance and on the Employee's base salary. The required
contribution will be borne by the Employee by means of a voluntary salary
reduction in the amount of the contribution implemented by the Company at the
request of the Employee.
The standard benefit package also currently includes a flexible
spending account plan and a 401(k) retirement plan, available to all qualified
full-time employees after a certain period of employment with the Company. The
401(k) retirement plan currently includes a matching program and a graded
vesting schedule; the Company does not contribute to the flexible spending
account plan, but the Employee may contribute pre-tax dollars. The Employee
agrees that the composition, providers, and all other aspects of the Company's
standard benefit package may be changed from time to time in the sole discretion
of the Management Company.
(f) EXCLUSIVE COMPENSATION. The compensation and benefits described in
this Section 2 shall be the exclusive compensation due to the Employee from the
Company or any of its affiliates during or on account of the services of the
Employee. If directed by the Company, the Employee shall provide the services
described in this Agreement to one or more affiliates of the Company without
compensation other than as specified in this Section 2.
3. DISCLOSURE TO THE COMPANY
(a) DISCLOSURE OF INFORMATION TO THE COMPANY. The Employee shall
promptly disclose and deliver over to the Company, without additional
compensation, to the extent that such disclosure could reasonably be expected to
be of interest to the D. E. Shaw Group, in writing, or in such form and manner
as the Company may reasonably require:
(i) any and all algorithms, procedures, methods or techniques
directly related to electronic communication and/or commerce or to the
Employee's work with the Company, and the essential ideas and principles
<PAGE>
underlying such algorithms, procedures, methods or techniques, conceived,
originated, discovered, developed, evaluated, tested, or applied by the Employee
while employed by the Company, whether or not such algorithms, procedures,
methods or techniques are embodied in a computer program;
(ii) any and all programming, marketing, advertising, or
financing strategies, the essential ideas and principles on which such
strategies are based, and any information that might reasonably be expected to
lead to the development of such strategies, conceived, originated, discovered,
developed, evaluated, tested, or employed by the Employee while employed by the
Company, whether or not such strategies are embodied in a computer program;
(iii) any and all Internet-related and other products and
services, and the essential ideas and principles underlying such products and
services, conceived, originated, adapted, developed, evaluated, tested, or
applied by the Employee while employed by the Company, whether or not such
products or services are embodied in a computer program, and whether or not
marketed, sold, or provided by the D. E. Shaw Group;
(iv) such information and data pertaining to the business,
operations, personnel, activities, financial status and affairs, current or
anticipated business or investment objectives or practices, current or
anticipated requirements for Internet-related or other products or services, and
other information relating to current or prospective investors, other current or
prospective funding sources, limited partners, shareholders, clients, customers,
accounts, joint venturers, or other business affiliates of the D. E. Shaw Group,
and of the officers, partners, principals, employees, and other persons
affiliated with such current or prospective investors, limited partners,
shareholders, clients, customers, accounts, joint venturers, or other business
affiliates, as is known to the Employee and as might reasonably be expected to
be of value to the D. E. Shaw Group in developing, maintaining, or expanding its
current or prospective business relationships with such current or prospective
investors, limited partners, shareholders, clients, customers, accounts, joint
venturers, or other business affiliates.
(b) PERIOD COVERED; INFORMATION EXCLUDED. The provisions of this
Section 3 shall apply to information acquired by the Employee at any time during
his employment with the Company, whether prior to or subsequent to the execution
of this Agreement.
The Employee agrees not to disclose to the D. E. Shaw Group any
confidential or proprietary information belonging to any previous employer of
the Employee that is not part of the D. E. Shaw Group, or belonging to any other
party, without first securing the written permission of such previous employer
or other party.
(c) DISCLOSURE UPON TERMINATION. Any information required to be
disclosed under this Section 3 that has not yet been disclosed by the Employee
to the Company at the time of the termination of the Employee's employment with
the Company, without regard to when or for what reason, if any, such employment
shall terminate, shall be disclosed to the Company in writing, or in such form
and manner as the Company may reasonably require, within 10 days of the
termination of the Employee's employment with the Company.
4. CONFIDENTIAL INFORMATION
(a) DEFINITION. The parties acknowledge that, in order to permit the
Employee to successfully perform and/or continue to perform the duties
associated with his employment with the Company, it is necessary for the Company
to entrust the Employee with certain valuable proprietary information and
knowledge of certain modes of business operation ("Confidential Information")
which are essential to the profitable operation of the D. E. Shaw Group, and
which give the D. E. Shaw Group a competitive advantage over other firms
pursuing related business activities. In the context of this Agreement, the term
"Confidential Information" shall be deemed to include
(i) computer software or data of any sort developed (in the
case of software) or compiled (in the case of data) by the D. E. Shaw Group;
(ii) the fact that the D. E. Shaw Group uses, has used, or has
evaluated for potential use a particular computer program or system, if the
disclosure of such fact to a competitor of the D. E. Shaw Group might reasonably
be expected to adversely affect the competitive position of the D. E. Shaw Group
relative to that of such a competitor; provided, however, that information about
the type of computers, computer peripherals, operating systems, database
systems, or other systems software which the D. E. Shaw Group uses, has used, or
has evaluated for potential use, but which is not specific to any financial or
Internet related application, shall not by reason of this Section 4(a)(ii) be
considered Confidential Information;
<PAGE>
(iii) algorithms, procedures, methods, or techniques, or the
essential ideas and principles underlying such algorithms, procedures, methods,
or techniques, developed by the D. E. Shaw Group (but excluding any public
domain algorithm, procedure, or technique), whether or not such algorithms,
procedures, methods, or techniques are embodied in a computer program;
(iv) the fact that the D. E. Shaw Group uses, has used, or has
evaluated for potential use any particular algorithm, procedure, or technique
developed by a party other than the D. E. Shaw Group, whether or not such
algorithm, procedure, or technique is embodied in a computer program, if the
disclosure of such information to a competitor of the D. E. Shaw Group might
reasonably be expected to adversely affect the competitive position of the D. E.
Shaw Group relative to that of such a competitor;
(v) the results of any programming, marketing, advertising,
financial, or other analysis conducted by the D. E. Shaw Group for its own
internal use (and not approved for dissemination to its customers, investors,
consultants, joint venturers, or other parties);
(vi) any information that would typically be included in the
D. E. Shaw Group's income statements, including, but not limited to the amount
of the D. E. Shaw Group's revenues, expenses, or net income;
(vii) any plans for the business of the Company or of other
members of the D. E. Shaw Group (whether or not such plans have been reduced to
writing); financial information concerning such plans (including without
limitation projected revenues, projected expenses, projected net income and
information concerning rates and costs of customer acquisition and retention);
descriptions of such business and technical aspects of or relating to the
operation of such business (including without limitation algorithms, computer
programs, processes or formulas that relate to computer and network security,
authentication, logging, accounting and distribution); and products and services
that the D. E. Shaw Group is considering offering to its subscribers and/or to
other persons;
(viii) any other information gained in the course of the
Employee's employment with the Company that could reasonably be expected to
prove deleterious to the D. E. Shaw Group if disclosed to third parties,
including without limitation any information that could reasonably be expected
to aid a competitor of the D. E. Shaw Group in making inferences regarding the
nature of the D. E. Shaw Group's proprietary and/or World Wide Web-related
activities, where such inferences could reasonably be expected to adversely
affect the competitive position of the D. E. Shaw Group relative to that of such
a competitor;
(ix) any other information gained in the course of or incident
to the Employee's employment with the Company that the D. E. Shaw Group has
received from a third party and is required to hold confidential in connection
with an agreement between the D. E. Shaw Group and such third party;
(x) any other information gained in the course of or incident
to the Employee's employment with the Company that the Company treats or
designates as Confidential Information and which is not publicly available.
(b) USE AND DISCLOSURE.
(i) The Employee acknowledges that he has acquired and/or will
acquire Confidential Information in the course of or incident to his employment
with the Company. Accordingly, the Employee agrees that he shall not, directly
or indirectly, at any time, during the term of his employment with the Company
or at any time thereafter, and without regard to when or for what reason, if
any, such employment shall terminate, use or cause to be used any such
Confidential Information, whether acquired prior to or subsequent to the
execution of this Agreement, in connection with any activity or business except
the business of the D. E. Shaw Group, and shall not disclose such Confidential
Information to any individual, partnership, corporation, or other entity unless
such disclosure has been authorized in writing by the Management Company, or
except as may be required by any applicable law or by order of a court of
competent jurisdiction, a regulatory or self-regulatory body, or a governmental
body.
(ii) The provisions of Section 4(b)(i) notwithstanding, the
Employee shall be free to disclose any information contained in any
non-confidential brochure or other promotional material which the D. E. Shaw
Group routinely makes available to the press and/or the general public
(including, but not limited to (A) the Company's public site of Juno Online
Services, L.P. on the World Wide Web (www.juno.com); (B) the official "Company
Profile," of the D. E. Shaw Group; (C) the general overview brochure describing
the D. E. Shaw Group's Third Market operation; and (D) the general overview
brochure describing D. E. Shaw Securities International), and shall be free to
disclose or use any information which is in or which enters the public domain
prior to the time of such disclosure or use (except where such information
enters the public domain as a result of unauthorized actions of the Employee).
The Employee acknowledges, however, that (A) a large number of market
inefficiencies and trading strategies, and a large number of
<PAGE>
analyses, observations, and findings from which such market inefficiencies and
trading strategies might be derived, and (B) a large number of programming
techniques and programming strategies, and a large number of analyses,
observations and findings from which such computer programming techniques and
strategies might be derived, have been or may be reported in the open
literature, or may otherwise have entered or may enter the public domain, and
that one of the Company's most valuable forms of Confidential Information is its
accumulated knowledge, based on research, analysis, and experimentation not
reported in the open literature or otherwise falling within the public domain,
of which of these market inefficiencies, trading strategies, programming
techniques, and programming strategies, and which of these analyses,
observations, and findings, are likely to form the basis for practical,
profitable business applications for the D. E. Shaw Group ("Confidential
Applicability Information"). The Employee thus agrees that he shall not,
directly or indirectly, at any time, during the term of his employment with the
Company, or at any time thereafter, and without regard to when or for what
reason, if any, such employment shall terminate, use or cause to be used any
Confidential Applicability Information in connection with any activity or
business except the business of the D. E. Shaw Group, and shall not disclose
such Confidential Applicability Information to any individual, partnership,
corporation, or other entity, unless what would otherwise be deemed to
constitute Confidential Applicability Information is itself in or itself enters
the public domain by some means other than as a result of unauthorized actions
of the Employee, or unless such disclosure has been authorized in writing by the
Management Company, or except as may be required by any applicable law or by
order of a court of competent jurisdiction, a regulatory or self-regulatory
body, or a governmental body.
(iii) In the event that the Employee is required to disclose
Confidential Information or Confidential Applicability Information pursuant to
judicial or administrative process or other requirements of law, the Employee
will (A) notify the Company of his receipt of such process within 24 hours of
such receipt, and prior to any disclosure being made, (B) to the extent
reasonably practicable, consult with the Company on the advisability of taking
steps to resist or narrow such request provided that the ultimate decision shall
be that of the Employee, and (C) if disclosure is required or deemed advisable,
cooperate with the Company in any attempt that it may make in order to obtain an
order or other reliable assurance that confidential treatment will be accorded
to designated portions of such information. If no such order is obtained by the
Company, disclosure of such information by the Employee shall not be deemed a
violation of this Agreement. If such an order is obtained, then disclosure of
the information covered by such order in the manner described in the order shall
not be deemed a violation of this Agreement. The Employee shall be entitled to
reimbursement for his reasonable expenses, including the fees and expenses of
his counsel, in connection with action taken pursuant to this paragraph.
(iv) The provisions of Sections 4(b)(i), 4(b)(ii), and
4(b)(iii) notwithstanding, the Employee shall be free to disclose or use any
information which was obtained by the Employee prior to his employment with the
Company, or which is obtained by the Employee subsequent to and independent of
his relationship with the D. E. Shaw Group.
(v) The provisions of Section 4(b)(i), 4(b)(ii), and 4(b)(iii)
notwithstanding, the Employee shall, with the prior written permission of the
Management Company, be free to disclose selected Confidential Information and/or
Confidential Applicability Information to a limited number of parties for the
purpose of securing employment subsequent to the Employee's employment with the
Company or progressing professionally, provided further that where such
disclosure would not be harmful to the D. E. Shaw Group, such permission shall
not be unreasonably withheld. For purposes of this Section 4(b)(v), the
termination of the Employee's employment with the Company shall not in itself be
deemed harmful to the D. E. Shaw Group, even if such termination is voluntary.
(c) RETURN AND OWNERSHIP OF DOCUMENTS AND WORK PRODUCT. Upon the
termination of the Employee's employment with the Company for any reason, the
Employee promises and agrees to return immediately to the Company any and all
Confidential Information and all other materials or documents, including without
limitation mailing lists, rolodexes, computer print-outs, and computer disks and
tapes, belonging to the Company which contain information pertaining to the D.
E. Shaw Group's business, methods, clients, potential clients, customers,
potential customers, investors, potential investors, funding providers,
potential funding providers, or employees, unless the Company consents in
writing to the Employee's retention thereof.
(d) OWNERSHIP OF INTELLECTUAL PROPERTY. All right, title, and interest
of every kind and nature whatsoever, whether now known or unknown, in and to any
intellectual property ("Intellectual Property"), including without limitation
any ideas, inventions (whether or not patentable), designs, improvements,
discoveries, innovations, patents,
<PAGE>
trademarks, service marks, trade dress, trade names, trade secrets, works of
authorship, copyrights, films, audio and video tapes, other audio and visual
works of any kind, scripts, sketches, models, formulas, tests, analyses,
software, firmware, computer processes, computer and other applications,
creations, properties, and any documentation or other memorialization containing
or relating to the foregoing, in each case discovered, invented, created,
written, developed, taped, filmed, furnished, produced, or disclosed by or to
the Employee in the course of rendering services to the Company shall, as
between the parties hereto, be and remain the sole and exclusive property of
Juno Online Services, L.P. for any and all purposes and uses whatsoever, and the
Employee and his successors and assigns shall have no right, title, or interest
of any kind or nature therein or thereto, or in or to any results and proceeds
therefrom. Juno Online Services L.P. shall have all right, title, and interest
in such Intellectual Property, whether such Intellectual Property is conceived
by the Employee alone or with others and whether conceived during regular
working hours or other hours.
The Employee makes, and agrees to make and execute, any assignment
necessary to perfect Juno Online Services, L.P.'s right, title, and interest in
Intellectual Property, and agrees to perform any act reasonably requested by the
Company in furtherance of any such assignment, and/or of perfecting Juno Online
Services, L.P.'s rights in Intellectual Property.
(e) NO WAIVER OF TRADE SECRET PROTECTION. Nothing contained in this
Agreement shall be deemed to weaken or waive any rights related to the
protection of trade secrets or confidential business information that the
Company may have under common law or any applicable statutes or rules.
5. COMPETITION WHILE EMPLOYED
During the period of his employment with the Company, the Employee will
not, directly or indirectly, without the written consent of the Management
Company, and whether or not for compensation, either for his own account or as
an employee, officer, agent, consultant, director, owner, partner, joint
venturer, shareholder, investor, or in any other capacity (except in the
capacity of an employee or officer of the Company acting for the benefit of the
D. E. Shaw Group):
(a) perform a function which is of the same nature as, or substantively
similar to, a function that the employee performs for the Company; or
(b) engage in any activity or business which is the same nature as, or
substantively similar to, an activity or business of the Company or an activity
or business which the Company is developing and of which the Employee has
knowledge.
6. INTERFERENCE WITH RELATIONSHIPS
(a) RESTRICTIONS ON INTERFERENCE. While employed by the Company, and
for a period of 18 months after the date the Employee ceases to be employed by
the Company, without regard to when or for what reason, if any, such employment
shall terminate (the "Termination Date"), the Employee shall not, directly or
indirectly, without the written consent of the Management Company, and whether
or not for compensation, either on his own behalf or as an employee, officer,
agent, consultant, director, owner, partner, joint venturer, shareholder,
investor, or in any other capacity (except in the capacity of an employee or
officer of the Company acting for the benefit of the Company or an employee or
officer of another entity affiliated with David E. Shaw), knowingly:
(i) interfere with an ongoing (as of the Termination Date)
relationship between the Company and one of its customers (except as permitted
under the provisions of Sections 6(b) and 6(c) below) by providing or offering
to provide a product or service to that customer which, as of the Termination
Date, was provided to that customer by a business unit of the Company in which
the Employee worked during his employment with the Company, if by so doing, the
Employee might reasonably be expected to cause the Company to suffer a loss of
profits from or other damage to its business relationship with that customer;
(ii) interfere with an ongoing (as of the Termination Date)
joint venture, strategic alliance, licensing agreement, distribution
relationship, advertising relationship, or similar agreement or relationship
between the Company and another business entity (the "Joint Venture
Relationship") by entering into or proposing to enter into a
<PAGE>
substantially similar business relationship with that entity, if the Employee
was directly involved in that Joint Venture Relationship during his employment
with the Company, and if by so doing, the Employee might reasonably be expected
to cause the Company to suffer a loss of profits that would otherwise accrue to
the Company in connection with that Joint Venture Relationship, or to suffer
other damage to that Joint Venture Relationship;
(iii) employ, or retain as a consultant or contractor, or
cause to be so employed or retained, or enter into a partnership or business
venture with, any person (a "Related Person") who at the time of such action (A)
is an employee of the D. E. Shaw Group; (B) has been employed by the D. E. Shaw
Group at any time within the previous 18 months; (C) is a consultant, sales
agent, contract programmer, or other independent agent who is retained on a
full-time or substantially full-time basis by the D. E. Shaw Group; or (D) has
been retained on a full-time or substantially full-time basis by the D. E. Shaw
Group as a consultant, sales agent, contract programmer, or other independent
agent at any time within the previous 18 months;
(iv) solicit, persuade, encourage, or induce any employee of
the D. E. Shaw Group (or any consultant, sales agent, contract programmer, or
other independent agent who is retained on a full-time or substantially
full-time basis by the D. E. Shaw Group) to cease his employment with or
retention by the D. E. Shaw Group; or
(v) accept or solicit investment capital or debt financing
(directly or indirectly) from, or accept or solicit employment with, or accept
or solicit a consulting assignment with, any individual or entity, or an
officer, partner, principal, or affiliate of any entity, or another entity
managed by or otherwise affiliated with an officer, partner, principal, or
affiliate of any entity, that, as of the Termination Date or at any time within
the 18 months immediately preceding the Termination Date, provided or arranged
for the provision of more than 20 percent of the Capital of Juno Online
Services, L.P., Juno Online Services, Inc., D. E. Shaw Development, L.P. or any
other subsidiary of D. E. Shaw Development, L.P.
(b) EXCEPTIONS TO PREVENT UNDUE HARDSHIP. In the event that the
application of Section 6(a)(i) and/or Section 6(a)(ii) would, in the Company's
judgment, cause undue hardship to the Employee, the Management Company shall,
upon written request by the Employee, provide to the Employee a written
instrument authorizing such specific exceptions to the provisions of Section
6(a)(i) and/or Section 6(a)(ii) as the President of Juno Online Services, Inc.
shall determine are reasonably necessary to prevent such undue hardship, the
provisions of which instrument shall thereafter be deemed to supersede the
corresponding provisions of Section 6(a)(i) and/or Section 6(a)(ii).
(c) PRIOR RELATIONSHIPS. The provisions of Section 6(a)
notwithstanding, the Employee shall not by reason of Section 6(a) be restricted
from resuming, after the termination of his employment with the Company, any
employment or business relationship that preceded his employment with the
Company, or from providing or offering to provide any product or service to a
customer which the Employee provided to that customer at any time prior to his
employment by the Company; provided, however, that Section 4 and the other
provisions of this Section 6 shall continue to apply.
(d) EXCEPTION FOR UNRELATED ACTIVITIES. The provisions of Section 6(a)
notwithstanding, the Employee shall become free nine months after the
Termination Date to employ, retain, cause to be employed or retained, or enter
into a business relationship with any Related Person provided that neither the
Employee nor any Related Person directly or indirectly engages in business
activities competitive with the business activities of the Company in the course
of such employment, retention, or business relationship.
(e) EXCEPTION FOR D. E. SHAW GROUP. Nothing contained in this Agreement
shall prohibit the Employee from (i) at any time accepting employment with, or
entering into a consultant or contractor arrangement with, or becoming an
officer, agent, owner, or partner of, or becoming an investor in, any entity in
the D. E. Shaw Group; or (ii) at any time soliciting, persuading, encouraging or
inducing any other person (including without limitation a present employee of
the Company) to enter into such a relationship with an entity in the D. E. Shaw
Group; and the Company agrees that it shall not interfere with, or seek to
enjoin, any such activity.
(f) NO WAIVER OF COMMON LAW OR STATUTORY PROTECTION. Nothing contained
in this Agreement shall be deemed to weaken or waive any of the Company's rights
or protections that may be accorded by statute or common law as regards the
conduct of the Employee with respect to the Company's business, investors,
customers, clients, joint venture partners, employees, consultants, or
contractors. The Employee authorizes the Company and other D. E. Shaw Group
<PAGE>
entities to disclose this Agreement to any person at any time, including without
limitation any employer or prospective employer of the Employee.
7. REASONABLENESS OF COVENANTS
(a) CERTAIN RECOGNITIONS. The Employee acknowledges that the
restrictions specified in Sections 4, 5, and 6 of this Agreement are reasonable
in view of the nature of the business in which the Company and/or the D. E. Shaw
Group is engaged, the Employee's position with the Company, and the Employee's
knowledge of the Company's and/or the D. E. Shaw Group's business.
The Employee recognizes that the amount of his compensation reflects
his Agreement in Sections 4, 5, and 6, and acknowledges that he will not be
subject to undue hardship by reason of his agreements set forth in Sections 4,
5, and 6.
(b) MODIFICATION OF RESTRICTION. Notwithstanding anything contained in
Sections 4, 5, or 6 of this Agreement to the contrary, if a court of competent
jurisdiction should hold any restriction specified in Sections 4, 5, or 6 to be
unreasonable, unenforceable, illegal or invalid, then that restriction shall be
limited to the extent necessary to be enforceable, and only to that extent. In
particular, and without limitation on the foregoing, if any provision of
Sections 4, 5, or 6 should be held to be unenforceable as to scope or length of
time or geographical area involved, such provision shall be deemed to be
enforceable as to, and shall be deemed to be amended to cover, the maximum
scope, maximum length of time, or broadest area, as the case may be, which is
then lawful.
(c) SURVIVAL OF COVENANTS. The obligations of the Employee under
Sections 4 and 6 of this Agreement shall survive the termination of this
Agreement and of his employment with the Company.
8. REGULATORY COMPLIANCE
The Employee agrees to abide by all applicable securities laws and all
applicable rules and regulations of the Securities Exchange Commission, the
National Association of Securities Dealers, the Commodity Futures Trading
Commission, and all other applicable self-regulatory organizations, including
those regulations requiring the disclosure to the D. E. Shaw Group's management
of all securities transactions conducted for the Employee's own account.
9. REMEDIES/ARBITRATION
(a) INJUNCTIONS, RESTRAINING ORDERS, AND OTHER EQUITABLE RELIEF. The
Employee acknowledges that breach or threatened breach of Sections 4, 5, or 6 of
this Agreement will cause the D. E. Shaw Group irreparable harm for which there
is no adequate remedy at law, and as a result of this, the D. E. Shaw Group
shall be entitled to the issuance by a court of competent jurisdiction of an
injunction, restraining order, or other equitable relief in favor of itself,
without the necessity of posting a bond, restraining the Employee from
committing or continuing to commit any such violation. Any right to obtain an
injunction, restraining order, or other equitable relief hereunder shall not be
deemed a waiver of any right to assert any other remedy the D. E. Shaw Group may
have at law or in equity. The right of the D. E. Shaw Group to seek equitable
relief under this Agreement shall be in addition to (and not in derogation of)
the requirement imposed on each party hereto to arbitrate disputes as provided
in Section 9(b) below.
(b) MANDATORY ARBITRATION. The Employee and the Company agree that any
claim, controversy or dispute between the Employee and the Company (including
without limitation its affiliates, officers, employees, representatives, or
agents) arising out of or relating to this Agreement, the employment of the
Employee, the cessation of employment of the Employee, or any matter relating to
the foregoing shall be submitted to and settled by arbitration in a forum of the
American Arbitration Association ("AAA") located in New York County in the State
of New York and conducted in accordance with the National Rules for the
Resolution of Employment Disputes. In such arbitration: (i) each arbitrator
shall agree to treat as confidential evidence and other information presented by
the parties to the same extent as Confidential Information under this Agreement
must be held confidential by the Employee, (ii) the arbitrators shall
<PAGE>
have no authority to amend or modify any of the terms of this Agreement, and
(iii) the arbitrators shall have ten business days from the closing statements
or submission of post-hearing briefs by the parties to render their decision.
Any arbitration award shall be final and binding upon the parties, and any
court, state or federal, having jurisdiction may enter a judgment on the award.
The foregoing requirement to arbitrate claims, controversies, and disputes
applies to all claims or demands by the Employee, including without limitation
any rights or claims the Employee may have under the Age Discrimination in
Employment Act of 1967 (which prohibits age discrimination in employment), Title
VII of the Civil Rights Act of 1964 (which prohibits discrimination in
employment based on race, color, national origin, religion, sex, or pregnancy),
the Americans with Disabilities Act of 1991 (which prohibits discrimination in
employment against qualified persons with a disability), the Equal Pay Act
(which prohibits paying men and women unequal pay for equal work) or any other
federal, state, or local laws or regulations pertaining to the Employee's
employment or the termination of the Employee's employment.
(c) RECOVERY OF LEGAL FEES. If one of the parties to this Agreement
(the "Plaintiff") should bring a proceeding against the other party (the
"Defendant") in connection with an alleged breach or threatened breach of this
Agreement, and if such proceeding is ultimately resolved by an order or a
judgment in favor of the Defendant, by a voluntary discontinuance with prejudice
by the Plaintiff, or by an arbitration decision wholly in favor of the
Defendant, the Plaintiff will, upon presentation by the Defendant of appropriate
evidence of the amount and nature of the expense incurred, reimburse the
Defendant in an amount equal to the lesser of:
(i) the cost of all reasonable legal fees actually incurred by
the Defendant in connection with such litigation or arbitration; or
(ii) $100,000.
(d) FORUM. Each party submits to the jurisdiction of the courts, state
and federal, and arbitration forums (set forth in Section 9(b)) located in the
State of New York.
10. RELATIONSHIP OF THE PARTIES
The relationship between the Company and the Employee hereunder is
agreed to be solely that of employee and employer. Nothing contained herein and
no modification of responsibility or compensation made hereafter shall be
construed so as to constitute the parties as partners or joint venturers.
11. AMENDMENT OR ALTERATION
No amendment or alteration of the terms of this Agreement shall be
valid unless made in writing and signed by both of the parties hereto.
12. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS-OF-LAW
PRINCIPLES).
13. SEVERABILITY
The holding of any provision of this Agreement to be illegal, invalid,
or unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
14. WAIVER
The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion or occasions shall not be considered a waiver
thereof or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
<PAGE>
15. ENTIRE AGREEMENT
This Agreement contains the entire agreement of the parties and shall
supersede any prior verbal or written agreement or understanding between the
Employee and the Company. The Employee acknowledges that in choosing to accept
the Company's offer of employment (and/or to continue such employment), he has
not relied on any warranties, representations, or promises by the Company, its
employees, or any other parties except as specifically set forth herein.
16. ASSIGNMENT
Except as otherwise provided in this paragraph, this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective heirs, representatives, successors, and assigns. Neither this
Agreement nor any right or interest hereunder shall be assignable by the
Employee, his beneficiaries, or legal representatives without the Company's
prior written consent; provided, however, that nothing in this Section 16 shall
preclude the Employee from designating a beneficiary to receive any benefit
payable hereunder upon his death, or the executors, administrators, or other
legal representatives of the Employee or his estate from assigning any rights
hereunder to the person or persons entitled thereunto. This agreement shall be
assignable by the Company to a subsidiary or affiliate of the Company; to any
corporation, partnership, or other entity that may be organized by the Company,
its general partners, or its officers, as a separate business unit in connection
with the business activities of the Company or of its general partners or
officers; or to any corporation, partnership, or other entity resulting from the
reorganization, merger, or consolidation of the Company with any other
corporation, partnership, or other entity, or any corporation, partnership, or
other entity to or with which all or any portion of the Company's business or
assets may be sold, exchanged, or transferred. The Management Company, Juno
Online Services, L.P., and other members of the D. E. Shaw Group are third-party
beneficiaries of this Agreement.
17. NO ATTACHMENT
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null,
void, and of no effect.
18. NO COERCION OR DURESS
The Employee enters into this Agreement with full understanding of the
nature and extent of the restrictive covenants contained herein, and
acknowledges that because of the nature of the Company's business, this
Agreement would not be entered into without the restrictive covenants contained
herein.
The Employee acknowledges and agrees that he is entering into this
Agreement voluntarily and of his own free will in order to obtain the benefits
of employment, continued employment, and additional compensation by the Company.
The Employee acknowledges and agrees that he has not been coerced or suffered
any duress in order to induce him to enter into this Agreement.
19. HEADINGS
The Section headings appearing in this Agreement are used for
convenience of reference only and shall not be considered a part of this
Agreement or in any way modify, amend, or affect the meaning of any of its
provisions.
<PAGE>
20. RULES OF CONSTRUCTION
Whenever the context so requires, the use of the masculine gender shall
be deemed to include the feminine and vice versa, and the use of the singular
shall be deemed to include the plural and vice versa. That this Agreement was
drafted by the Company shall not be taken into account in interpreting or
construing any provision of this Agreement.
21. ACKNOWLEDGMENT OF RECEIPT
By signing below, the Employee acknowledges receiving a copy of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.
D. E. SHAW & CO., L.P.
By: /s/ CHARLES ARDAI
-----------------------------------
Charles Ardai
Managing Director
Date: 4/6/98
-----------------------------------
EMPLOYEE
Signature: /s/ MARK MORAES
----------------------------------
Name: Mark Moraes
Address: c/o D.E. Shaw & Co.
------------------------------------
120 W. 45th St., 39th Fl.
New York, NY 10036
------------------------------------
Date: 31 Mar 1998
------------------------------------
<PAGE>
Exhibit 10.15
EMPLOYMENT AGREEMENT
AGREEMENT dated as of this 25th day of September, 1998, by and
between Juno Online Services, Inc., a Delaware corporation, and Richard Eaton
(the "Employee").
For purposes of this Agreement, the term "D. E. Shaw Group" shall
include, individually and/or collectively, (a) Juno Online Services, Inc. and
Juno Online Services, L.P. (the sole shareholder of Juno Online Services, Inc.);
(b) D. E. Shaw & Co., L.P. and D. E. Shaw & Co., Inc. (D. E. Shaw & Co., L.P.'s
general partner); (c) any partnership, other entity or account that D. E. Shaw &
Co., L.P. or D. E. Shaw & Co., Inc. owns, in whole or in part, or for which they
act, directly or indirectly, as general partner, investment manager, or
management company, along with their respective subsidiaries; (d) any other
affiliate of D. E. Shaw & Co., L.P. or of D. E. Shaw & Co., Inc. for which the
Employee provides services in his capacity as an employee of Juno Online
Services, Inc.; and (e) any predecessor or successor entity to (i) Juno Online
Services, Inc. or (ii) any partnership, entity, or account described in (c) and
(d) above. The term "Company" shall include Juno Online Services, Inc., Juno
Online Services, L.P. and, as applicable, any predecessor or successor companies
in the D. E. Shaw Group that have served, serve, or may in the future serve as
the employer of the Employee. The term "Management Company" means D. E. Shaw &
Co., Inc. and its successor. References in this Agreement to any entity also
refer to any successor to that entity. The term "Capital" means (A) equity
financing, and/or (B) certain debt financing (other than bank financing, than
equipment leasing and than ordinary trade payables incurred in connection with
the purchase of goods or services by Juno Online Services, L.P. or its
subsidiaries), as identified by the Management Company in its sole discretion.
WHEREAS, the Company desires to retain (or to continue to retain) the
Employee on the terms and conditions hereinafter set forth, and the Employee is
willing to undertake (or to continue) employment by the Company upon such terms
and conditions;
NOW, THEREFORE, in consideration of the foregoing and in consideration
of their mutual promises and agreements contained herein, the parties hereto
agree as follows:
1. EMPLOYMENT
Employment shall commence (or has commenced) on November 4, 1996, and
may be terminated by either party at any time, for any reason, upon 30 days
notice (the "Notice Period"), which notice may be given either verbally or in
writing. Notwithstanding the foregoing, the Company may elect to terminate
immediately upon notice, except that in this event, the compensation and
benefits set forth in Section 2 shall be continued for the duration of the
Notice Period. The Employee acknowledges and agrees that he is an employee at
will, and that just as the Employee is free to resign at any time, the Company
has the right to terminate the employment relationship at any time for any
lawful reason. The Employee acknowledges and agrees that no representative of
the Company may verbally change the at will employment relationship between the
Employee and the Company. References to time periods in this Agreement shall not
be construed or interpreted as promising or guaranteeing employment for any
specific duration or until any specific date.
2. COMPENSATION
(a) BASE SALARY DURING THE COMPENSATION PERIOD. As compensation for the
Employee's services during the period beginning on January 1, 1998 and ending on
December 31, 1998 (the "Compensation Period"), the Company shall pay the
Employee a base salary computed at an annual rate of $125,000 per year, prorated
to correspond to that portion of the Compensation Period during which the
Employee is actually employed with the Company, such base salary to be paid
semi-monthly.
(b) BASE SALARY AFTER THE COMPENSATION PERIOD. As of the end of the
Compensation Period, or as of the end of any subsequent calendar year, the
Employee's base salary may be increased or decreased, or the manner in which the
<PAGE>
Employee is compensated may be changed, in the sole discretion of the President
of Juno Online Services, Inc., expressed in writing by the President of Juno
Online Services, Inc. Any such change in compensation shall be deemed to modify
only this Section 2 of this Agreement, and all other provisions of this
Agreement shall remain in effect following such change in compensation. In the
absence of any such change, the Employee's base salary shall remain the same as
it was during the Compensation Period.
(c) DISCRETIONARY YEAR-END BONUS. At the end of each calendar year that
includes one or more days falling within the Compensation Period, the Company
may (or may not, in the sole discretion of the President of Juno Online
Services, Inc.) pay the Employee a year-end bonus. The award and amount of any
such bonus shall be determined in the sole discretion of the President on Juno
Online Services, Inc., which date shall ordinarily be no later than March 15th
of the following calendar year, or as soon thereafter as is practicable.
(d) NON-REFUNDABLE ADVANCE AGAINST BONUS. In addition to the base
salary specified in Section 2(a)the Employee shall, during the Compensation
Period, receive a non-refundable advance against the bonus specified in Section
2(c) computed at an annual rate of $30,000 per year, prorated to correspond to
that portion of the Compensation Period during which the Employee is actually
employed with the Company, such advance to be paid semi-monthly. In the event
that a year-end bonus is paid pursuant to the terms of Section 2(c), the amount
of such advance shall be deducted from such year-end bonus payment. The Employee
shall under no circumstances be required to repay any correctly computed sum
that has already been paid to the Employee as a non-refundable advance against
bonus pursuant to the terms of this Section 2(d).
(e) YEAR-END BONUS AFTER THE COMPENSATION PERIOD. As of the end of the
Compensation Period, or as of the end of any subsequent calendar year, the
Employee's year-end bonus, if any, and/or the non refundable advance against
such year-end bonus, if any, may be increased, decreased, or eliminated, or the
manner in which the Employee is compensated may be changed, in the sole
discretion of the President of Juno Online Services, Inc., expressed in writing
by the President of Juno Online Services, Inc. Any such change in compensation
shall be deemed to modify only this Section 2 of this Agreement, and all other
provisions of this Agreement shall remain in effect following such change in
compensation. Subsequent to the Compensation Period, the Company shall not have
any obligation to continue to pay a year-end bonus to the Employee unless such
an arrangement is explicitly agreed to in writing by the President of Juno
Online Services, Inc.
(f) STANDARD COMPANY BENEFITS. In addition to the compensation outlined
elsewhere in this Section 2, the Company shall provide to the Employee all of
the benefits included in the Company's standard benefit package, which currently
include medical (hospitalization and major medical), dental, disability, life,
and accidental death and dismemberment insurance. Most of the cost of such
benefits shall be borne by the Company. However, in the case of coverage for the
Employee himself, the Employee contributes a nominal pre-tax amount to the cost
of the medical insurance; if the Employee wishes to obtain coverage for other
qualified family members, and arranges with the Company's insurance providers
(through the Company's Human Resources staff) to obtain such additional
coverage, the Employee will also be required to contribute part of the
incremental cost of such coverage. Individual and dependent medical insurance
contribution amounts are determined on a set scale, based on both the actual
cost of the insurance and on the Employee's base salary. The required
contribution will be borne by the Employee by means of a voluntary salary
reduction in the amount of the contribution implemented by the Company at the
request of the Employee.
The standard benefit package also currently includes a flexible
spending account plan and a 401(k) retirement plan, available to all qualified
full-time employees after a certain period of employment with the Company. The
401(k) retirement plan currently includes a matching program and a graded
vesting schedule; the Company does not contribute to the flexible spending
account plan, but the Employee may contribute pre-tax dollars. The Employee
agrees that the composition, providers, and all other aspects of the Company's
standard benefit package may be changed from time to time in the sole discretion
of the Management Company.
(g) EXCLUSIVE COMPENSATION. The compensation and benefits described in
this Section 2 shall be the exclusive compensation due to the Employee from the
Company or any of its affiliates during or on account of the services of the
Employee. If directed by the Company, the Employee shall provide the services
described in this Agreement to one or more affiliates of the Company without
compensation other than as specified in this Section 2.
<PAGE>
3. DISCLOSURE TO THE COMPANY
(a) DISCLOSURE OF INFORMATION TO THE COMPANY. The Employee shall
promptly disclose and deliver over to the Company, without additional
compensation, to the extent that such disclosure could reasonably be expected to
be of interest to the D. E. Shaw Group, in writing, or in such form and manner
as the Company may reasonably require:
(i) any and all algorithms, procedures, methods or techniques
directly related to electronic communication and/or commerce or to the
Employee's work with the Company, and the essential ideas and principles
underlying such algorithms, procedures, methods or techniques, conceived,
originated, discovered, developed, evaluated, tested, or applied by the Employee
while employed by the Company, whether or not such algorithms, procedures,
methods or techniques are embodied in a computer program;
(ii) any and all programming, marketing, advertising, or
financing strategies, the essential ideas and principles on which such
strategies are based, and any information that might reasonably be expected to
lead to the development of such strategies, conceived, originated, discovered,
developed, evaluated, tested, or employed by the Employee while employed by the
Company, whether or not such strategies are embodied in a computer program;
(iii) any and all Internet-related and other products and
services, and the essential ideas and principles underlying such products and
services, conceived, originated, adapted, developed, evaluated, tested, or
applied by the Employee while employed by the Company, whether or not such
products or services are embodied in a computer program, and whether or not
marketed, sold, or provided by the D. E. Shaw Group;
(iv) such information and data pertaining to the business,
operations, personnel, activities, financial status and affairs, current or
anticipated business or investment objectives or practices, current or
anticipated requirements for Internet-related or other products or services, and
other information relating to current or prospective investors, other current or
prospective funding sources, limited partners, shareholders, clients, customers,
accounts, joint venturers, or other business affiliates of the D. E. Shaw Group,
and of the officers, partners, principals, employees, and other persons
affiliated with such current or prospective investors, limited partners,
shareholders, clients, customers, accounts, joint venturers, or other business
affiliates, as is known to the Employee and as might reasonably be expected to
be of value to the D. E. Shaw Group in developing, maintaining, or expanding its
current or prospective business relationships with such current or prospective
investors, limited partners, shareholders, clients, customers, accounts, joint
venturers, or other business affiliates.
(b) PERIOD COVERED; INFORMATION EXCLUDED. The provisions of this
Section 3 shall apply to information acquired by the Employee at any time during
his employment with the Company, whether prior to or subsequent to the execution
of this Agreement.
The Employee agrees not to disclose to the D. E. Shaw Group any
confidential or proprietary information belonging to any previous employer of
the Employee that is not part of the D. E. Shaw Group, or belonging to any other
party, without first securing the written permission of such previous employer
or other party.
(c) DISCLOSURE UPON TERMINATION. Any information required to be
disclosed under this Section 3 that has not yet been disclosed by the Employee
to the Company at the time of the termination of the Employee's employment with
the Company, without regard to when or for what reason, if any, such employment
shall terminate, shall be disclosed to the Company in writing, or in such form
and manner as the Company may reasonably require, within 10 days of the
termination of the Employee's employment with the Company.
4. CONFIDENTIAL INFORMATION
(a) DEFINITION. The parties acknowledge that, in order to permit the
Employee to successfully perform and/or continue to perform the duties
associated with his employment with the Company, it is necessary for the Company
to entrust the Employee with certain valuable proprietary information and
knowledge of certain modes of business operation ("Confidential Information")
which are essential to the profitable operation of the D. E. Shaw Group, and
which give the D. E. Shaw Group a competitive advantage over other firms
pursuing related business activities. In the context of this Agreement, the term
"Confidential Information" shall be deemed to include
(i) computer software or data of any sort developed (in the
case of software) or compiled (in the case of data) by the D. E. Shaw Group;
<PAGE>
(ii) the fact that the D. E. Shaw Group uses, has used, or has
evaluated for potential use a particular computer program or system, if the
disclosure of such fact to a competitor of the D. E. Shaw Group might reasonably
be expected to adversely affect the competitive position of the D. E. Shaw Group
relative to that of such a competitor; provided, however, that information about
the type of computers, computer peripherals, operating systems, database
systems, or other systems software which the D. E. Shaw Group uses, has used, or
has evaluated for potential use, but which is not specific to any financial or
Internet related application, shall not by reason of this Section 4(a)(ii) be
considered Confidential Information;
(iii) algorithms, procedures, methods, or techniques, or the
essential ideas and principles underlying such algorithms, procedures, methods,
or techniques, developed by the D. E. Shaw Group (but excluding any public
domain algorithm, procedure, or technique), whether or not such algorithms,
procedures, methods, or techniques are embodied in a computer program;
(iv) the fact that the D. E. Shaw Group uses, has used, or has
evaluated for potential use any particular algorithm, procedure, or technique
developed by a party other than the D. E. Shaw Group, whether or not such
algorithm, procedure, or technique is embodied in a computer program, if the
disclosure of such information to a competitor of the D. E. Shaw Group might
reasonably be expected to adversely affect the competitive position of the D. E.
Shaw Group relative to that of such a competitor;
(v) the results of any programming, marketing, advertising,
financial, or other analysis conducted by the D. E. Shaw Group for its own
internal use (and not approved for dissemination to its customers, investors,
consultants, joint venturers, or other parties);
(vi) any information that would typically be included in the
D. E. Shaw Group's income statements, including, but not limited to the amount
of the D. E. Shaw Group's revenues, expenses, or net income;
(vii) any plans for the business of the Company or of other
members of the D. E. Shaw Group (whether or not such plans have been reduced to
writing); financial information concerning such plans (including without
limitation projected revenues, projected expenses, projected net income and
information concerning rates and costs of customer acquisition and retention);
descriptions of such business and technical aspects of or relating to the
operation of such business (including without limitation algorithms, computer
programs, processes or formulas that relate to computer and network security,
authentication, logging, accounting and distribution); and products and services
that the D. E. Shaw Group is considering offering to its subscribers and/or to
other persons;
(viii) any other information gained in the course of the
Employee's employment with the Company that could reasonably be expected to
prove deleterious to the D. E. Shaw Group if disclosed to third parties,
including without limitation any information that could reasonably be expected
to aid a competitor of the D. E. Shaw Group in making inferences regarding the
nature of the D. E. Shaw Group's proprietary and/or World Wide Web-related
activities, where such inferences could reasonably be expected to adversely
affect the competitive position of the D. E. Shaw Group relative to that of such
a competitor;
(ix) any other information gained in the course of or incident
to the Employee's employment with the Company that the D. E. Shaw Group has
received from a third party and is required to hold confidential in connection
with an agreement between the D. E. Shaw Group and such third party;
(x) any other information gained in the course of or incident
to the Employee's employment with the Company that the Company treats or
designates as Confidential Information and which is not publicly available.
(b) USE AND DISCLOSURE.
(i) The Employee acknowledges that he has acquired and/or will
acquire Confidential Information in the course of or incident to his employment
with the Company. Accordingly, the Employee agrees that he shall not, directly
or indirectly, at any time, during the term of his employment with the Company
or at any time thereafter, and without regard to when or for what reason, if
any, such employment shall terminate, use or cause to be used any such
Confidential Information, whether acquired prior to or subsequent to the
execution of this Agreement, in connection with any activity or business except
the business of the D. E. Shaw Group, and shall not disclose such Confidential
Information to any individual, partnership, corporation, or other entity unless
such disclosure has been authorized in writing by the Management Company, or
except as may be required by any applicable law or by order of a court of
competent jurisdiction, a regulatory or self-regulatory body, or a governmental
body.
(ii) The provisions of Section 4(b)(i) notwithstanding, the
Employee shall be free to disclose any information contained in any
non-confidential brochure or other promotional material which the D. E. Shaw
Group routinely makes available to the press and/or the general public
(including, but not limited to (A) the Company's public site on the World Wide
Web (www.juno.com); (B) the official "Company Profile," of the D. E. Shaw Group;
(C) the
<PAGE>
general overview brochure describing the D. E. Shaw Group's Third Market
operation; and (D) the general overview brochure describing D. E. Shaw
Securities International), and shall be free to disclose or use any information
which is in or which enters the public domain prior to the time of such
disclosure or use (except where such information enters the public domain as a
result of unauthorized actions of the Employee). The Employee acknowledges,
however, that (A) a large number of market inefficiencies and trading
strategies, and a large number of analyses, observations, and findings from
which such market inefficiencies and trading strategies might be derived, and
(B) a large number of programming techniques and programming strategies, and a
large number of analyses, observations and findings from which such computer
programming techniques and strategies might be derived, have been or may be
reported in the open literature, or may otherwise have entered or may enter the
public domain, and that one of the Company's most valuable forms of Confidential
Information is its accumulated knowledge, based on research, analysis, and
experimentation not reported in the open literature or otherwise falling within
the public domain, of which of these market inefficiencies, trading strategies,
programming techniques, and programming strategies, and which of these analyses,
observations, and findings, are likely to form the basis for practical,
profitable business applications for the D. E. Shaw Group ("Confidential
Applicability Information"). The Employee thus agrees that he shall not,
directly or indirectly, at any time, during the term of his employment with the
Company, or at any time thereafter, and without regard to when or for what
reason, if any, such employment shall terminate, use or cause to be used any
Confidential Applicability Information in connection with any activity or
business except the business of the D. E. Shaw Group, and shall not disclose
such Confidential Applicability Information to any individual, partnership,
corporation, or other entity, unless what would otherwise be deemed to
constitute Confidential Applicability Information is itself in or itself enters
the public domain by some means other than as a result of unauthorized actions
of the Employee, or unless such disclosure has been authorized in writing by the
Management Company, or except as may be required by any applicable law or by
order of a court of competent jurisdiction, a regulatory or self-regulatory
body, or a governmental body.
(iii) In the event that the Employee is required to disclose
Confidential Information or Confidential Applicability Information pursuant to
judicial or administrative process or other requirements of law, the Employee
will (A) notify the Company of his receipt of such process within 24 hours of
such receipt, and prior to any disclosure being made, (B) to the extent
reasonably practicable, consult with the Company on the advisability of taking
steps to resist or narrow such request provided that the ultimate decision shall
be that of the Employee, and (C) if disclosure is required or deemed advisable,
cooperate with the Company in any attempt that it may make in order to obtain an
order or other reliable assurance that confidential treatment will be accorded
to designated portions of such information. If no such order is obtained by the
Company, disclosure of such information by the Employee shall not be deemed a
violation of this Agreement. If such an order is obtained, then disclosure of
the information covered by such order in the manner described in the order shall
not be deemed a violation of this Agreement. The Employee shall be entitled to
reimbursement for his reasonable expenses, including the fees and expenses of
his counsel, in connection with action taken pursuant to this paragraph.
(iv) The provisions of Sections 4(b)(i), 4(b)(ii), and
4(b)(iii) notwithstanding, the Employee shall be free to disclose or use any
information which was obtained by the Employee prior to his employment with the
Company, or which is obtained by the Employee subsequent to and independent of
his relationship with the D. E. Shaw Group.
(v) The provisions of Section 4(b)(i), 4(b)(ii), and 4(b)(iii)
notwithstanding, the Employee shall, with the prior written permission of the
Management Company, be free to disclose selected Confidential Information and/or
Confidential Applicability Information to a limited number of parties for the
purpose of securing employment subsequent to the Employee's employment with the
Company or progressing professionally, provided further that where such
disclosure would not be harmful to the D. E. Shaw Group, such permission shall
not be unreasonably withheld. For purposes of this Section 4(b)(v), the
termination of the Employee's employment with the Company shall not in itself be
deemed harmful to the D. E. Shaw Group, even if such termination is voluntary.
(c) RETURN AND OWNERSHIP OF DOCUMENTS AND WORK PRODUCT. Upon the
termination of the Employee's employment with the Company for any reason, the
Employee promises and agrees to return immediately to the Company any and all
Confidential Information and all other materials or documents, including without
limitation mailing lists, rolodexes, computer print-outs, and computer disks and
tapes, belonging to the Company which contain information pertaining to the D.
E. Shaw Group's business, methods, clients, potential clients, customers,
potential customers, investors, potential investors, funding providers,
potential funding providers, or employees, unless the Company consents in
writing to the Employee's retention thereof.
<PAGE>
(d) OWNERSHIP OF INTELLECTUAL PROPERTY. All right, title, and interest
of every kind and nature whatsoever, whether now known or unknown, in and to any
intellectual property ("Intellectual Property"), including without limitation
any ideas, inventions (whether or not patentable), designs, improvements,
discoveries, innovations, patents, trademarks, service marks, trade dress, trade
names, trade secrets, works of authorship, copyrights, films, audio and video
tapes, other audio and visual works of any kind, scripts, sketches, models,
formulas, tests, analyses, software, firmware, computer processes, computer and
other applications, creations, properties, and any documentation or other
memorialization containing or relating to the foregoing, in each case
discovered, invented, created, written, developed, taped, filmed, furnished,
produced, or disclosed by or to the Employee in the course of rendering services
to the Company shall, as between the parties hereto, be and remain the sole and
exclusive property of Juno Online Services, L.P. for any and all purposes and
uses whatsoever, and the Employee and his successors and assigns shall have no
right, title, or interest of any kind or nature therein or thereto, or in or to
any results and proceeds therefrom. Juno Online Services L.P. shall have all
right, title, and interest in such Intellectual Property, whether such
Intellectual Property is conceived by the Employee alone or with others and
whether conceived during regular working hours or other hours.
The Employee makes, and agrees to make and execute, any assignment
necessary to perfect Juno Online Services, L.P.'s right, title, and interest in
Intellectual Property, and agrees to perform any act reasonably requested by the
Company in furtherance of any such assignment, and/or of perfecting Juno Online
Services, L.P.'s rights in Intellectual Property.
(e) NO WAIVER OF TRADE SECRET PROTECTION. Nothing contained in this
Agreement shall be deemed to weaken or waive any rights related to the
protection of trade secrets or confidential business information that the
Company may have under common law or any applicable statutes or rules.
5. COMPETITION WHILE EMPLOYED
During the period of his employment with the Company, the Employee will
not, directly or indirectly, without the written consent of the President of
Juno Online Services, Inc., and whether or not for compensation, either for his
own account or as an employee, officer, agent, consultant, director, owner,
partner, joint venturer, shareholder, investor, or in any other capacity (except
in the capacity of an employee or officer of the Company acting for the benefit
of the D. E. Shaw Group):
(a) perform a function which is of the same nature as, or substantively
similar to, a function that the employee performs for the Company; or
(b) engage in any activity or business which is the same nature as, or
substantively similar to, an activity or business of the Company or an activity
or business which the Company is developing and of which the Employee has
knowledge.
6. INTERFERENCE WITH RELATIONSHIPS
(a) RESTRICTIONS ON INTERFERENCE. While employed by the Company, and
for a period of 18 months after the date the Employee ceases to be employed by
the Company, without regard to when or for what reason, if any, such employment
shall terminate (the "Termination Date"), the Employee shall not, directly or
indirectly, without the written consent of the President of Juno Online
Services, Inc., and whether or not for compensation, either on his own behalf or
as an employee, officer, agent, consultant, director, owner, partner, joint
venturer, shareholder, investor, or in any other capacity (except in the
capacity of an employee or officer of the Company acting for the benefit of the
Company or an employee or officer of another entity affiliated with David E.
Shaw), knowingly:
(i) interfere with an ongoing (as of the Termination Date)
relationship between the Company and one of its customers (except as permitted
under the provisions of Sections 6(b) and 6(c) below) by providing or offering
to provide a product or service to that customer which, as of the Termination
Date, was provided to that customer by a business unit of the Company in which
the Employee worked during his employment with the Company, if by so doing, the
Employee might reasonably be expected to cause the Company to suffer a loss of
profits from or other damage to its business relationship with that customer;
(ii) interfere with an ongoing (as of the Termination Date)
joint venture, strategic alliance, licensing agreement, distribution
relationship, advertising relationship, or similar agreement or relationship
between the Company and another business entity (the "Joint Venture
Relationship") by entering into or proposing to enter into a
<PAGE>
substantially similar business relationship with that entity, if the Employee
was directly involved in that Joint Venture Relationship during his employment
with the Company, and if by so doing, the Employee might reasonably be expected
to cause the Company to suffer a loss of profits that would otherwise accrue to
the Company in connection with that Joint Venture Relationship, or to suffer
other damage to that Joint Venture Relationship;
(iii) employ, or retain as a consultant or contractor, or
cause to be so employed or retained, or enter into a partnership or business
venture with, any person (a "Related Person") who at the time of such action (A)
is an employee of the D. E. Shaw Group; (B) has been employed by the D. E. Shaw
Group at any time within the previous 18 months; (C) is a consultant, sales
agent, contract programmer, or other independent agent who is retained on a
full-time or substantially full-time basis by the D. E. Shaw Group; or (D) has
been retained on a full-time or substantially full-time basis by the D. E. Shaw
Group as a consultant, sales agent, contract programmer, or other independent
agent at any time within the previous 18 months;
(iv) solicit, persuade, encourage, or induce any employee of
the D. E. Shaw Group (or any consultant, sales agent, contract programmer, or
other independent agent who is retained on a full-time or substantially
full-time basis by the D. E. Shaw Group) to cease his employment with or
retention by the D. E. Shaw Group; or
(v) accept or solicit investment capital or debt financing
(directly or indirectly) from, or accept or solicit employment with, or accept
or solicit a consulting assignment with, any individual or entity, or an
officer, partner, principal, or affiliate of any entity, or another entity
managed by or otherwise affiliated with an officer, partner, principal, or
affiliate of any entity, that, as of the Termination Date or at any time within
the 18 months immediately preceding the Termination Date, provided or arranged
for the provision of more than 20 percent of the Capital of Juno Online
Services, L.P., Juno Online Services, Inc., D. E. Shaw Development, L.P. or any
other subsidiary of D. E. Shaw Development, L.P.
(b) EXCEPTIONS TO PREVENT UNDUE HARDSHIP. In the event that the
application of Section 6(a)(i) and/or Section 6(a)(ii) would, in the Company's
judgment, cause undue hardship to the Employee, the Management Company shall,
upon written request by the Employee, provide to the Employee a written
instrument authorizing such specific exceptions to the provisions of Section
6(a)(i) and/or Section 6(a)(ii) as the President of Juno Online Services, Inc.
shall determine are reasonably necessary to prevent such undue hardship, the
provisions of which instrument shall thereafter be deemed to supersede the
corresponding provisions of Section 6(a)(i) and/or Section 6(a)(ii).
(c) PRIOR RELATIONSHIPS. The provisions of Section 6(a)
notwithstanding, the Employee shall not by reason of Section 6(a) be restricted
from resuming, after the termination of his employment with the Company, any
employment or business relationship that preceded his employment with the
Company, or from providing or offering to provide any product or service to a
customer which the Employee provided to that customer at any time prior to his
employment by the Company; provided, however, that Section 4 and the other
provisions of this Section 6 shall continue to apply.
(d) EXCEPTION FOR UNRELATED ACTIVITIES. The provisions of Section 6(a)
notwithstanding, the Employee shall become free nine months after the
Termination Date to employ, retain, cause to be employed or retained, or enter
into a business relationship with any Related Person provided that neither the
Employee nor any Related Person directly or indirectly engages in business
activities competitive with the business activities of the Company in the course
of such employment, retention, or business relationship.
(e) EXCEPTION FOR D. E. SHAW GROUP. Nothing contained in this Agreement
shall prohibit the Employee from (i) at any time accepting employment with, or
entering into a consultant or contractor arrangement with, or becoming an
officer, agent, owner, or partner of, or becoming an investor in, any entity in
the D. E. Shaw Group; or (ii) at any time soliciting, persuading, encouraging or
inducing any other person (including without limitation a present employee of
the Company) to enter into such a relationship with an entity in the D. E. Shaw
Group; and the Company agrees that it shall not interfere with, or seek to
enjoin, any such activity.
(f) NO WAIVER OF COMMON LAW OR STATUTORY PROTECTION. Nothing contained
in this Agreement shall be deemed to weaken or waive any of the Company's rights
or protections that may be accorded by statute or common law as regards the
conduct of the Employee with respect to the Company's business, investors,
customers, clients, joint venture partners, employees, consultants, or
contractors. The Employee authorizes the Company and other D. E. Shaw Group
entities to disclose this Agreement to any person at any time, including without
limitation any employer or prospective employer of the Employee.
<PAGE>
7. REASONABLENESS OF COVENANTS
(a) CERTAIN RECOGNITIONS. The Employee acknowledges that the
restrictions specified in Sections 4, 5, and 6 of this Agreement are reasonable
in view of the nature of the business in which the Company and/or the D. E. Shaw
Group is engaged, the Employee's position with the Company, and the Employee's
knowledge of the Company's and/or the D. E. Shaw Group's business.
The Employee recognizes that the amount of his compensation reflects
his Agreement in Sections 4, 5, and 6, and acknowledges that he will not be
subject to undue hardship by reason of his agreements set forth in Sections 4,
5, and 6.
(b) MODIFICATION OF RESTRICTION. Notwithstanding anything contained in
Sections 4, 5, or 6 of this Agreement to the contrary, if a court of competent
jurisdiction should hold any restriction specified in Sections 4, 5, or 6 to be
unreasonable, unenforceable, illegal or invalid, then that restriction shall be
limited to the extent necessary to be enforceable, and only to that extent. In
particular, and without limitation on the foregoing, if any provision of
Sections 4, 5, or 6 should be held to be unenforceable as to scope or length of
time or geographical area involved, such provision shall be deemed to be
enforceable as to, and shall be deemed to be amended to cover, the maximum
scope, maximum length of time, or broadest area, as the case may be, which is
then lawful.
(c) SURVIVAL OF COVENANTS. The obligations of the Employee under
Sections 4 and 6 of this Agreement shall survive the termination of this
Agreement and of his employment with the Company.
8. REGULATORY COMPLIANCE
The Employee agrees to abide by all applicable securities laws and all
applicable rules and regulations of the Securities Exchange Commission, the
National Association of Securities Dealers, the Commodity Futures Trading
Commission, and all other applicable self-regulatory organizations, including
those regulations requiring the disclosure to the D. E. Shaw Group's management
of all securities transactions conducted for the Employee's own account.
9. REMEDIES/ARBITRATION
(a) INJUNCTIONS, RESTRAINING ORDERS, AND OTHER EQUITABLE RELIEF. The
Employee acknowledges that breach or threatened breach of Sections 4, 5, or 6 of
this Agreement will cause the D. E. Shaw Group irreparable harm for which there
is no adequate remedy at law, and as a result of this, the D. E. Shaw Group
shall be entitled to the issuance by a court of competent jurisdiction of an
injunction, restraining order, or other equitable relief in favor of itself,
without the necessity of posting a bond, restraining the Employee from
committing or continuing to commit any such violation. Any right to obtain an
injunction, restraining order, or other equitable relief hereunder shall not be
deemed a waiver of any right to assert any other remedy the D. E. Shaw Group may
have at law or in equity. The right of the D. E. Shaw Group to seek equitable
relief under this Agreement shall be in addition to (and not in derogation of)
the requirement imposed on each party hereto to arbitrate disputes as provided
in Section 9(b) below.
(b) MANDATORY ARBITRATION. The Employee and the Company agree that any
claim, controversy or dispute between the Employee and the Company (including
without limitation its affiliates, officers, employees, representatives, or
agents) arising out of or relating to this Agreement, the employment of the
Employee, the cessation of employment of the Employee, or any matter relating to
the foregoing shall be submitted to and settled by arbitration in a forum of the
American Arbitration Association ("AAA") located in New York County in the State
of New York and conducted in accordance with the National Rules for the
Resolution of Employment Disputes. In such arbitration: (i) each arbitrator
shall agree to treat as confidential evidence and other information presented by
the parties to the same extent as Confidential Information under this Agreement
must be held confidential by the Employee, (ii) the arbitrators shall have no
authority to amend or modify any of the terms of this Agreement, and (iii) the
arbitrators shall have ten business days from the closing statements or
submission of post-hearing briefs by the parties to render their decision. Any
arbitration award shall be final and binding upon the parties, and any court,
state or federal, having jurisdiction may enter a judgment on the award. The
foregoing requirement to arbitrate claims, controversies, and disputes applies
<PAGE>
to all claims or demands by the Employee, including without limitation any
rights or claims the Employee may have under the Age Discrimination in
Employment Act of 1967 (which prohibits age discrimination in employment), Title
VII of the Civil Rights Act of 1964 (which prohibits discrimination in
employment based on race, color, national origin, religion, sex, or pregnancy),
the Americans with Disabilities Act of 1991 (which prohibits discrimination in
employment against qualified persons with a disability), the Equal Pay Act
(which prohibits paying men and women unequal pay for equal work) or any other
federal, state, or local laws or regulations pertaining to the Employee's
employment or the termination of the Employee's employment.
(c) RECOVERY OF LEGAL FEES. If one of the parties to this Agreement
(the "Plaintiff") should bring a proceeding against the other party (the
"Defendant") in connection with an alleged breach or threatened breach of this
Agreement, and if such proceeding is ultimately resolved by an order or a
judgment in favor of the Defendant, by a voluntary discontinuance with prejudice
by the Plaintiff, or by an arbitration decision wholly in favor of the
Defendant, the Plaintiff will, upon presentation by the Defendant of appropriate
evidence of the amount and nature of the expense incurred, reimburse the
Defendant in an amount equal to the lesser of:
(i) the cost of all reasonable legal fees actually incurred by
the Defendant in connection with such litigation or arbitration; or
(ii) $100,000.
(d) FORUM. Each party submits to the jurisdiction of the courts, state
and federal, and arbitration forums (set forth in Section 9(b)) located in the
State of New York.
10. RELATIONSHIP OF THE PARTIES
The relationship between the Company and the Employee hereunder is
agreed to be solely that of employee and employer. Nothing contained herein and
no modification of responsibility or compensation made hereafter shall be
construed so as to constitute the parties as partners or joint venturers.
11. AMENDMENT OR ALTERATION
No amendment or alteration of the terms of this Agreement shall be
valid unless made in writing and signed by both of the parties hereto.
12. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS-OF-LAW
PRINCIPLES).
13. SEVERABILITY
The holding of any provision of this Agreement to be illegal, invalid,
or unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
14. WAIVER
The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion or occasions shall not be considered a waiver
thereof or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
<PAGE>
15. ENTIRE AGREEMENT
This Agreement contains the entire agreement of the parties and shall
supersede any prior verbal or written agreement or understanding between the
Employee and the Company. The Employee acknowledges that in choosing to accept
the Company's offer of employment (and/or to continue such employment), he has
not relied on any warranties, representations, or promises by the Company, its
employees, or any other parties except as specifically set forth herein.
16. ASSIGNMENT
Except as otherwise provided in this paragraph, this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective heirs, representatives, successors, and assigns. Neither this
Agreement nor any right or interest hereunder shall be assignable by the
Employee, his beneficiaries, or legal representatives without the Company's
prior written consent; provided, however, that nothing in this Section 16 shall
preclude the Employee from designating a beneficiary to receive any benefit
payable hereunder upon his death, or the executors, administrators, or other
legal representatives of the Employee or his estate from assigning any rights
hereunder to the person or persons entitled thereunto. This agreement shall be
assignable by the Company to a subsidiary or affiliate of the Company; to any
corporation, partnership, or other entity that may be organized by the Company,
its general partners, or its officers, as a separate business unit in connection
with the business activities of the Company or of its general partners or
officers; or to any corporation, partnership, or other entity resulting from the
reorganization, merger, or consolidation of the Company with any other
corporation, partnership, or other entity, or any corporation, partnership, or
other entity to or with which all or any portion of the Company's business or
assets may be sold, exchanged, or transferred. The Management Company, Juno
Online Services, L.P., and other members of the D. E. Shaw Group are third-party
beneficiaries of this Agreement.
17. NO ATTACHMENT
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null,
void, and of no effect.
18. NO COERCION OR DURESS
The Employee enters into this Agreement with full understanding of the
nature and extent of the restrictive covenants contained herein, and
acknowledges that because of the nature of the Company's business, this
Agreement would not be entered into without the restrictive covenants contained
herein.
The Employee acknowledges and agrees that he is entering into this
Agreement voluntarily and of his own free will in order to obtain the benefits
of employment, continued employment, and additional compensation by the Company.
The Employee acknowledges and agrees that he has not been coerced or suffered
any duress in order to induce him to enter into this Agreement.
19. HEADINGS
The Section headings appearing in this Agreement are used for
convenience of reference only and shall not be considered a part of this
Agreement or in any way modify, amend, or affect the meaning of any of its
provisions.
20. RULES OF CONSTRUCTION
Whenever the context so requires, the use of the masculine gender shall
be deemed to include the feminine and vice versa, and the use of the singular
shall be deemed to include the plural and vice versa. That this Agreement
<PAGE>
was drafted by the Company shall not be taken into account in interpreting or
construing any provision of this Agreement.
21. ACKNOWLEDGMENT OF RECEIPT
By signing below, the Employee acknowledges receiving a copy of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.
JUNO ONLINE SERVICES, INC.
By: /s/ CHARLES ARDAI
------------------------------------
Charles Ardai
President
Date: 9/25/98
------------------------------------
EMPLOYEE
Signature: /s/ RICHARD M. EATON
----------------------------------
Name: Richard M. Eaton
Address: 25 Quaker Ridge Rd.
------------------------------------
Bethel, CT 06801
------------------------------------
Date: 9/25/98
------------------------------------
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Amendment No. 1 to the registration
statement on Form S-1 of our report dated March 4, 1999, on our audits of the
consolidated financial statements of Juno Online Serivces, Inc. (formerly Juno
Online Services, L.P. and Subsidiary) as of December 31, 1997 and 1998 and for
each of the three years in the period ended December 31, 1998. We also consent
to the reference to our firm under the captions "Selected Consolidated Financial
Data" and "Experts."
/s/ PricewaterhouseCoopers LLP
New York, New York
April 23, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 53,165
<SECURITIES> 0
<RECEIVABLES> 3,600
<ALLOWANCES> 395
<INVENTORY> 47
<CURRENT-ASSETS> 67,557
<PP&E> 6,988
<DEPRECIATION> 3,112
<TOTAL-ASSETS> 71,660
<CURRENT-LIABILITIES> 19,557
<BONDS> 0
141,431
0
<COMMON> 3
<OTHER-SE> (98,829)
<TOTAL-LIABILITY-AND-EQUITY> 71,660
<SALES> 9,720
<TOTAL-REVENUES> 9,720
<CGS> 7,182
<TOTAL-COSTS> 7,182
<OTHER-EXPENSES> 9,379
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 138
<INCOME-PRETAX> (6,730)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,730)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,730)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
