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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box: / /
Preliminary Proxy Statement / /
Definitive Proxy Statement /X/
Definitive Additional Materials / /
Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12 / /
JUNO ONLINE SERVICES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
1540 BROADWAY, 27TH FLOOR
NEW YORK, NEW YORK 10036
April 10, 2000
Dear Fellow Stockholders:
On behalf of the Board of Directors of Juno Online Services, Inc. ("Juno"),
I cordially invite you to attend the Annual Meeting of Stockholders which will
be held on Wednesday, May 24, 2000, at 10:00 A.M. at The Empire Hotel, 44 West
63rd Street, New York, New York 10023.
At the Annual Meeting, we will vote on the election of a director, the
approval of a series of amendments to the Juno 1999 Stock Incentive Plan and the
ratification of the selection of PricewaterhouseCoopers LLP as our independent
accountants for the year 2000. In the pages that follow, you will find the
Notice of Meeting and the Proxy Statement which describes these matters in
detail.
You will also find enclosed a proxy form appointing proxies to vote your
shares at the Annual Meeting. Please sign, date and return your proxy form as
soon as possible so that your shares can be represented and voted in accordance
with your instructions even if you cannot attend the Annual Meeting in person.
Sincerely,
[SIGNATURE]
Charles E. Ardai
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
JUNO ONLINE SERVICES, INC.
1540 BROADWAY, 27(TH) FLOOR
NEW YORK, NEW YORK 10036
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 2000
TO THE STOCKHOLDERS OF JUNO ONLINE SERVICES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Juno
Online Services, Inc., a Delaware corporation (the "Company"), will be held at
The Empire Hotel, 44 West 63(rd) Street, New York, New York 10023 on Wednesday,
May 24, 2000 at 10:00 a.m. Eastern Time for the following purposes, as more
fully described in the Proxy Statement accompanying this Notice:
1. To elect a director to serve for a three-year term ending at the 2003
Annual Meeting of Stockholders or until his successor is duly elected
and qualified;
2. To approve a series of amendments to the Company's 1999 Stock Incentive
Plan (the "1999 Plan"), to (i) increase the number of shares of Common
Stock reserved for issuance over the term of the 1999 Plan by an
additional 3,500,000 shares and (ii) amend the 1999 Plan so that at the
beginning of each calendar year the share reserve under the 1999 Plan is
automatically increased by an amount equal to 4% of the total number of
shares of Common Stock outstanding;
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the fiscal year ending December 31, 2000;
and
4. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The foregoing items of business are more thoroughly described in the Proxy
Statement accompanying this notice. Only stockholders of record at the close of
business on April 10, 2000 are entitled to notice of and to vote at the Annual
Meeting. The stock transfer books of the Company will remain open between the
record date and the date of the meeting. A list of stockholders entitled to vote
at the Annual Meeting will be available for inspection at the executive offices
of the Company.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed proxy as
promptly as possible in the envelope enclosed for your convenience. Should you
receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to assure that all
your shares will be voted. You may revoke your proxy at any time prior to the
Annual Meeting. If you attend the Annual Meeting and vote by ballot, your proxy
will be revoked automatically and only your vote at the Annual Meeting will be
counted.
Sincerely,
[SIGNATURE]
Richard D. Buchband
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL; SECRETARY
New York, New York
April 10, 2000
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
<PAGE>
JUNO ONLINE SERVICES, INC.
1540 BROADWAY, 27(TH) FLOOR
NEW YORK, NEW YORK 10036
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2000
GENERAL
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of Juno Online Services, Inc., a Delaware corporation (the "Company"),
for use at the Annual Meeting of Stockholders to be held on May 24, 2000 (the
"Annual Meeting"). The Annual Meeting will be held at 10:00 a.m. at The Empire
Hotel, 44 West 63(rd) Street, New York, New York 10023. These proxy solicitation
materials were mailed on or about April 17, 2000, to all stockholders entitled
to vote at the Annual Meeting.
VOTING
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice and are described in more detail in
this Proxy Statement. On April 10, 2000, the record date for determination of
stockholders entitled to notice of and to vote at the Annual Meeting, 38,645,583
shares of the Company's common stock, par value $0.01 ("Common Stock"), were
issued and outstanding. No shares of the Company's preferred stock, par value
$0.01, were outstanding. Each stockholder is entitled to one vote for each share
of Common Stock held by such stockholder on April 10, 2000. Stockholders may not
cumulate votes in the election of directors.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes are counted
as present for purposes of determining the presence or absence of a quorum for
the transaction of business. Abstentions will be counted towards the tabulations
of votes cast on proposals presented to the stockholders and will have the same
effect as negative votes, whereas broker non-votes will not be counted for
purposes of determining whether a proposal has been approved.
PROXIES
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election of
the director proposed by the Board unless the authority to vote for the election
of such director is withheld and, if no contrary instructions are given, the
proxy will be voted FOR the approval of Proposals 2, 3 and 4 described in the
accompanying Notice and Proxy Statement. You may revoke or change your Proxy at
any time before the Annual Meeting by filing with the Secretary of the Company
at the Company's principal executive offices, 1540 Broadway, 27(th) Floor, New
York, New York 10036, a notice of revocation or another signed Proxy with a
later date. You may also revoke your Proxy by attending the Annual Meeting and
voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional solicitation materials furnished to the stockholders. Copies
of solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by a solicitation by
telephone, telegram or other means by directors, officers or employees of the
Company. No additional compensation will be paid to these individuals for
<PAGE>
any such services. Except as described above, the Company does not presently
intend to solicit proxies other than by mail.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting must be received no
later than December 31, 2000, in order that they may be included in the proxy
statement and form of proxy relating to that meeting. In addition, the proxy
solicited by the Board of Directors for the 2001 Annual Meeting will confer
discretionary authority to vote on any stockholder proposal presented at that
meeting, unless the Company receives notice of such proposal on or before
March 4, 2001.
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MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE
ELECTION OF DIRECTOR
GENERAL
The Company's Certificate of Incorporation provides for a classified Board
of Directors consisting of three classes of directors with staggered three-year
terms, with each class consisting, as nearly as possible, of one-third of the
total number of directors. The Board currently consists of four persons. The
class whose term of office expires at the Annual Meeting currently consists of
one director. The director elected to this class will serve for a term of three
years, expiring at the 2003 annual meeting of stockholders or until his
successor has been duly elected and qualified. The nominee listed below is
currently a director of the Company. If this proposal is approved, the Board
will consist of four persons, with two classes consisting of one director each
and the third class consisting of two directors.
The nominee for election has agreed to serve if elected, and management has
no reason to believe that such nominee will be unavailable to serve. In the
event the nominee is unable or declines to serve as a director at the time of
the Annual Meeting, the proxies will be voted for any nominee who may be
designated by the present Board of Directors to fill the vacancy. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
FOR the nominee named below.
NOMINEE FOR TERM ENDING UPON THE 2003 ANNUAL MEETING OF STOCKHOLDERS
CHARLES E. ARDAI, 30, has served as President of Juno since its inception in
June 1995 and was named Chief Executive Officer of Juno in May 1999. Mr. Ardai
has served as a director of Juno since October 1997. From January 1992 until
June 1995, Mr. Ardai was employed by D. E. Shaw & Co., L.P., where he served 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.
CONTINUING DIRECTOR FOR TERM ENDING UPON THE 2001 ANNUAL MEETING OF STOCKHOLDERS
LOUIS K. SALKIND, 42, 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.
CONTINUING DIRECTORS FOR TERM ENDING UPON THE 2002 ANNUAL MEETING OF
STOCKHOLDERS
DAVID E. SHAW, 49, served as Chairman of Juno 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
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Morgan Stanley & Co., where he managed the firm's automated 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
the Treasurer of the American Association for the Advancement of Science and a
member of the executive committee of the Council on Competitiveness. 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, 30, has served as a director of Juno since March 1999.
Since December 1999, Mr. Ryeom has been the Chief Executive Officer and
President of Axalon Internet Group, Inc., an information technology holding
company engaged in building digital media, applications and service platforms
through a network of partner companies. From January 1999 through
December 1999, Mr. Ryeom was a Partner of Prospect Street Ventures, a venture
capital firm focused on information technology investments. From May 1998 to
December 1998, he was a Vice President of Prospect Street Ventures. 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 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 the University of Virginia.
BOARD COMMITTEES AND MEETINGS
The Board of Directors held four meetings and acted by unanimous written
consent on seven occasions during the fiscal year ended December 31, 1999 (the
"1999 Fiscal Year"). The Board of Directors has an Audit Committee and a
Compensation Committee. Each director attended or participated in all of the
Board of Directors and committees of the Board on which such director served
during the 1999 Fiscal Year.
The Audit Committee currently consists of three directors, Mr. Ryeom and
Drs. Salkind and Shaw. The Audit Committee reviews, acts on and reports to the
board of directors with respect to various auditing and accounting matters,
including the recommendation of the Company's auditors, the scope of the annual
audits, fees to be paid to the auditors, the performance of the Company's
independent auditors and the accounting practices of the Company. The Audit
Committee held two meetings during the 1999 Fiscal Year.
The Compensation Committee currently consists of three directors,
Messrs. Ardai and Ryeom, and Dr. Shaw. The Compensation Committee recommends,
reviews and oversees the salaries, benefits and stock option plans for the
Company's employees, consultants, directors, and other individuals compensated
by the Company. The Compensation Committee also administers the Company's
compensation plans. The Compensation Committee acted by unanimous written
consent thirteen times during the 1999 Fiscal Year.
DIRECTOR COMPENSATION
Other than reimbursing directors for customary and reasonable expenses of
attending board of directors or committee meetings, Juno does not currently pay
cash compensation to 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 became exercisable on August 9, 1999. Additionally, under Juno's
1999 Stock Incentive Plan each individual who first joins the Juno board after
May 25, 1999 as a non-employee board member will
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automatically receive a grant of an option 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.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEE LISTED ABOVE.
PROPOSAL TWO
APPROVAL OF AMENDMENT TO THE
1999 STOCK INCENTIVE PLAN
The Company's stockholders are being asked to approve an amendment to the
Company's 1999 Stock Incentive Plan (the "Plan") which will effect the following
changes:
(i) increase the number of shares of the Company's Common Stock reserved for
issuance under the Plan by an additional 3,500,000 shares; and
(ii) increase the number of shares by which the share reserve under the Plan
will automatically increase on the first trading day in each calendar
year from one percent (1%) of the shares of Common Stock outstanding on
the last trading day of the immediately preceding calendar year
(subject to a maximum annual increase of 444,444 shares) to four
percent (4%) of such outstanding shares, subject to a maximum annual
increase of 2,400,000 shares.
The Board of Directors adopted the amendment on March 2, 2000, subject to
stockholder approval at this Meeting.
The Board believes the amendment is necessary to assure that a sufficient
reserve of Common Stock remains available for issuance under the Plan in order
to allow the Company to continue to utilize equity incentives to attract and
retain the services of key individuals essential to the Company's long-term
growth and financial success. The Company relies significantly on equity
incentives in the form of stock option grants in order to attract and retain key
employees and believes that such equity incentives are necessary for the Company
to remain competitive in the marketplace for executive talent and other key
employees. Option grants made to newly-hired or continuing employees will be
based on both competitive market conditions and individual performance.
The following is a summary of the principal features of the Plan, as most
recently amended. Any stockholder of the Company who wishes to obtain a copy of
the actual plan document may do so upon written request to the Company's
Secretary at 1540 Broadway, 27(th) Floor, New York, New York 10036.
EQUITY INCENTIVE PROGRAMS
The Plan consists of four (4) separate equity incentive programs: (i) the
Discretionary Option Grant Program, (ii) the Salary Investment Option Grant
Program, (iii) the Stock Issuance Program and (iv) the Automatic Option Grant
Program for non-employee Board members. The principal features of each program
are described below. The Compensation Committee of the Board has the exclusive
authority to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to option grants and stock issuances made to the Company's
executive officers and non-employee Board members and also has the authority to
make option grants and stock issuances under those programs to all other
eligible individuals. However, the Board may at any time appoint a secondary
committee of one or more Board members to have separate but concurrent authority
with the Compensation Committee to make option grants and stock issuances under
those two programs to individuals other than the Company's executive
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officers and non-employee Board members. The Compensation Committee has complete
discretion to select the individuals who are to participate in the Salary
Investment Option Grant Program, but all grants made to the selected individuals
are governed by the express terms of that program.
The term Plan Administrator, as used in this summary, will mean the
Compensation Committee and any secondary committee, to the extent each such
entity is acting within the scope of its administrative jurisdiction under the
Plan. However, neither the Compensation Committee nor any secondary committee
exercises any administrative discretion under the Automatic Option Grant
Program. All grants under that program are made in strict compliance with the
express provisions of such program.
SHARE RESERVE
An aggregate of 9,616,946 shares of Common Stock has been reserved for
issuance over the term of the Plan. Such share reserve consists of (i) the
5,768,611 shares initially reserved for issuance under the Plan, (ii) the
additional 348,335 shares added to the reserve on January 3, 2000 pursuant to
the automatic share increase provisions of the Plan plus (iii) the additional
increase of 3,500,000 shares of Common Stock which forms part of this Proposal.
In addition, subject to approval of this Proposal by the Company's stockholders,
on the first trading day of each calendar year during the term of the Plan,
beginning January 2001, the number of shares of Common Stock available for
issuance under the Plan will automatically increase by an amount equal to four
percent (4%) of the shares of the Company's Common Stock outstanding on the last
trading day of the immediately preceding calendar year, subject to a maximum
annual increase of 2,400,000 shares.
No participant in the Plan may receive option grants, separately exercisable
stock appreciation rights or direct stock issuances for more than 1,111,111
shares of Common Stock in the aggregate per calendar year. Stockholder approval
of this Proposal will also constitute a reapproval of the 1,111,111-share
limitation for purposes of Internal Revenue Code Section 162(m).
The shares of Common Stock issuable under the Plan may be drawn from shares
of the Company's authorized but unissued shares of such common stock or from
shares of such common stock reacquired by the Company, including shares
repurchased on the open market.
In the event any change is made to the outstanding shares of Common Stock by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to the securities issuable (in the aggregate, annually and per participant)
under the Plan and the securities and the exercise price per share in effect
under each outstanding option.
ELIGIBILITY
Officers and employees, non-employee Board members and independent
consultants in the service of the Company or its parent and subsidiaries
(whether now existing or subsequently established) are eligible to participate
in the Discretionary Option Grant and Stock Issuance Programs. Executive
officers and other highly paid employees are also eligible to participate in the
Salary Investment Option Grant Program. Participation in the Automatic Option
Grant Program will be limited to non-employee members of the Board.
As of March 24, 2000, four executive officers, three non-employee Board
members and approximately 290 other employees and consultants were eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs. The
four executive officers were also eligible to participate in the Salary
Investment Option Grant Program, and the three non-employee Board members were
also eligible to participate in the Automatic Option Grant Program.
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VALUATION
The fair market value per share of Common Stock on any relevant date under
the Plan will be deemed to be equal to the closing selling price per share on
that date on the Nasdaq National Market. On March 24, 2000 the fair market value
per share determined on such basis was $18.19.
DISCRETIONARY OPTION GRANT PROGRAM
The Plan Administrator has complete discretion under the Discretionary
Option Grant Program to determine which eligible individuals are to receive
option grants, the time or times when those grants are to be made, the number of
shares subject to each such grant, the status of any granted option as either an
incentive stock option or a non-statutory option under the federal tax laws, the
vesting schedule (if any) to be in effect for the option grant and the maximum
term for which any granted option is to remain outstanding.
Each granted option will have an exercise price per share equal to the fair
market value of the shares unless otherwise determined by the Plan Administrator
on the date of grant. No granted option will have a term in excess of ten
(10) years, and the option will generally become exercisable in one or more
installments over a specified period of service measured from the grant date.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent exercisable for vested
shares. The Plan Administrator will have complete discretion to extend the
period following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability or
vesting of such options in whole or in part. Such discretion may be exercised at
any time while the options remain outstanding, whether before or after the
optionee's actual cessation of service.
The Plan Administrator is authorized to issue tandem stock appreciation
rights under the Discretionary Option Grant Program, which provide the holders
with the right to surrender their options for an appreciation distribution from
the Company equal to the excess of (i) the fair market value of the vested
shares of Common Stock subject to the surrendered option over (ii) the aggregate
exercise price payable for such shares. Such appreciation distribution may, at
the discretion of the Plan Administrator, be made in cash or in shares of Common
Stock.
The Plan Administrator also has the authority to effect the cancellation of
any or all options outstanding under the Discretionary Option Grant Program and
to grant, in substitution therefor, new options covering the same or a different
number of shares of Common Stock but with an exercise price per share based upon
the fair market value of the option shares on the new grant date.
SALARY INVESTMENT OPTION GRANT PROGRAM
The Compensation Committee has complete discretion in implementing the
Salary Investment Option Grant Program for one or more calendar years and in
selecting the executive officers and other eligible individuals who are to
participate in the program for those years. As a condition to such
participation, each selected individual must, prior to the start of the calendar
year of participation, file with the Compensation Committee an irrevocable
authorization directing the Company to reduce his or her base salary for the
upcoming calendar year by a specified dollar amount not less than $5,000 nor
more than $50,000 and to apply that amount to the acquisition of a special
option grant under the program.
Each selected individual who files such a timely election will automatically
be granted a non-statutory option on the first trading day in January of the
calendar year for which that salary reduction is to be in effect.
The number of shares subject to each such option will be determined by
dividing the salary reduction amount by two-thirds of the fair market value per
share of Company Common Stock on the grant date, and
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the 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 total spread on the option
shares at the time of grant (the fair market value of the option shares on the
grant date less the aggregate exercise price payable for those shares) will be
equal to the amount by which the optionee's salary is to be reduced for the
calendar year. In effect, the salary reduction serves as an immediate
prepayment, as of the time of the option grant, of two thirds of the then
current market price of the shares of common stock subject to the option.
The option will become exercisable in a series of twelve equal monthly
installments upon the optionee's completion of each month of service in the
calendar year for which such salary reduction is in effect and will become
immediately exercisable for all the option shares on an accelerated basis should
the Company experience certain changes in ownership or control. Each option will
remain exercisable for any vested shares until the earlier of (i) the expiration
of the ten-year option term or (ii) the end of the three (3)-year period
measured from the date of the optionee's cessation of service.
The Company has not yet implemented the Salary Investment Option Grant
Program.
STOCK ISSUANCE PROGRAM
Shares of Common Stock may be issued under the Stock Issuance Program at a
price per share equal to the fair market value of the shares unless otherwise
determined by the Plan Administrator and for such valid consideration under the
Delaware General Corporation Law as the Plan Administrator deems appropriate,
including cash and promissory notes. The shares may also be issued as a bonus
for past services without any cash outlay required of the recipient. The shares
issued may be fully vested upon issuance or may vest upon the completion of a
designated service period or the attainment of pre-established performance
goals. The Plan Administrator will, however, have the discretionary authority at
any time to accelerate the vesting of any and all unvested shares outstanding
under the Stock Issuance Program.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, eligible non-employee Board
members receive a series of option grants over their period of Board service.
Each non-employee Board member will, at the time of his or her initial election
or appointment to the Board, receive an option grant for 22,222 shares of Common
Stock. In addition, on the date of each Annual Stockholders Meeting, each
individual 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,
provided he or she has served as a non-employee Board member for at least six
(6) months. There will be no limit on the number of such 7,777-share option
grants any one eligible non-employee Board member may receive over his or her
period of continued Board service.
Stockholder approval of this Proposal will also constitute pre-approval of
each option granted under the Automatic Option Grant Program after the date of
the Annual Stockholders Meeting and the subsequent exercise of that option in
accordance with the terms of the program summarized below.
Each automatic grant will have an exercise price per share equal to the fair
market value per share of 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 initial 22,222-share automatic option will
become exercisable upon optionee's completion of four (4) months of Board
service measured from the grant date. Each annual 7,777-share automatic option
will become exercisable upon optionee's completion of six (6) months of Board
service measured from the grant date. However, each outstanding automatic option
grant will automatically accelerate and become immediately exercisable in full
upon certain changes in control or ownership of the Company or upon the
optionee's death or disability while a Board member. Following the optionee's
cessation of Board service for any reason, each option will remain exercisable
for a 12-month period and may be exercised during that time for any or all
shares in which the optionee is vested at the time of such cessation of Board
service.
8
<PAGE>
Stockholder approval of this Proposal will also constitute pre-approval of
each limited stock appreciation right granted under the Salary Investment Option
Grant Program and the Automatic Option Grant Program and the subsequent exercise
of those rights in accordance with the foregoing terms.
GENERAL PROVISIONS
In the event that the Company is acquired by merger, asset sale or sale by
the stockholders of more than 50% of the Company's outstanding voting stock
recommended by the Board, each outstanding option under the Discretionary Option
Grant Program that is not to be assumed or replaced by the successor corporation
or otherwise continued in effect will automatically accelerate in full, and all
unvested shares outstanding under the Discretionary Option Grant and Stock
Issuance Programs will immediately vest, except to the extent the Company's
repurchase rights with respect to those shares are to be assigned to the
successor corporation or otherwise continued in effect.
The Plan Administrator will have the authority under the Discretionary
Option Grant Program to provide that those options will automatically vest in
full (i) upon an acquisition of the Company, whether or not those options are
assumed or replaced, (ii) upon a hostile change in control of the Company
effected through a tender offer for more than 50% of the Company's outstanding
voting stock or by proxy contest for the election of Board members, or (iii) in
the event of certain terminations of service (including forced terminations)
following an acquisition or a hostile change in control. The vesting of
outstanding shares under the Stock Issuance Program may be accelerated upon
similar terms and conditions. The options granted under the Salary Investment
Option Grant Program and the Automatic Option Grant Program will automatically
accelerate and become exercisable in full upon any acquisition or change in
control transaction.
The acceleration of vesting in the event of a change in the ownership or
control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
Each option granted under the Salary Investment Option Grant Program and the
Automatic Option Grant Program will include a limited stock appreciation right
so that upon the successful completion of a hostile tender offer for more than
fifty percent (50%) of the Company's outstanding voting securities or a change
in a majority of the Board as a result of one or more contested elections for
Board membership, the option may be surrendered to the Company in return for a
cash distribution from the Company. The amount of the distribution per
surrendered option share will be equal to the excess of (i) the fair market
value per share at the time the option is surrendered or, if greater, the tender
offer price paid per share in the hostile take-over over (ii) the exercise price
payable per share under such option. In addition, the Plan Administrator may
grant such rights to officers of the Company who are subject to Section 16 of
the Securities Exchange Act of 1934, as amended, as part of their option grants
under the Discretionary Option Grant Program.
The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options under the
Discretionary Option Grant Program or the purchase of shares under the Stock
Issuance Program through full-recourse interest-bearing promissory notes.
However, the maximum amount of financing provided any participant may not exceed
the cash consideration payable for the issued shares plus all applicable taxes
incurred in connection with the acquisition of those shares. The Plan
Administrator may provide one or more holders of non-statutory options or
unvested share issuances under the Plan with the right to have the Company
withhold a portion of the shares otherwise issuable to such individuals in
satisfaction of the withholding taxes to which such individuals become subject
in connection with the exercise of those options or the vesting of those shares.
Alternatively, the Plan Administrator may allow such individuals to deliver
previously acquired shares of common stock in payment of such withholding tax
liability.
9
<PAGE>
AMENDMENT AND TERMINATION
The Board may amend or modify the Plan at any time, subject to any required
stockholder approval pursuant to applicable laws and regulations. Unless sooner
terminated by the Board, the Plan will terminate on the earliest of
(i) March 25, 2009, (ii) the date on which all shares available for issuance
under the Plan have been issued as fully-vested shares or (iii) the termination
of all outstanding options in connection with certain changes in control or
ownership of the Company.
STOCK AWARDS
The table below shows, for each of the Company's executive officers named in
the Summary Compensation Table of the Executive Compensation and Other
Information section of this Proxy Statement and the other individuals and groups
indicated, the number of shares of Common Stock subject to option grants made
under the Plan through March 24, 2000, together with the weighted average
exercise price payable per share. The Company has not made any direct stock
issuances to date under the Plan.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF SHARES AVERAGE
UNDERLYING EXERCISE
NAME AND POSITION OPTIONS GRANTED (1) PRICE PER SHARE
- ----------------- ------------------- ---------------
<S> <C> <C>
Charles E. Ardai............................................ 1,134,044 $ 9.36
President, Chief Executive Officer and Director Nominee
Robert H. Cherins........................................... 450,069 $ 9.16
Executive Vice President, Sales and Marketing
Mark A. Moraes.............................................. 450,069 $ 9.28
Executive Vice President, Technology
Richard M. Eaton, Jr........................................ 406,679 $12.52
Chief Financial Officer and Treasurer
All current executive officers as a group (4 persons)....... 2,440,861 $ 9.83
All current non-employee directors as a group (3 persons)... 66,666 $ 9.00
All employees, including current officers who are not
executive officers, as a group (290 persons).............. 3,566,981 $14.76
</TABLE>
- ------------------------------
(1) The option grants set forth above include those certain option grants made
in March 2000 that are described below in the section of this Proxy
Statement entitled "New Plan Benefits."
As of March 24, 2000, 6,074,508 shares of Common Stock were subject to
outstanding options under the Plan, 657,942 shares of Common Stock had been
issued under the Plan, and 2,884,496 shares of Common Stock remained available
for future issuance, assuming stockholder approval of this Proposal.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the Plan may be either incentive stock options which
satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
INCENTIVE OPTIONS. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will,
10
<PAGE>
however, recognize taxable income in the year in which the purchased shares are
sold or otherwise disposed of. For Federal tax purposes, dispositions are
divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying
disposition occurs if the sale or other disposition is made after the optionee
has held the shares for more than two (2) years after the option grant date and
more than one (1) year after the exercise date. If either of these two holding
periods is not satisfied, then a disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased shares,
the Company will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the excess of (i) the fair market value
of such shares on the option exercise date over (ii) the exercise price paid for
the shares. If the optionee makes a qualifying disposition, the Company will not
be entitled to any income tax deduction.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the
Section 83(b) election is made, the optionee will not recognize any additional
income as and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
STOCK APPRECIATION RIGHTS
No taxable income is recognized upon receipt of a stock appreciation right.
The holder will recognize ordinary income, in the year in which the stock
appreciation right is exercised, in an amount equal to the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution in the taxable year in which such ordinary income
is recognized by the optionee.
DIRECT STOCK ISSUANCES
The tax principles applicable to direct stock issuances under the Plan will
be substantially the same as those summarized above for the exercise of
non-statutory option grants.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company anticipates that any compensation deemed paid by it in
connection with the disqualifying dispositions of incentive stock option shares
or the exercise of non-statutory options with exercise prices equal to the fair
market value of the option shares on the grant date will qualify as performance-
based compensation for purposes of Code Section 162(m) and will not have to be
taken into account for purposes of the $1 million limitation per covered
individual on the deductibility of the compensation paid
11
<PAGE>
to certain executive officers of the Company. Accordingly, all compensation
deemed paid with respect to those options will remain deductible by the Company
without limitation under Code Section 162(m).
ACCOUNTING TREATMENT
Option grants under the Discretionary Option Grant and Automatic Option
Grant Programs with exercise prices equal to the fair market value of the option
shares on the grant date will not result in any direct charge to the Company's
reported earnings. However, the fair value of those options is required to be
disclosed in the notes to the Company's financial statements, and the Company
must also disclose, in footnotes to the Company's financial statements, the
pro-forma impact those options would have upon the Company's reported earnings
were the fair value of those options at the time of grant treated as a
compensation expense. In addition, the number of outstanding options may be a
factor in determining the Company's earnings per share on a fully-diluted basis.
Option grants or stock issuances made under the Plan with exercise or issue
prices less than the fair market value of the shares on the grant or issue date
will result in a direct compensation expense to the Company in an amount equal
to the excess of such fair market value over the exercise or issue price. The
expense must be amortized against the Company's earnings over the period that
the option shares or issued shares are to vest.
On March 31, 1999, the Financial Accounting Standards Board issued an
exposure draft of a proposed interpretation of APB Opinion No. 25 governing the
accounting principles applicable to equity incentive plans. Under the proposed
interpretation, as subsequently modified on August 11, 1999, option grants made
to non-employee consultants (but not non-employee Board members) after
December 15, 1998 will result in a direct charge to the Company's reported
earnings based upon the fair value of the option measured initially as of the
grant date and then subsequently on the vesting date of each installment of the
underlying option shares. Such charge will accordingly include the appreciation
in the value of the option shares over the period between the grant date of the
option (or, if later, the effective date of the final interpretation) and the
vesting date of each installment of the option shares. In addition, if the
proposed interpretation is adopted, any options which are repriced after
December 15, 1998 will also trigger a direct charge to Company's reported
earnings measured by the appreciation in the value of the underlying shares over
the period between the grant date of the option (or, if later, the effective
date of the final amendment) and the date the option is exercised for those
shares.
Should one or more individuals be granted tandem stock appreciation rights
under the Plan, then such rights would result in a compensation expense to be
charged against the Company's reported earnings. Accordingly, at the end of each
fiscal quarter, the amount (if any) by which the fair market value of the shares
of common stock subject to such outstanding stock appreciation rights has
increased from the prior quarter-end would be accrued as compensation expense,
to the extent such fair market value is in excess of the aggregate exercise
price in effect for those rights.
NEW PLAN BENEFITS
As of March 24, 2000, 1,087,600 stock options had been granted, and no
direct stock issuances had been made, on the basis of the share increases which
are the subject of this Proposal.
The table below shows, for each of the Company's executive officers named in
the Summary Compensation Table of the Executive Compensation and Other
Information section of this Proxy Statement and the other individuals and groups
indicated, the number of shares of Common Stock subject to option grants under
the Plan that have been made on the basis of the 3,500,000 share increase that
is the subject of this Proposal, together with the weighted average exercise
price payable per share.
12
<PAGE>
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF SHARES AVERAGE
UNDERLYING EXERCISE PRICE
NAME AND POSITION OPTIONS GRANTED PER SHARE
- ----------------- ---------------- --------------
<S> <C> <C>
Charles E. Ardai President,................................. 250,000 $19.81
President, Chief Executive Officer and Director Nominee
Robert H. Cherins........................................... 100,000 $19.81
Executive Vice President, Sales and Marketing
Mark A. Moraes.............................................. 100,000 $19.81
Executive Vice President, Technology
Richard M. Eaton, Jr........................................ 100,000 $19.81
Chief Financial Officer and Treasurer
All current executive officers as a group (4 persons)....... 550,000 $19.81
All current non-employee directors as a group -- $ --
(3 persons)...............................................
All employees, including current officers who are not 537,600 $19.81
executive officers, as a group (18 persons)...............
</TABLE>
Additionally, on the date of the Annual Meeting, Drs. Shaw and Salkind and
Mr. Ryeon will receive an option grant for 7,777 shares at an exercise price
equal to the fair market value per share of Common Stock on that date
STOCKHOLDER APPROVAL
The affirmative vote of at least a majority of the outstanding shares of
Common Stock present in person or by proxy at the Annual Meeting and entitled to
vote is required for approval of the amendment to the Plan. Should such
stockholder approval not be obtained, then the 3,500,000-share increase to the
share reserve under the Plan will not be implemented, the 4% percentage increase
to the automatic share increase provision will not be implemented, any stock
options granted under the Plan on the basis of the increases will immediately
terminate without ever becoming exercisable for the shares of Common Stock
subject to those options, and no additional options or stock issuances will be
made on the basis of such increases. The Plan will, however, continue in effect,
and option grants and direct stock issuances may continue to be made under the
Plan until all the shares available for issuance under the Plan have been issued
pursuant to such option grants and direct stock issuances.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT AND RECOMMENDS
THAT THE STOCKHOLDERS VOTE FOR THE AMENDMENT TO THE PLAN.
PROPOSAL THREE
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of PricewaterhouseCoopers LLP,
independent accountants for the Company during the 1999 Fiscal Year, to serve in
the same capacity for the year ending December 31, 2000, and is asking the
stockholders to ratify this appointment. The affirmative vote of a majority of
the shares represented and voting at the Annual Meeting is required to ratify
the selection of PricewaterhouseCoopers LLP.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors in its discretion may direct the
13
<PAGE>
appointment of a different independent auditing firm at any time during the year
if the Board of Directors believes that such a change would be in the best
interests of the Company and its stockholders.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP TO SERVE AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other matters is granted
by the execution of the enclosed Proxy.
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Company's Common Stock as of
March 24, 2000, by (i) all persons who are beneficial owners of five percent
(5%) or more of the Company's Common Stock, (ii) each director and nominee for
director, (iii) the executive officers named in the Summary Compensation Table
of the Executive Compensation and Other Information section of this Proxy
Statement and (iv) all current directors and executive officers as a group.
Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares beneficially owned, subject to
community property laws, where applicable. 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.
<TABLE>
<CAPTION>
NUMBER
OF SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED
- ---------------- ------------ ------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
David E. Shaw (1)........................................... 17,509,123 45.3%
Charles E. Ardai (2)........................................ 388,452 *
Louis K. Salkind (3)........................................ 188,704 *
Mark A. Moraes (4).......................................... 151,700 *
Richard M. Eaton, Jr. (5)................................... 86,817 *
Robert H. Cherins (6)....................................... 76,908 *
Edward J. Ryeom (7)......................................... 22,222 *
All directors and executive officers as a group (7 persons)
(8)....................................................... 18,423,926 46.8
5% STOCKHOLDERS
Shaw Family Trust IV (9).................................... 7,419,152 19.2
D. E. Shaw & Co., L.P. (10)................................. 6,336,735 16.4
News America Incorporated (11).............................. 3,135,208 8.1
</TABLE>
- ------------------------------
* Less than 1%.
(1) Includes (i) 3,217,812 shares held directly by David E. Shaw, (ii) 107,627
shares held by D. E. Shaw & Co., Inc., (iii) 5,559,697 shares held by D. E.
Shaw & Co., L.P., (iv) 777,038 shares held by D. E. Shaw Investment Group,
L.P., (v) 7,419,152 shares held
14
<PAGE>
by Shaw Family Trust IV and (vi) 22,222 shares that are issuable upon the
exercise of stock options. Dr. Shaw disclaims beneficial ownership of the
shares held by D. E. Shaw & Co., L.P., D. E. Shaw Investment Group, L.P.,
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, New York 10036. In addition to the shares included above, 233,334
shares are held by the Shaw Juno Trust. For a description of the
relationship between David E. Shaw and Juno, please see "Certain
Transactions."
(2) Includes 388,289 shares that are issuable upon the exercise of stock
options. This number does not include 745,755 shares issuable upon the
exercise of stock options that do not vest within 60 days of March 24, 2000.
Of the stock options granted to Mr. Ardai, an option to acquire 250,000
shares has been granted subject to stockholder approval of the increase in
the share reserve which forms a part of Proposal Two described in this Proxy
Statement.
(3) Includes shares held by the Louis K. Salkind 1999 Grantor Retained Annuity
Trust and 22,222 shares that are issuable upon the exercise of stock
options. 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, New York 10036.
(4) Includes 115,264 shares that are issuable upon the exercise of stock
options. This number does not include 299,805 shares issuable upon the
exercise of stock options that do not vest within 60 days of March 24, 2000.
Of the stock options granted to Mr. Moraes, an option to acquire 100,000
shares has been granted subject to stockholder approval of the increase in
the share reserve which forms a part of Proposal Two described in this Proxy
Statement.
(5) Includes 80,797 shares that are issuable upon the exercise of stock options.
This number does not include 305,688 shares issuable upon the exercise of
stock options that do not vest within 60 days of March 24, 2000. Of the
stock options granted to Mr. Eaton, an option to acquire 100,000 shares has
been granted subject to stockholder approval of the increase in the share
reserve which forms a part of Proposal Two described in this Proxy
Statement.
(6) Includes 76,787 shares that are issuable upon the exercise of stock options.
This number does not include 300,580 shares issuable upon the exercise of
stock options that do not vest within 60 days of March 24, 2000. Of the
stock options granted to Mr. Cherins, an option to acquire 100,000 shares
has been granted subject to stockholder approval of the increase in the
share reserve which forms a part of Proposal Two described in this Proxy
Statement.
(7) Includes 22,222 shares that are issuable upon the exercise of stock options.
The address of Mr. Ryeom is 70 West 36th Street, Suite 906, New York, New
York 10018.
(8) Includes 727,803 shares that are issuable upon the exercise of stock
options.
(9) David E. 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.
(10) Includes (i) 5,559,697 shares held directly by D. E. Shaw & Co., L.P. and
(ii) 777,038 shares held by D. E. Shaw Investment Group, L.P. D. E. Shaw &
Co., Inc., which is wholly owned by David E. Shaw, is the general partner of
D. E. Shaw & Co., 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., 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. For a description of the relationship between
D. E. Shaw & Co., L.P. and Juno, please see "Certain Transactions."
(11) 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, New York 10036. For a description of the
relationship between News America Incorporated and Juno, please see "Certain
Transactions."
15
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The executive officers and key employees of the Company, and their ages and
positions as of March 31, 2000, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- -------- ------------------------------------------
<S> <C> <C>
Charles E. Ardai.......................... President, Chief Executive Officer and
30 Director
Robert H. Cherins......................... Executive Vice President, Sales and
59 Marketing
Mark A. Moraes............................ 34 Executive Vice President, Technology
Richard M. Eaton, Jr...................... 39 Chief Financial Officer and Treasurer
Jordan S. Birnbaum........................ Senior Vice President, Business
29 Development
Richard D. Buchband....................... 36 Senior Vice President and General Counsel
V. S. Mani................................ 35 Senior Vice President, Database Systems
Peter D. Skopp............................ 29 Senior Vice President, Network Development
</TABLE>
INFORMATION CONCERNING EXECUTIVE OFFICERS AND KEY EMPLOYEES WHO ARE NOT
DIRECTORS
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 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.
16
<PAGE>
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.
17
<PAGE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation that in 1999 was awarded to, earned or paid to the Company's Chief
Executive Officer and each of the three other most highly compensated executive
officers of the Company whose salary and bonus for the 1999 fiscal year was in
excess of $100,000. No other executive officers who would have otherwise been
includable in such table on the basis of salary and bonus earned for the 1999
fiscal year has been excluded by reason of his or her termination of employment
or change in executive status during that year. The listed individuals shall be
hereinafter referred to as the "Named Officers".
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(2)..................................... $223,353 $165,000 462,933
President and Chief Executive Officer
Robert H. Cherins(3).................................... $150,000 $200,000 150,067
Executive Vice President, Sales and Marketing
Mark A. Moraes(4)....................................... $150,000 $175,000 150,067
Executive Vice President, Technology
Richard M. Eaton, Jr.(5)................................ $125,000 $125,000 217,789
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) Amounts presented represent amounts paid for services rendered in 1999.
(3) Amounts presented represent amounts paid for services rendered in 1999. The
amounts shown above exclude a bonus of $100,000 paid in 1999 for services
rendered in 1998.
(4) Amounts presented represent amounts paid for services rendered in 1999. The
amounts shown above exclude a bonus of $75,000 paid in 1999 for services
rendered in 1998.
(5) Amounts presented represent amounts paid for services rendered in 1999. The
amounts shown above exclude a bonus of $60,000 paid in 1999 for services
rendered in 1998.
18
<PAGE>
OPTION GRANTS IN LAST YEAR
The following table contains information concerning the stock options
granted to the Named Officers during the 1999 fiscal year. No stock appreciation
rights were granted to the Named Officers during such fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------------------
NAME GRANTED 1999 PER SHARE DATE 0% 5% 10%
- ---- ---------- ------------ -------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles E. Ardai....... 105,277 3.8% $ 9.00 4/8/2009 $315,831 $ 595,873 $1,510,060
315,556 11.3 13.00 4/21/2009 -- 2,579,869 6,537,895
42,100 1.5 8.94 6/3/2009 -- 236,700 599,843
Robert H. Cherins...... 66,667 2.4 13.00 4/26/2009 -- 545,045 1,381,250
13,400 0.5 8.94 6/3/2009 -- 75,339 190,924
70,000 2.5 15.00 8/15/2009 -- 660,339 1,673,430
Mark A. Moraes......... 66,667 2.4 13.00 4/21/2009 -- 545,045 1,381,250
13,400 0.5 8.94 6/3/2009 -- 75,339 190,924
70,000 2.5 15.00 8/15/2009 -- 660,339 1,673,430
Richard M. Eaton, 88,889 3.2 13.00 4/21/2009 -- 726,724 1,841,660
Jr................... 8,900 0.3 8.94 6/3/2009 -- 50,039 126,808
120,000 4.3 15.00 8/15/2009 -- 1,132,010 2,868,736
</TABLE>
- ------------------------------
(1) Each option represents the right to purchase one share of common stock and
generally vests at a rate of 25% per annum over four years.
(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.
19
<PAGE>
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1999 AND YEAR-END
OPTION VALUES
The following table provides information, with respect to the Named
Officers, concerning the exercise of options during the 1999 fiscal year and
unexercised options held by them at of the end of that fiscal year. None of the
Named Officers exercised any stock appreciation rights during the 1999 fiscal
year.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1999
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED DECEMBER 31, 1999 AT DECEMBER 31, 1999(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Ardai........ -- -- 159,653 724,391 $5,584,707 $20,138,845
Robert H. Cherins....... 73,000 $1,305,934 58,909 218,158 2,061,570 4,232,965
Mark A. Moraes.......... 35,000 194,250 58,280 256,789 1,661,140 7,341,830
Richard M. Eaton, Jr.... 20,194 341,528 51,681 234,804 1,220,707 5,848,651
</TABLE>
- ------------------------------
(1) The last reported sale price of the common stock of Juno as of December 31,
1999 was $35.50 per share.
EMPLOYMENT, SEVERANCE AND OTHER ARRANGEMENTS
Juno has entered into an employment agreement with Charles E. Ardai, dated
April 26, 1999, which may be terminated by either party upon 30 days notice. The
agreement was amended on February 29, 2000 for calendar year 2000 and provides
for Mr. Ardai to receive a base salary of $225,000 and to receive semi-annual
bonus payments on June 30 and December 31 of each year, of $50,000 each.
Subsequent to calendar year 2000, Mr. Ardai's base salary and bonus amount may
be increased, decreased or eliminated in the sole discretion of Juno.
Juno has entered into an employment agreement with Robert H. Cherins, dated
April 26, 1999, which may be terminated by either party upon 30 days notice. The
agreement, which incorporates the terms of a letter agreement dated
November 20, 1996, was amended on February 29, 2000 for calendar year 2000 and
provides for Mr. Cherins to receive a base salary of $185,000. The agreement
also provides for Mr. Cherins to receive a non-refundable advance of $143,500,
to be paid semi-monthly and deducted against any year-end bonus. Mr. Cherins is
eligible under the agreement to receive a year-end bonus. Subsequent to calendar
year 2000, 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
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 the event that Mr. Cherins is discharged by Juno, 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.
Juno has entered into an employment agreement with Mark A. Moraes, dated
October 6, 1999, which may be terminated by either party upon 30 days notice.
The agreement was amended on February 29, 2000 for calendar year 2000 and
provides for a base salary of $185,000 and for Mr. Moraes to be eligible to
receive a bonus at the sole discretion of Juno. Subsequent to calendar year
2000, Mr. Moraes's base salary and bonus amount may be increased, decreased or
eliminated in the sole discretion 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. The agreement was amended on February 29, 2000 for calendar year 2000
and provides for a base salary of $160,000 and for Mr. Eaton to be eligible to
receive a bonus at the sole discretion of Juno. Subsequent to calendar year
2000, Mr. Eaton's base salary and bonus amount may be increased or decreased in
the sole discretion of Juno.
20
<PAGE>
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 following a relocation of their place of employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Juno did not have a Compensation Committee during the first quarter of 1999.
During that period, 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during fiscal year 1999, all filings with the
Securities and Exchange Commission of its officers, directors and 10%
stockholders complied with requirements for reporting ownership and changes in
ownership of the Company's Common Stock pursuant to Section 16 (a) of the
Securities Exchange Act of 1934, except that Richard M. Eaton, Jr. omitted to
file a Form 4 with respect to the sale by him of 9,000 shares of Common Stock in
December 1999 and instead reflected such transaction on Form 5 filed by him in
February 2000.
21
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors advises the Chief
Executive Officer and the Board of Directors on matters of the Company's
compensation philosophy and the compensation of executive officers and other
individuals compensated by the Company. The Compensation Committee is also
responsible for the administration of the Company's stock option plans under
which option grants may be made to executive officers. The Compensation
Committee has reviewed and is in accord with the compensation paid to executive
officers in 1999.
GENERAL COMPENSATION POLICY
The fundamental policy of the Compensation Committee is to provide the
Company's executive officers with competitive compensation opportunities based
upon their contribution to the development and financial success of the Company
and their personal performance. It is the Compensation Committee's objective to
have a portion of each executive officer's compensation contingent upon the
Company's performance as well as upon such executive officer's own level of
performance.
COMPONENTS OF EXECUTIVE COMPENSATION
The Compensation Committee focuses primarily on the following three
components in forming the total compensation package for its executive officers:
- Base Salary
- Annual Bonus
- Long-Term Stock-Based Incentive Awards
BASE SALARY
The suggested base salary for each executive officer is determined on the
basis of the following factors: experience, personal performance, the salary
levels in effect for comparable positions within and without the industry and
internal base salary comparability considerations. The weight given to each of
these factors differs from individual to individual, as the Compensation
Committee deems appropriate.
ANNUAL BONUS
During the year, the executive officers of the Company were eligible for
discretionary annual bonuses, as determined by the Compensation Committee. Among
factors considered in determining the bonus were personal performance and the
Company's achievements and performance.
LONG-TERM STOCK-BASED INCENTIVE AWARDS
Long-term stock-based incentives are provided through grants of stock
options. The grants are designed to align the interests of each executive
officer with those of the stockholders and provide each individual with a
significant incentive to manage the Company from the perspective of an owner
with an equity stake in the Company. Each option generally becomes exercisable
in installments over a four-year period, contingent upon the executive officer's
continued employment with the Company. Accordingly, the option grant will
provide a return to the executive officer only if the executive officer remains
employed by the Company during the vesting period, and then only if the market
price of the underlying shares appreciates. The number of shares subject to each
option grant is set at a level intended to create a meaningful opportunity for
stock ownership based on the executive officer's current position with the
Company, the base salary associated with that position, the size of comparable
awards made to individuals in similar positions within the industry, the
individual's potential for increased responsibility and promotion over the
option term and the individual's personal performance in recent periods. The
Compensation
22
<PAGE>
Committee also considers the number of unvested options held by the executive
officer in order to maintain an appropriate level of equity incentive for that
individual. However, the Compensation Committee does not adhere to any specific
guidelines as to the relative option holdings of the Company's executive
officers. Stock options to purchase an aggregate of 980,856 shares of Common
Stock were granted to executive officers in 1999.
CEO COMPENSATION
The plans and policies discussed above were the basis for the 1999
compensation of the Company's Chief Executive Officer, Mr. Charles E. Ardai. In
advising the Board of Directors with respect to the compensation of the
Company's Chief Executive Officer, the Compensation Committee seeks to achieve
two objectives: (i) establish a level of base salary competitive with that paid
by companies within the industry which are of comparable size to the Company and
by companies outside of the industry with which the Company competes for
executive talent and (ii) make a significant percentage of the total
compensation package contingent upon the Company's performance. In accordance
with these objectives, Mr. Ardai received a base salary of $223,353 for fiscal
year 1999. Stock options to purchase 462,933 shares of Common Stock were granted
to Mr. Ardai in fiscal year 1999; he currently holds a total of 1,134,044
unexercised stock options.
DISCUSSION OF COMPENSATION IN EXCESS OF $1 MILLION PER YEAR
The Compensation Committee has considered the implications of
Section 162(m) of the Internal Revenue Code of 1986, as amended, enacted under
the Revenue Reconciliation Act of 1993. This Section precludes a public
corporation from taking a tax deduction for individual compensation in excess of
$1 million for its Chief Executive Officer or any of its four other highest-paid
officers. This limitation will apply to all compensation paid to the covered
executive officers which is not considered to be performance based. Compensation
which does qualify as performance-based compensation will not have to be taken
into account for purposes of this limitation. The Plan contains certain
provisions which are intended to assure that any compensation deemed paid in
connection with the exercise of stock options granted under that plan with an
exercise price equal to the market price of the option shares on the grant date
will qualify as performance-based compensation. The Compensation Committee does
not expect that the compensation to be paid to the Company's executive officers
for 2000 will exceed the $1 million limit per officer.
SUMMARY
The Compensation Committee believes that its executive compensation policy
serves the interests of the Company and its stockholders.
THE COMPENSATION COMMITTEE
David E. Shaw
Edward J. Ryeom
Charles E. Ardai
23
<PAGE>
STOCK PERFORMANCE GRAPH
The graph depicted below shows a comparison of cumulative total stockholder
returns for the Company, the Nasdaq Stock Market (U.S) Index and the
Hambrecht & Quist Internet Index.
CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C>
5/26/99 12/31/99
JUNO ONLINE SERVICES, INC. 100 305.38
NASDAQ STOCK MARKET (U.S.) 100 157.09
HAMBRECHT & QUIST INTERNET 100 181.07
</TABLE>
- ------------------------------
(1) The graph covers the period from May 26, 1999, the commencement date of the
Company's initial public offering of shares of its Common Stock, to
December 31, 1999.
(2) The graph assumes that $100 was invested in the Company on May 26, 1999, in
the Company's Common Stock and in each index, and that all dividends were
reinvested. No cash dividends have been declared on the Company's Common
Stock.
(3) Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings made under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings made by the Company under those statutes, neither the preceding Stock
Performance Graph nor the Compensation Committee Report is to be incorporated by
reference into any such prior filings, nor shall such graph or report be
incorporated by reference into any future filings made by the Company under
those statutes.
24
<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.
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. Upon completion of
our initial public offering on May 25, 1999, the outstanding shares of Series A
redeemable convertible preferred stock and Series B redeemable convertible
preferred stock automatically converted into 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. 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, $61,600 per month for the period
April 17, 1998 to December 31, 1999 and $7,200 per month, primarily for
telecommunications services, 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;
- miscellaneous administrative services;
- various professional services;
- various purchasing services; and
- various information technology services.
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.
Prior to May 20, 1999, Juno and DESCO, L.P. were parties to a services
agreement pursuant to which DESCO, L.P., through certain affiliates based in
India, provided various consulting services to Juno. Under
25
<PAGE>
this agreement, DESCO, L.P. provided technical and non-technical consulting
services as well as other consulting services agreed to by the parties. Each
staff member who performed consulting services under this agreement was
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 paid DESCO, L.P. $3,650 per month for each
technical consultant and $2,300 per month for each non-technical consultant. The
parties terminated this agreement effective May 20, 1999, and we are presently
restructuring the manner in which Juno obtains the services that had been
provided under the agreement. We have formed a subsidiary of Juno based in
Hyderabad, India, and that subsidiary has entered into employment agreements
with substantially all of the individuals who had previously served as technical
or non-technical consultants. In the future, we expect to enter into a more
limited agreement to formalize occupancy and related services that we continue
to obtain from DESCO, L.P.'s affiliated entity in India. We believe that the
economic terms of the new agreement will be generally comparable to those that
could be obtained from 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. 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 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.
On September 29, 1999, Juno entered into an agreement with News America
Digital Publishing, an affiliate of News Corporation, to use Fox-branded news,
sports, entertainment and business content within co-branded channels on the
Juno portal site.
LEASES
Since November 1997, Juno's principal executive offices have been located on
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 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.
Juno also currently occupies two floors in an adjacent building under a
subleasing arrangement with DESCO, L.P. Although the terms of this arrangement
have not been finalized, Juno expects that the sublease will expire on
April 30, 2001. We believe that the economic terms of this sublease will be
generally comparable to those that could be obtained from an independent third
party.
26
<PAGE>
ANNUAL REPORT
A copy of the Annual Report of the Company for the 1999 Fiscal Year has been
mailed concurrently with this Proxy Statement to all stockholders entitled to
notice of and to vote at the Annual Meeting. The Annual Report is not
incorporated into this Proxy Statement and is not considered proxy solicitation
material.
FORM 10-K
The Company filed an Annual Report on Form 10-K with the Securities and
Exchange Commission on February 15, 2000. Stockholders may obtain a copy of this
report, without charge, by writing to Richard D. Buchband, Senior Vice President
and General Counsel, at the Company's principal executive offices located at
1540 Broadway, 27(th) Floor, New York, New York 10036.
****
Management does not know of any business to be transacted at the meeting
other than as indicated herein. However, certain stockholders may present topics
for discussion from the floor. Should any matter other than as indicated herein
proeprly come before the meeting for a vote, the persons designated as proxies
will vote thereon in accordance with their best judgment.
You are urged to sign, date and return the enclosed proxy in the prepaid
envelope provided or, if applicable, to vote by telephone. Promptly voting may
save your Company the expense of a second mailing.
By Order of the Board of Directors
[SIGNATURE]
Richard D. Buchband
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL; SECRETARY
Dated: April 10, 2000
27
<PAGE>
JUNO ONLINE SERVICES, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 24, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
JUNO ONLINE SERVICES, INC.
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders to be held May 24, 2000 and the
Proxy Statement and appoints Charles E. Ardai, Richard M. Eaton Jr. and
Richard D. Buchband, and each of them, the Proxy of the undersigned, with full
power of substitution, to vote all shares of Common Stock or Preferred Stock of
Juno Online Services, Inc. (the "Company") which the undersigned is entitled to
vote, either on his or her own behalf or on behalf of any entity or entities, at
the Annual Meeting of Stockholders of the Company to be held at The Empire
Hotel, 44 West 63(rd) Street, New York, New York 10023 on Wednesday,
May 24, 2000 at 10:00 Eastern Time (the "Annual Meeting"), and at any
adjournment or postponement thereof, with the same force and effect as the
undersigned might or could do if personally present thereat. The shares
represented by this Proxy shall be voted in the manner set forth on the reverse
side.
<TABLE>
<S> <C> <C> <C> <C> <C>
1. To elect a director to serve for a three-year term ending in the year 2003 or until his
successor is duly elected and qualified;
Charles E. Ardai For / / Withhold Authority to Vote / /
To approve a series of amendments to the Company's 1999 Stock
Incentive Plan (the "1999 Plan"), to (i) increase the number of
shares of Common Stock reserved for issuance over the term of the
2. For Against Abstain 1999 Plan by an additional 3,500,000 shares and (ii) to amend the
/ / / / / / 1999 Plan so that at the beginning of each calendar year the
share reserve under the 1999 Plan is automatically increased by a
number of shares equal to 4% of the total number of shares of
Common Stock outstanding (each such increase not to exceed
2,400,000 shares);
3. For Against Abstain To ratify the appointment of PricewaterhouseCoopers LLP as
/ / / / / / independent accountants of the Company for the fiscal year ending
December 31, 2000.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
4. In accordance with the discretion of the proxy holders, to act upon all matters incident
to the conduct of the meeting and upon other matters as may properly come before the
meeting.
</TABLE>
The Board of Directors recommends a
vote FOR the director listed above
and a vote FOR each of the listed
proposals. This Proxy, when
properly executed, will be voted as
specified above. IF NO
SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF
THE DIRECTOR LISTED ABOVE AND FOR
THE OTHER PROPOSALS.
<TABLE>
<S> <C>
Please print the name(s) appearing on each share
certificate(s) over which you have voting
authority:
--------------------------------------------------
(Print name(s) on certificate)
Please sign your name:
--------------------------------------------------
(Authorized Signature(s))
Date:
--------------------------------------------------
</TABLE>
<PAGE>
Exhibit 99(a)
JUNO ONLINE SERVICES, INC.
1999 STOCK INCENTIVE PLAN
(AMENDED AND RESTATED AS OF MARCH 2, 2000)
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:
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(i) The Board shall have the authority to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to
Section 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.
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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 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
Nine Million, Six Hundred Sixteen Thousand, Nine Hundred Forty-Six (9,616,946)
shares. Such authorized share reserve consists of (i) the number of shares
transferred to the Plan under the Predecessor Plan and the number of shares by
which the Plan was increased on the Plan Effective Date, (ii) the number of
shares added to the Plan on January 3, 2000 under the automatic share increase
provision of the Plan, plus (iii) an increase of Three Million, Five Hundred
Thousand (3,500,000) shares authorized by the Board subject to stockholder
approval at the Corporation's 2000 annual meeting of stockholders.
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 2001 calendar
year, by an amount equal to four percent (4%) 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 Two Million
Four Hundred Thousand (2,400,000) 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
Eleven (1,111,111) 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 transferred 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, (v) the number and/or class of securities and the
exercise price per share in effect under each outstanding option under the Plan
and (vi) 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 may, subject to the provisions of Section II of
Article Six, be paid as follows:
(i) in cash or via check payable to the Corporation;
(ii) in 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
(iii) 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.
7
<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
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<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.
9
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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 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 divided by (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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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 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 Two (22,222) 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 Seven (7,777) 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 22,222-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 7,777-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 or 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 became 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.
B. The Plan serves as the successor to the Predecessor Plan,
and no further options or direct stock issuances shall be made under the
Predecessor Plan. However, each outstanding option transferred from the
Predecessor Plan 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
transferred 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 transferred 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 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
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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 transferred from the
Predecessor Plan, 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 amended and restated as of March 2, 2000 and 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.
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).
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