<PAGE>
As filed with the Securities and Exchange Commission on February 19, 1999
Registration Statement No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
MapQuest.com, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 7374 363949110
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
MapQuest.com, Inc. Michael J. Mulligan, Chief Executive
3710 Hempland Road Officer
Mountville, PA 17554 MapQuest.com, Inc.
(717) 285-8500 3710 Hempland Road
Mountville, PA 17554
(717) 285-8500
(Address, including zip code, and (Name, address, including zip code,
telephone number, including area code, and telephone number, including area
of registrant's principal executive code, of agent for service)
offices)
-------------------
Copies to:
James B. Carlson, Esq. Mayer, Brown & Alexander D. Lynch, Esq. Alan P.
Platt 1675 Broadway New York, NY 10019 Blaustein, Esq. Brobeck, Phleger &
(212) 506-2500 Harrison LLP 1633 Broadway New York,
NY 10019 (212) 581-1600
-------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Maximum
Title of Each Class of Aggregate Offering Amount of
Securities to be Registered Price(1)(2) Registration Fee
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<S> <C> <C>
Common Stock ($0.001 par value per
share)............................. $50,000,000 $13,900
</TABLE>
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(1) The Company has granted to the Underwriters a 30-day option to purchase
additional shares of Common Stock solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) promulgated under the Securities
Act of 1933, as amended.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until this
registration statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 19, 1999
[MAPQUEST.COM, INC. LOGO]
Shares
Common Stock
We are offering shares of our common stock. This is our initial public
offering, and no public market currently exists for our shares. We intend to
apply to have the shares we are offering approved for quotation on the Nasdaq
National Market under the symbol "MQST." We anticipate that the initial public
offering price will be between $ and $ per share.
Shares of common stock may be reserved for sale at the initial public
offering price to our employees, directors and other persons with relationships
with us. These employees, directors and other persons may purchase, in the
aggregate, not more than 10% of the common stock in this offering. See
"Underwriting."
--------------
Investing in the common stock involves risks.
See "Risk Factors" beginning on page 6.
--------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price.......................................... $ $
Underwriting Discounts and Commissions......................... $ $
Proceeds to MapQuest........................................... $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
We have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments. BancBoston
Robertson Stephens Inc. expects to deliver the shares of common stock to
purchasers on , 1999.
--------------
BancBoston Robertson Stephens
Piper Jaffray Inc.
Thomas Weisel Partners LLC
Volpe Brown Whelan & Company
The date of this Prospectus is , 1999
<PAGE>
[Picture of the mapquest.com home page and logos of representative customers]
<PAGE>
[Sequential pictures illustrating MapQuest's Connect Services and logos of
representative customers]
<PAGE>
[Pictures of MapQuest maps on various web portals and third party websites and
logos of representative customers]
<PAGE>
[Picture of various Digital Mapping Services products and logos of
representative customers.]
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. Unless otherwise indicated, all
references in this prospectus to "MapQuest", "we", "us" or "our" are to
MapQuest.com, Inc. and its predecessor.
Until , 1999, all dealers that buy, sell or trade our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This requirement is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
---------------------
TABLE OF CONTENTS
<TABLE>
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Page
----
<S> <C>
Summary.................................................................. 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 15
Dividend Policy.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Financial Data.................................................. 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 19
Business................................................................. 26
Management............................................................... 36
Certain Transactions..................................................... 46
Principal Stockholders................................................... 49
Description of Capital Stock............................................. 51
Shares Eligible for Future Sale.......................................... 55
Underwriting............................................................. 57
Legal Matters............................................................ 59
Experts.................................................................. 59
Where You Can Find More Information...................................... 59
Index to Financial Statements............................................ F-1
</TABLE>
---------------------
This prospectus contains trademarks and tradenames of other companies.
2
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company, the common stock being sold in this offering
and our financial statements and the notes relating to these financial
statements appearing elsewhere in this prospectus.
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about MapQuest and our
industry. These forward-looking statements involve risks and uncertainties.
MapQuest's actual results could differ materially from those anticipated in
these forward-looking statements as a result of the factors described in the
"Risk Factors" section and elsewhere in this prospectus. MapQuest undertakes no
obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.
MapQuest
We are a leading online provider of mapping and destination information. By
leveraging over 30 years of traditional and digital mapping experience together
with our proprietary integration and editing of geographic databases, we
provide comprehensive online mapping solutions to businesses and customized
maps, destination information and driving directions to consumers. During
January 1999, we delivered over 70.3 million maps and over 13.5 million driving
directions through our website and through third-party websites. According to
Media Metrix, Inc., in December 1998 mapquest.com had over 3.3 million unique
visitors making it the number one travel/tourism Internet property in terms of
audience reach.
Our online products and services enable businesses to:
. Provide customized maps, destination information and driving
directions to potential customers;
. Expand the functionality of their websites to attract and retain
users;
. Outsource their map-enabling and destination information needs,
thereby avoiding a significant portion of the expenses normally
associated with establishing and maintaining a map-enabling
infrastructure; and
. Provide potential customers with proximity information regarding
which of a business' multiple locations is closest to the potential
customer.
Our online products and services enable consumers to:
. Receive maps and destination information on a real-time basis based
on specific geocentric parameters provided by the consumer;
. Generate detailed door-to-door driving directions at any time; and
. Create and retrieve customized maps based on the consumer's
preferences.
We are also a leading U.S. provider of traditional and digital mapping
products and services to the educational, reference, directory, travel and
governmental markets. In addition, companies that incorporate call centers, CD-
ROMs or driving direction kiosks into their information delivery strategy often
require non-Internet customized mapping solutions. We have developed our map-
enabling software to provide mapping applications in these environments.
3
<PAGE>
Strategy
Our objective is to be the leading online provider of destination solutions
for businesses and consumers. Key elements of our strategy include:
. Building brand awareness by engaging in a number of advertising, public
relations and other marketing programs designed to promote our global
brand and build loyalty among our business and consumer customers;
. Expanding and enhancing our service by providing comprehensive, cost-
effective, accurate and easily accessible destination information and
value-added tools and features;
. Growing sales channels aggressively by building our direct field sales
force and developing strategic value-added reseller channel relationships
to target U.S. and international markets;
. Developing additional advertising opportunities by offering new methods
of targeted advertising based on a consumer's geographic information;
. Leveraging our integrated geographic data in developing future services
and products; and
. Pursuing international opportunities to expand our access to additional
business customers seeking to improve the functionality of their websites
and consumers seeking online map-related information.
Our headquarters are located at 3710 Hempland Road, Mountville,
Pennsylvania 17554. Our telephone number at that location is (717) 285-8500.
Our website address is www.mapquest.com. The information on our website is not
part of this prospectus.
The Offering
Common stock offered............ shares
Common stock to be outstanding
after this offering............ shares(1)
Over-allotment option........... shares
Use of proceeds................. We intend to use $8,332,036 of the net
proceeds to redeem all outstanding shares of
our Series B Preferred Stock. We intend to
use the remaining net proceeds for expansion
of sales and marketing capabilities, product
development, working capital and other
general corporate purposes.
Proposed Nasdaq National Market MQST
symbol.........................
- --------
(1) This information is based on shares of common stock outstanding as of
December 31, 1998. It excludes (i) 1,795,426 shares of common stock
issuable upon exercise of options outstanding at December 31, 1998, with a
weighted average exercise price of $0.69 per share, (ii) 233,750 shares of
common stock issuable upon exercise of options outstanding at December 31,
1998 with an exercise price of the per share price of this offering, (iii)
193,500 shares of common stock issuable upon exercise of options granted
since December 31, 1998, with an exercise price of the per share price of
this offering, (iv) 75,335 shares of common stock reserved for future
issuance under MapQuest's stock option plan, (v) 857,264 shares of common
stock issuable upon exercise of warrants outstanding at December 31, 1998,
with a weighted average exercise price of $1.84, (vi) 1,000,000 shares of
common stock that have been reserved for future issuance under our 1999
omnibus stock plan, and (vii) 1,000,000 shares of common stock that have
been reserved for future issuance under our 1999 employee stock purchase
plan. See "Management--Employee Benefit Plans" and Note 6 to the Financial
Statements.
4
<PAGE>
Summary Financial Data
(in thousands, except per share data)
The following table sets forth our summary financial data. You should read
this information together with the financial statements and the notes to those
statements appearing elsewhere in this prospectus and the information under
"Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1996 1997 1998
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<S> <C> <C> <C>
Statement of Operations Data:
Revenues
Business...................................... $ 7,020 $ 4,763 $ 6,536
Consumer...................................... 140 1,276 1,376
Digital mapping............................... 12,417 15,377 16,805
-------- -------- ---------
Total revenues.............................. 19,577 21,416 24,717
-------- -------- ---------
Costs of revenues.............................. 12,320 15,302 17,646
-------- -------- ---------
Gross profit................................... 7,257 6,113 7,071
Operating expenses:
Sales and marketing........................... 4,455 7,257 5,243
Product development........................... 2,619 5,048 2,955
General and administrative.................... 1,902 1,811 2,326
-------- -------- ---------
Total operating expenses.................... 8,976 14,116 10,524
-------- -------- ---------
Operating loss ................................ (1,719) (8,002) (3,453)
Interest income and expense, net............... 199 136 54
Other income................................... 244 267 244
Loss before provision for income taxes......... (1,276) (7,599) (3,155)
-------- -------- ---------
Provision for income taxes..................... -- -- --
-------- -------- ---------
Net loss....................................... (1,276) (7,599) (3,155)
Less preferred stock dividends and accretion... (525) (623) (667)
-------- -------- ---------
Net loss applicable to common stockholders..... $ (1,802) $ (8,222) $ (3,822)
======== ======== =========
Basic and diluted loss per share............... $ (23.87) $(106.48) $ (32.64)
Shares used to compute basic and diluted loss
per share(1)................................. 75 77 117
Pro forma basic and diluted loss per share..... $ (0.36)
=========
Shares used to compute pro forma basic and
diluted loss per share(1).................... 10,162
=========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
----------------------------------
Pro Pro Forma
Actual Forma(2) As Adjusted(3)
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<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................. $ 564 $ 564 $
Working capital............................ 4,301 4,301
Total assets............................... 11,450 11,450
Payment to redeem preferred stock.......... -- 8,322
Redeemable preferred stock................. 26,186 --
Stockholders' equity (deficit)............. (19,768) (1,914)
</TABLE>
- --------
(1) See the financial statements and the notes to those statements appearing
elsewhere in this prospectus for the determination of shares used in
computing basic and diluted loss per share and pro forma basic and diluted
loss per share.
(2) Gives pro forma effect to (i) the redemption of all outstanding shares of
our Series B preferred stock upon the closing of this offering and (ii) the
automatic conversion of all outstanding shares of our Series A preferred
stock and Series C preferred stock into 10,045,354 shares of our common
stock upon the closing of this offering.
(3) As adjusted to reflect the sale of shares of common stock offered by
this prospectus at an assumed initial public offering price of $ per
share after deducting underwriting discounts and estimated offering
expenses payable by us. See "Use of Proceeds" and "Capitalization."
--------------------
Unless otherwise indicated, all information in this prospectus: (i)
reflects a [ ] for [ ] stock split of our common stock to be effected prior
to the closing of this offering; (ii) reflects the redemption of all
outstanding shares of our Series B preferred stock upon the closing of this
offering; (iii) reflects the automatic conversion of all outstanding shares of
our Series A preferred stock and Series C preferred stock into 10,045,354
shares of our common stock upon the closing of this offering; and (iv) assumes
no exercise of the underwriters' over-allotment option.
5
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations. If any of the following risks actually occur, our business,
financial condition and results of operations would likely suffer. In this
case, the market price of our common stock could decline, and you may lose all
or part of the money you paid to buy our common stock.
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ materially from those anticipated in such forward-looking
statements as a result of certain factors, including the risks faced by us
described below and elsewhere in this prospectus.
We Have a Limited Internet-Related Operating History
We introduced our first Internet products and services in 1995 and launched
our website in February 1996. Accordingly, we have a limited Internet-related
operating history upon which you can evaluate our business and prospects. An
investor in our common stock must consider the risks and difficulties
frequently encountered by companies in new and rapidly evolving markets such as
the Internet. These risks include our ability to:
. anticipate and adapt to the developing Internet market;
. integrate our developing Internet business with our traditional and
digital mapping businesses;
. achieve market acceptance of our Internet products and services;
. generate significant license and service revenues from business
customers;
. generate significant advertising revenues from mapquest.com;
. successfully expand our sales force;
. maintain and develop our relationships with both Internet-based
businesses and non-Internet-based businesses that have an Internet
presence; and
. attract a larger consumer audience to, and increase the use of,
mapquest.com.
If we are unsuccessful in addressing these risks or in executing our
business strategy, our business, financial condition and results of operations
could be materially adversely affected. Please see "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
We Have a History of Losses and Our Prospects of Future Profitability are
Uncertain
We incurred net losses of $1.3 million for the year ended December 31,
1996, $7.6 million for the year ended December 31, 1997 and $3.2 million for
the year ended December 31, 1998. From the period from October 31, 1994 to
December 31, 1998, our accumulated deficit was $19.9 million. We expect losses
from operations and negative cash flows to continue for the foreseeable future
as a result of our intention to continue to incur significant expenses. We base
current and future expense levels on our operating plans and our estimates of
future revenues. If our revenues grow at a slower rate than we anticipate, or
if our spending levels exceed our expectations or cannot be adjusted
accordingly, we may not generate sufficient revenues to achieve profitability.
If we do achieve profitability, we may be unable to sustain or increase
profitability on a quarterly or annual basis in the future. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
6
<PAGE>
We Are Dependent on a Limited Number of Third Parties for a Significant Portion
of our Primary Geographic Data
Our products and services rely on the availability and accuracy of primary
geographic data. We have licensed a significant portion of our primary
geographic data from a limited number of sources through non-exclusive, short-
term contractual arrangements. In particular, we license a substantial portion
of our data from Navigation Technologies Corporation ("NavTech") pursuant to
short-term data licenses and from Geographical Data Technologies, Inc. ("GDT").
If we cannot maintain these data licenses or any other third-party license
arrangement on commercially reasonable terms, the accuracy of our products and
services would suffer. As a result, the marketability of our products and
services would be reduced, which would have a material adverse effect on our
business, financial condition and results of operations. Further, the accuracy
of our products and services is substantially dependent on the accuracy of the
information contained in these third-party databases. The information in these
databases, and in our own proprietary databases, may contain inaccuracies that
our customers may not accept. In addition, we plan to update our geographic
databases periodically. However, in view of the complexity of updating several
new databases, revising software and the need for third-party geocoding, we may
not be able to perform this update when planned. This would adversely affect
the accuracy of our products and services. In addition, given the short-term
nature of our primary geographic data licenses, we will have to renegotiate our
contracts in the foreseeable future which may result in contractual terms that
are not as favorable to us as the existing data licenses. New contracts or
renewals may also be unavailable to us on commercially reasonable terms. This
could have a material adverse effect on our business, financial condition and
results of operations. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Brand Identity is Critical to Us
We believe that establishing and maintaining our brand identity is critical
to our efforts to attract users to our website and to build market acceptance
of our mapping and destination information products and services. Furthermore,
we believe that the importance of brand recognition will increase as low
barriers to entry encourage the proliferation of Internet sites. In order to
attract and retain consumers and business customers, and in response to
competitive pressures, we intend to increase substantially our financial
commitment to brand loyalty efforts among these groups. We plan to accomplish
this, although not exclusively, through advertising campaigns in several forms
of media, including print and online media and other marketing and promotional
efforts. If we do not generate a corresponding increase in revenue as a result
of our branding efforts or otherwise fail to promote our brand successfully, or
if we incur excessive expenses in an attempt to promote and maintain our brand,
our business, financial condition and results of operations would be materially
and adversely affected.
Volatility of Quarterly Operating Results
We expect our quarterly operating results to vary significantly in the
future due to a variety of factors, many of which are beyond our control. These
factors include:
. demand for our products and services from businesses and consumers;
. our relative mix of Internet and traditional and digital mapping
businesses;
. the timing and amount of license and service payments from our business
customers;
. traffic levels on mapquest.com;
. development of competitive websites and businesses;
. the relatively short terms of our advertising agreements;
. advertising budget decisions by our clients; and
. technical difficulties or system downtime affecting the Internet
generally or the operation of our website specifically.
7
<PAGE>
Our limited Internet-related operating history makes it difficult to fully
assess the impact of seasonal factors on the Internet and therefore whether our
Internet products and services are susceptible to cyclical or seasonal economic
fluctuations. In addition, we believe that the rapid growth of our Internet
products and services may have overshadowed whatever cyclical or seasonal
factors might have influenced our Internet product and service revenues to
date. Traffic levels on websites have typically fluctuated during the summer
and year-end vacation and holiday periods, which could result in a decrease in
user traffic on our website during these periods. We believe that advertising
sales in traditional media, such as television and radio, generally are lower
in the first and third calendar quarters of each year. Similar seasonal or
other patterns may develop in the Internet industry. There can be no assurance
that cyclical or seasonal variations in our operations will not become more
pronounced over time or that they will not materially adversely affect our
results of operations in the future.
Due to all of the foregoing factors and the other risks discussed in this
section, you should not rely on quarter-to-quarter comparisons of our results
of operations as an indication of future performance. It is possible that in
some future periods our results of operations may be below the expectations of
public market analysts and investors. In this event, the price of our common
stock is likely to fall. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The Developing Market for our Internet Products and Services
To date, sales of our traditional and digital mapping products and services
have accounted for a significant portion of our revenues. However, we expect
that our Internet products and services will account for a significant and
growing portion of our revenues in the foreseeable future. Given the emerging
nature of the Internet and our limited Internet-related operating history,
these revenues are difficult to forecast. In 1998, revenues from a limited
number of business customers accounted for a substantial portion of our
Internet products and services revenues. The loss of one or more of these
customers could have a material adverse effect on our business, financial
condition and results of operations. The markets for our Internet products and
services have only recently begun to develop, are rapidly evolving and are
characterized by a large number of entrants. Demand and market acceptance for
recently introduced products and services are subject to a high level of
uncertainty and risk, and it is difficult to predict the size and future growth
rate, if any, of these markets. The markets for our Internet products and
services may not develop and demand for our Internet products and services may
not emerge or become economically sustainable or customer turnover rates may be
higher than expected. Our failure to generate demand for our Internet products
and services or successfully predict turnover rates could have a material
adverse effect on our business, financial condition and results of operations.
In addition, our failure to continue to generate demand and derive revenues
from our traditional and digital mapping products and services could have a
material adverse effect on our business, financial condition and results of
operations. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Risks of Developing our Sales Channels
In order to support our growth, we need to substantially increase our
direct and indirect sales channels. On January 31, 1999, our internal sales
force had 30 members. Of these professionals, 17 focus on sales of Internet
products and services to our business customers, two focus on advertising sales
on our website, and 11 focus on sales of our traditional and digital mapping
products and services. Our ability to increase our internal sales force
involves a number of risks, including:
. the competition we face in hiring and retaining qualified sales
personnel;
. the length of time it takes new sales personnel to become productive;
and
. our ability to integrate and motivate additional sales personnel and
sales support personnel.
Our business would be materially and adversely affected if we fail to
maintain an effective internal sales force.
8
<PAGE>
In addition, we are seeking to develop relationships with partners such as
value-added resellers in order to leverage their sales organizations to
distribute our Internet products and services. Sales through these indirect
sales channels accounted for less than 0.4% of our revenues in 1998. We may be
unsuccessful in our efforts to develop increased indirect sales in the future,
which could have a material adverse effect on our business, financial condition
and results of operations.
Uncertain Protection of Intellectual Property and Risk of Infringement
We rely upon a combination of patent, trademark, copyright law, trade
secret protection and contractual restrictions with employees, customers,
partners and others to protect our proprietary rights. We do not currently hold
any patents, but we have filed one patent application with the United States
Patent and Trademark Office, and intend to file a second patent application in
the near future. There can be no assurance that our patent applications will be
approved and, if approved, that they will not be successfully challenged by
others or invalidated through administrative process or litigation. Patent,
trademark, copyright and trade secret protection may not be available in every
country in which our products and services are distributed or made available.
If we fail to adequately protect our proprietary rights, our business,
financial condition and results of operations could be materially and adversely
affected.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any of our proprietary rights or those of other companies
within the industry. Despite our efforts to protect our proprietary rights,
third parties may infringe or misappropriate these rights, which could result
in a material adverse effect on our business, financial condition and results
of operations.
Currently we are a defendant in two pending litigations involving
allegations of infringements of third-party patents by our technologies. Both
litigations are in the early stages. While we intend to defend these actions
vigorously, our efforts may not be successful. In addition, in the ordinary
course of business we have been, and we expect to continue to be, subject to
claims, including claims of alleged infringement of patents, trademarks and
other proprietary rights of third parties. We expect that infringement claims
in our markets will increase in number as more participants enter the market.
These claims and any resultant litigation could subject us to significant
liability for damages and could result in the invalidation of our proprietary
rights. In addition, even if we prevail, litigation could be time-consuming and
expensive to defend, and could result in the diversion of our time and
attention, any of which could materially adversely affect our business,
financial condition and results of operations. Any claims from third parties
may also result in limitation on our ability to use the trademarks and other
intellectual property subject to claims unless we enter into agreements with
the third parties responsible for claims, which may be unavailable on
commercially reasonable terms. Please see "Business--Legal Proceedings."
Markets for MapQuest Products and Services Are Highly Competitive
The markets for MapQuest's products and services are highly competitive. We
compete for customers with companies offering online map-enabling technology,
publishers and distributors of traditional print media that use or license
their content for use on the Internet, commercial publishing companies,
corporate materials and information market companies, and governmental
authorities.
We expect competition to continue to increase because these markets,
particularly the markets for Internet-related products and services, pose no
substantial barriers to entry. Competition may also increase as a result of
industry consolidation. Increased competition could result in reduced markets,
loss of market share or less traffic to our website, any of which could have a
material adverse effect on our business, financial condition and results of
operations.
We believe that our ability to compete depends upon many factors, many of
which are beyond our control. These factors include our ability to provide
depth and accuracy of destination information, to increase our sales force and
to implement our sales and marketing initiatives, the introduction and
acceptance of new
9
<PAGE>
and enhanced products and services developed either by us or our competitors
and the ease of use of products and services developed either by us or our
competitors. We may not be able to compete successfully and competitive
pressures may have a material adverse effect on our business, financial
condition and results of operations. Please see "Business--Competition."
Dependence on Continued Use of the Internet
The Internet is relatively new and is rapidly evolving. As a result, we
cannot accurately predict whether the number of users will continue to
increase. Our business would be adversely affected if Internet usage does not
continue to grow. Internet usage may be inhibited for a number of reasons,
including:
. the Internet infrastructure may not be able to support the demands
placed on it or its performance and reliability may decline as usage
grows;
. the ability of websites to provide security and authentication of
confidential information contained in transmissions over the Internet;
. the quality of Internet products and services may not continue to
generate user interest; and
. the ability of websites to respond to privacy concerns of potential
users, including concerns related to the placement by websites of
information on a user's hard drive without the user's knowledge or
consent.
Risk Associated with Capacity Constraints, System Disruption, System Failure
and Reliance on Qwest
The performance of the technologies employed in our Internet products and
services is critical to our reputation and brand, and to our ability to attract
business customers and consumers to our products and services. Any system
failure, including computer viruses, electronic break-ins or network, software
or hardware failure, that causes an interruption in the delivery of our
products and services or a decrease in responsiveness of our website service
could result in reduced revenue, and could impair our reputation and brand. In
May 1998, we entered into a one-year Internet hosting agreement with Qwest to
maintain all of our production servers at its Denver data center. Although
Qwest provides comprehensive facilities management services, including human
and technical monitoring of all production servers 24 hours-per-day, seven
days-per-week, Qwest does not guarantee that our Internet access will be
uninterrupted, error free or secure. Our operations depend on Qwest's ability
to protect its and our systems against damage from fire, power loss, water
damage, telecommunications failures, vandalism and other malicious acts, and
similar unexpected adverse events. Any disruption in the Internet access
provided by Qwest could have a material adverse effect on our business, results
of operations and financial condition. We have experienced system interruptions
in the past and believe that these interruptions will continue to occur from
time to time in the future. Our insurance may not adequately compensate us for
any losses that may occur due to any failures in our system or interruptions in
our service. Our servers and software must be able to accommodate a high volume
of traffic and we have in the past and may in the future experience slower
response times for a variety of reasons. Additionally, any substantial increase
in demands on our servers will require us to expand and adapt our network
infrastructure. If we were unable to add additional software and hardware to
accommodate increased demand, this could cause unanticipated system disruptions
and result in slower response times. An increase in the volume of consumers
accessing mapquest.com or the websites of our business customers could lead to
systems failures or slower response times. Business and consumer customers may
become dissatisfied by any system failure that interrupts our ability to
provide our products and services to them or results in slower response time.
Our business, financial condition and results of operations could be materially
adversely affected by any damage or failure that interrupts or delays our
operations.
Consumers visiting mapquest.com and other websites depend on Internet
service providers, online service providers and other website operators for
access to particular websites. Many of these providers have experienced
significant outages in the past, and could experience outages, delays and other
difficulties due to system failures unrelated to our systems. Moreover, the
Internet infrastructure may not be able to support
10
<PAGE>
continued growth in its use. Any of these problems could materially adversely
affect our business, financial condition and results of operations. Please see
"Business--Technology and Infrastructure."
Risks Associated with Managing our Expansion
To successfully implement our business plan requires an effective planning
and management process. As of January 31, 1996, we had a total of 167 employees
and, as of January 31, 1999, we had a total of 222 employees. We expect that
the number of our employees will continue to increase for the foreseeable
future, in particular with respect to our Internet-related business. This
growth has placed, and our anticipated future growth combined with the
requirements we will face as a public company will continue to place, a
significant strain on our management systems and resources. We expect that we
will need to continue to improve our financial and managerial controls and
reporting systems and procedures. We will also need to continue to expand and
maintain close coordination among our technical, accounting, finance and sales
and marketing organizations. Our inability to manage growth effectively could
have a material adverse effect on our business, financial condition and results
of operations.
Our future success also depends on ability to attract, train, motivate and
retain highly skilled employees. Competition for employees in our industries is
intense. We may be unable to retain our key employees or attract, assimilate or
retain other highly qualified employees in the future. We have from time to
time in the past experienced, and we expect to continue to experience in the
future, difficulty in hiring and retaining highly skilled employees with
appropriate qualifications.
We Depend on Our Key Management Personnel for Our Future Success
Our future success depends to a significant extent on the continued service
and coordination of our management team, particularly Michael Mulligan, our
Chief Executive Officer. Certain members of our management team, including our
Chief Executive Officer, have joined us within the last year. These individuals
have not previously worked together and are becoming integrated into our
management team. They may not be able to work together effectively or
successfully manage our growth. We do not currently have employment agreements
with members of management other than our Chief Executive Officer and William
Muenster, our Senior Vice President of Development and Production. The
departure of any of our officers or key employees could have a material adverse
effect on our business, financial condition and results of operations.
Risks Associated with International Expansion
We market and sell our products and services in the United States and
internationally. We intend to continue to expand the sale of our products and
services into international markets. To date, we have limited experience in
marketing our products and services internationally, and we cannot predict our
success in these international markets. In addition, international operations
are subject to inherent risks, including:
. the impact of economic fluctuations in economies outside of the United
States;
. greater difficulty in accounts receivable collection and longer
collection periods;
. unexpected changes in regulatory requirements, tariffs and other trade
barriers;
. difficulties and costs of staffing and managing foreign operations;
. political instability;
. currency exchange fluctuations;
. potentially adverse tax consequences; and
. reduced protection for intellectual property rights outside the United
States.
One or more of the foregoing factors may have a material adverse effect on our
current and future international operations and, consequently, on our business,
financial condition and results of operations.
Risks Associated with Offering New Products and Services
We expect to introduce new and enhanced products and services, and in
particular, Internet products and services in order to generate additional
revenues, attract more business customers to our products and services,
11
<PAGE>
attract more consumers to our website and respond to competition. Any new
product or service we introduce that is not favorably received could damage our
reputation and the perception of our brand name. The failure of our new
products and services to achieve market acceptance and generate revenue could
result in a material adverse effect on our business, financial condition and
results of operations.
Risks Associated with Rapid Technological Change
The Internet is characterized by rapidly changing technologies, evolving
industry standards, frequent new product introductions, and changing business
and consumer customer demands. To be successful, we must adapt to our rapidly
changing market by continually enhancing the technologies used in our Internet
products and services, and introducing new technology to address the changing
needs of our business and consumers. If we are unable, for technical, legal,
financial or other reasons, to adapt in a timely manner in response to changing
market conditions or business and consumer customer requirements, our business,
financial condition and results of operations could be materially adversely
affected. See "Business--Technology and Infrastructure."
Risks Associated with Online Commerce Security
A fundamental requirement for online commerce and communications is the
secure transmission of confidential information over public networks. Online
commerce on our website relies on encryption and authentication technology
licensed from third parties to provide the security and authentication
necessary to effect secure transmission of confidential information. The
misappropriation of credit card numbers or other proprietary personal
information could expose us to a risk of loss or litigation and possible
liability. In addition, we may suffer losses as a result of online orders
placed with fraudulent credit card data, even though the consumer's payment for
such orders has been authorized by the associated financial institution. Under
current credit card practices, a merchant is liable for fraudulent credit card
transactions where, as is the case with the transactions that we process, no
cardholder signature is obtained. We may suffer losses as a result of
fraudulent use of credit card data in the future, which could have a material
adverse effect on our business, financial condition and results of operations.
See "Business--Technology and Infrastructure."
Risks Associated with Database Security
We maintain an extensive geographic database. Advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments may result in a compromise of the methods we use to protect data
contained in our database. A party who is able to circumvent our security
measures could misappropriate proprietary information or cause interruptions in
our operations. We may be required to expend significant capital and other
resources to protect against such security breaches or to alleviate problems
caused by such breaches, which could have a material adverse effect on our
business, financial condition and results of operations.
Government Regulation and Legal Uncertainties
There is an increasing number of laws and regulations pertaining to the
Internet. In addition, a number of legislative and regulatory proposals are
under consideration by federal, state, local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to liability for information retrieved from or transmitted over the
Internet, domain name registration, online content regulation, user privacy,
taxation and quality of products and services. Moreover, the applicability to
the Internet of existing laws governing issues including intellectual property
ownership and infringement, copyright, patent, trademark, trade secret,
obscenity, libel, employment and personal privacy is uncertain and developing.
Any new legislation or regulation, or the application or interpretation of
existing laws, may decrease the growth in the use of the Internet, which could
in turn decrease the demand for our products and services, increase our cost of
doing business or otherwise have a material adverse effect on our business,
financial condition and results of operations. Please see "Business--Government
Regulation and Legal Uncertainties."
12
<PAGE>
Risks Associated with Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. The
failure to correct any such programs or hardware could result in system
failures or miscalculations causing disruptions of our operations, including,
among other things, a temporary inability to process normal business
activities. We have performed a preliminary assessment and completed a series
of Year 2000 simulation tests on a majority of our IT systems. Based on the
results of these tests, we have and will continue to modify or replace portions
of our information processing systems so that those systems will properly
utilize dates beyond December 31, 1999. We plan to complete the modifications
and replacements necessary to correct those systems prior to December 31, 1999.
If such modifications and replacements are not made, or are not completed on a
timely basis, the Year 2000 Issue could have a material adverse effect on our
future operating performance.
We create products and perform services that interface directly with
systems of our clients. There is no guarantee that the systems of our business
customers and consumers on which our systems rely will be timely converted and
will not experience material business disruptions that could affect us as a
result of the Year 2000 problem. Responses of business customers and data
suppliers to our inquiries to date indicate that they expect, at this time, to
be compliant by the Year 2000 based on their progress to date. However, the
inability of a substantial number of our business customers and data suppliers
to complete their Year 2000 compliance could cause significant disruptions in
our ability to provide services to business customers and consumers. Moreover,
the inability of a substantial number of our business customers and data
suppliers to complete their Year 2000 compliance could cause them to reduce
spending on interactive marketing programs. Either event could have a material
adverse effect on our business, financial condition and results of operations.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000."
Future Capital Needs; Uncertainty of Additional Financing
Since the launch of mapquest.com in 1996, we have experienced negative cash
flow from our Internet-related operations and expect to continue to do so for
the foreseeable future. We currently anticipate that the net proceeds from this
offering, together with available funds, will be sufficient to meet our
anticipated needs for at least the next 12 months. We may need to raise
additional funds in the future in order to fund more aggressive marketing
programs or to acquire complementary businesses, technologies or services. Any
required additional financing may be unavailable on terms favorable to us, or
at all. If we raise additional funds by issuing equity securities, stockholders
may experience significant dilution of their ownership interest and such
securities may have rights senior to those of the holders of our common stock.
If additional financing is not available when required or is not available on
acceptable terms, we may be unable to fund our expansion, successfully promote
our brand name, develop or enhance our products and services, take advantage of
business opportunities or respond to competitive pressures, any of which could
have a material adverse effect on our products and business, financial
condition and results of operations. Please see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
Risks Associated with Potential Acquisitions or Investments
From time to time, we have had discussions with companies regarding our
acquiring, or investing in, their businesses, products, services or
technologies. However, we have no present understanding or agreement relating
to any such acquisition or investment. If we make an acquisition, we could have
difficulty assimilating the acquired company's operations and personnel. If we
make other types of acquisitions, we could have difficulty in assimilating any
acquired products, services, and technologies into our operations. These
difficulties could disrupt our ongoing business, distract our management and
employees, increase our expenses and materially adversely affect our business,
financial condition and results of operations due to increased operating
expenses and charges, such as amortization of goodwill.
13
<PAGE>
Shares Eligible for Future Sale
The market price of our common stock could decline as a result of sales of
a large number of shares of our common stock in the market following this
offering, or the perception that such sales could occur. These sales also might
make it more difficult for us to sell equity securities in the future at a time
and at a price that we deem appropriate. Please see "Shares Eligible for Future
Sale."
Control by Officers, Directors and Affiliated Entities
Our executive officers and directors and entities affiliated with them
will, in the aggregate, beneficially own approximately % of our common stock
following this offering. These stockholders will be able to exercise control
over all matters requiring approval by our stockholders, including the election
of directors and the approval of significant corporate transactions. This
concentration of ownership may also have the effect of delaying or preventing a
change in control of our company, which could have a material adverse effect on
our stock price. Please see "Management" and "Principal Stockholders."
Anti-takeover Provisions
Certain provisions of our certificate of incorporation, our bylaws and
Delaware law could make it more difficult for a third party to acquire us, even
if doing so might be beneficial to our stockholders. Please see "Description of
Capital Stock."
Lack of Prior Public Market and Possible Volatility of Stock Price
Prior to this offering, there has been no public market for our common
stock. We cannot predict the extent to which investor interest in our company
will lead to the development of an active trading market or how liquid that
market may become. The initial public offering price for the shares will be
determined by negotiations between us and the underwriters and may not be
indicative of the market price for the common stock that will prevail in the
trading market. The market price of the common stock may decline below the
initial public offering price. The stock market has experienced extreme price
and volume fluctuations. The market prices of the securities of Internet-
related companies have been especially volatile. In the past, securities class
action litigation has often been instituted against a company following periods
of volatility in the market price of such company's securities. If instituted
against us, regardless of the outcome, such litigation could result in
substantial costs and diversion of our management's attention and resources and
have a material adverse effect on our business, financial condition and results
of operations. Please see "Underwriting."
Dilution
The initial public offering price per share will exceed the net tangible
book value per share. Accordingly, investors purchasing shares in this offering
will incur immediate and substantial dilution in their investments. To the
extent outstanding options to purchase common stock are exercised, there will
be further dilution. Please see "Dilution."
Broad Discretion in Use of Proceeds
Our management will have broad discretion with respect to the expenditure
of proceeds. Investors will be relying on the judgment of our management
regarding the application of the proceeds of this offering. Please see "Use of
Proceeds."
14
<PAGE>
USE OF PROCEEDS
The net proceeds to MapQuest from the sale of the shares offered by this
prospectus are estimated to be $ ($ if the over-allotment
option is exercised in full) at an assumed initial public offering price of
$ per share and after deducting the underwriting discount and estimated
offering expenses payable by MapQuest.
MapQuest intends to use $8,332,036 of the net proceeds to redeem the
1,354,802 outstanding shares of MapQuest's Series B preferred stock. MapQuest
intends to use the remaining net proceeds for expansion of sales and marketing,
for product development, for working capital and for other general corporate
purposes. A portion of the net proceeds also may be used to acquire or invest
in complementary businesses, products or services. MapQuest has not yet
determined the amount of net proceeds to be used specifically for each of the
preceding purposes. Accordingly, management will have significant flexibility
in applying the net proceeds of this offering. Pending use of the net proceeds
for the above purposes, MapQuest intends to invest such funds in short-term,
interest-bearing, investment-grade securities. See "Description of Capital
Stock-- Preferred Stock" and Note 5 to the Financial Statements.
DIVIDEND POLICY
MapQuest has never declared or paid any cash dividends on its common stock.
MapQuest intends to retain any future earnings to support operations and to
finance the growth and development of MapQuest's business and does not
anticipate paying cash dividends for the foreseeable future.
15
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1998, the capitalization
of MapQuest (i) on an actual basis, (ii) on a pro forma basis to reflect (a)
the reclassification as a liability of the Series B preferred stock, which will
be redeemed upon the closing of this offering, and (b) the automatic conversion
of all outstanding shares of Series A preferred stock and Series C preferred
stock into 10,045,354 shares of common stock upon the closing of this offering,
and (iii) on a pro forma as adjusted basis to give effect to the sale of the
shares offered by this prospectus at an assumed initial public offering price
of $ per share, after deducting the underwriting discount and the estimated
offering expenses payable by MapQuest. This information should be read together
with MapQuest's financial statements and the notes relating to those statements
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(In thousands)
<S> <C> <C> <C>
Payment to redeem Preferred Stock--Series B.... $ -- $ 8,332
Cumulative Redeemable Preferred Stock
Series B Preferred Stock, par value $0.01 per
share, nonvoting, $6.15 per share redemption
value, aggregate liquidation preference of
$8,332,036. 2,000,000 shares authorized;
1,354,802 shares issued and outstanding,
actual; no shares issued and outstanding pro
forma or pro forma as adjusted.............. 8,332 --
Convertible Redeemable Preferred Stock
Series A Preferred Stock, par value $0.01 per
share voting, $1.00 per share redemption
value, aggregate liquidation preference of
$6,550,000. 6,550,000 shares authorized;
6,550,000 shares issued and outstanding,
actual; no shares issued and outstanding pro
forma or pro forma as adjusted.............. 6,550 --
Series C Preferred Stock, par value $0.01 per
share voting, $3.51 per share redemption
value, aggregate liquidation preference of
$12,268,292. 3,800,000 shares authorized;
3,495,354 shares issued and outstanding,
actual; no shares issued and outstanding pro
forma or pro forma as adjusted.............. 11,595 --
Notes receivable for convertible preferred
stock........................................ (291) --
Stockholders' Equity (Deficit)
Preferred stock, par value $0.01 per share.
5,000,000 shares authorized, no shares
issued and outstanding, actual, pro forma or
pro forma as adjusted....................... -- --
Common stock, par value $0.001 per share.
20,000,000 shares authorized, 124,455 shares
issued and outstanding, actual; 10,170,289
shares issued and outstanding pro forma, and
shares issued and outstanding pro forma
as adjusted(1).............................. -- 10
Notes receivable for convertible preferred
stock....................................... -- (291)
Additional paid-in capital.................... 140 18,275
Retained deficit.............................. (19,908) (19,908)
-------- --------
Total stockholder's deficit................... (19,768) (1,914)
-------- --------
Total capitalization........................ $ 6,418 $ 6,418
======== ======== =======
</TABLE>
- --------
(1) Based on shares of common stock outstanding as of December 31, 1998.
Excludes (i) 1,795,426 shares of common stock issuable upon exercise of
options outstanding at December 31, 1998, with a weighted average exercise
price per share of $0.69; (ii) 233,750 shares of common stock issuable upon
exercise of options outstanding at December 31, 1998, with an exercise price
of the per share price of this offering; (iii) 193,500 shares of common stock
issuable upon exercise of options granted since December 31, 1998, with an
exercise price of the per share price of this offering, (iv) 75,335 shares of
common stock reserved for future issuance under MapQuest's stock option plan,
(iv) 857,264 shares of common stock issuable upon exercise of warrants
outstanding at December 31, 1998, with a weighted average price of $1.84, (v)
1,000,000 shares of common stock that have been reserved for issuance under
MapQuest's 1999 omnibus stock plan, and (vi) 1,000,000 shares of common stock
that have been reserved for issuance under MapQuest's 1999 employee stock
purchase plan. See "Management--Employee Benefit Plans" and Note 6 to the
Financial Statements.
16
<PAGE>
DILUTION
The pro forma net tangible book value of MapQuest as of December 31, 1998,
after giving effect to the conversion of preferred stock, was $ million, or
$ per share of common stock. "Pro forma net tangible book value per share"
is determined by dividing the number of outstanding shares of common stock into
the net tangible book value of MapQuest (total tangible assets less total
liabilities). After giving effect to the application of the estimated net
proceeds from the sale of the shares of common stock offered by this prospectus
(based upon an assumed initial public offering price of $ per share and
after deducting the underwriting discounts and estimated offering expenses
payable by MapQuest), the pro forma net tangible book value of MapQuest as of
December 31, 1998 would have been $ million, or $ per share. This
represents an immediate increase in net tangible book value of $ per share
to existing stockholders and an immediate dilution of $ per share to new
investors purchasing shares at the initial public offering price. The following
table illustrates the per share dilution:
<TABLE>
<S> <C>
Assumed initial public offering price............................
Pro forma net tangible book value as of December 31, 1998.......
Pro forma increase in net tangible book value attributable to
new investors.................................................
Pro forma net tangible book value per share after this offering..
Pro forma dilution per share to new investors....................
</TABLE>
The following table summarizes on a pro forma basis, as of December 31,
1998, the number of shares of common stock purchased from MapQuest, the total
consideration paid to MapQuest and the average price per share paid by the
existing stockholders and by the investors purchasing shares of common stock in
this offering:
<TABLE>
<CAPTION>
Shares
Purchased Total Consideration Average
-------------- --------------------- Price Per
Number Percent Amount Percent Share
------ ------- --------- ---------- ---------
% $ % $
<S> <C> <C> <C> <C> <C>
Existing stockholders.............
New Investors(1)..................
----- ----- --------- --------- -----
Total...........................
===== ===== ========= ========= =====
</TABLE>
- --------
(1) If the underwriters' over-allotment is exercised in full, the number of
shares held by new investors will increase to , or % of the total
shares of common stock to be outstanding after this offering.
The foregoing tables and computations assume no exercise of any outstanding
stock options or warrants. Based on shares of common stock outstanding as of
December 31, 1998. Excludes (i) 1,795,426 shares of common stock issuable upon
exercise of options outstanding at December 31, 1998, with a weighted average
exercise price per share of $0.69 per share, (ii) 233,750 shares of common
stock issuable upon exercise of options outstanding at December 31, 1998, with
an exercise price of the per share price of this offering, (iii) 193,500 shares
of common stock issuable upon exercise of options granted since December 31,
1998, with an exercise price of the per share price of this offering, (iv)
75,335 shares of common stock reserved for future issuance under MapQuest's
1995 stock option plan, (v) 857,264 shares of common stock issuable upon
exercise of warrants outstanding at December 31, 1998, with a weighted average
price of $1.84, (vi) 1,000,000 shares of common stock that have been reserved
for issuance under the 1999 omnibus stock plan, and (vii) 1,000,000 shares of
common stock that have been reserved for issuance under MapQuest's employee
stock purchase plan. See "Management--Employee Benefit Plans" and Note 6 to the
Financial Statements.
17
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data set forth below should be read
together with the financial statements and the notes relating to those
statements and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing elsewhere in this prospectus.
The selected financial data set forth below for each of the years ended
December 31, 1996, 1997 and 1998 and at December 31, 1997 and 1998 are derived
from financial statements of MapQuest, audited by Ernst & Young LLP,
independent auditors, which are included elsewhere in this prospectus. The
selected financial data for the year ended December 31, 1995 and at December
31, 1994, 1995 and 1996 are derived from financial statements of MapQuest
audited by Ernst & Young LLP, which are not included in this prospectus. The
selected financial data for the year ended December 31, 1994 are derived from
the unaudited financial statements of MapQuest, which are not included in this
prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1994 1995 1996 1997 1998
------- ------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues
Business.................... $ 4,226 $ 3,095 $ 7,020 $ 4,763 $ 6,536
Consumer.................... -- -- 140 1,276 1,376
Digital mapping............. 6,243 10,982 12,417 15,377 16,805
------- ------- -------- -------- --------
Total revenues............ 10,469 14,077 19,577 21,416 24,717
------- ------- -------- -------- --------
Costs of revenues............. 9,189 8,556 12,320 15,302 17,646
------- ------- -------- -------- --------
Gross profit.................. 1,280 5,521 7,257 6,114 7,071
Operating expenses
Sales and marketing......... 3,027 2,738 4,455 7,257 5,244
Product development......... 642 1,395 2,619 5,048 2,954
General and administrative.. 1,897 1,373 1,902 1,811 2,326
------- ------- -------- -------- --------
Total operating expenses.. 5,566 5,506 8,976 14,116 10,524
------- ------- -------- -------- --------
Operating income (loss)....... (4,286) 15 (1,719) (8,002) (3,453)
Interest income and expense,
net......................... (72) 271 199 136 54
Other income.................. 168 258 244 267 244
------- ------- -------- -------- --------
Income (loss) before provision
for income taxes(1)......... (4,190) 544 (1,276) (7,599) (3,155)
Provision for income
taxes(1).................... -- 20 -- -- --
------- ------- -------- -------- --------
Net income (loss)............. (4,190) 524 (1,276) (7,599) (3,155)
Less preferred stock dividends
and accretion............... (10) (458) (525) (623) (667)
------- ------- -------- -------- --------
Net income (loss) applicable
to common stockholders...... $(4,200) $ 66 $ (1,802) $ (8,222) $ (3,822)
======= ======= ======== ======== ========
Basic earnings (loss) per
share....................... -- 2.13 (23.87) (106.48) (32.64)
Diluted earnings (loss) per
share....................... -- .01 (23.87) (106.48) (32.64)
Shares used to compute basic
earnings (loss) per share... -- 31 75 77 117
Shares used to compute diluted
earnings (loss) per share... -- 7,153 75 77 117
Pro forma basic and diluted
loss per share(2)(3)........ $ (0.36)
========
Shares used to compute pro
forma basic and diluted loss
per share(2)(3)............. 10,162
========
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------
Pro
1994 1995 1996 1997 1998 Forma(3)
------ ------ ------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $4,646 $4,619 $ 1,904 $ 2,482 $ 564
Working capital.......... 5,687 6,066 4,085 7,460 4,301
Total assets............. 9,169 9,601 9,526 13,221 11,450
Long-term obligations,
less current portion... -- -- -- 48 --
Redeemable preferred
stock.................. 6,486 6,877 7,331 25,711 26,186
Stockholders' equity
(deficit).............. 89 213 (1,553) (16,237) (19,768)
</TABLE>
- --------
(1) See Note 8 to the Financial Statements for an explanation of MapQuest's
ability to utilize net operating loss and research and development tax
credit carryforwards.
(2) See Note 7 to the Financial Statements for an explanation of the method
used to determine the number of shares used to compute historical and pro
forma basic and diluted loss per share.
(3) Pro forma gives effect to the completion of this offering and the
application of the net proceeds from this offering.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following section contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of the factors set
forth under Risk Factors and elsewhere in this prospectus. The following
discussion also should be read together with our financial statements and the
notes to those statements included elsewhere in this prospectus.
Overview
MapQuest is a leading online provider of mapping and destination
information. MapQuest provides comprehensive online mapping solutions to
businesses and provides customized maps, destination information and driving
directions to consumers. MapQuest has three lines of business: Internet
business products and services, Internet consumer products and services and
digital mapping products and services.
MapQuest was formed in 1967 as a business unit of R.R. Donnelley & Sons
Company. In 1994, R.R. Donnelley & Sons Company created a subsidiary into which
it transferred the MapQuest business unit. Also in 1994, MapQuest sold shares
to third parties. R.R. Donnelley & Sons Company sold all of its shares of
MapQuest to third parties in 1998. See "Certain Transactions."
Since 1967, MapQuest has provided traditional cartographic products and
services. In 1989, MapQuest began offering digital mapping products and
services and, beginning in 1991, MapQuest introduced map-enabling computer
integration services which evolved into online mapping and routing
applications. During the first quarter of 1996, MapQuest launched mapquest.com
and initiated sales and marketing efforts to build brand awareness and to
generate advertising revenues from its website. In the third quarter of 1996,
MapQuest began providing online mapping and destination information products
and services from its website to companies with an Internet presence and to
portal websites (high-traffic websites offering users a wide range of
information and services on their websites). In 1997, MapQuest increased its
focus on its Internet business and consumer lines of business by devoting
significant resources to mapquest.com and to its other Internet products and
services. During the fourth quarter of 1997 and the first quarter of 1998,
MapQuest decreased its Internet-related sales and marketing activities as it
revised its overall business strategy. During the remainder of 1997, MapQuest
continued its product development efforts and increased its sales and marketing
efforts across all of its lines of business. During the second quarter of 1998,
MapQuest introduced its MapQuest Enterprise Server. As part of its Internet
strategy, MapQuest appointed a new chief executive officer in the second half
of 1998.
MapQuest derives its revenues from the following three lines of business:
Business Products and Services. MapQuest provides Internet products and
services to companies with an Internet presence and to portal websites. These
companies typically contract for MapQuest's services on an annual basis in
consideration for service fee based on usage and an initial set-up fee.
MapQuest recognizes service fees ratably over the period of the service. In
addition, MapQuest recognizes revenues from the set-up fee upon completion of
the related installation services (which typically are completed in less than a
month). With respect to MapQuest Enterprise Server, MapQuest licenses its data
and sub-licenses certain third-party data to its business customers. Revenues
for software and data licenses relating to MapQuest Enterprise Server and other
licensed products are recognized upon delivery of the product. In addition,
under certain agreements, there is a revenue sharing arrangement for
advertising revenues generated by a MapQuest business customer's website. Any
revenues MapQuest receives from these revenue sharing arrangements are
recognized by MapQuest upon notification by its business customers of
advertising revenues on their websites. However, revenues from these
arrangements have not been material to date. Further, under those agreements
where MapQuest has a maintenance or upgrade obligation, MapQuest recognizes
revenue for these obligations over the period of the obligation. Revenues from
systems integration contracts, typically long-term fixed-price contracts, are
recognized on the percentage-of-completion method, measured by the percentage
of labor hours
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incurred to date of estimated total labor hours for each contract. MapQuest has
also historically provided business products and services for non-Internet
applications by licensing software and data and by providing professional
services on a time and materials basis or a fixed fee basis. Revenues for non-
Internet applications as a percent of business products and services revenues
has declined over the last three years and, in 1998, they accounted for less
than 10.0% of revenues from the business products and services line of
business. Revenues from all other services provided are recognized when the
services are rendered or delivery of the product is made. Revenues from
MapQuest's business products and services line of business accounted for 26.4%
of total revenues in 1998.
Consumer Products and Services. Through mapquest.com, MapQuest derives
revenues primarily from the sale of advertising and sponsorships. Advertising
rates vary depending on whether the advertisements are delivered to a general
audience or a targeted audience based on specific geographic location.
Advertising revenues are typically recognized ratably over the period in which
the advertisements are displayed, provided that no significant obligations
remain and the collection of the resulting receivable is probable. The average
term of MapQuest's advertising contracts is between one to two months. In
certain instances MapQuest guarantees its advertisers a certain level of
impressions (times that a particular advertisement is delivered to users) on
mapquest.com. If the guaranteed impressions are not met, MapQuest defers
recognition of the corresponding revenue until the guaranteed impressions are
achieved. Sponsorship contracts may have longer terms and may allow sponsors to
be exclusive sponsors of portions of mapquest.com or particular advertising
categories. Barter transactions, in which MapQuest received advertising or
other goods and services in exchange for content or advertising on
mapquest.com, accounted for no more than 2.0% of total revenue in each of 1996,
1997 and 1998. Revenues from MapQuest's consumer products and services business
line accounted for 5.6% of total revenues in 1998.
Digital Mapping Products and Services. In its digital mapping business,
MapQuest derives substantially all of its revenues from providing digital
mapping services to businesses and from the sale of mapping products to
distributors, retailers and corporate customers. MapQuest typically receives
fees and payments on a time and materials basis or a fixed fee basis. Revenues
from these services are recognized when the services are rendered. In addition,
revenues from long-term contracts are recognized on the percentage-of-
completion method, measured by the percentage of labor hours incurred to date
to estimated total labor hours for each contract. MapQuest also licenses
software and data for a license fee and/or royalties. License fees are
recognized upon delivery of the software and data. Royalty revenue is
recognized upon payment received. Revenues from all other services provided are
recognized when the services are rendered. In the sale of mapping products,
MapQuest is paid negotiated amounts, depending on volume, from retailers and
distributors, subject to minimum sales and certain return arrangements.
Revenues from MapQuest's digital mapping line of business accounted for
approximately 68.0% of total revenues in 1998.
Year ended December 31, 1997 compared to year ended December 31, 1998
Revenues
Total revenues increased by $3.3 million from $21.4 million in 1997 to
$24.7 million in 1998. Revenue for the top 10 customers of MapQuest as a
percent of total revenue decreased from 44.5% in 1997 to 27.2% in 1998.
Business Revenues. Business revenues increased by $1.7 million from $4.8
million in 1997 to $6.5 million in 1998. This increase was primarily due to an
increase in the number of businesses using MapQuest's products and services and
the introduction of additional products and services. In addition, during 1998
MapQuest introduced its Enterprise Solutions products and services. MapQuest
expects its business products and services revenues to become a greater
percentage of its total revenue in the future. As a percent of total revenues,
business revenues increased from 22.2% in 1997 to 26.4% in 1998.
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<PAGE>
Consumer Revenues. Consumer revenues increased $0.1 million from $1.3
million in 1997 to $1.4 million in 1998. This increase was due to increased
advertising sales, including advertisements placed on its website and
sponsorship advertisements. During 1998, MapQuest changed its third-party
advertising sales representative organization. Consequently, MapQuest did not
recognize revenues from third-party advertising sales representative
organizations during this transition. MapQuest expects to continue to derive
revenue from selling advertisements on mapquest.com and also expects that
revenues from its consumer business will increase as a percentage of its total
revenue. As a percent of total revenues, consumer revenues decreased from 6.0%
in 1997 to 5.6% in 1998.
Digital Mapping Revenues. Digital mapping revenues increased by $1.4
million from $15.4 million in 1997 to $16.8 million in 1998. This increase was
primarily due to increased sales of printed products, including the National
Geographic Road Atlas and the National Geographic American Road. MapQuest
expects digital mapping revenues will decrease as a percentage of total revenue
as MapQuest believes the growth in this business line to be slower than that of
the Internet consumer and business line of business. As a percent of total
revenues, digital mapping revenues decreased from 71.8% in 1997 to 68.0% in
1998.
Cost of Revenues
Cost of revenues consists primarily of compensation for operations
personnel and related operations costs, including depreciation of operating
assets, third-party royalties, print and paper costs for printed products, and
subcontractor costs. Cost of revenues increased by $2.3 million from $15.3
million in 1997 to $17.6 million in 1998 primarily due to the increased cost of
printed products for distributors, retailers and corporate customers, including
National Geographic, and higher depreciation costs associated with computer
hardware purchases.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions, travel related expenses, sales promotion expenses,
public relations expenses and costs of marketing materials. Sales and marketing
expenses decreased by $2.1 million from $7.3 million in 1997 to $5.2 million in
1998. This decrease reflects lower promotional costs and personnel expenses as
MapQuest implemented expense reduction efforts in early 1998. MapQuest expects
to incur significant increased sales and marketing expenses on an absolute
dollar basis and as a percentage of revenues as it hires additional sales and
marketing personnel and as it expands its sales and marketing campaigns.
Product Development. Product development expenses are primarily the costs
of developing new products and services and modifying existing products and
services, including software and data. These expenses consist primarily of
salaries for product development personnel and related expenses, contract labor
expense, and consulting fees. Product development expenses decreased by $2.0
million from $5.0 million in 1997 to $3.0 million in 1998. The decrease from
1997 to 1998 was primarily due to decreases in personnel and related expenses
as MapQuest implemented expense reduction efforts in early 1998. MapQuest plans
to increase product development expenditures significantly for MapQuest's
business and consumer products and services in absolute dollars in future
periods.
General and Administrative. General and administrative expenses consist
primarily of payroll and related expenses for MapQuest's executive, accounting
and administrative personnel, professional services and other general corporate
expenses. These expenses increased by $0.5 million from $1.8 million in 1997 to
$2.3 million in 1998. The increase from 1997 to 1998 was primarily due to costs
associated with the hiring of a new Chief Executive Officer and for additional
professional services. MapQuest anticipates hiring additional personnel and
incurring additional costs related to being a publicly held entity, including
directors' and officers' liability insurance, investor relations programs and
professional service fees.
Interest Income and Expense, Net
Interest income was $0.1 million in 1997 and 1998.
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<PAGE>
Other Income
Other income decreased $0.1 million from $0.3 million in 1997 to $0.2
million in 1998. This decrease was primarily due to lower equity in the
earnings of a joint venture that serves a number of automobile clubs with trip
routing services.
Income Taxes
MapQuest paid no income taxes in 1997 or 1998. MapQuest has incurred a net
loss for each period since incorporation, except for 1995. As of December 31,
1998, MapQuest had approximately $11.7 million of net operating loss
carryforwards for federal income tax purposes, which expire beginning in 2009.
Due to the uncertainty of future profitability, a valuation allowance equal to
the deferred tax asset has been recorded. Certain changes in ownership
resulting from transactions among MapQuest's stockholders and sales of common
stock may limit the future annual realization of the tax net operating loss
carryforwards under Section 382 of the Internal Revenue Code of 1986, as
amended.
Year ended December 31, 1996 compared to year ended December 31, 1997
Revenues
Total revenues increased $1.8 million from $19.6 million in 1996 to $21.4
million in 1997. Revenue for the top ten customers of MapQuest as a percent of
total revenue declined from 58.3% in 1996 to 44.5% in 1997.
Business Revenues. Business revenues decreased $2.2 million from $7.0
million in 1996 to $4.8 million in 1997 as MapQuest transitioned its focus from
non-Internet client/server based products and services to Internet products and
services.
Consumer Revenues. Consumer revenues increased $1.2 million from $0.1
million in 1996 to $1.3 million in 1997. This increase was primarily due to
increased advertising sales on mapquest.com.
Digital Mapping Revenues. Digital mapping revenues increased $3.0 million
from $12.4 million in 1996 to $15.4 million in 1997. The increase reflects
increased sales from printed products for retail, wholesale and corporate
customers, particularly the introduction of the National Geographic Road Atlas.
Cost of Revenues
Cost of revenues increased $3.0 million from $12.3 million in 1996 to $15.3
million in 1997, primarily due to the increased costs of printed products for
distributors, retailers and corporate customers and increased costs for
operational personnel and related costs.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased by $2.8 million
from $4.5 million in 1996 to $7.3 million in 1997. This increase was primarily
due to increased expenses for the hiring of additional personnel and for
increased promotional expenses.
Product Development. Product development expenses increased $2.4 million
from $2.6 million in 1996 to $5.0 million in 1997. This increase was primarily
the result of the development of the National Geographic Road Atlas and the
hiring of additional personnel for MapQuest Internet products and services.
General and Administrative. General and administrative expenses decreased
$0.1 million from $1.9 million in 1996 to $1.8 million in 1997. This decrease
was primarily due to lower personnel costs.
Interest Income and Expense, Net
Interest income decreased by $0.1 million from $0.2 million in 1996 to $0.1
million in 1997. The decrease from 1996 to 1997 was the result of changes in
average cash and cash equivalent balances.
Other Income
Other income remained relatively constant at $0.2 million in 1996 and in
1997.
Income Taxes
MapQuest paid no income taxes in 1997. Income taxes paid in 1996 were less
than $0.1 million.
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Selected Unaudited Quarterly
Results of Operations
The following table sets forth selected unaudited quarterly statement of
operations data for the eight quarters ended December 31, 1998. The selected
statement of operations data has been prepared substantially on the same basis
as the financial statements appearing elsewhere in this prospectus and, in the
opinion of management, includes all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the information set
forth in the data. The quarterly data should be read together with the
financial statements and the notes to those statements appearing elsewhere in
this prospectus. The results of operations for any quarter are not necessarily
indicative of results to be expected in any future period.
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- -------- --------- -------- --------- -------- --------- --------
(Unaudited, in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Business............... $1,192 $ 1,054 $ 1,251 $ 1,266 $1,720 $1,334 $1,834 $ 1,648
Consumer............... 117 180 465 514 292 259 245 580
Digital Mapping........ 4,093 3,593 3,758 3,933 3,538 4,729 3,896 4,642
------ ------- ------- ------- ------ ------ ------ -------
Total revenues......... 5,402 4,827 5,474 5,713 5,550 6,322 5,975 6,870
------ ------- ------- ------- ------ ------ ------ -------
Costs of revenues....... 3,479 3,574 3,994 4,255 3,654 4,618 4,283 5,091
------ ------- ------- ------- ------ ------ ------ -------
Gross profit............ 1,923 1,253 1,480 1,458 1,896 1,704 1,692 1,779
Operating expenses
Sales and marketing.... 1,351 1,718 1,990 2,198 1,483 1,067 1,163 1,531
Product development.... 1,143 1,633 1,138 1,134 877 813 728 536
General and
administrative....... 422 526 440 423 465 527 529 805
------ ------- ------- ------- ------ ------ ------ -------
Total operating
expenses............. 2,916 3,877 3,568 3,755 2,825 2,407 2,420 2,872
------ ------- ------- ------- ------ ------ ------ -------
Operating income loss... (993) (2,624) (2,088) (2,297) (929) (703) (728) (1,093)
Interest income and
expense, net.......... 17 6 84 52 23 14 8 9
Other income............ 49 118 51 26 47 70 117 12
------ ------- ------- ------- ------ ------ ------ -------
Net loss................ $ (927) $(2,500) $(1,953) $(2,219) $ (859) $ (619) $ (603) $(1,074)
====== ======= ======= ======= ====== ====== ====== =======
</TABLE>
MapQuest's total revenues fluctuated on a quarter to quarter basis during
the periods presented primarily due to changes in the mix of products and
services sold. During the quarter ended March 31, 1998, MapQuest recognized
business revenues of $0.4 million resulting from the license of its software
and data to a third-party. During the quarter ended March 31, 1998, revenues
from MapQuest's consumer line of business decreased as a result of difficulties
with its then third-party advertising sales organization. During the quarter
ended September 30, 1997, MapQuest began recognizing digital mapping revenues
attributable to an agreement entered into with National Geographic Holdings,
Inc. to develop and publish mapping products for retail distribution with the
National Geographic brand name. During the quarter ended June 30, 1998,
MapQuest began providing the American Road Atlas to National Geographic for
sale to its members. This resulted in increased digital mapping revenues
partially offset by increased cost of revenues relating to print and paper
costs for printed product.
During the quarters ended December 31, 1997 and March 31, 1998, MapQuest
temporarily reduced its sales and marketing and product development activities,
including reducing its headcount, as it revised its overall business strategy.
As part of its revised Internet strategy, MapQuest reduced its non-Internet
product development activities in the quarter ended December 31, 1998. During
the same quarter, MapQuest incurred additional general and administrative
expenses in connection with hiring its Chief Executive Officer.
As a result of MapQuest's relatively recent focus on the Internet and the
emerging nature of the Internet markets in which it competes, MapQuest is
limited in its ability to accurately forecast its revenue. MapQuest's current
and future expense levels are based largely on its estimates of future revenue
and are to a large extent fixed. Accordingly, MapQuest may be unable to adjust
spending in a timely manner to compensate for any unexpected revenue shortfall,
and a shortfall in revenue in relation to MapQuest's expectations could have a
material adverse effect on MapQuest's business, financial condition and results
of operations. In addition, MapQuest currently intends to significantly
increase its operating expenses to develop and enhance its
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<PAGE>
technology, to create, introduce and enhance its products and services
offerings, to acquire and develop content, to fund increased sales and
marketing expenses and to enter into new strategic agreements. To the extent
that such expenses precede or are not subsequently followed by increased
revenue, MapQuest's business, financial condition and results of operations
could be materially adversely affected.
MapQuest's quarterly and annual operating results are likely to fluctuate
significantly in the future due to a variety of factors, many of which are
outside MapQuest's control. See "Risk Factors--Volatility of Quarterly
Operating Results."
Liquidity and Capital Resources
MapQuest has financed its operations to date primarily through the private
placement of equity securities, funds from operations and bank borrowings. As
of December 31, 1998, MapQuest had $0.6 million of cash and cash equivalents.
Net cash used in operating activities was $9.5 million in 1997 and $0.8
million in 1998. In 1997, cash used by operating activities was primarily a
result of a net loss and increased working capital. In 1998, cash used by
operating activities was primarily a result of a net loss.
Net cash provided by financing activities was $11.4 million in 1997. In
1997, cash provided by financing activities was primarily attributable to net
proceeds from the issuance of convertible preferred stock.
Net cash used in investing activities was $1.5 million in 1996, $1.3
million in 1997 and $1.1 million in 1998. Cash used in investing activities in
each period was primarily related to purchases of property and equipment. In
addition, in 1996 MapQuest acquired the assets of a map specialty supplier.
MapQuest's material capital commitments consisted of obligations under
facilities and operating leases (see Note 14 to Financial Statements).
Management anticipates that it will experience an increase in its capital
expenditures and lease commitments consistent with its anticipated growth in
operations, infrastructure and personnel and additional resources devoted to
building its brand name and building its marketing and sales force.
MapQuest has a revolving demand credit facility with First Union Bank, N.A.
in the amount of $5,000,000 which bears interest at First Union Bank's prime
rate or fixed rates as offered by First Union Bank or LIBOR plus 1.75%.
Borrowings are secured by MapQuest's accounts receivable and are limited to the
lesser of $5,000,000 or 80% of the net amount of eligible accounts receivable
which are within 90 days of invoice. As of December 31, 1998, there were no
borrowings under this credit facility.
MapQuest believes that the net proceeds of this offering, together with its
existing cash and cash equivalents and available borrowings, will be sufficient
to meet its anticipated cash needs for working capital and capital expenditures
for at least the next twelve months. There can be no assurance that the
underlying assumed levels of revenues and expenses will prove to be accurate.
MapQuest may seek additional funding through public or private financings or
other arrangements prior to such time. Adequate funds may not be available when
needed or may not be available on terms favorable to MapQuest. If additional
funds are raised by issuing equity securities, dilution to existing
stockholders will result. If funding is insufficient at any time in the future,
MapQuest may be unable to develop or enhance its products or services, take
advantage of business opportunities or respond to competitive pressures, any of
which could have a material adverse effect on MapQuest's business, financial
condition and results of operations.
Year 2000
The Year 2000 issue is the potential for system and processing failures of
date-related data as a result of computer-controlled systems using two digits
rather than four to define the applicable year. For example,
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<PAGE>
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in system
failure or miscalculations causing disruptions of operations, including, among
other things, an inability to process transactions, send invoices or engage in
similar normal business activities. MapQuest may be affected by Year 2000
issues related to non-compliant information technology ("IT") systems or non-IT
systems operated by MapQuest or third parties. MapQuest's IT systems consist of
software and data developed either in-house or purchased from third parties,
and hardware purchased from vendors.
State of Readiness. MapQuest has substantially completed a preliminary
assessment of its proprietary IT systems and non-IT systems. MapQuest has
performed a Year 2000 simulation on a majority of its proprietary systems,
products and services to test system and product readiness. Based on the
results of its Year 2000 simulation tests, MapQuest has revised and continues
to revise its code as necessary to improve the Year 2000 compliance of its
proprietary systems. At this point in its assessment, MapQuest is not aware of
any Year 2000 problems relating to its proprietary systems that would have a
material adverse effect on MapQuest's business, financial condition or results
of operations, without taking into account MapQuest's efforts to avoid these
problems, although there can be no assurance of this.
MapQuest has identified all vendors of material hardware and software
components of its IT systems, and has contacted its principal vendors of
hardware, software and data and is in the process of working with its hardware,
software and data providers to assure that MapQuest is prepared for the Year
2000. However, failure by third parties to provide fixes, upgrades or
modifications in the products used by MapQuest could disrupt normal operations.
MapQuest is currently assessing its non-IT systems. At this point in its
assessment, MapQuest is not currently aware of any Year 2000 problems relating
to these systems which would have a material effect on its business, financial
condition or results of operations, without taking into account its efforts to
avoid such problems. MapQuest plans to complete its Year 2000 assessment during
the summer of 1999.
Cost. To date, MapQuest has not incurred any material costs in connection
with identifying and evaluating Year 2000 compliance issues. Most of its
expenses have been related to, and are expected to continue to relate to, the
operating costs associated with time spent by employees in the evaluation
process and Year 2000 compliance matters generally. At this time, MapQuest does
not possess the information necessary to estimate the potential costs of the
replacement of third party software, hardware or services that are determined
not to be Year 2000 compliant. Although MapQuest does not anticipate those
amounts will be material, such expenses, if higher than anticipated, could have
a material adverse effect on MapQuest's business, financial condition and
operating results.
Risks. Although MapQuest's assessment may be finalized without identifying
any additional material non-compliant IT or systems operated by MapQuest or by
third parties, a systemic failure beyond the control of MapQuest, such as a
prolonged telecommunications or electrical failure is possible. This type of
failure could prevent MapQuest from operating its business, prevent users from
accessing its website, or change the behavior of advertising customers or
persons accessing its website. MapQuest believes that the primary business
risks, in the event of such systemic failure, would include but not be limited
to, lost advertising revenues, lost business revenues, increased operating
costs, loss of customers or persons accessing its website and servers, or other
business interruptions of a material nature, as well as claims of
mismanagement, misrepresentation, or breach of contract.
Contingency Plan. As discussed above, MapQuest is engaged in an ongoing
Year 2000 assessment. The results of MapQuest's further testing and the
responses received from third-party vendors, service providers and customers
will be taken into account in determining the nature and extent of any
contingency plans.
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<PAGE>
BUSINESS
The following discussion contains forward-looking statements that involve
risks and uncertainties. MapQuest's actual results could differ materially from
these forward-looking statements as a result of the factors set forth under
"Risk Factors" and elsewhere in this prospectus. In addition, the following
discussion includes market projections provided by certain research firms
identified in this prospectus. This information is based on data, assumptions
and methodologies compiled and applied by these firms. These market projections
may not be achieved.
Overview
MapQuest is a leading online provider of mapping and destination
information. By leveraging its over 30 years of traditional and digital mapping
experience together with its proprietary integration and editing of geographic
databases, MapQuest provides comprehensive online mapping solutions to
businesses and provides customized maps, destination information and driving
directions to consumers. During January 1999, MapQuest delivered over 70.3
million maps and over 13.5 million driving directions through its own website
and through third-party websites. According to Media Metrix, Inc., in December
1998 mapquest.com had over 3.3 million unique visitors, making it the number
one travel/tourism Internet property in terms of audience reach.
Industry Background
Growth of the Internet
The Internet is an increasingly significant global medium for distributing
and collecting information, conducting commerce and communicating.
International Data Corporation estimates that the number of Internet users
worldwide exceeded 69.0 million in 1997 and will grow to over 320.0 million by
2002, representing a compounded annual growth rate of over 35%. According to
Forrester Research, Inc., by 2002 approximately 50% of U.S. businesses will
have an online presence. The growth of this medium is being driven by a number
of factors, including:
. increased use of personal computers and modems;
. improvements in network systems and infrastructure;
. more readily available and lower cost access to the Internet;
. increased awareness of the Internet among businesses and consumers;
. increased volume of information and services offered on the Internet;
. more compelling interactive content available on the Internet; and
. increased acceptance of conducting transactions online.
Convergence of the Traditional and Digital Mapping Industries and the
Internet
Geographically-relevant information has traditionally been provided through
a variety of reference materials, including road maps, atlases, travel guides,
telephone directories and textbooks. According to a 1998 International Map
Trade Associations' United States consumer survey, the annual market for
published map, atlas and travel guide products in the United States is
estimated to be in excess of $1.6 billion. The development of technology has
allowed companies to leverage their databases of information across a greater
number of platforms such as CD-ROMs, client/server systems and the Internet.
Further, with the development of the Internet, users are able to easily and
cost-effectively access information on a 24-hour basis. MapQuest believes that
the Internet presents a significant opportunity to provide users with
comprehensive and reliable geographically relevant information through the
delivery of highly customized maps, destination information and driving
directions on a real-time basis.
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<PAGE>
Online Destination Information for Businesses
Businesses must be able to cost-effectively communicate their existence and
physical locations to potential customers. This information has historically
been provided through traditional print media, such as newspapers and the
yellow pages, which generally target only narrow geographic audiences and have
a limited ability to provide updated destination information that is tailored
to the specific routing needs of a potential customer. MapQuest believes that
the Internet presents a significant opportunity for businesses to provide
potential customers with real-time physical location information and customized
driving directions to such locations.
In addition, highly trafficked websites such as portals, which provide
users with a wide range of information and services at a single site, need to
continually enhance and expand their functionality to promote and extend usage
among existing and new users. Many of these sites have expanded their service
offerings through the addition of a variety of features such as stock quotes,
news, yellow pages, and mapping and destination information. However, many of
these websites do not have the personnel or technical infrastructure necessary
to provide this expanded functionality on a cost-effective basis. MapQuest
believes that businesses will increasingly seek to outsource products and
services to expand the functionality of their websites.
Online Destination Information for Consumers
Consumers and travelers have traditionally located businesses and other
points of interest by using maps, telephone and general information inquiries.
As the availability of travel-related information on the Internet becomes more
available, consumers and travelers are increasingly obtaining location
information online. MapQuest believes there is a significant opportunity to
provide consumers and travelers with easily accessible, reliable and
comprehensive door-to-door driving directions available 24 hours a day.
Geographically Targeted Online Advertising
Forrester Research, Inc. estimates that online advertising revenues will
grow from approximately $1.0 billion in 1998 to approximately $8.1 billion in
2002. Advertisers on the Internet desire cost-effective means of targeting
their advertising and direct marketing efforts. MapQuest believes that specific
geocentric information provided by a consumer on a real-time basis would
improve these efforts.
MapQuest believes there is a significant opportunity to provide accurate
and reliable products and services designed to meet the mapping and destination
information needs of businesses and consumers on the Internet. Businesses must
be able to accurately direct a potential customer to their physical
location(s). Further, to successfully attract and retain users, highly
trafficked websites need to continually and cost-effectively expand the
functionality of their websites. In addition, consumers using the Internet need
a reliable source of real-time customized destination information available 24
hours a day.
The MapQuest.com Solution
MapQuest is a leading online provider of mapping and destination
information for businesses and consumers.
MapQuest's online products and services enable businesses to:
. Provide customized maps, destination information and driving
directions to potential customers;
. Expand the functionality of their websites to attract and retain
users;
. Outsource their map-enabling and destination information needs,
thereby avoiding a significant portion of the expenses normally
associated with establishing and maintaining a map-enabling
infrastructure; and
. Provide potential customers with proximity information regarding which
of a business' multiple locations is closest to the potential
customer.
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<PAGE>
MapQuest's online products and services enable consumers to:
. Receive maps and destination information on a real-time basis based on
specific geocentric parameters provided by the customer;
. Generate detailed door-to-door driving directions at anytime; and
. Create and retrieve customized maps based on the consumer's
preferences.
MapQuest is also a leading U.S. provider of traditional and digital mapping
products and services to the educational, reference, directory, travel and
governmental markets. In addition, companies that incorporate call centers, CD-
ROMs or driving direction kiosks into their information delivery strategy
require non-Internet customized mapping solutions. MapQuest has developed its
map-enabling software to promote the rapid development of mapping applications
in these environments.
Strategy
MapQuest's objective is to be the leading online provider of destination
solutions for businesses and consumers. Key elements of MapQuest's strategy
include:
Build Brand Awareness. MapQuest intends to further its position as an
industry leader for online destination information for businesses and consumers
by enhancing its brand name recognition. In addition to branding on its
website, MapQuest currently co-brands its products and services on each of its
business customer's websites. MapQuest intends to expand its use of
advertising, public relations and other marketing programs designed to promote
its global brand and build loyalty among its consumer and business customers.
In the future, MapQuest intends to expand both its online and offline marketing
programs.
Expand and Enhance the MapQuest Service. MapQuest intends to continue to
broaden and deepen its services by providing comprehensive, cost-effective,
accurate and easily accessible information and value-added tools and features.
MapQuest is developing product and service enhancements aimed at its business
customers, including enhancing their opportunity to offer geographically
targeted advertising programs on their websites. MapQuest's planned
enhancements to its consumer service include introducing greater
personalization functionality to mapquest.com.
Grow Sales Channels Aggressively. MapQuest intends to build its sales
capabilities in order to broaden penetration of its products and services and
drive revenues. MapQuest intends to build its direct field sales force to
target U.S. and international markets. MapQuest also seeks to develop strategic
relationships in the value-added-reseller ("VAR") channels. MapQuest also
intends to build its own advertising sales force in order to augment the
current third-party representative sales force it engages to sell
advertisements on mapquest.com.
Develop Additional Advertising Opportunities. MapQuest intends to increase
and expand its advertising revenue opportunities by offering new methods of
targeted advertising based on a consumer's geographic information. MapQuest
will leverage consumer-provided information to provide advertisers with the
ability to base their advertising and promotions on a consumer's geographic
information.
Leverage Integrated Geographic Data. MapQuest intends to develop new
products and services by leveraging the comprehensive integrated geographic
databases it has been developing since 1967. MapQuest has utilized proprietary
editing software tools to create its geographic data from multiple providers in
variety of data formats.
Pursue International Opportunities. MapQuest believes that significant
opportunities exist to leverage MapQuest's products and services
internationally. As of December 1998, approximately 10.8% of the maps that
MapQuest generates from its own website represent international locations.
MapQuest intends to expand its international marketing efforts to gain access
to additional business customers seeking to improve the functionality of their
websites and consumers seeking online map-related information.
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<PAGE>
MapQuest Products and Services
Internet Business
<TABLE>
<CAPTION>
Application
Name of and
Product/Service Data Host Description
--------------- ----------------- -------------------------------------
<C> <C> <S>
MapQuest Connect MapQuest . Enables businesses to display user-
requested maps based on any
combination of city, state, street
address and ZIP code in the United
States.
MapQuest InterConnect MapQuest . Enhances MapQuest Connect.
. Offers proximity searching,
enabling consumers who visit a
business' website to find the
closest location to a user's point
of origin.
MapQuest Locator MapQuest . Enhances MapQuest InterConnect.
. Enables more advanced proximity
searching by integrating MapQuest
with specific geographic search
parameters contained in its business
customer's database, such as "find
closest gas station with a car
wash."
MapQuest TripConnect MapQuest . Enables businesses to provide
consumers with door-to-door driving
instructions, including a route-
highlighted map, trip mileage and
estimated driving time.
MapQuest Enterprise MapQuest . Provides mapping and routing
Service capability designed primarily for
high volume websites.
. Enables business customers to
integrate generated map pages into
their websites.
MapQuest Enterprise Business Customer . Provides mapping and routing
Server capability designed primarily for
high volume websites.
. Enables business customers to
integrate generated map pages into
websites.
MapQuest Server for Business Customer . Provides mapping and routing
Windows NT capability designed primarily for
low volume websites.
. Enables business customers to
customize their own mapping
solutions.
</TABLE>
Internet Consumer
The mapquest.com website offers several menu options for consumers:
. Maps--enables map generation either based on detailed supplied
information or a more general location request;
. Driving Directions--provides the most direct route from a point of
origin to a destination using a variety of options and formats, including
door-to-door, city-to-city, overview map with text, text only or turn-by-
turn;
. Travel Guide--provides access to lodging, dining, city information,
weather and build-an-itinerary options for most consumer-requested
destinations, all of which can be tailored by the consumer to fit his or
her particular information needs;
. Buy A Map--provides access to the MapStore to buy U.S. and international
maps, road atlases, travel guides and other map and travel-related
products; and
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<PAGE>
. Membership--by becoming a member, the consumer is able to save generated
maps, place his or her personalized icons on generated maps that can be
stored for future use, receive advance notice of new MapQuest features
and enhancements and become eligible for promotional offers.
Traditional and Digital Mapping Products and Services
MapQuest publishes or provides the relevant geographic data for printed
road maps, atlases, travel guides, hotel and telephone directories, maps used
in textbooks and reference books, and CD-ROMs. In addition, MapQuest's products
and services include software applications incorporating customized mapping
solutions for publishers and producers of CD-ROMs. MapQuest also provides
extensive cartography, geographic database development, comprehensive map data
maintenance, advanced mapping technology and consultation services to a wide
variety of customers on a fee for service basis. MapQuest's traditional and
digital mapping customers include National Geographic, Galileo International,
Ryder, Exxon, Best Western and the Alamo and National car rental units of
Republic Industries.
MapQuest's product development strategy is to enhance the technology and
features of its Internet, client/server network applications and traditional
and digital mapping applications and to further expand its core geographical
database assets. MapQuest has numerous development projects in process.
MapQuest expects to continue to devote substantial resources to its product
development activities.
Sales and Marketing
MapQuest sells its Internet business products and services in the United
States through a sales organization of 17 employees as of January 31, 1999.
This sales organization consists of 12 direct field salespeople based
throughout the United States and 5 telemarketers located at MapQuest's Denver
office. In addition, MapQuest sells its Internet products and services through
indirect sales channels, including value-added resellers such as Moore Data,
SABRE BTS and Three-X Communications.
Sales of advertisements on mapquest.com have been generated by third-party
advertising sales representatives and to a lesser extent by MapQuest's internal
advertising sales force, which consisted of two persons as of January 31, 1999.
MapQuest sells its traditional and digital mapping products through a
direct sales force consisting of 11 field salespersons and telemarketers.
MapQuest markets its products and services online by placing advertisements
on third-party websites. In addition, MapQuest advertises through traditional
offline media and utilizes public relations campaigns, trade shows and ongoing
customer communications programs.
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<PAGE>
Customers
As of January 31, 1999, MapQuest had licensed its products and services to
over 380 business customers. No one customer accounts for over 10% of
MapQuest's overall revenues. The following is a representative list of
customers as of December 31, 1998:
Content Providers Telecommunications/Directories
Excite Ameritech
Infoseek APIL Partnership (Don Tech)
Lycos GTE
Ticketmaster-Citysearch Pacific Bell
Yahoo! Southwestern Bell
US West
Travel/Entertainment
American Automobile Association Retail/Services
American Express Blockbuster
Avis Border's Group
Bass Hotel and Resorts Cybermeals
Best Western Home Depot
Budget Rent-A-Car Kinko's
Galileo International Sears
Hertz
Republic Industries
Ryder Transportation Services Publishers/Advertising Agencies
Sabre Group (Travelocity) Classical Atlas
Sierra On-Line DDB Needham
Harte Hanks
McGraw-Hill
Media Modem Media . Poppe Tyson
Denver Post R.R. Donnelley
Los Angeles Times
National Geographic Real Estate
Cendant
Other Moore Data
Citgo Petroleum
Exxon
Technology and Infrastructure
Geographic Data
MapQuest has licensed a significant portion of its primary geographic data
from a limited number of sources through non-exclusive, short-term contractual
arrangements. MapQuest currently relies on United States street level data
drawn from the U.S. government and through agreements with NavTech and GDT.
Beginning in April 1999, data covering Canada will be supplied by Digital
Mapping Technologies, Inc. MapQuest obtains Western European street and major
road data from TeleAtlas, NavTech and AND Mapping NV. Major road data for the
rest of the world is obtained from AND Mapping NV. If MapQuest lost access to
these sources of third-party data or should the terms of these contractual
arrangements materially change, MapQuest would need to substitute alternative
sources of data or attempt to develop substitute sources of data internally,
and MapQuest's business, financial condition and results of operations could be
materially and adversely affected.
MapQuest's own proprietary data assets also support its online and
traditional and digital mapping products and services. MapQuest has spent
approximately six years developing a United States major road database.
MapQuest also maintains a graphical image database that contains over 190,000
archived files to serve as an internal reference library. In addition, MapQuest
has developed a suite of international city map data that includes over 300
metropolitan maps and over 500 downtown maps of most major international
tourist and business destinations.
Software and Editing Tools
MapQuest's proprietary software development toolkit, GeoLocate, employs
scalable object-oriented technology and comprises the core tools used to
perform high-speed mapping while maintaining high-quality cartographic display.
Designed with an open architecture, GeoLocate offers platform flexibility in
converting a variety of data formats. GeoLocate has been used in the
development of MapQuest's Internet technology, resulting in the creation of a
scalable platform that is designed to serve millions of maps and driving
directions
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<PAGE>
on a daily basis. An easy-to-use consumer interface overlays MapQuest's variety
of integrated data formats and personalization tools, enabling consumers to
save and display customized maps and driving directions. MapQuest has also
developed numerous software tools and has customized existing commercial
applications to create and maintain its digital map databases.
System Architecture
Maps and driving directions delivered by MapQuest are generated utilizing a
UNIX operating system, Apache web server software and MapQuest's proprietary
mapping applications. User activity is distributed and load-balanced across
multiple servers via our proprietary software and third-party equipment, which
maintain replicated, local storage of underlying software and data, resulting
in minimal interdependencies among servers. Each server has its own local
storage, and all data and software are replicated across all servers. The
system's flexible architecture is designed to be scalable to meet anticipated
future demand. In addition to built-in redundancies, MapQuest operates
automated internal monitoring tools seven days a week/24 hours a day and
independent third parties continuously monitor MapQuest's website from at least
10 different cities on at least eight different national Internet backbone
providers.
MapQuest's network, hosting facilities, internal architecture and
monitoring are deployed to provide high availability, efficiency and
redundancy. MapQuest's Internet map and driving direction applications are
located in Denver, Colorado in a Qwest Communications Cyber Center hosting
facility tied to Qwest's nationwide, dedicated high speed OC-48 IP network.
mapquest.com is connected to Qwest's backbone via Cisco routers and
multiplexers. Qwest does not guarantee that our Internet access will be
uninterrupted, secure, or error free and MapQuest's operations are dependent on
Qwest's ability to protect its and MapQuest's systems against damage from fire,
power loss, water damage, telecommunications failure, vandalism, and other
malicious acts. Any disruption in the Internet access provided by Qwest could
have a material adverse effect on MapQuest's business, financial condition and
results of operations.
Competition
The markets for MapQuest's products and services are highly competitive.
MapQuest competes for customers with companies offering online map-enabling
technology and publishers and distributors of traditional print media that use
or license their content for use on the Internet, commercial publishing
companies, corporate materials and information market companies, and
governmental authorities.
MapQuest expects competition to continue to increase because these markets,
particularly the markets for Internet-related products and services, pose no
substantial barriers to entry. Competition may also increase as a result of
industry consolidation. In addition, MapQuest's licensees may develop products
and services that are equal or superior to MapQuest's or that achieve greater
market acceptance than those of MapQuest. Similarly there can be no assurance
that MapQuest's data suppliers will not develop products and services
competitive with those of MapQuest or will continue licensing data to MapQuest.
Increased competition could result in reduced markets, loss of market share or
less traffic to MapQuest's website, any of which could have a material adverse
effect on MapQuest's business, financial condition and results of operations.
MapQuest believes that its ability to compete depends upon many factors,
many of which are beyond its control. These factors include MapQuest's ability
to provide depth and accuracy of destination information, to increase its sales
force and to implement its sales and marketing initiatives, the introduction
and acceptance of new and enhanced products and services developed either by
MapQuest or its competitors and the ease of use of products and services
developed either by MapQuest or its competitors.
Government Regulation
There is an increasing number of laws and regulations pertaining to the
Internet including laws or regulations relating to user privacy, liability for
information retrieved from or transmitted over the Internet,
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<PAGE>
online content regulation, user privacy, taxation and domain name registration.
Moreover, the applicability to the Internet of existing laws governing issues
such as intellectual property ownership and infringement, copyright, patent,
trademark, trade secret, obscenity, libel, employment and personal privacy is
uncertain and developing.
Privacy Concerns. Government agencies are considering adopting regulations
regarding the collection and use of personal identifying information obtained
from individuals when accessing websites. While MapQuest has implemented and
intends to implement additional programs, designed to enhance the protection of
the privacy of its users, these programs may not conform with any regulations
adopted by these agencies. In addition, these regulatory and enforcement
efforts may adversely affect the ability to collect demographic and personal
information from users, which could have an adverse effect on MapQuest's
ability to provide advertisers with geocentric information. The European Union
(the "EU") has adopted a directive that imposes restrictions on the collection
and use of personal data. The directive could impose restrictions that are more
stringent than current Internet privacy standards in the United States. The
directive may adversely affect the activities of entities such as MapQuest that
plan to engage in data collection from users in EU member countries.
Liability for Information Retrieved from mapquest.com and from the
Internet. Content may be accessed on mapquest.com or on the websites of
MapQuest's business customers, and this content may be downloaded by users and
subsequently transmitted to others over the Internet which could result in
claims against MapQuest based on a variety of theories, including negligence,
copyright, patent or trademark infringement. It is also possible that if any
destination information provided on or through mapquest.com contains errors,
third parties could make claims against MapQuest for losses incurred in
reliance on such information. Any imposition of liability that is not covered
by insurance or is in excess of insurance coverage could have a material
adverse effect on MapQuest's business, financial condition and results of
operations.
Internet Taxation. A number of legislative proposals would impose
additional taxes on the sale of goods and services over the Internet which may
substantially impair the growth of commerce on the Internet and, as a result,
adversely affect MapQuest's opportunity to derive financial benefit from these
activities.
Domain Names. Domain names are the user's Internet "addresses." The current
system for registering, allocating and managing domain names has been the
subject of litigation and of proposed regulatory reform. Although MapQuest has
applied to register "mapquest.com" as a trademark, third parties may bring
claims for infringement against MapQuest for the use of this trademark. There
can be no assurance that MapQuest's domain name will not lose its value, or
that MapQuest will not have to obtain entirely new domain names in addition to
or in lieu of its current domain names if reform efforts result in a
restructuring in the current system.
Jurisdictions. Due to the global nature of the Internet, it is possible
that, although transmissions by MapQuest over the Internet originate primarily
in Denver, the governments of other states and foreign countries might attempt
to regulate MapQuest's business activities. In addition, as MapQuest's service
is available over the Internet in multiple states and foreign countries, these
jurisdictions may require MapQuest to qualify to do business as a foreign
corporation in each of these states or foreign countries, which could subject
MapQuest to taxes and other regulations.
Intellectual Property
We rely upon a combination of patent, trademark, copyright law, trade
secret protection and contractual restrictions with employees, customers,
partners and others to protect our proprietary rights. We do not currently hold
any patents, but we have filed one patent application with the United States
Patent and Trademark Office, and intend to file a second patent application in
the near future. There can be no assurance that our patent applications will be
approved and, if approved, that they will not be successfully challenged by
others or invalidated through administrative process or litigation. Patent,
trademark, copyright and trade secret protection may not be available in every
country in which our
33
<PAGE>
products and services are distributed or made available. If we fail to
adequately protect our proprietary rights, our business, financial condition
and results of operations could be materially and adversely affected.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any of our proprietary rights or those of other companies
within the industry. Despite our efforts to protect our proprietary rights,
third parties may infringe or misappropriate these rights, which could result
in a material adverse effect on our business, financial condition and results
of operation.
Currently we are a defendant in two pending litigations involving
allegations of infringements of third-party patents by our technologies. Both
litigations are in the early stages. While we intend to defend these actions
vigorously, our efforts may not be successful. In addition, in the ordinary
course of business we have been, and we expect to continue to be, subject to
claims, including claims of alleged infringement of the patents, trademarks and
other proprietary rights of third parties. We expect that infringement claims
in our markets will increase in number as more participants enter the market.
These claims and any resultant litigation could subject us to significant
liability for damages and could result in the invalidation of our proprietary
rights. In addition, even if we prevail, such litigation could be time-
consuming and expensive to defend, and could result in the diversion of our
time and attention, any of which could materially adversely affect our
business, financial condition and results of operations. Any claims from third
parties may also result in limitation on our ability to use the trademarks,
patents, copyrights and other intellectual property subject to such claims
unless we enter into agreements with the third parties responsible for such
claims, which may be unavailable on commercially reasonable terms.
Employees
As of January 31, 1999, MapQuest employed 222 persons, including 63
cartographers, 16 GIS/database analysts, 59 software/systems/Internet
engineers, 46 persons in sales, marketing and customer-support, and 38 persons
in general and administrative areas. None of MapQuest's employees is
represented by a labor union and MapQuest believes it has good employee
relations.
MapQuest believes that its future success will depend in part on its
continued ability to attract, integrate, retain and motivate highly qualified
sales, technical, and managerial personnel, and upon the continued service of
MapQuest's senior management and key sales and technical personnel. MapQuest
may not successfully attract, integrate, retain and motivate a sufficient
number of qualified personnel to conduct its business in the future. Please see
"Risk Factors--Risks Associated with Managing Our Expansion."
Facilities
MapQuest's headquarters are located in Mountville, Pennsylvania, where
MapQuest currently leases approximately 62,000 square feet under a ten-year
lease expiring in March 2007. MapQuest also leases approximately 7,200 square
feet in Columbia, Maryland under a two-year lease expiring in June 2000,
approximately 11,000 square feet in Denver, Colorado under a three-year lease
expiring in October 1999 and approximately 4,200 square feet in New York, New
York under a seven-year lease expiring January 2006. MapQuest believes that its
current facilities will be adequate to meet its needs for the foreseeable
future.
Legal Proceedings
On December 14, 1998, Mark Tornetta filed a lawsuit against Moore U.S.A.,
Inc. in the United States District Court for the Eastern District of
Pennsylvania. MapQuest is defending this matter pursuant to an indemnity
provision in its contract with Moore U.S.A., Inc. Mr. Tornetta's patent
describes a specific method for searching real estate properties, which Mr.
Tornetta alleges is infringed by Moore U.S.A., Inc.'s online real estate
service. MapQuest believes that the claims of the patent are not infringed by
MapQuest, and/or the patent
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<PAGE>
is invalid. While the litigation is in the early stage, and its outcome cannot
be predicted, MapQuest believes that this litigation is without merit, and
intends to defend this action vigorously.
On January 26, 1999, Civix-DDI, LLC filed a lawsuit in the United States
District Court for the District of Colorado against twenty different
defendants, including MapQuest. Seven of these defendants are licensees of
MapQuest technology and may have rights to indemnification under their
respective agreements or at law. The complaint alleges infringement by MapQuest
of two patents, by manufacture, use, sale, and offers to sell MapQuest
electronic yellow page services, systems and products. MapQuest believes that
the claims of the patents are not infringed by MapQuest, and/or the patents are
invalid. While the litigation is in the early stage, and its outcome cannot be
predicted, MapQuest believes that this litigation is without merit, and intends
to defend this action vigorously.
MapQuest is not party to any other material legal proceedings.
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MANAGEMENT
Executive Officers and Directors and Key Employees
The following table sets forth certain information with respect to the
executive officers, key employees and directors of MapQuest as of the date of
this prospectus.
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<C> <C> <S>
*Michael Mulligan................ 48 Chief Executive Officer and Chairman
*James Thomas.................... 48 Chief Operating Officer and Chief
Financial Officer
*William Muenster................ 46 Senior Vice President of Development
and Production
James Hilliard................... 47 Vice President of Digital Mapping
Services
James Killick.................... 36 Vice President of Product Management
Michael Nappi.................... 44 Vice President of Business Solutions
David Ingerman................... 36 Vice President of Marketing
Michael Crosson.................. 46 Vice President of Advertising Sales
Robert Binford................... 44 Corporate Controller
Robert McCormack................. 59 Director
John Moragne (1) (2)............. 42 Director
Dan Nova......................... 37 Director
Carlo von Schroeter (1) (2)...... 35 Director
C. Richard Allen................. 44 Director
</TABLE>
- --------
* Denotes executive officer.
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Michael Mulligan has served as Chief Executive Officer and Chairman of
MapQuest since August 1998. From May 1995 to June 1998, Mr. Mulligan was Senior
Vice President and General Manager of Corporate Services Interactive at
American Express Travel Related Services, where he was responsible for
developing and implementing American Express' interactive travel strategy. Mr.
Mulligan was an independent consultant to various companies from October 1994
to April 1995. From September 1993 to October 1994, Mr. Mulligan served as
Chief Operating Officer of Official Airline Guide, an airline information
publishing company. Mr. Mulligan holds a B.A. from Wheeling College and an
M.B.A. from Harvard Business School.
James Thomas has served as Chief Operating Officer of MapQuest since July
1995 and as Chief Financial Officer of MapQuest since June 1997. From September
1994 to June 1995, Mr. Thomas was an independent consultant. From July 1993 to
August 1994, Mr. Thomas was President of the publishing division of Sierra On-
Line, Inc., a multimedia entertainment publisher and developer. Mr. Thomas
holds a B.S. from the Florida Institute of Technology and an M.B.A. from the
University of Virginia.
William Muenster has served as Senior Vice President of Development and
Production of MapQuest since September 1997. From February 1995 to August 1997,
Mr. Muenster served as Unit President of MapQuest's Mapping Products and
Services Group. From November 1993 to February 1995, Mr. Muenster served as
MapQuest's Vice President of Operations. Mr. Muenster holds a B.A. from the
University of Virginia and an M.I.M. from the American Graduate School.
James Hilliard has served as Vice President of Digital Mapping Services of
MapQuest since October 1998. From June 1996 to October 1998, Mr. Hilliard
served as MapQuest's Vice President of Sales and Marketing for Mapping Products
and Services. From July 1993 to June 1996, Mr. Hilliard served as MapQuest's
Director of Publisher Services. Mr. Hilliard holds a B.B.A. and an M.S. from
the University of Wisconsin.
James Killick has served as Vice President of Product Management of
MapQuest since January 1998. From January 1997 to January 1998, Mr. Killick was
MapQuest's Director of Product Management. From
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January 1996 to January 1997, Mr. Killick served as MapQuest's Director of Data
Products. From January 1995 to January 1996, Mr. Killick was Director of
Product Marketing at Etak, Inc., a mapping database company. From January 1994
to January 1995, Mr. Killick served as Director of Map Data Products at Etak,
Inc. Mr. Killick holds a B.Sc. from the University of York, England.
Michael Nappi has served as Vice President of Business Solutions of
MapQuest since October 1997. From September 1995 to October 1997 , Mr. Nappi
served as MapQuest's Director of Business Development. Mr. Nappi held various
sales positions with MapQuest from May 1992 to September 1995. Mr. Nappi holds
a B.A. and a B.S. from Kent State University.
David Ingerman has served as Vice President of Marketing of MapQuest since
January 1999. From June 1998 to December 1998, Mr. Ingerman was President of
Internet Marketing Associates Consulting, a consulting firm focusing on
applying direct marketing disciplines to the Internet. From August 1984 to May
1998, Mr. Ingerman held various marketing positions at American Express. Mr.
Ingerman holds a B.A. from the University of Pennsylvania and an M.B.A. from
Columbia Business School.
Michael Crosson has served as Vice President of Advertising Sales of
MapQuest since January 1999. From March 1998 to January 1999, Mr. Crosson
served as the Managing Director of Eastern Sales for NetRatings, a web audience
measurement company. From January 1993 to March 1998, Mr. Crosson operated his
own consulting business, developing strategic advertising and partnerships for
websites. From April 1992 to August 1996, Mr. Crosson served as Director of
Online Publishing at Scholastic, Inc., a publishing company. Mr. Crosson holds
a B.A. from the University of Arizona.
Robert Binford has served as Corporate Controller of MapQuest since January
1995. From February 1991 to January 1995, Mr. Binford served as a Financial
Manager of MapQuest. Mr. Binford holds a B.S. from the University of Kentucky.
Robert McCormack has served as a director of MapQuest since May 1998 and
previously served as a director of MapQuest from November 1994 to July 1997.
Since 1993, Mr. McCormack has been a managing director of Trident Capital,
Inc., the general partner of Trident Capital, L.P. which is the general partner
of Trident Capital Partners Fund-I, L.P. and the investment general partner of
Trident Capital Partners Fund-I, C.V. Trident Capital, Inc. is a private equity
investment firm established in 1993 that invests in information and business
service companies. Mr. McCormack serves on the boards of directors of Illinois
Tool Works, Inc., DeVry, Inc., The Revere Group, Inc., The Compucare Company
and CommSite International, Inc. Mr. McCormack holds a B.A. from the University
of North Carolina and an M.B.A. from the University of Chicago. Mr. McCormack
was elected to the board of directors pursuant to an agreement between MapQuest
and some of MapQuest's stockholders.
John Moragne has served as a director of MapQuest since November 1994.
Since 1993, Mr. Moragne has been a managing director of Trident Capital, Inc.,
the general partner of Trident Capital, L.P. which is the general partner of
Trident Capital Partners Fund-I, L.P. and the investment general partner of
Trident Capital Partners Fund-I, C.V. Trident Capital, Inc. is a private equity
investment firm established in 1993 that invests in information and business
service companies. Mr. Moragne serves on the boards of directors of Daou
Systems, Inc., Health Quality, Inc., Internet Profiles Corp., Newgen Results
Corp., Vality Technology, Inc. and Youth Sports Network, Inc. Mr. Moragne holds
a B.A. from Dartmouth College, an M.S. from Stanford University and an M.B.A.
from Stanford Business School. Mr. Moragne was elected to the board of
directors pursuant to an agreement between MapQuest and some of MapQuest's
stockholders.
Dan Nova has served as a director of MapQuest since July 1997. Since June
1996, Mr. Nova has been a general partner of Highland Capital Partners, a
venture capital firm. From January 1995 to July 1996, Mr. Nova was a general
partner of CMG@Ventures, a publicly traded venture capital firm. From June 1991
to January 1995, Mr. Nova was a Senior Associate at Summit Partners, focusing
on later stage technology and environmental investments. Mr. Nova serves on the
boards of directors of eToys, Inc., Quote.com, Inc.,
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Topica, Inc., VStream, Inc. and Lycos, Inc. Mr. Nova holds a B.S. from Boston
College and an M.B.A. from Harvard Business School. Mr. Nova was elected to the
board of directors pursuant to an agreement between MapQuest and some of
MapQuest's stockholders.
Carlo von Schroeter has served as a director of MapQuest since July 1997.
Mr. von Schroeter is a General Partner of Weston Presidio Capital, a private
equity partnership with over $900 million under management. Prior to joining
Weston Presidio Capital at its inception in September 1992, Mr. von Schroeter
was a Vice President with Security Pacific Capital. Mr. von Schroeter serves on
the boards of directors of NOVA Pb, U.S. Netting, Star International Holdings,
and The Lion Brewery. Mr. von Schroeter holds a B.S. from Queen's University,
Canada and an M.B.A. from Harvard Business School. Mr. von Schroeter was
elected to the board of directors pursuant to an agreement between MapQuest and
some of MapQuest's stockholders.
C. Richard Allen has served as a director of MapQuest since May 1998. Since
December 1997, Mr. Allen has served as the President and Chief Executive
Officer of National Geographic Holdings, Inc. Mr. Allen is also the Chief
Executive Officer of National Geographic Ventures, a position he has held since
October 1997. From December 1995 to October 1997, Mr. Allen was a Senior Vice
President of Discovery Communications, Inc., and from February 1993 to December
1995, Mr. Allen was Deputy Assistant to the President of the United States. Mr.
Allen serves on the boards of directors of National Geographic Ventures,
National Geographic Television, National Geographic Holdings, Inc., National
Geographic Channel and Destination Cinema, Inc. Mr. Allen holds a B.A. from
Dartmouth College and a J.D. from the University of Chicago. Mr. Allen was
elected to the board of directors pursuant to an agreement between MapQuest and
some of MapQuest's stockholders.
Each officer serves at the discretion of MapQuest's board of directors.
Within 90 days following this offering, MapQuest expects to nominate and
elect an additional independent director.
Director Terms and Compensation
All directors hold office until the next annual meeting of stockholders or
until their successors have been duly elected and qualified. Independent, non-
institutional investor directors are paid an annual retainer and will be
granted stock options exercisable for shares of common stock. Directors who are
also employees of MapQuest or who are affiliated with institutional investors
do not receive any additional compensation for serving on the board of
directors.
Committees of the Board of Directors
MapQuest has an audit committee that reports to the board of directors
regarding the appointment of the independent auditors of MapQuest, the scope
and fees of prospective annual audits and the results of those audits,
compliance with MapQuest's accounting and financial policies, and management's
procedures and policies relative to the adequacy of MapQuest's internal
accounting controls.
Compensation Committee Interlocks and Insider Participation
MapQuest's compensation committee is comprised of one director designated
by Highland Capital Partners and Weston Presidio Capital, one director
designated by Trident Capital Partners Fund - I, L.P. and Trident Capital
Partners Fund - I, C.V. and one director designated by all of the directors
other than those nominated by members of management. MapQuest's compensation
committee currently has two members. In the past, compensation of executive
officers of MapQuest has been determined by directors of MapQuest who were not
officers of MapQuest. No interlocking relationship exists between MapQuest's
board of directors and the board of directors or compensation committee of any
other company, nor has any interlocking relationship existed in the past.
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Limitation of Liability and Indemnification Matters
MapQuest's certificate of incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. The Delaware General
Corporation Law provides that the personal liability of a director for monetary
damages for breach of his or her fiduciary duties as a director may be
eliminated, except for liability for:
. any breach of the duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or
. any transaction from which the director derives an improper personal
benefit.
Prior to the closing of this offering, MapQuest's bylaws provide that
MapQuest shall indemnify its directors and officers and may indemnify its
employees and agents to the fullest extent permitted by Delaware law.
In addition to the indemnification provided for in its certificate of
incorporation and bylaws, MapQuest intends to enter into agreements to
indemnify its directors and officers. Under these agreements, MapQuest will be
obligated to indemnify its directors and officers for expenses, attorneys'
fees, judgments, fines and settlement amounts incurred by any director or
officer in any action or proceeding arising out of the director's or officer's
services as a director or officer of MapQuest, any subsidiary of MapQuest or
any other company or enterprise to which the person provides services at the
request of MapQuest. MapQuest believes that these provisions and agreements are
necessary to attract and retain qualified individuals to serve as directors and
officers.
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<PAGE>
Executive Compensation and Employment Agreements
The following table sets forth information concerning the compensation
received for services rendered to MapQuest by its current Chief Executive
Officer and each of the other four most highly-compensated executive officers
of MapQuest for the year ended December 31, 1998, whose total compensation in
1998 equaled or exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
--------------- Securities
Salary Bonus Underlying
Name and Principal Position(1) ($) ($) Options (3)
------------------------------ ------- ------- ------------
<S> <C> <C> <C>
Michael Mulligan,
Chief Executive Officer (2)................. 94,769 100,000 720,000
James Thomas, Chief Operating Officer and
Chief Financial Officer..................... 150,000 -- --
William Muenster, Senior Vice President of
Development and Production.................. 140,004 -- --
James Hilliard, Vice President of Digital
Mapping Services............................ 115,008 28,177(4) 35,000
Michael Nappi, Vice President of Business
Solutions................................... 107,508 69,814(5) 90,000
</TABLE>
- --------
(1) Prior to Mr. Mulligan's appointment, Barry Glick served as MapQuest's
Chief Executive Officer. Mr. Glick received salary payments of $131,256
for the period January 1, 1998 through September 30, 1998. In addition,
Mr. Glick received $56,041 upon the voluntary termination of his
employment with MapQuest. See "Certain Transactions--Other Transactions."
(2) Mr. Mulligan was appointed Chief Executive Officer and Chairman of
MapQuest on August 10, 1998. He received salary payments for the period
August 10, 1998 through December 31, 1998.
(3) These options to purchase common stock were granted pursuant to the 1995
stock option plan. See "--Employee Benefit Plans--1995 Stock Option
Plan."
(4) Consists of a $23,177 bonus accrued in 1997 and paid in 1998 and a $5,000
sales bonus earned and paid in 1998.
(5) Reflects sales commissions paid to Mr. Nappi.
David Ingerman was hired by MapQuest on January 15, 1999 to serve as Vice
President of Marketing. His base salary is $130,008 and he may earn a bonus of
up to 50% of his base salary upon the attainment of certain performance goals
set by the board of directors. Mr. Ingerman also received options to purchase
100,000 shares of common stock at an exercise price of the per share price of
this offering. These options vest over four years and expire on January 15,
2009.
Michael Crosson was hired by MapQuest on January 20, 1999 to serve as Vice
President of Advertising. His base salary is $125,004 and he received a bonus
of $10,000 upon commencing his employment with MapQuest. Mr. Crosson is also
entitled to sales commissions equal to 5% of any recognized personal sales,
1.5% of any sales made for MapQuest through certain third-party advertising
sales representatives and 1.5% of any recognized sales made by Mr. Crosson's
sales staff. Mr. Crosson also received options to purchase 50,000 shares of
common stock at an exercise price of the per share price of this offering.
These options vest over four years and expire on January 20, 2009.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information as to options granted to the
named executive officers during the year ended December 31, 1998. MapQuest has
not granted any stock appreciation rights.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term (4)
------------------------------------------ ---------------------
Percent of
Total
Number of Options
Securities Granted to Exercise
Underlying Employees Price
Options in Fiscal Per Expiration
Name (1) Granted (2) Year (3) Share Date 5% 10%
-------- ----------- ---------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael Mulligan (5).... 720,000 68.2% $1.00 8/10/08 $452,804 $1,147,495
James Thomas............ -- -- -- -- -- --
William Muenster........ -- -- -- -- -- --
James Hilliard.......... 20,000 1.9 1.00 2/1/08 12,578 31,875
15,000 1.4 [IPO] 12/30/08 [TBD] [TBD]
Michael Nappi........... 30,000 2.8 1.00 2/1/08 18,867 47,812
60,000 5.7 [IPO] 12/30/08 [TBD] [TBD]
</TABLE>
- --------
(1) Prior to Mr. Mulligan's appointment, Barry Glick served as Chief Executive
Officer. Mr. Glick was granted no options to purchase shares of common stock
in fiscal year 1998.
(2) These options to purchase common stock were granted pursuant to the 1995
stock option plan, as amended.
(3) Based on options to purchase an aggregate of 1,055,250 shares of common
stock granted to MapQuest employees, including management, during the year
ended December 31, 1998.
(4) Potential realizable values are net of exercise price, but before the
payment of taxes associated with exercise. Amounts represent hypothetical
gains that could be achieved for the respective options if exercised at the
end of the option term. The 5% and 10% assumed annual rates of compounded
stock price appreciation are mandated by rules of the Commission and do not
represent MapQuest's estimate or projection of MapQuest's future common
stock prices. These amounts represent certain assumed rates of appreciation
in the value of the common stock from the fair market value 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.
(5) These options vest over four years as follows: 16.67% on August 10, 1998,
16.67% on the date of this offering, and 16.67% on each of August 10, 1999,
August 10, 2000, August 10, 2001 and August 10, 2002.
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<PAGE>
AGGREGATED STOCK OPTION EXERCISES IN FISCAL 1998
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to unexercised
options held by the named executive officers as of December 31, 1998. No
options were exercised by the named executive officers during 1998.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at December 31, 1998 at December 31, 1998(2)
------------------------- -------------------------
Name(1) Exercisable Unexercisable Exercisable Unexercisable
------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael Mulligan............ 120,024 599,976(3) $ $
James Thomas................ 75,100 115,891
William Muenster............ 83,311 106,658
James Hilliard.............. 17,500 57,500
Michael Nappi............... 6,000 94,000
</TABLE>
- --------
(1) Prior to Mr. Mulligan's appointment, Barry Glick served as Chief Executive
Officer. Upon the voluntary termination of his employment with MapQuest the
board of directors accelerated the vesting of options to purchase 51,377
shares of common stock held by Mr. Glick. The value of Mr. Glick's
unexercised in-the-money options at December 31, 1998 was $[ ].
(2) There was no public trading market for the common stock as of December 31,
1998. Accordingly, these values have been calculated on the basis of the
assumed initial public offering price of $ per share, less the applicable
exercise price per share, multiplied by the number of shares underlying such
options.
(3) Options to purchase 120,024 shares of common stock will vest on the closing
of this offering.
Employment Agreements
William Muenster Employment Agreement. In October 1994, MapQuest entered
into an employment agreement with Mr. Muenster providing for an initial annual
base salary of $82,500, subject to annual increases at the sole discretion of
MapQuest's board of directors, and incentive compensation of an immediately
payable bonus of $10,000 and the right to participate in MapQuest's annual
bonus program. Mr. Muenster is entitled to an annual bonus of 15% of his base
salary if MapQuest achieves its annual budget, determined by MapQuest's
management and board of directors at the beginning of each fiscal year, and he
may receive an additional bonus of up to 15% of his base salary for any other
target that the board of directors may establish. If MapQuest terminates Mr.
Muenster's employment without cause or if Mr. Muenster voluntarily terminates
his employment, Mr. Muenster would be entitled to receive severance benefits
equal to any salary and bonus earned through the date of termination, plus base
salary for the six-month period after the date of termination and health plan
benefits for one year following the date of termination. If Mr. Muenster is
terminated by MapQuest for cause, Mr. Muenster is entitled to receive his base
compensation, plus all earned and unpaid bonus compensation through the
termination date of his employment and all health plan benefits for the 12-
month period following the date of his termination. In addition, Mr. Muenster
has agreed to certain confidentiality, non-competition and non-solicitation
provisions.
Michael Mulligan Employment Agreement. On August 10, 1998, MapQuest entered
into an employment agreement with Mr. Mulligan providing for an initial annual
base salary of $240,000, subject to annual increases at the sole discretion of
MapQuest's board of directors, and incentive compensation of up to $145,000 per
year, based on objectives and according to a plan to be mutually agreed to by
Mr. Mulligan and MapQuest's board of directors from time to time. Pursuant to
the employment agreement, if MapQuest terminates Mr. Mulligan's employment
without cause, Mr. Mulligan would be entitled to receive severance benefits
equal to any salary and bonus earned through the date of termination, plus base
salary and health insurance benefits for the 12-month period after the date of
termination. If Mr. Mulligan is terminated by MapQuest for cause or if he
resigns following the first anniversary of his employment, Mr. Mulligan is
entitled to receive his base compensation, plus all earned and unpaid bonus
compensation through the termination date of his employment. In addition, Mr.
Mulligan has agreed to certain confidentiality, non-competition and non-
solicitation provisions.
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<PAGE>
In addition, MapQuest granted Mr. Mulligan options to purchase 720,000
shares of common stock under MapQuest's 1995 Stock Option Plan at an exercise
price of $1.00 per share. The options granted under the employment agreement,
subject to certain contingencies, vest over four years as follows: 16.67% on
August 10, 1998, 16.67% on the date of this offering, 16.67% on each of August
10, 1999, August 10, 2000, August 10, 2001 and August 10, 2002.
Employee Benefit Plans
1995 Stock Option Plan
The board of directors of MapQuest adopted and the stockholders approved
the 1995 stock option plan and the reservation of 657,000 shares of common
stock for the 1995 stock option plan on March 1, 1996. On March 26, 1996, the
board of directors and the stockholders of MapQuest approved an increase of
747,275 shares reserved for issuance under the 1995 stock option plan. The
board of directors and the stockholders of MapQuest approved a further increase
of 400,000 shares on July 18, 1997. The board of directors and the stockholders
of MapQuest approved a further increase of 504,476 shares, for an aggregate of
2,308,751 shares reserved for issuance under the 1995 stock option plan, on
August 4, 1998. Pursuant to the 1995 stock option plan, as amended, MapQuest
may grant stock options to MapQuest's employees and officers and consultants.
The board of directors selects the individuals to whom options are granted and
specifies the vesting, exercise price and other terms of options. Stock options
granted under the 1995 stock option plan may either be incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, or stock options that do not qualify as incentive stock options. As of
December 31, 1998, options to purchase an aggregate of 1,795,426 shares of
common stock had been granted, at a weighted average exercise price of $0.69
per share and options to purchase an aggregate of 233,750 shares of common
stock had been granted, at an exercise price of the price per share of this
offering. Subsequent to December 31, 1998, MapQuest granted options to purchase
an aggregate of 193,500 shares of common stock at an exercise price of the
price per share of this offering.
No incentive stock option granted under the 1995 stock option plan may be
exercised more than 10 years after the date of its grant. If an optionee
terminates his or her service with MapQuest, the optionee generally may
exercise only those options vested as of the date of termination of service.
Unless otherwise specified in the option agreement, the optionee must effect
such exercise within 90 days of termination of service for any reason other
than death or disability, and within one year after termination due to death or
disability. The exercise price of incentive stock options granted under the
stock option plan cannot be less than the fair market value of the common stock
of MapQuest on the date of grant and the exercise price of nonqualified stock
options cannot be less than the lesser of $0.10 per share or the fair market
value of the common stock as of the date of the stock option grant. Payment of
the exercise price may be made in cash or in shares of MapQuest's common stock
having a total fair market value equal to the aggregate exercise price.
The 1995 stock option plan provides for an adjustment in the number of
option shares under the stock option plan, the exercise price of existing
options and the number of existing options in the event of a recapitalization
or other change in the common stock of MapQuest which dilutes the rights of
stock option plan participants. In the event of any person, directly or
indirectly, acquiring securities of MapQuest representing 50% or more of the
voting power of MapQuest or certain other events constituting a change of
control, then each outstanding option shall automatically vest and become fully
exercisable.
1999 Employee Stock Purchase Plan
Concurrently with this offering, MapQuest intends to establish an employee
stock purchase plan under which a total of 1,000,000 shares of common stock
will be made available for sale. The purchase plan, which is intended to
qualify as an employee stock purchase plan within the meaning of Section 423 of
the Internal Revenue Code of 1986, as amended, will be administered by the
board of directors or by a committee appointed by the Board. All employees of
MapQuest or any present or future subsidiary of MapQuest
43
<PAGE>
designated by the Board of Directors are eligible to participate in the
purchase plan. The purchase plan permits eligible employees to purchase common
stock through payroll deductions, which may not exceed 10% of an employee's
compensation, subject to certain limitations. The purchase plan will be
implemented in a series of consecutive, overlapping offering periods, each
approximately six months in duration. Offering periods will begin on the first
trading day on or after and of each year and
terminate on the last trading day in the period six months later. However, the
first offering period shall be the period of approximately months
commencing on the date upon which the registration statement of which this
prospectus is a part is declared effective by the Commission and terminating on
the last trading day in the period ending , 1999. Each
participant will be granted an option to purchase stock on the first day of the
six-month purchase period and this option will be automatically exercised on
the last date of each offering period. The purchase price of each share of
common stock under the purchase plan will be equal to the lesser of 85% of the
closing price per share of the common stock on the NASDAQ National Market
System on the start date of that offering period or on the date of termination
of the offering period. Employees may modify or end their participation in the
purchase plan at any time prior to the termination date of an offering period.
Participation ends automatically on termination of employment with MapQuest.
The purchase plan will terminate on 2009 unless sooner terminated by
MapQuest's Board of Directors.
1999 Omnibus Stock Plan
At the closing of this offering, the board of directors of MapQuest intends
to adopt a 1999 omnibus stock plan and MapQuest has reserved 1,000,000 shares
of common stock for the omnibus stock plan. Pursuant to the omnibus stock plan,
MapQuest may grant stock options, stock appreciation rights, restricted or
unrestricted share awards, phantom stock, performance awards or any combination
of the foregoing to all employees, officers, directors of MapQuest and its
subsidiaries. However, incentive stock options may only be granted to employees
of MapQuest. The board of directors selects the individuals to whom options are
granted and specifies the vesting, exercise price and other terms of options.
No incentive stock option granted under the omnibus stock plan may be
exercised more than 10 years after the date of its grant. The exercise price of
incentive stock options granted under the stock option plan must be at least
equal to the fair market value of the common stock of MapQuest on the date of
grant. No non-qualified stock option may be exercised more than 10 years after
the date of its grant. The exercise price of non-qualified stock options
granted under the omnibus stock plan will be determined by the board of
directors. The purchase price of the shares issued upon exercise of those
options may be paid in cash or shares of common stock having a total fair
market value equal to the aggregate purchase price. Stock appreciation rights
may be granted under the omnibus stock plan either on a free-standing or tandem
basis. The term during which a stock appreciation right may be exercised will
be determined by the board of directors, but in no event will a stock
appreciation right be exercisable more than ten years from the date of its
grant. A stock appreciation right will entitle the holder to receive a payment
having an aggregate value equal to the product of the excess of the fair market
value over the base price per share specified in the grant multiplied by the
number of shares specified in the award. Payment by MapQuest of the amount
receivable in respect of the stock appreciation right may be paid in any
combination of cash and common stock. MapQuest may also award phantom stock and
restricted shares under the omnibus stock plan and performance awards at the
discretion of the board of directors. Payment of the exercise price may be made
by such methods as determined by the board of directors and may include cash or
shares of MapQuest's common stock having a total fair market value equal to the
aggregate exercise price.
The omnibus stock plan will provide for an adjustment in the number of
awards under the omnibus stock plan, the exercise price of existing awards and
the number of existing awards in the event of a recapitalization or other
change in the common stock of MapQuest which dilutes the rights of omnibus
stock plan participants.
44
<PAGE>
401(k) Plan
MapQuest has a tax-qualified employee savings plan (the "MapQuest 401(k)
Plan") which covers all of MapQuest's full-time employees who are at least 21
years of age and who have been employed with MapQuest for at least one month.
Pursuant to MapQuest 401(k) Plan, eligible employees may defer up to 15% of
their pre-tax earnings, subject to the Internal Revenue Service's annual
contribution limit. MapQuest 401(k) Plan permits additional discretionary
matching contributions by MapQuest on behalf of all participants in MapQuest
401(k) Plan in such a percentage amount as may be determined by MapQuest. The
MapQuest 401(k) Plan is intended to qualify under Section 401 of the Internal
Revenue Code of 1986, as amended, so that contributions by employees or by
MapQuest to MapQuest 401(k) Plan, and income earned on plan contributions, are
not taxable to employees until withdrawn from MapQuest 401(k) Plan, and so that
contributions by MapQuest, if any, will be deductible by MapQuest when made.
The trustee under MapQuest 401(k) Plan, at the direction of each participant,
invests the assets of MapQuest 401(k) Plan in any of a number of investment
options.
45
<PAGE>
CERTAIN TRANSACTIONS
Equity Transactions
Equity Sale by R.R. Donnelley & Sons Company and 77 Capital Corporation
On May 8, 1998, R.R. Donnelley & Sons Company and 77 Capital Corporation
sold their respective equity positions in MapQuest to Highland Capital Partners
III Limited Partnership, Highland Entrepreneurs' Fund III Limited Partnership,
Weston Presidio Capital II, L.P., Trident Capital Partners Fund-I, L.P. and
Trident Capital Partners Fund-I, C.V. R.R. Donnelley & Sons Company sold
3,000,000 shares of Series A preferred stock and 1,000,000 shares of Series B
preferred stock. 77 Capital Corporation sold 220,798 shares of Series C
preferred stock.
Series C Preferred Stock. In July 1997, MapQuest sold an aggregate of
3,431,498 shares of Series C preferred stock for an aggregate purchase price of
$12,044,558, or $3.51 per share, to various investors, including Highland
Capital Partners III Limited Partnership, Highland Entrepreneurs' Fund III
Limited Partnership, Weston Presidio Capital II, L.P., Trident Capital Partners
Fund-I, L.P., Trident Capital Partners Fund-I, C.V., The Roman Arch Fund, L.P.,
the Roman Arch Fund II, L.P., and Stet & Query, L.P.
Rights Agreement. Series A preferred stock investors and Series C
preferred stock investors entered into a rights agreement concurrent with the
sale of the Series C preferred stock. Pursuant to the rights agreement, holders
of not less than 35% of either the outstanding Series A preferred stock or
outstanding Series C preferred stock or any common stock issued or issuable
upon conversion of Series A preferred stock or Series C preferred stock may
request that MapQuest cause their shares of common stock to be registered under
the Securities Act. See "Description of Capital Stock--Registration Rights of
Certain Holders."
In November 1997, James Thomas, MapQuest's Chief Financial Officer, and
William Muenster, its Senior Vice President of Development and Production, each
purchased 31,928 shares of Series C preferred stock from MapQuest for
$112,067.28, or $3.51 per share, paid in each case by delivery to MapQuest of a
non-recourse promissory note. Each promissory note bears interest at 7.0%
accruing as and from November 1, 1999. Payments under the promissory notes are
due beginning November 1, 2000 in an amount that is the lesser of one-fifth of
the principal balance together with any accrued interest or 50% of any bonus to
which such person is entitled while an employee of MapQuest. Each of these
promissory notes is payable in full on November 1, 2004. The promissory notes
are secured by the shares purchased, with shares released to the extent each
promissory note is paid. At December 31, 1998, $112,067.28 remained outstanding
on Mr. Thomas's promissory note and $112,067.28 remained outstanding on Mr.
Muenster's promissory note. Each of Mr. Thomas and Mr. Muenster have the right
to cause MapQuest to purchase their Series C Preferred Stock at the fair market
value upon the earlier of each person's death or disability or November 1,
2007.
Other Transactions
Related Party Transactions. MapQuest incurred rent expense of $16,597 to
R.R. Donnelley & Sons Company, a then stockholder, during 1998. MapQuest
recorded sales to R.R. Donnelley & Sons Company of $513,626 during 1998. Also,
MapQuest recorded sales to an affiliate, the National Geographic Society, of
$2,022,000 during 1998.
Evans 1996 Stock Purchase. In March 1996, pursuant to the terms of an
employment agreement dated October 31, 1994, MapQuest sold an aggregate of
35,000 shares of Series A preferred stock at an aggregate purchase price of
$35,000, or $1.00 per share, to Perry Evans, MapQuest's then Vice President of
Sales and Marketing. The purchase price was paid as $3,500 in cash and $31,500
as a promissory note due October 31, 2000. The promissory note bears interest
at a rate of 7.5% per annum. The promissory note is secured by the shares
purchased with shares released to the extent the promissory note is paid. At
December 31, 1998, $31,500 in principal amount remained outstanding under this
promissory note.
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<PAGE>
Evans Separation Agreement. In September 1997, upon the voluntary
termination of Mr. Evans' employment as Vice President of Sales and Marketing,
MapQuest agreed to engage Mr. Evans as an independent consultant and paid him a
separation fee of approximately $93,656, forgave him $27,000 in respect of
unearned bonus payments he had received and agreed to provide him with his then
current medical and certain other benefits until November 7, 1997.
Glick Separation Agreement. In June 1998, upon the voluntary termination of
Mr. Glick's employment as Chief Executive Officer and pursuant to a transition
agreement and general release, MapQuest agreed to pay Mr. Glick a total of
approximately $43,752, representing separation and salary payments for the
period between July 1, 1998 and September 30, 1998, inclusive.
National Geographic Alliance
MapQuest, the National Geographic Society, and a subsidiary of the National
Geographic Society, National Geographic Holdings, Inc. (d/b/a National
Geographic Maps) ("National Geographic"), entered into a Cartographic Product
Development, Publishing, Marketing and Distribution Agreement in April 1997
(the "National Geographic Agreement") whereby MapQuest and National Geographic
established a five-year alliance, commencing May 1997, to pursue commercial
opportunities involving mapping products and services using certain trademarks
and copyrighted materials of National Geographic. Pursuant to its rights under
the National Geographic Agreement, National Geographic has designated C.
Richard Allen to serve as its nominee director on MapQuest's Board of
Directors. As part of this arrangement, National Geographic Holdings, Inc.
received warrants to purchase 353,388 shares of common stock with an exercise
price of $2.81 per share.
The alliance with National Geographic authorizes MapQuest to be the primary
(and in limited cases, exclusive) commercial publisher of National Geographic
mapping products and services, including printed products where mapping
represents the central theme or majority content of the products such as maps,
globes, road atlases, reference atlases, historical atlases, and map guide (but
not travel guides) products which are distributed other than by National
Geographic to its members or in promotion to prospective members.
Under the National Geographic Agreement, MapQuest has guaranteed minimum
annual royalty payments to National Geographic for each year of the initial
five-year term of the agreement. MapQuest must pay additional royalties on the
net revenues derived by MapQuest from the sale of National Geographic related
products and services. The National Geographic Agreement's initial five-year
term is to be automatically extended at the end of the five years provided that
(i) MapQuest has elected not to extend the term, (ii) MapQuest has not breached
the National Geographic Agreement, (iii) National Geographic has received a
minimum aggregate royalty payment of $2.0 million from MapQuest in each of the
last three years of the initial term, and (iv) minimum royalties have been
negotiated in accordance with the National Geographic Agreement.
Warrants
As of December 31, 1998, warrants to purchase 857,264 shares of common
stock were outstanding at a weighted-average exercise price of $1.84 per share.
Generally, each warrant contains provisions for the adjustment of the exercise
price and the aggregate number of shares issuable upon the exercise of the
warrant in the event of stock dividends, stock splits, reorganizations,
reclassifications, consolidations and certain dilutive issuances of securities
at prices below the then existing warrant exercise price. Set forth below is a
summary of the outstanding warrants.
47
<PAGE>
Prudential Warrant. In connection with the sale of the Series C preferred
stock, MapQuest issued to Prudential Securities Incorporated a warrant for an
aggregate purchase price of $1,000 to purchase 150,633 shares of MapQuest's
common stock at an exercise price of $3.51 per share. The warrant is
exercisable prior to July, 2002.
National Geographic Warrant. In April 1997, in connection with the National
Geographic Agreement, MapQuest issued National Geographic warrants (the
"National Geographic Warrants") to purchase 353,388 shares of common stock at
an exercise price of $2.81 per share. The National Geographic Warrant expires
on April 22, 2002 (or earlier in the event of a termination of the National
Geographic Agreement without cause by National Geographic or termination by
MapQuest for material breach by National Geographic). In the event that
National Geographic shall have exercised the National Geographic Warrant prior
to MapQuest terminating the National Geographic Agreement due to a breach of
the agreement by National Geographic, MapQuest shall have the option to
purchase these shares of common stock for a period of 60 days after the
termination of the National Geographic Agreement at a purchase price which is
the lesser of $4.79 or the then fair market value of such shares.
Warrants to Series C Investors. In May 1998, MapQuest and some of the
Series C preferred stock investors entered into an agreement to preserve these
investors' fully diluted ownership percentage in MapQuest as a result of the
issuance by MapQuest of options to purchase shares of common stock in
connection with the increase in the number of options to purchase shares of
common stock eligible for award under the 1995 stock option plan, and the
appointment of Mr. Michael Mulligan as Chief Executive Officer of MapQuest.
Pursuant to this agreement, the Series C preferred stock investors were issued
an aggregate of 193,419 warrants to purchase common stock at an exercise price
of $0.01 per share. The warrants are exercisable prior to April 30, 2008.
Executive Search Firm Warrants. On September 22, 1998 MapQuest issued to
Ramsey/Beirne Associates a warrant to purchase 15,284 shares of MapQuest common
stock in partial consideration for executive search firm services Ramsey/Beirne
Associates performed. This warrant is exercisable at any time at an exercise
price of $3.51 per share. This warrant expires in September 2003.
48
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of MapQuest's common stock as of December 31, 1998:
. each person or entity who is known by MapQuest to beneficially own five
percent or more of the outstanding shares of MapQuest's common stock;
. each director;
. each named executive officer; and
. all directors and executive officers of MapQuest as a group.
<TABLE>
<CAPTION>
Percentage of Shares
Number of Shares Beneficially Owned(2)(3)
Beneficially ------------------------------
Name (1) Owned(2) Before Offering After Offering
- -------- ---------------- --------------- --------------
<S> <C> <C> <C>
Trident Capital Partners
Fund - I, L.P. (4).......... 3,586,964 30.5%
Trident Capital Partners
Fund - I, C.V. (5).......... 709,572 6.0
Weston Presidio Capital II,
L.P. (6).................... 2,534,993 21.5
Highland Capital Partners III
Limited Partnership (7)..... 2,433,592 20.7
Highland Entrepreneurs' Fund
III, L.P. (8)............... 101,400 .9
Michael Mulligan (9).......... 235,040 2.0
James Thomas (10)............. 209,999 1.8
William Muenster (11)......... 210,690 1.8
James Hilliard (12)........... 24,000 .2
James Killick (13)............ 8,000 .1
Michael Nappi (14)............ 8,000 .1
Robert McCormack (15)......... 4,296,536 36.5
John Moragne (16)............. 4,296,536 36.5
Dan Nova (17)................. 2,534,932 21.5
Carlo von Schroeter (18)...... 2,534,933 21.5
C. Richard Allen (19)......... 353,388 3.0
Directors & Executive Officers
as a group (persons) (20)... 10,430,518 88.6
</TABLE>
- --------
* Less than one percent.
(1) Prior to Mr. Mulligan's appointment, Barry Glick served as Chief Executive
Officer. Mr. Glick beneficially owns 288,486 shares of MapQuest's common
stock, consisting of 288,486 shares issuable upon exercise of options. Mr.
Glick's beneficial ownership represents 2.5% of MapQuest's common stock
before this offering and % of MapQuest's common stock after this
offering.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of common stock subject to options and warrants held by
that person that are currently exercisable or exercisable within 60 days
of December 31, 1998, are deemed outstanding. These shares, however, are
not deemed outstanding for the purpose of computing the percentage
ownership of any other person. Except as indicated in the footnotes to
this table and pursuant to applicable community property laws, each
stockholder named in the table has sole voting and investment power with
respect to the shares set forth opposite the stockholder's name.
(3) Assumes no exercise of the underwriter's over-allotment option.
(4) Includes 130,650 shares of common stock issuable upon the exercise of
warrants. The address of Trident Capital Partners Fund - I, L.P. is 2480
Sand Hill Road, Suite 100, Menlo Park, California 94025.
(5) Includes 25,845 shares of common stock issuable upon the exercise of
warrants. The address of Trident Capital Partners Fund - I, C.V. is 2480
Sand Hill Road, Suite 100, Menlo Park, California 94025.
(6) Includes 82,899 shares of common stock issuable upon the exercise of
warrants. The address of Weston Presidio Capital II, L.P. is One Federal
Street, 21st Floor, Boston, Massachusetts 02110.
49
<PAGE>
(7) Includes 79,583 shares of common stock issuable upon the exercise of
warrants. The address of Highland Capital Partners III, L.P. is Two
International Place, Boston, Massachusetts 02110
(8) Includes 3,316 shares of common stock issuable upon the exercise of
warrants. The address of Highland Entrepreneurs' Fund III, L.P. is Two
International Place, Boston, Massachusetts 02110
(9) Includes options to purchase 120,024 shares of common stock issuable upon
the exercise of options.
(10) Includes 1,767 shares of common stock issuable upon exercise of warrants
and 103,298 shares issuable upon the exercise of options.
(11) Includes 1,767 shares issuable upon the exercise of warrants and includes
101,995 shares issuable upon the exercise of options.
(12) Includes 24,000 shares of common stock issuable upon the exercise of
options.
(13) Includes 8,000 shares of common stock issuable upon the exercise of
options.
(14) Includes 8,000 shares of common stock issuable upon the exercise of
options.
(15) Includes 4,296,536 shares of common stock beneficially owned by Trident
Capital Partners and its affiliates. Robert McCormack is a managing
director of Trident Capital, Inc., the general partner of Trident Capital,
L.P., which is the general partner of Trident Capital Partners Fund-I,
L.P. and the investment general partner of Trident Capital Partners Fund-
I, C.V. Mr. McCormack disclaims beneficial ownership of shares held by
Trident Capital, Inc. and its affiliates.
(16) Includes 4,296,536 shares of common stock beneficially owned by Trident
Capital Partners and its affiliates. John Moragne is a managing director
of Trident Capital, Inc., the general partner of Trident Capital, L.P.,
which is the general partner of Trident Capital Partners Fund-I, L.P. and
the investment general partner of Trident Capital Partners Fund-I, C.V.
Mr. Moragne disclaims beneficial ownership of shares held by Trident
Capital, Inc and its affiliates.
(17) Dan Nova is a general partner of Highland Capital Partners. Mr. Nova
disclaims beneficial ownership of shares held by Highland Capital
Partners.
(18) Carlo von Schroeter is a general partner of Weston Presidio Capital. Mr.
von Schroeter disclaims beneficial ownership of shares held by Weston
Presidio Capital II, L.P.
(19) C. Richard Allen is President and Chief Executive Officer of National
Geographic Holdings, Inc. Mr. Allen disclaims beneficial ownership of
shares issuable upon the exercise of warrants held by National Geographic
Holdings, Inc.
(20) Includes an aggregate of 379,617 shares of common stock subject to options
held by executive officers of MapQuest.
50
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary of the terms of MapQuest's capital stock is qualified
in its entirety by reference to the applicable provisions of Delaware law and
to MapQuest's restated certificate of incorporation and restated bylaws.
Following this offering, MapQuest will have the authority to issue an
aggregate of 55,000,000 shares of capital stock, consisting of 50,000,000
shares of common stock, par value $0.001 per share, and 5,000,000 shares of
preferred stock, par value $0.01 per share.
Set forth below is a description of the common stock and the preferred
stock that may be issued under MapQuest's restated certificate of
incorporation.
Common Stock
Shares of common stock have the following rights, preferences and
privileges.
Voting Rights. Each outstanding share of common stock is entitled to one
vote on all matters submitted to a vote of MapQuest's stockholders, including
the election of directors. There is no cumulative voting in the election of
directors.
Dividends. Holders of common stock are entitled to receive dividends at the
same rate if and when dividends are declared by MapQuest's board of directors
out of assets legally available for the payment of dividends, subject to
preferential rights of shares of preferred stock, if any.
Liquidation. In the event of any dissolution, liquidation, or winding up of
the affairs of MapQuest, whether voluntary or involuntary, after payment of the
debts and other liabilities of MapQuest and making provision for the holders of
preferred stock, if any, the remaining assets of MapQuest will be distributed
ratably among the holders of the common stock.
Preferred Stock
Prior to the Consummation of this Offering
Series A Preferred Stock. MapQuest was authorized to issue 6,550,000 shares
of noncumulative, redeemable convertible, voting Series A preferred stock. The
Series A preferred stock ranked senior to the common stock and junior to the
Series B preferred stock and Series C preferred stock as to dividend,
liquidation, and redemption rights. Upon any liquidation of MapQuest and
subject to the rights of the holders of Series B preferred stock and the Series
C preferred stock, the holder of each share of Series A preferred stock is
entitled to receive a liquidation amount of $1.00 per share of Series A
preferred stock together with any accrued and unpaid dividends thereon. Each
share of Series A preferred stock issued and outstanding had a number of votes
equal to the number of shares of common stock into which such share of Series A
preferred stock was then convertible. Each share of Series A preferred stock
was automatically convertible into one share of common stock, subject to anti-
dilution adjustments, upon the earlier of (i) an initial public offering having
an aggregate price of not less than $15.0 million, or (ii) the affirmative vote
of at least two-thirds of the holders of outstanding shares of Series A
preferred stock. In addition, a holder of Series A preferred stock could, at
the holder's option, elect to convert each share of Series A preferred stock
held by the holder into one share of common stock, subject to anti-dilution
adjustments. Subject to the superior rights of the holders of shares of Series
B preferred stock and shares of Series C preferred stock, upon written notice
of at least 120 days prior to December 31 of any calendar year from, and
including, the year 2002, by the holders of at least two-thirds of the then
outstanding shares of Series A preferred stock, MapQuest was required to redeem
all of the issued, outstanding and nonredeemed shares of Series A preferred
stock held by each holder of Series A preferred stock at a redemption price per
share of $1.00 plus an amount equal to all declared but unpaid dividends on the
Series A preferred stock. The redemption would be payable in three annual
installments commencing on the December 31 that follows the redemption
election. No dividend could be paid on the Series A preferred stock unless
MapQuest had fulfilled its dividend obligations on the Series B preferred stock
and Series C preferred stock. The Series A preferred stock has an annual cash
divided rate of $0.075 per share, payable when and as declared by the board of
directors. Concurrently with the completion of this offering, all outstanding
shares of MapQuest's Series A preferred stock were converted on a one-to-one
basis into shares of common stock.
51
<PAGE>
Series B Preferred Stock. MapQuest was authorized to issue 2,000,000 shares
of nonvoting redeemable Series B preferred stock. Holders of shares of Series B
preferred stock were entitled to a cumulative dividend at the annual rate of
$0.39975 per share. The dividend could be paid in cash or a combination of cash
and additional shares of Series B preferred stock. Subject to the prior written
consent of the holders of a majority of the shares of Series C preferred stock
then issued and outstanding, the Series B preferred stock was redeemable at the
option of MapQuest at any time at a price of $6.15 per share, payable in cash
or a combination of cash and subordinated convertible debentures. Upon any
liquidation of MapQuest and subject to the rights of the holders of Series C
preferred stock, the holder of each share of Series B preferred stock is
entitled to receive a liquidation amount of $6.15 per share of Series B
preferred stock together with any accrued and unpaid dividends thereon. Subject
to the superior rights of holders of Series C preferred stock, the Series B
preferred stock was redeemable at the option of the holders upon written notice
at least 120 days prior to December 31 of any calendar year from and including
the year 2002, by the holders of at least two-thirds of the then outstanding
shares of Series B preferred stock, at a price of $6.15 per share payable in
cash, plus an amount equal to all dividends accrued and unpaid on the Series B
preferred stock. The redemption would be payable on each December 31 of each of
the three years following the redemption election. The Series B preferred stock
ranked senior to the Series A preferred stock and the common stock as to
dividend, liquidation and redemption rights. The Series B preferred stock
ranked senior to the Series C preferred stock as to dividend rights and junior
to the Series C preferred stock as to liquidation and redemption rights.
Concurrent with this offering, all outstanding shares of MapQuest's Series B
preferred stock were redeemed in full.
Series C Preferred Stock. MapQuest was authorized to issue 3,800,000 shares
of noncumulative, redeemable convertible, voting Series C preferred stock. At
the option of each holder of Series C preferred stock, each share of Series C
preferred stock was convertible on a one-to-one basis into shares of common
stock. Each share of Series C preferred stock issued and outstanding had a
number of votes equal to the number of shares into which the share were then
convertible. The Series C preferred stock ranked senior to the common stock,
the Series A preferred stock and the Series B preferred stock as to liquidation
and redemption rights and ranked senior to the common stock and the Series A
preferred stock with respect to the payment of dividends. The Series C
preferred stock ranked junior to the Series B preferred stock with respect to
the payment of dividends. The Series C preferred stock had an annual cash
dividend rate of $0.26325 per share, payable when and as declared by the board
of directors. Upon any liquidation of MapQuest, the holder of each share of
Series C preferred stock is entitled to receive a liquidation amount of $3.51
per share of Series C preferred stock together with any accrued an unpaid
dividends thereon. Upon written notice at least 120 days prior to December 31
of any calendar year from, and including, the year 2002, by the holders of at
least two-thirds of the then outstanding shares of Series C preferred stock,
MapQuest was required to redeem all of the issued, outstanding and nonredeemed
shares of Series C preferred stock held by each holder of Series C preferred
stock at a redemption price per share of $3.51 plus an amount equal to all
declared but unpaid dividends on the Series C preferred stock. The redemption
would be payable on December 31 of each of the three years following the
redemption election. Concurrent with this offering, all outstanding shares of
MapQuest's Series C preferred stock were converted on a one-to-one basis into
shares of common stock.
Following the Consumation of this Offering
New Preferred Stock. Upon the closing of this offering, the board of
directors will have the authority, without further action by the stockholders,
to issue up to 5,000,000 shares of preferred stock, $0.01 par value, in one or
more series and to fix the designations, powers, preferences, privileges, and
relative participating, options, or special rights and the qualifications,
limitations, or restrictions of the preferred stock, including dividend rights,
conversion rights, voting rights, terms of redemption and liquidation
preferences, any or all of which may be greater than the rights of the common
stock. The board of directors, without stockholder approval, can issue
preferred stock with voting, conversion, or other rights that could adversely
affect the voting power and other rights of the holders of common stock.
Preferred stock could thus be issued with terms that may delay or prevent a
change in control of MapQuest or make removal of management more difficult.
52
<PAGE>
Additionally, the issuance of preferred stock may have the effect of decreasing
the market price of the common stock. Upon the completion of this offering,
there will be no shares of preferred stock outstanding and MapQuest has no
current plans to issue any preferred stock.
Registration Rights
After this offering, the holders of approximately 10,045,354 shares of
common stock will be entitled to certain rights with respect to the
registration of their shares under the Securities Act. Under the terms of the
agreement between MapQuest and the holders of these registrable securities, if
MapQuest proposes to register any of its securities under the Securities Act,
either for its own account or for the account of other securities holders
exercising registration rights, these holders are entitled to notice of the
registration and are entitled to include their shares as part of the
registration. Holders of registration rights may also require MapQuest to file
a registration statement under the Securities Act at MapQuest's expense with
respect to their shares of common stock. Further, holders may require MapQuest
to file registration statements on Form S-3 at MapQuest's expense when the form
becomes available for use to MapQuest. All such registration rights are subject
to certain conditions and limitations, including the right of the underwriters
of an offering to limit the number of shares to be included in the
registration.
Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions
MapQuest is subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, the statute
prohibits a publicly-held Delaware corporation from engaging in a business
combination with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed
manner. A "business combination" includes a merger, asset sale or other
transaction resulting in a financial benefit to the stockholder. For purposes
of Section 203, an "interested stockholder" is defined to include any person
that is:
. the owner of 15% or more of the outstanding voting stock of the
corporation;
. an affiliate or associate of the corporation and was the owner of 15% or
more of the voting stock outstanding of the corporation, at any time
within three years immediately prior to the relevant date; and
. an affiliate or associate of the persons described in the foregoing
bullet points.
Stockholders may, by adopting an amendment to the corporation's certificate of
incorporation or bylaws, elect for the corporation not to be governed by
Section 203, effective 12 months after adoption. Neither MapQuest's certificate
of incorporation nor the bylaws exempt MapQuest from the restrictions imposed
under Section 203 of the Delaware General Corporation Law.
Annual meetings of stockholders shall be held to elect the board of
directors of MapQuest and transact such other business as may be properly
brought before the meeting. Special meetings of stockholders may be called by
the Chairman or the Chief Executive Officer or by a majority of the board of
directors. MapQuest's certificate of incorporation and bylaws provide that any
action required or permitted to be taken by the stockholders of MapQuest may be
effected at a duly called annual or special meeting of the stockholders.
MapQuest's certificate of incorporation may be amended with the approval of
a majority of the board and the holders of a majority of MapQuest's outstanding
voting securities.
The number of directors shall be fixed by resolution of the board of
directors. The size of the board of directors is currently fixed at six
members. The directors shall be elected at the annual meeting of the
stockholders, except for filling vacancies. Directors may be removed with the
approval of the holders of a majority of MapQuest's voting power present and
entitled to vote at a meeting of stockholders. Vacancies and newly-created
directorships resulting from any increase in the number of directors may be
filled by a majority of the directors then in office, a sole remaining
director, or the holders of a majority of the voting power present and entitled
to vote at a meeting of stockholders.
53
<PAGE>
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast by the stockholders entitled to vote generally shall
constitute a quorum for stockholder action at any meeting.
Limitation of Liability and Indemnification Matters
MapQuest's certificate of incorporation contains provisions permitted under
the Delaware General Corporation Law relating to the liability of directors.
These provisions eliminate a director's personal liability for monetary damages
resulting from a breach of fiduciary duty, except in certain circumstances
involving certain wrongful acts, including:
. for any breach of the director's duty of loyalty to MapQuest or its
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. under Section 174 of the Delaware General Corporation Law; or
. for any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate the rights of MapQuest or any
stockholder to seek non- monetary relief, such as an injunction or rescission,
in the event of a breach of a director's fiduciary duty. These provisions will
not alter a director's liability under federal securities laws. MapQuest's
bylaws also contain provisions indemnifying the directors and officers of
MapQuest to the fullest extent permitted by the Delaware General Corporation
Law. MapQuest believes that these provisions are necessary to attract and
retain qualified individuals to serve as directors and officers.
Listing
Application will be made to have the common stock approved for quotation on
the Nasdaq National Market under the trading symbol "MQST."
54
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for the common
stock, and no prediction can be made as to the effect, if any, that market
sales of shares of common stock or the availability of shares of common stock
for sale will have on the market price of the common stock prevailing from time
to time. Nevertheless, sales of substantial amounts of common stock in the
public market, or the perception that such sales could occur, could adversely
affect the market price of the common stock and could impair MapQuest's future
ability to raise capital through the sale of its equity securities.
Upon completion of this offering, MapQuest will have an aggregate of
shares of common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants. Of
the outstanding shares, the shares sold in this offering will be freely
tradeable, except that any shares held by "affiliates" of MapQuest (as that
term is defined in Rule 144 promulgated under the Securities Act) may only be
sold in compliance with the limitations described below. The remaining
11,181,245 shares of common stock will be deemed "restricted securities" as
defined under Rule 144. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rule 144, 144(k) or 701 promulgated under the Securities Act, which rules are
summarized below. Subject to the lock-up agreements described below and the
provisions of Rules 144, 144(k) and 701, additional shares will be available
for sale in the public market as follows:
<TABLE>
<CAPTION>
Number of
Shares Date
--------- ----
<S> <C>
85,655 After the date of this prospectus
1,263,399 At various times after 90 days from the
date of this prospectus (Rule 144)
10,867,375 After 180 days from the date of this
prospectus (subject, in some cases, to
volume limitations)
3,200 Upon the filing of a registration statement
to register for resale shares of common
stock issuable upon the exercise of options
granted under MapQuest's 1995 stock option
plan
1,030,120 At various times after 180 days from the
date of this prospectus (Rule 144)
</TABLE>
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated), including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of common stock (approximately shares immediately after
this offering) or (ii) the average weekly trading volume in the common stock
during the four calendar weeks preceding the date on which notice of such sale
is filed, subject to certain restrictions. In addition, a person who is not
deemed to have been an affiliate of MapQuest at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years would be entitled to sell such shares under Rule 144(k)
without regard to the requirements described above. To the extent that shares
were acquired from an affiliate of MapQuest, that person's holding period for
the purpose of effecting a sale under Rule 144 commences on the date of
transfer from the affiliate. Notwithstanding the foregoing, to the extent the
shares were acquired through the cashless exercise of a stock option or a
warrant, that person's holding period for effecting a sale under Rule 144
commences on the date of the option or warrant grant. In general, under Rule
701 of the Securities Act as currently in effect, any employee, consultant or
advisor of MapQuest who purchased shares from MapQuest in connection with a
compensatory stock or
55
<PAGE>
option plan or other written agreement is eligible to resell such shares after
the effective date of this offering in reliance on Rule 144, but without
compliance with certain restrictions, including the holding period, contained
in Rule 144.
As of the date of this prospectus, options to purchase a total of 2,222,596
shares of common stock are outstanding, of which 706,983 are currently
exercisable (without regard to the 180-day lock up period). Not sooner than 180
days after the closing of this offering, MapQuest intends to file a
registration statement to register for resale all shares of common stock issued
or issuable under its 1995 stock option plan, the 1999 employee stock purchase
plan and not otherwise freely transferable. Accordingly, shares covered by that
registration statement will be eligible for sale in the public markets, unless
those options are subject to vesting restrictions or the lock-up agreements
referred to below. Upon the closing of this offering, 857,264 shares of common
stock will be issuable upon the exercise of outstanding warrants.
MapQuest's directors and officers and certain stockholders who hold
11,601,281 shares and options in the aggregate, and the holders of warrants to
purchase 497,928 shares of common stock, have agreed that they will not sell,
directly or indirectly, any shares of common stock (other than shares of
common stock offered hereby and purchased by certain affiliates and family
members of such stockholders) without the prior written consent of BancBoston
Robertson Stephens, Inc. for a period of 180 days from the date of this
prospectus. See "Underwriting."
MapQuest has agreed not to sell or otherwise dispose of any shares of
common stock during the 180-day period following the date of the prospectus,
except MapQuest may issue, and grant options to purchase, shares of common
stock under its stock option plan.
Following this offering, under certain circumstances and subject to certain
conditions, holders of 10,045,354 shares of MapQuest's outstanding common stock
will have certain demand registration rights with respect to their shares of
common stock (subject, in certain cases, to the 180-day lock-up arrangement
described above) to require MapQuest to register their shares of common stock
under the Securities Act, and they will have certain rights to participate in
any future registration of securities by MapQuest. MapQuest is not required to
effect more than an aggregate of four demand registrations on behalf of such
holders. See "Description of Capital Stock--Registration Rights."
56
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Piper Jaffray Inc., Thomas Weisel Partners
LLC and Volpe Brown Whelan & Company, LLC have severally agreed with MapQuest,
subject to the terms and conditions of the underwriting agreement, to purchase
from MapQuest the number of shares of common stock set forth opposite their
names below. The underwriters are committed to purchase and pay for all of the
shares if any are purchased.
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- -------------
<S> <C>
BancBoston Robertson Stephens Inc. ............................
Piper Jaffray Inc. ............................................
Thomas Weisel Partners LLC.....................................
Volpe Brown Whelan & Company, LLC..............................
-------------
Total........................................................ [ ]
=============
</TABLE>
The representatives have advised MapQuest that the underwriters propose to
offer the shares of common stock to the public at the initial public offering
price set forth on the cover page of this prospectus and to certain dealers at
such price less a concession of not in excess of $ per share, of which
$ may be reallowed to other dealers. After this offering, the public
offering price, concession, and reallowance to dealers may be reduced by the
representatives. No reduction shall change the amount of proceeds to be
received by MapQuest as set forth on the cover page of this prospectus. The
common stock is offered by the underwriters as stated in this prospectus,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part.
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Over-allotment Option
MapQuest has granted to the underwriters an option, exercisable during the
30-day period after the date of this prospectus, to purchase up to [ ]
additional shares of common stock at the same price per share as MapQuest will
receive for the [ ] shares that the underwriters have agreed to purchase. To
the extent that the underwriters exercise this option, each of the underwriters
will have a firm commitment to purchase approximately the same percentage of
the additional shares that the number of shares of common stock to be purchased
by it shown in the above table represents as a percentage of the [ ] shares
offered in this prospectus. If purchased, these additional shares will be sold
by the underwriters on the same terms as those on which the [ ] shares are
being sold. MapQuest will be obligated, pursuant to the option, to sell shares
to the extent the option is exercised. The underwriters may exercise this
option only to cover over-allotments made in connection with the sale of the
shares of common stock offered by this prospectus. If the option is exercised
in full, the total public offering price, underwriting discounts and
commissions and proceeds to MapQuest will be $[ ] million, $[ ] million and
$[ ] million, respectively.
Directed Share Program
At the request of MapQuest, the underwriters have reserved up to [ ]
shares of common stock to be issued by MapQuest and offered by this prospectus
for sale, at the initial public offering price, to directors, officers,
employees, business associates and related persons of MapQuest. The number of
shares of common stock available for sale to the general public will be reduced
to the extent these individuals purchase such reserved shares. Any reserved
shares which are not so purchased will be offered by the underwriters to the
general public on the same basis as the other shares offered by this
prospectus.
57
<PAGE>
Indemnity
The Underwriting Agreement contains covenants of indemnity among the
underwriters and MapQuest against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements
Each officer and director of MapQuest and substantially all other holders
of shares of common stock and shares of common stock issuable upon the exercise
of outstanding options or warrants have agreed, during the period ending 180
days after the date of this prospectus ("the lock-up period"), subject to
certain exceptions, not to offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to any shares of
common stock, any options or warrants to purchase any shares of common stock,
or any securities convertible into or exchangeable for shares of common stock
owned as of the date of this prospectus or acquired after the date of this
prospectus directly by such holders or with respect to which they have the
power of disposition, without the prior written consent of BancBoston Robertson
Stephens Inc. However, BancBoston Robertson Stephens Inc. may, in its sole
discretion and at any time without notice, release all or any portion of
securities subject to the lock-up agreement. There are no existing agreements
between the representatives of the underwriters and any of MapQuest's
stockholders providing consent to the sale of shares prior to the expiration of
the lock-up period.
Future Sales. In addition, MapQuest has agreed that during the lock-up
period MapQuest will not, without the prior written consent of BancBoston
Robertson Stephens Inc., subject to certain exceptions, (i) consent to the
disposition of any shares held by stockholders or option holders subject to
lock-up agreements prior to the expiration of the lock-up period, (ii) issue,
sell, contract to sell, or otherwise dispose of, any shares of common stock,
any options to purchase any shares of common stock or any securities
convertible into, exercisable for or exchangeable for shares of common stock
other than MapQuest's sale of shares in this offering, the issuance of common
stock upon the exercise of outstanding options, and the issuance of options
under existing stock option and incentive plans provided the options do not
vest prior to the expiration of the lock-up period or (iii) file a Form S-8
registration statement. See "Shares Eligible for Future Sale."
No Prior Public Market. Prior to this offering, there has been no public
market for MapQuest's common stock. Consequently, the public offering price for
the common stock offered by this prospectus will be determined through
negotiations among MapQuest and the representatives of the underwriters. Among
the factors to be considered in such negotiations are prevailing market
conditions, financial information of MapQuest, market valuations of other
companies that MapQuest and the representatives believe to be comparable to
MapQuest, estimates of the business potential of MapQuest, the present state of
MapQuest's development and other factors deemed relevant.
Stabilization. The representatives of the underwriters have advised
MapQuest that, pursuant to Regulation M under the Securities Act, certain
persons participating in this offering may engage in transactions, including
stabilizing bids, syndicate covering transactions or the imposition of penalty
bids, that may have the effect of stabilizing or maintaining the market price
of the common stock at a level above that which might otherwise prevail in the
open market. A "stabilizing bid" is a bid for or the purchase of common stock
on behalf of the underwriters for the purpose of fixing or maintaining the
price of the common stock. A "syndicate covering transaction" is the bid for or
the purchase of common stock on behalf of the underwriters to reduce a short
position incurred by the underwriters in connection with this offering. A
"penalty bid" is an arrangement permitting the representatives to reclaim the
selling concession otherwise accruing to an underwriter or syndicate member in
connection with this offering if the common stock originally sold by such
underwriter or syndicate member is purchased by the representatives in a
syndicate covering transaction and has not been effectively placed by such
underwriter or syndicate member. The representatives have advised MapQuest that
these transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.
58
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for MapQuest by Mayer, Brown & Platt, New York, New York, and for the
underwriters by Brobeck, Phleger & Harrison LLP, New York, New York.
EXPERTS
The financial statements of MapQuest.com, Inc. at December 31, 1997 and
1998, and for each of the three years in the period ended December 31, 1998,
appearing in this prospectus and Registration Statement of which it forms a
part, and the related financial statement schedule included elsewhere in this
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
MapQuest has filed with the Commission a registration statement on Form S-1
under the Securities Act with respect to the shares of common stock offered by
this prospectus. This prospectus does not contain all of the information set
forth in the registration statement and its exhibits and schedules. Particular
items are omitted in accordance with the rules and regulations of the
Securities and Exchange Commission. For further information with respect to
MapQuest and the common stock offered by this prospectus, reference is made to
the registration statement and its exhibits and schedules. Statements contained
in this prospectus as to the contents of any contract or any other document
referred to are not necessarily complete, and, in each instance that a copy of
the contract or other document has been filed as an exhibit to the registration
statement, reference is made to the exhibit filed, each statement being
qualified in all respects by this reference. A copy of the registration
statement, and the exhibits and schedules to the registration statement, may be
inspected without charge at the public reference facilities maintained by the
Securities and Exchange Commission in Room 1024, 450 Fifth Street., N.W.,
Washington, D.C. 20549, and at the Securities and Exchange Commission's
regional offices located at the Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048, and copies of all or any part of the registration
statement may be obtained from such offices upon the payment of the fees
prescribed by the Securities and Exchange Commission. The Securities and
Exchange Commission maintains a website that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission. The address of the
site is http://www.sec.gov.
This prospectus includes statistical data regarding Internet usage and the
advertising and marketing industry that were obtained from industry
publications, including reports generated by Forrester Research Inc.,
International Data Corporation and Media Metrix, Inc. These industry
publications generally indicate that they have obtained information from
sources believed to be reliable, but do not guarantee the accuracy and
completeness of their information. While MapQuest believes these industry
publications to be reliable, MapQuest has not independently verified their
data. MapQuest also has not sought the consent of any of these organizations to
refer to their reports in this prospectus.
59
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................. F-2
Balance sheets at December 31, 1997 and 1998............................... F-3
Statements of Operations for the Years ended December 31, 1996, 1997 and
1998..................................................................... F-4
Statements of Changes in Redeemable Preferred Stock, Common Stock, and
Other Stockholders' Equity (Deficit) for the Years ended December 31,
1996, 1997 and 1998...................................................... F-5
Statements of Cash Flows for the Years ended December 31, 1996, 1997 and
1998..................................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
MapQuest.com, Inc.
We have audited the accompanying balance sheets of MapQuest.com, Inc.
(formerly GeoSystems Global Corporation) as of December 31, 1997 and 1998, and
the related statements of operations, changes in redeemable preferred stock,
common stock, and other stockholders' equity (deficit), and cash flows for each
of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MapQuest.com, Inc. at
December 31, 1997 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Harrisburg, Pennsylvania
February 18, 1999
F-2
<PAGE>
MAPQUEST.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 Pro Forma
-------------------------- December 31
1997 1998 1998
------------ ------------ ------------
(Unaudited)
(Note 15)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 2,482,090 $ 564,087 $ 564,087
Accounts receivable, net of
allowance for doubtful accounts
(1997--$407,136; 1998--
$469,726)........................ 5,468,654 6,646,882 6,646,882
Accounts receivable--affiliates.... 57,500 127,989 127,989
Inventories........................ 1,686,117 1,364,608 1,364,608
Contract work in progress.......... 385,778 147,317 147,317
Prepaid expenses and other current
assets........................... 1,079,347 481,921 481,921
------------ ------------ ------------
Total current assets........... 11,159,486 9,332,804 9,332,804
Property and equipment, net of
accumulated depreciation (1997--
$2,420,561; 1998--$3,433,368)...... 1,830,324 1,844,324 1,844,324
Goodwill, net........................ 208,763 178,212 178,212
Other assets......................... 22,650 94,901 94,901
------------ ------------ ------------
Total assets................... $ 13,221,223 $ 11,450,241 $ 11,450,241
============ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable................... $ 1,332,656 $ 1,715,133 $ 1,715,133
Current portion of note payable.... 51,716 48,108 48,108
Accrued personnel costs............ 450,287 561,714 561,714
Advance billings on contracts...... 346,383 498,108 498,108
Deferred revenue................... 505,238 1,207,867 1,207,867
Other accrued liabilities.......... 1,012,809 1,000,940 1,000,940
------------ ------------ ------------
Total current liabilities...... 3,699,089 5,031,870 5,031,870
------------ ------------ ------------
Note payable, less current portion... 48,108 -- --
Payment to redeem Preferred Stock--
Series B........................... -- -- 8,332,036
Convertible Redeemable Preferred
Stock--Series A, voting, $1.00 per
share redemption value, aggregate
liquidation preference of
$6,550,000:
Issued and outstanding shares--
actual, 6,550,000 in 1997 and
1998; pro forma; none............ 6,550,000 6,550,000 --
Cumulative Redeemable Preferred
Stock--Series B, nonvoting, $6.15
per share redemption value,
aggregate liquidation preference of
$7,815,737 in 1997 and $8,332,036
in 1998:
Issued and outstanding shares--
actual, 1,270,851 in 1997 and
1,354,802 in 1998; pro forma,
none ............................ 7,815,737 8,332,036 --
Convertible Redeemable Preferred
Stock--Series C, voting, $3.51 per
share redemption value, aggregate
liquidation preference of
$12,268,292:
Issued and outstanding shares--
actual, 3,495,354 in 1997 and
1998; pro forma, none............ 11,636,252 11,595,176 --
Notes receivable arising from
issuance of preferred stock........ (290,835) (290,835) --
Stockholders' deficit:
Common Stock--$.001 par value:
Authorized shares--20,000,000
Issued and outstanding shares--
actual, 80,155 in 1997 and
124,455 in 1998, pro forma,
10,170,289 80 125 10,170
Notes receivable arising from
issuance of preferred stock...... -- -- (290,835)
Additional paid-in capital......... -- 140,245 18,275,376
Retained deficit................... (16,237,208) (19,908,376) (19,908,376)
------------ ------------ ------------
Total stockholders' deficit.... (16,237,128) (19,768,006) (1,913,665)
------------ ------------ ------------
Total liabilities and
stockholders' deficit........ $ 13,221,223 $ 11,450,241 $ 11,450,241
============ ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
MAPQUEST.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Business............................. $ 7,019,461 $ 4,762,627 $ 6,536,153
Consumer............................. 140,200 1,275,900 1,375,900
Digital mapping...................... 12,417,232 15,377,141 16,805,149
----------- ----------- -----------
Total revenues.................... 19,576,893 21,415,668 24,717,202
Cost of revenues....................... 12,319,513 15,302,409 17,645,800
----------- ----------- -----------
Gross profit........................... 7,257,380 6,113,259 7,071,402
Operating expenses
Sales and marketing.................. 4,454,791 7,256,519 5,243,377
Product development.................. 2,619,443 5,047,744 2,954,510
General and administrative........... 1,901,857 1,811,391 2,326,191
----------- ----------- -----------
Total operating expenses.......... 8,976,091 14,115,654 10,524,078
Operating loss......................... (1,718,711) (8,002,395) (3,452,676)
Interest income and expense, net....... 198,632 135,888 53,916
Other income........................... 243,900 267,384 243,891
----------- ----------- -----------
Loss before provision for income
taxes................................ (1,276,179) (7,599,123) (3,154,869)
Provision for income taxes............. -- -- --
----------- ----------- -----------
Net loss.......................... (1,276,179) (7,599,123) (3,154,869)
Less preferred stock dividends and
accretion............................ (525,320) (623,266) (667,223)
----------- ----------- -----------
Net loss applicable to common
stockholders......................... $(1,801,499) $(8,222,389) $(3,822,092)
=========== =========== ===========
Basic and diluted loss per share....... $ (23.87) $ (106.48) $ (32.64)
===========
Shares used to compute basic and
diluted loss per share............... 75,474 77,222 117,112
=========== =========== ===========
Pro forma basic and diluted loss per
share................................ $ (0.36)
===========
Shares used to compute pro forma basic
and diluted loss per share........... 10,162,466
</TABLE>
See accompanying notes.
F-4
<PAGE>
MAPQUEST.COM, INC.
STATEMENTS OF CHANGES IN REDEEMABLE PREFERRED STOCK, COMMON STOCK,
AND OTHER STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Notes
Convertible Cumulative Convertible Receivable
Redeemable Redeemable Redeemable Arising from Convertible
Preferred Preferred Preferred Issuance of Preferred Additional
Stock-- Stock-- Stock-- Preferred Stock-- Common Paid Retained
Series A Series B Series C Stock Series A Stock in Capital Deficit
----------- ----------- ------------ ------------ ----------- ------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995.................. $ -- $ 6,877,136 $ -- $ (87,500) $ 65,150 $ 74 $ 1,238,560 $ (1,003,071)
Net loss............... -- -- -- -- -- -- -- (1,276,179)
Payment on notes
receivable........... -- -- -- 31,168 -- -- -- --
Dividends.............. -- 454,295 -- -- -- -- -- (525,320)
Issuance of 35,000
shares convertible
preferred stock--
Series A............. -- -- -- (31,500) 350 -- 34,650 --
Exercise of 2,620
options.............. -- -- -- -- -- 2 260 --
----------- ----------- ------------ ---------- -------- ----- ----------- -------------
Balance at December 31,
1996.................. -- 7,331,431 -- (87,832) 65,500 76 1,273,470 (2,804,570)
Net loss............... -- -- -- -- -- -- -- (7,599,123)
Payment on notes
receivable........... -- -- -- 21,132 -- -- -- --
Dividends.............. -- 484,306 -- -- -- -- -- (560,023)
Exercise of 3,820
options.............. -- -- -- -- -- 4 781 --
Addition of redemption
feature to Series A
preferred stock...... 6,550,000 -- -- -- (65,500) -- (1,274,251) (5,210,249)
Issuance of 3,495,354
shares convertible
preferred stock--
Series C, net........ -- -- 11,573,009 (224,135) -- -- -- --
Accretion of redeemable
preferred stock to
redemption value..... -- -- 63,243 -- -- -- -- (63,243)
----------- ----------- ------------ ---------- -------- ----- ----------- -------------
Balance at December 31,
1997.................. $ 6,550,000 $ 7,815,737 $ 11,636,252 $ (290,835) $ -- $ 80 $ -- $ (16,237,208)
Net loss............... -- -- -- -- -- -- -- (3,154,869)
Dividends.............. -- 516,299 -- -- -- -- -- (516,299)
Exercise of 44,300
options.............. -- -- -- -- -- 45 7,519 --
Issuance of 193,420
warrants............. -- -- (192,000) -- -- -- 192,000 --
Issuance of 15,284
warrants for
services............. -- -- -- -- -- -- 53,650 --
Accretion of redeemable
preferred stock to
redemption value..... -- -- 150,924 -- -- -- (150,924) --
Compensation related to
stock options........ -- -- -- -- -- -- 38,000 --
----------- ----------- ------------ ---------- -------- ----- ----------- -------------
Balance at December 31,
1998.................. $ 6,550,000 $ 8,332,036 $ 11,595,176 $ (290,835) $ -- $ 125 $ 140,245 $ (19,908,376)
=========== =========== ============ ========== ======== ===== =========== =============
</TABLE>
See accompanying notes.
F-5
<PAGE>
MAPQUEST.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities
Net loss................................ $(1,276,179) $(7,599,123) $(3,154,869)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation........................... 527,990 816,369 1,074,875
Amortization........................... 30,550 30,550 30,551
Provision for doubtful accounts........ 232,500 262,388 271,598
Issuance of warrants for services...... -- -- 53,650
Compensation expense related to
options.............................. -- -- 38,000
Equity in earnings of joint venture.... (282,461) (256,068) (291,558)
Dividends received from joint venture.. 285,273 288,556 285,976
Loss (gain) on disposal of property and
equipment............................ -- 59,758 (3,089)
Changes in operating assets and
liabilities, net of effects from
acquisition of a business:
Accounts receivable................... (1,505,806) (1,115,351) (1,449,823)
Accounts receivable--affiliates....... 10,154 72,400 (70,489)
Inventories........................... (20,778) (1,182,649) 321,509
Contract work in progress............. (151,563) (60,575) 238,461
Prepaid expenses...................... (231,318) (724,940) 597,426
Other assets.......................... (16,694) 14,659 (94,638)
Accounts payable...................... 448,974 448,374 382,447
Advance billings on contracts......... 471,473 (688,387) 151,726
Deferred revenue...................... -- 396,807 702,629
Accrued personnel costs and other
liabilities......................... 316,892 (257,500) 99,557
----------- ----------- -----------
Net cash used in operating activities... (1,160,993) (9,494,732) (816,061)
Investing activities
Property and equipment purchases........ (1,190,210) (1,354,690) (1,062,126)
Proceeds from disposal of property and
equipment............................. -- 32,264 4,340
Purchase of Interarts' assets........... (328,600) -- --
----------- ----------- -----------
Net cash used in investing activities... (1,518,810) (1,322,426) (1,057,786)
Financing activities
Proceeds from note payable.............. -- 131,468 --
Principal payments on debt.............. -- (32,499) (51,716)
Proceeds from issuance of Series A
convertible preferred stock........... 3,500 -- --
Net proceeds from issuance of Series C
convertible preferred stock........... -- 11,348,874 --
Exercise of common stock options........ 262 785 7,560
Principal payments received on notes
receivable arising from issuance of
preferred stock....................... 31,168 21,132 --
Cash dividends paid..................... (69,889) (74,506) --
----------- ----------- -----------
Net cash provided by (used in) financing
activities............................ (34,959) 11,395,254 (44,156)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents........................... (2,714,762) 578,096 (1,918,003)
Cash and cash equivalents at the
beginning of the year................. 4,618,756 1,903,994 2,482,090
----------- ----------- -----------
Cash and cash equivalents at the end of
the year.............................. $ 1,903,994 $ 2,482,090 $ 564,087
=========== =========== ===========
Supplemental cash flow information
Stock dividends paid on Preferred Stock
Series B.............................. $ 454,294 $ 484,306 $ 516,299
=========== =========== ===========
Dividends accrued on Preferred Stock
Series B.............................. $ 18,329 $ 19,540 $ --
=========== =========== ===========
Notes receivable received for stock..... $ 31,500 $ 224,135 $ --
=========== =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. Business and Accounting Policies
Business
In February 1999, GeoSystems Global Corporation changed its name to
MapQuest.com, Inc. MapQuest.com, Inc. ("MapQuest" or the "Company") is an
online provider of mapping and destination information through its Web site,
mapquest.com. MapQuest's proprietary integration and editing of geographic
databases enable it to provide comprehensive mapping solutions to businesses
and provide customized maps, destination information and driving directions to
consumers. Consumers can also purchase maps and cartography information from
MapQuest's MapStore located on mapquest.com.
MapQuest is also a United States provider of traditional digital mapping
products and services to the educational, reference, directory, travel and
governmental markets. In addition, companies that incorporate call centers, CD-
ROMs or stand-alone driving direction kiosks into their information delivery
strategy require non-Internet customized mapping solutions. MapQuest has
developed its map-enabling software to promote the rapid development of mapping
applications in these environments.
Revenue Recognition
Contracts with businesses for Internet products and services are generally
on an annual basis and consist of a one-time setup fee and annual service or
license fee. The one-time setup fee is based on costs incurred to initially
integrate the Web site connection and is recognized upon installation of the
connection. The remaining service or license fee is recognized ratably over the
contract period.
Royalty revenues are recognized when earned based on the revenues generated
by the sale of a licensed product or based on the minimum royalty provisions in
the related contract. Revenue from the sale of licenses to its customers for
the use of MapQuest's geographic systems or products are generally recognized
upon delivery of the licensed systems or products if no significant obligations
exist. If a maintenance or upgrade obligation exists, revenues are recognized
ratably over the obligation period. MapQuest's license agreements have terms
generally ranging from one to three years.
Revenues from long-term fixed price contracts for the development of
customized geographic and cartographic data are recognized on the percentage of
completion method, measured by the percentage of labor hours incurred to date
to estimated total labor hours for each contract. Revenues recognized in excess
of amounts billed are classified as contract work in progress. Amounts billed
to clients for contracts in excess of revenues recognized to date are
classified as advance billings on contracts.
Advertising revenue is recognized ratably over the period in which the
advertisements are displayed, provided that no significant obligations remain
and collection of the resulting receivable is probable. The average duration of
MapQuest's advertising arrangements is one to two months. In certain
circumstances, MapQuest guarantees a certain level of impressions. If the
guaranteed impressions are not met, MapQuest defers recognition of the
corresponding revenue until the guaranteed impressions are provided.
Barter revenues are recognized in connection with agreements in which
MapQuest receives advertising or other goods and services in exchange for
content or advertising on mapquest.com. Barter transactions are
F-7
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
recorded at the lower of estimated fair value of the goods or services received
or the estimated fair value of the content or advertisements given. Barter
transactions accounted for approximately 0%, 1% and 2% of revenues during 1996,
1997 and 1998, respectively.
Revenues from all other services provided and products sold or licensed are
recognized when the services are rendered or delivery of the product is made
and no significant MapQuest obligations remain outstanding.
Product Development
Product development expenses in the accompanying statements of operations
include the costs to develop new products and services and to modify existing
products and services, including software and data. These costs consist
primarily of salaries for product development personnel and related expenses,
contract labor expense, and consulting fees. Statement of Financial Accounting
Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed," requires capitalization of certain
software development costs subsequent to the establishment of technological
feasibility. Based upon the Company's product development process,
technological feasibility is established upon completion of a working model.
Costs incurred by the Company between completion of the working model and the
point at which the product is ready for general release have been
insignificant. As a result, the Company has expensed software development
costs.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers all
cash and highly liquid investments with a maturity of three months or less when
purchased to be cash equivalents.
Fair Values of Financial Instruments
The carrying amounts of cash and cash equivalents, notes receivable and
notes payable approximate fair value because of the short-term maturity of
these instruments.
Inventories
Inventories are carried at the lower of cost or market using the first-in,
first-out (FIFO) method.
Property and Equipment
Property and equipment consisting primarily of computer hardware are stated
at historical cost. Depreciation is computed principally using the straight-
line method over the estimated useful life of assets ranging from 3 to 5 years.
Goodwill
Goodwill, principally from the acquisition of Maryland Cartographics, Inc.
in July 1994, represents the excess of cost over fair value of net assets
acquired and is being amortized over 10 years using the straight-line method.
As of December 31, 1997 and 1998, accumulated amortization was $96,744 and
$127,295, respectively.
Accounting for Stock-Based Compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 prescribes accounting and reporting standards for
all stock-based compensation plans, including
F-8
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
employee stock options, restricted stock, employee stock purchase plans and
stock appreciation rights. SFAS No. 123 requires compensation expense to be
recorded (i) using the new fair value method or (ii) using existing accounting
rules prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", ("APB 25") and related interpretations with pro
forma disclosure of what net income and earnings per share would have been had
the Company adopted the fair value method. The Company accounts for its stock-
based compensation plans in accordance with the provisions of APB 25.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs for 1996,
1997 and 1998 amounted to $332,300, $779,000 and $741,600, respectively, and
include barter advertising costs for 1997 and 1998 of $148,000 and $538,000,
respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
December 31
---------------------
1997 1998
---------- ----------
<S> <C> <C>
Materials.............................................. $ 240,000 $ 96,006
Work-in-process........................................ 207,838 336,123
Finished goods......................................... 1,238,279 932,479
---------- ----------
$1,686,117 $1,364,608
========== ==========
</TABLE>
3. Asset Purchase--Interarts
Effective April 1, 1996, the Company acquired certain assets, primarily
inventory, of Interarts, Ltd. (Interarts) for $328,600. Interarts is an upscale
niche publisher of reference maps, atlases and products that use map images.
This transaction was accounted for in accordance with the purchase method of
accounting for business combinations. No goodwill has been recognized by the
Company in connection with this transaction. The operating results of Interarts
are included in the Company's results of operations from the effective date of
the acquisition. Pro forma information about operating results assuming
Interarts was acquired at the beginning of 1996 is not presented because it
would not differ materially from reported results.
4. Debt Arrangements
The Company has a $5,000,000 secured line of credit payable on demand with
a financial institution. Borrowings under the line of credit are limited to 80%
of the Company's qualified accounts receivable that are within 90 days of
invoice. Under the agreement, the Company may choose an interest rate based on
the following options: prime rate, a fixed rate as offered by the Bank from
time to time for varying periods up to 180 days or at the LIBOR Rate plus 1.75%
for periods of 30, 60, 90 or 180 days. No amount was drawn on the line at
December 31, 1997 or 1998.
F-9
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company entered into a promissory note during 1997. Terms of repayment
require thirty consecutive monthly payments of principal and interest. Interest
on the outstanding principal is fixed at a rate of 9%.
5. Preferred Stock and Stockholders' Equity
Restated Certificate of Incorporation
On July 17, 1997, the Company filed a Restated Certificate of Incorporation
with the State of Delaware in conjunction with the purchase and sale of Series
C Preferred Stock. The Restated Certificate of Incorporation authorizes the
Company to issue 35,000,000 shares, of which 20,000,000 shares are designated
Common Stock and 15,000,000 shares are designated Preferred Stock. Of the
Preferred Stock, 6,550,000 shares are designated Series A Preferred, 2,000,000
shares are designated Series B Preferred, 3,800,000 shares are designated
Series C Preferred and 2,650,000 shares are undesignated as to series.
Series A Preferred Stock
The Company is authorized to issue 6,550,000 shares (10,000,000 shares as
of December 31, 1996) of noncumulative, convertible, voting Series A Preferred
Stock. Effective July 17, 1997, a redemption feature was added and the issued
and outstanding shares were reclassified outside of stockholders' equity. At
the option of the Holder, each share of Series A Preferred Stock is convertible
into Common Stock at a conversion rate of one share of Common Stock for each
share of Series A Preferred Stock. Each share of Series A Preferred Stock
automatically converts into shares of Common Stock, either (i) immediately
prior to the closing of the Company's initial underwritten public offering
pursuant to a Registration Statement filed with and declared effective by the
Securities and Exchange Commission under the Securities Act of 1993, as
amended, and having an aggregate offering to the public of not less than
$15,000,000 or (ii) upon the affirmative vote of the holders of at least two-
thirds of the then outstanding shares of Series A Preferred Stock, whichever is
earlier. The Series A Preferred Stock ranks senior to the Common Stock as to
dividend, liquidation, and redemption rights. The Series A Preferred Stock
ranks junior to the Series B Preferred Stock and the Series C Preferred Stock
as to dividend, liquidation and redemption rights. Each share of Series A
Preferred Stock issued and outstanding has a number of votes equal to the
number of shares into which such share of Series A Preferred Stock is then
convertible. Subject to the prior and superior rights of the holders of the
shares of Series B Preferred Stock and shares of Series C Preferred Stock, upon
written notice at least 120 days prior to December 31 of any calendar year
from, and including, the year 2002, by the holders of at least two-thirds of
the then outstanding shares of Series A Preferred Stock, the Company shall be
required to redeem all of the issued, outstanding and nonredeemed shares of
Series A Preferred Stock held by each holder of Series A Preferred Stock at a
redemption price per share of $1.00 plus an amount equal to all declared but
unpaid dividends on the Series A Preferred Stock. The redemption would be
payable in three annual installments. No dividends may be paid on the Series A
Preferred Stock unless the Company has fulfilled its dividend obligations on
the Series B Preferred Stock and Series C Preferred Stock. The Series A
Preferred Stock has an annual cash dividend rate of $.075 per share when and as
declared by the Board of Directors. The Company has reserved 6,550,000 shares
of Common Stock for issuance upon conversion of Series A Preferred Stock.
Pursuant to the terms of the stock purchase agreement dated October 31,
1994, the Company sold 215,000 shares of its Series A Preferred Stock at a
purchase price of $1 per share to the Company's then existing management. The
aggregate purchase price of $215,000 was paid $127,500 in cash and $87,500 in
notes due October 31, 1999. The notes bear interest at a rate of 7.5%
compounded annually. Payments are due annually in an amount that is the lesser
of one-fifth of the principal balance or 50% of any bonus to which each
employee is entitled. The notes are secured by the shares purchased, with
shares released to the extent each note is paid. At December 31, 1997 and 1998,
outstanding notes receivable in conjunction with this stock purchase was
$35,200.
F-10
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
On March 26, 1996, pursuant to the terms of an Employment Agreement dated
October 31, 1994, the Company sold 35,000 shares of its Series A Preferred
Stock at a purchase price of $1 per share to a member of the Company's then
existing management. The aggregate purchase price of $35,000 was paid $3,500 in
cash and $31,500 in a note due October 31, 2000. The note bears interest at a
rate of 7.5% compounded annually. The repayment terms were modified pursuant to
a severance agreement in 1997. The payment of the note, inclusive of interest,
is due on the earlier of September 30, 2000 or the date on which the severed
employee transfers all shares of the employee's Series A Preferred Stock. The
note is secured by the shares purchased with shares released to the extent the
note is paid. At December 31, 1997 and 1998, outstanding notes receivable in
conjunction with this stock purchase was $31,500.
Series B Preferred Stock
The Company is authorized to issue 2,000,000 shares of cumulative,
redeemable, nonvoting Series B Preferred Stock. Holders of shares of Series B
Preferred Stock are entitled to a cumulative dividend, payable semiannually, at
the annual rate of $.46125 per share with respect to dividends payable on or
prior to December 31, 1997 and $.39975 per share with respect to dividends
payable after December 31, 1997. The dividend may be paid in cash or a
combination of cash and additional shares of Series B Preferred Stock; however,
at least 13.33% of the dividend payable in any period on or prior to December
31, 1997 shall be payable in cash. As of December 31, 1997 and 1998, there were
no dividends in arrears. Subject to the prior written consent of the holders of
a majority of the shares of Series C Preferred Stock then issued and
outstanding, the Series B Preferred Stock is redeemable at the option of the
Company at any time at a price of $6.15 per share, payable in cash or a
combination of cash and subordinated convertible debentures. Subject to the
prior and superior rights of holders of Series C Preferred Stock, the Series B
Preferred Stock is also redeemable at the option of the holders upon written
notice at least 120 days prior to December 31 of any calendar year from and
including the year 2002, by the holders of at least two-thirds of the then
outstanding shares of Series B Preferred Stock, at a price of $6.15 per share
payable in cash, plus an amount equal to all dividends accrued and unpaid
thereon to the redemption date. The redemption would be payable in three annual
installments. The Series B Preferred Stock ranks senior to the Series A
Preferred Stock and the common stock as to dividend, liquidation and redemption
rights. The Series B Preferred Stock ranks senior to the Series C Preferred
Stock as to dividend rights and junior to the Series C Preferred Stock as to
liquidation and redemption rights.
During 1996, 1997 and 1998 the Company paid dividends totaling $524,183,
$558,812 and $516,299, respectively, on Series B Preferred Stock. These
dividends included cash dividends of $69,889, $74,506 and -0- and stock
dividends of $454,295, $484,306 and $516,299, during 1996, 1997 and 1998,
respectively. The stock dividends were based on the issuance of additional
shares of Series B Preferred Stock of 73,869, 78,749 and 83,951 shares during
1996, 1997 and 1998, respectively, using a value of $6.15 per share.
Series C Preferred Stock
The Company is authorized to issue 3,800,000 shares (0 shares as of
December 31, 1996) of noncumulative, redeemable, convertible, voting Series C
Preferred Stock. At the option of the holder, each share of Series C Preferred
Stock is convertible into Common Stock at a conversion rate of one share of
Common Stock for each share of Series C Preferred Stock. Each share of Series C
Preferred Stock automatically converts into shares of Common Stock, immediately
prior to the closing of the Company's initial underwritten public offering
pursuant to a Registration Statement filed with and declared effective by the
Securities and Exchange Commission under the Securities Act of 1993, as
amended, in which the aggregate proceeds to the Company equal at least
$15,000,000 and in which the price per share of Common Stock equals or exceeds
$7.02 per share (as adjusted for stock splits, stock dividends,
recapitalizations and similar events). Each share of Series C Preferred Stock
issued and outstanding has a number of votes equal to the number of
F-11
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
shares into which such share of Series C Preferred Stock is then convertible.
The Series C Preferred Stock ranks senior to the Common Stock, the Series A
Preferred Stock and the Series B Preferred Stock as to liquidation and
redemption rights and ranks senior to the Common Stock and the Series A
Preferred Stock with respect to the payment of dividends. The Series C
Preferred Stock ranks junior to the Series B Preferred Stock with respect to
the payment of dividends. The Series C Preferred Stock has an annual cash
dividend rate of $.26325 per share when and as declared by the Board of
Directors. Upon written notice at least 120 days prior to December 31 of any
calendar year from, and including, the year 2002, by the holders of at least
two-thirds of the then outstanding shares of Series C Preferred Stock, the
Company shall be required to redeem all of the issued, outstanding and
nonredeemed shares of Series C Preferred Stock held by each holder of Series C
Preferred Stock at a redemption price per share of $3.51 plus an amount equal
to all declared but unpaid dividends on the Series C Preferred Stock. The
redemption would be payable in three annual installments. The Company has
reserved 3,495,354 shares of Common Stock for issuance upon conversion of
Series C Preferred Stock.
Pursuant to the terms of the stock purchase agreement dated July 17, 1997,
the Company sold 3,431,498 shares of its Series C Preferred Stock at a purchase
price of $3.51 per share. The aggregate purchase price of $12,044,558 was paid
in cash. The difference between the aggregate purchase price net of the
warrants issued during 1998 is being accreted to the redemption value through
2002. Accretion totaled $63,243 and $150,924 during 1997 and 1998,
respectively.
On November 1, 1997, the Company sold 63,856 shares of its Series C
Preferred Stock at a purchase price of $3.51 per share to members of the
Company's then existing management. The aggregate purchase price of $224,135
was paid by $224,135 in notes due November 1, 2004. The notes bear interest at
a rate of 7.0% compounded annually. Payments are due annually, commencing in
the year 2000, in an amount that is the lesser of one-fifth of the principal
balance or 50% of any bonus to which each employee is entitled. The note is
secured by the shares purchased with shares released to the extent the note is
paid. At December 31, 1997 and 1998, outstanding notes receivable in connection
with this stock purchase were $224,135.
Common Stock
As of December 31, 1998, the Company has a total of 13,251,371 shares of
Common Stock reserved for future issuance.
6. Stock Options and Warrants
1995 Stock Option Plan
As of December 31, 1998, 2,308,751 shares of the Company's Common Stock
were reserved for issuance under the GeoSystems Global Corporation 1995 Stock
Option Plan (the Plan), under which the Company may grant stock options to key
employees and consultants. Each option entitles the holder to purchase from the
Company one share of Common Stock at an exercise price which shall not be less
than the fair market value of one share of stock on the date of grant. These
options vest generally over five years and expire ten years from the date of
grant.
F-12
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Changes during the years ended December 31, 1996, 1997 and 1998 in options
outstanding were as follows:
<TABLE>
<CAPTION>
Number of Exercise Price
Options Per Option
--------- --------------
<S> <C> <C> <C>
Balance at January 1, 1996..................... 509,450 $ 0.10
Granted during 1996............................ 396,733 $ 0.10
Granted during 1996............................ 135,300 $ 0.15
Granted during 1996............................ 159,000 $ 1.00
Exercised...................................... (2,620) $ 0.10
Forfeited...................................... (10,080) $ 0.10
--------- -----------
Outstanding at December 31, 1996............... 1,187,783 $ .10-$1.00
Granted during 1997............................ 345,807 $ 1.00
Exercised...................................... (1,200) $ 0.10
Exercised...................................... (2,300) $ 0.15
Exercised...................................... (320) $ 1.00
Forfeited...................................... (99,576) $ 0.10
Forfeited...................................... (9,200) $ 0.15
Forfeited...................................... (29,638) $ 1.00
--------- -----------
Outstanding at December 31, 1997............... 1,391,356 $ .10-$1.00
Granted during 1998............................ 821,500 $ 1.00
Exercised...................................... (29,100) $ 0.10
Exercised...................................... (12,500) $ 0.15
Exercised...................................... (2,700) $ 1.00
Forfeited...................................... (204,391) $ 0.10
Forfeited...................................... (50,000) $ 0.15
Forfeited...................................... (118,739) $ 1.00
--------- -----------
Outstanding at December 31, 1998............... 1,795,426 $0.10-$1.00
========= ===========
</TABLE>
During June, 1998 the Company accelerated the vesting and extended the
exercise period of options in connection with a severance agreement for the
former President and recorded compensation expense of $38,000.
Pro forma information regarding net loss and net loss per share is required
by SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The fair
value of the options was estimated at date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Assumptions
Volatility factor of the expected market price of
the Company's common stock........................ .5% .5% .5%
Average risk free interest rate.................... 6.9% 6.9% 6.9%
Dividend yield..................................... 0.0% 0.0% 0.0%
Average life....................................... 5 years 5 years 5 years
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models
F-13
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
require the input of highly subjective assumptions including the expected stock
price volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Pro forma net loss applicable to
common stockholders............... $(1,801,499) $(8,224,195) $(3,849,034)
Pro forma basic and diluted loss
per share......................... $ (23.87) $ (106.50) $ (32.87)
</TABLE>
Additional information with respect to outstanding options as of December
31, 1998 is as follows:
<TABLE>
<CAPTION>
Options
Options Outstanding Exercisable
----------------------- -----------
Weighted
Average
Remaining
Number of Contractual Number of
Exercise Prices Options Life Options
--------------- ---------- ----------- -----------
<S> <C> <C> <C>
$0.10.................................... 559,216 6.7 386,357
$0.15.................................... 61,300 7.5 33,200
$1.00.................................... 1,174,910 8.5 247,924
---------- -------
$0.10 - $1.00............................ 1,795,426 667,481
========== =======
</TABLE>
The weighted average fair value of options granted during 1996, 1997 and
1998 was $0, $0.15 and $0.29, respectively.
On December 31, 1998 the Company granted 233,750 options for which the
exercise price per share will be the initial public offering price determined
upon completion of the offering the Company intends to make (see Note 15).
These options are excluded from the disclosures in this Note 6.
Warrants
As of December 31, 1998, there were 144,540 warrants outstanding under
which each warrant entitles the holder to purchase one share of the Company's
Common Stock for $.10 per share. The warrants were issued for $.01 per warrant
in connection with the original Series A Preferred Stock Purchase Agreement
dated October 31, 1994. The warrants expire upon the earlier of October 31,
2004 or the fifth anniversary of an initial public offering. The Company has
reserved 144,540 shares of common stock for issuance upon exercise of the
warrants.
As of December 31, 1998, there were 150,633 warrants outstanding under
which each warrant entitles the holder to purchase one share of the Company's
common stock for $3.51. The warrants were issued for $1,000 in connection with
the Purchase and Sale of Series C Preferred Stock Agreement. The warrants
expire on July 18, 2002. The Company has reserved 150,633 shares of common
stock for issuance upon exercise of the warrants.
F-14
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
As of December 31, 1998, there were 353,388 warrants outstanding under
which each warrant entitles the holder to purchase one share of the Company's
common stock for $2.81 per share. The warrants were issued in connection with a
distribution agreement the Company executed in 1997. The warrants expire on the
earlier of April 22, 2002 or upon termination of the agreement. The Company has
reserved 353,388 shares of common stock for issuance upon exercise of the
warrants.
As of December 31, 1998, there were 193,419 warrants outstanding under
which each warrant entitles the holder to purchase one share of the Company's
common stock for $.01 per share. The warrants were issued during May 1998 to
certain holders of Series C Preferred Stock in connection with the original
issuance of the Series C Preferred Stock. The warrants expire on April 30,
2008. The Company has reserved 193,419 shares of common stock for issuance upon
exercise of the warrants.
As of December 31, 1998, there were 15,284 warrants outstanding under which
each warrant entitles the holder to purchase one share of the Company's common
stock for $3.51. The warrants were issued for services rendered by an outside
party. The warrants expire in September 2003.
7. Loss Per Share
The following table sets forth the computation of basic and diluted loss
per share:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Numerator:
Net loss.......................... $(1,276,179) $(7,599,123) $(3,154,869)
Preferred stock dividends......... (525,320) (560,023) (516,299)
Accretion of redeemable preferred
stock............................ -- (63,243) (150,924)
----------- ----------- -----------
Numerator for loss per share ap-
plicable to common stockholders.. $(1,801,499) $(8,222,389) $(3,822,092)
=========== =========== ===========
Denominator:
Denominator for basic and diluted
loss per share--weighted-average
shares........................... 75,474 77,222 117,112
Basic and diluted loss per common
share.............................. $ (23.87) $ (106.48) $ (32.64)
=========== =========== ===========
</TABLE>
The following securities and number of shares have been excluded from the
diluted per share computation as they are antidilutive:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Convertible redeemable preferred stock Se-
ries A..................................... -- 6,550,000 6,550,000
Convertible redeemable preferred stock Se-
ries C..................................... 3,495,354 3,495,354
Convertible preferred stock Series A........ 6,550,000 -- --
Stock options............................... 1,187,783 1,391,356 1,795,426
Stock warrants.............................. 144,540 648,561 857,264
</TABLE>
F-15
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table sets forth the computation of pro forma basic and
diluted loss per share, assuming conversion of the shares of Series A Preferred
Stock and Series C Preferred Stock to shares of common stock and the redemption
of the shares of Series B Preferred Stock outstanding at December 31, 1998 at
the beginning of the year ended December 31, 1998. However, the issuance of
common shares for the redemption of the Series B Preferred Stock has not been
reflected in the following table since an assumed offering price has not been
included on a pro forma basis.
<TABLE>
<CAPTION>
1998
-----------
<S> <C>
Numerator:
Net loss applicable to common stockholders.................. $(3,822,092)
Redeemable preferred stock--Series C accretion.............. 150,924
Preferred stock dividends on cumulative preferred stock--Se-
ries B..................................................... --
-----------
Numerator for pro forma basic and diluted loss per share.... $(3,671,168)
Denominator:
Weighted average number of common shares.................... 117,112
Assumed conversion of preferred shares to common shares..... 10,045,354
Assumed issuance of common shares to redeem Series B Pre-
ferred Stock............................................... --
-----------
Denominator for pro forma basic and diluted loss per share.. 10,162,466
Pro forma basic and diluted loss per share.................. $ (0.36)
</TABLE>
8. Income Taxes
No provision for income taxes has been recorded as the Company has incurred
net operating losses during 1996, 1997 and 1998.
The tax effects of temporary differences and net operating loss and credit
carryforwards that give rise to the Company's deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
December 31
------------------------
1997 1998
----------- -----------
<S> <C> <C>
Current deferred tax assets:
Allowance for doubtful accounts................ $ 84,040 $ 146,324
Other.......................................... 481,607 496,126
Non-current deferred tax assets:
Depreciation................................... 291,329 194,640
Net operating loss and credit carryforwards.... 3,486,589 4,746,255
----------- -----------
Total deferred tax assets........................ 4,343,565 5,583,345
Valuation allowances for deferred tax assets..... (4,343,565) (5,583,345)
----------- -----------
Net deferred tax assets........................ $ -- $ --
=========== ===========
</TABLE>
Due to the uncertainty of the realization of the assets, a valuation
allowance has been provided. The valuation allowance was increased by $717,000,
$2,618,565 and $1,239,780 for the years ended December 31, 1996, 1997 and 1998,
respectively.
As of December 31, 1998, the Company has net operating loss carryforwards
of approximately $11,680,000, which expire between 2009 and 2018, and research
and development tax credit carryforwards of approximately $623,000, which
expire during 2010 and 2013. The utilization of approximately $10,035,000 of
such net operating loss carryforwards and $561,000 of such research and
development tax credit carryforwards is subject to an annual limitation of
approximately $1,300,000, pursuant to Section 382 of the Internal Revenue Code.
F-16
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
9. Segment Information
The Company has two reportable segments: MapQuest Business/Consumer and
Digital Mapping Services. The MapQuest Business/Consumer segment provides
products and services to address the web-based destination information needs of
both businesses and consumers. The Digital Mapping Services segment provides
non-internet mapping products and services to the education, reference,
directory, travel and governmental markets as well as providing customized
mapping solutions to various other customers. Revenues are derived principally
from the United States.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on gross profit and does not allocate assets to the
reportable segments since management does not evaluate segment performance
based on asset information and common assets are used in the segments.
Accordingly, depreciation expense is not included in the information set forth
below.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies.
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------
1996 1997 1998
--------- --------- ---------
In thousands
<S> <C> <C> <C>
Business segment revenues:
MapQuest consumer/business-trade......... $ 7,159.7 $ 6,038.6 $ 7,912.0
Digital mapping services-trade........... 12,417.2 15,377.1 16,805.1
--------- --------- ---------
Total...................................... $19,576.9 $21,415.7 $24,717.1
========= ========= =========
Business segment profit:
MapQuest consumer/business............... 2,834.5 1,503.4 3,103.2
Digital mapping services................. 4,422.9 4,609.9 3,968.1
--------- --------- ---------
Total segment profit....................... 7,257.4 6,113.3 7,071.3
Reconciling items:
Operating expenses....................... (8,976.1) (14,115.7) (10,524.1)
Other and interest income................ 442.5 403.3 297.9
--------- --------- ---------
Pre-tax loss............................... $(1,267.2) $(7,599.1) $(3,154.9)
========= ========= =========
</TABLE>
10. Leases
The Company leases certain office and warehouse space from one of its
stockholders under operating leases. The Company also leases other office space
and office equipment from unrelated parties under operating leases. Future
lease commitments are as follows:
<TABLE>
<S> <C>
1999........................................................... $1,039,000
2000........................................................... 848,000
2001........................................................... 754,000
2002........................................................... 758,000
2003........................................................... 762,000
Thereafter..................................................... 2,351,000
----------
$6,512,000
==========
</TABLE>
F-17
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Rental expense for the years ended December 31, 1996, 1997 and 1998, was
$683,000, $1,131,000 and $1,033,000, respectively.
11. Retirement Savings Plan
The Company sponsors a defined contribution retirement savings plan for
substantially all of its employees. Employees may elect to defer up to 15% of
their salary. The Company has the option to match up to 100% of the employees'
contribution up to 2% of their salary. The expense incurred related to this
plan was $161,549, $209,235 and $189,512 during the years ended December 31,
1996, 1997 and 1998, respectively.
12. Related Party Transactions
The Company paid a management fee of $75,000 to a stockholder during 1996
and 1997, respectively. In connection with the Purchase and Sale of Series C
Preferred Stock Agreement, the $75,000 annual management fee arrangement was
terminated effective July 17, 1997. The Company incurred rent expense of
$112,000, $35,591 and $16,597 related to leases with one of its stockholders
during 1996, 1997 and 1998, respectively. The Company recorded sales to its
stockholders of $475,000, $432,320 and $513,626 during 1996, 1997 and 1998,
respectively. Also, the Company recorded sales to other affiliates of $181,000,
$1,290,900 and $2,022,000 during 1996, 1997 and 1998, respectively. As of
December 31, 1998, the Company's accounts receivable - affiliates was $127,989.
13. Concentration of Credit Risk
For the years ended December 31, 1996, 1997 and 1998, sales to the
Company's top four customers represented 38%, 25% and 18% of total sales,
respectively. During 1996, one customer represented 16% of total sales.
14. Commitments and Contingencies
Minimum Annual Royalties
The Company has guaranteed payment of the following minimum annual
royalties under a distribution agreement for each of the following years:
<TABLE>
<CAPTION>
Minimum
Year ended December 31 Annual Royalty
---------------------- --------------
<S> <C>
1997...................................................... $ 166,667
1998...................................................... 345,833
1999...................................................... 462,500
2000...................................................... 500,000
2001...................................................... 500,000
2002...................................................... 125,000
----------
Total................................................... $2,100,000
==========
</TABLE>
Contingencies
On December 14, 1998, Mark Tornetta filed a lawsuit against Moore U.S.A.,
Inc. in the United States District Court for the Eastern District of
Pennsylvania. The Company is defending this matter pursuant to an indemnity
provision in its contract with Moore U.S.A., Inc. Mr. Tornetta's patent
describes a specific method for searching real estate properties, which Mr.
Tornetta alleges is infringed by Moore U.S.A., Inc.'s online real
F-18
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
estate service. The Company believes that the claims of the patent are not
infringed by the Company, and/or the patent is invalid. While the litigation is
in the early stage, and its outcome cannot be predicted, the Company believes
that this litigation is without merit, and intends to defend this action
vigorously.
On January 26, 1999, Civix-DDI, LLC filed a lawsuit in the United States
District Court for the District of Colorado against twenty different
defendants, including the Company. Seven of these defendants are licensees of
the Company's technology and may have rights to indemnification under their
respective agreements or at law. The complaint alleges infringement by the
Company of two patents, by manufacture, use, sale, and offers to sell the
Company's electronic yellow page services, systems and products. The Company
believes that the claims of the patents are not infringed by the Company,
and/or the patents are invalid. While the litigation is in the early stage, and
its outcome cannot be predicted, the Company believes that this litigation is
without merit, and intends to defend this action vigorously.
The Company periodically receives notices of claims arising out of the
normal course of business. In the opinion of management, these matters will not
have a material effect on the Company's financial position, results of
operations, or liquidity.
15. Subsequent Events
During January 1999, the Board of Directors authorized the Company to file
a registration statement with the Securities and Exchange Commission for an
initial public offering of shares of its common stock. Prior to the closing of
the offering, the Company intends to effect a stock split. Concurrently with
the offering, the Company intends to establish an employee stock purchase plan
under which a total of 2,000,000 shares of common stock will be made available
for sale. Also, at the closing of the offering, the Company intends to adopt a
1999 Omnibus Stock Plan.
The Company intends to use a portion of the proceeds of the offering to
redeem the outstanding shares of Series B Preferred Stock. Also, upon the
completion of an initial public offering in which the gross proceeds paid by
the public are at least $15,000,000 and, with respect to the Series C Preferred
Stock at a per share price to the public of not less than $7.02, all
outstanding redeemable preferred shares of Series A Preferred Stock and Series
C Preferred Stock will automatically be converted into shares of common stock
in the manner described in Note 5. The pro forma balance sheet at December 31,
1998 gives effect to such conversion as if it occurred on that date. The pro
forma loss per share (Note 7) for the year ended December 31, 1998 gives effect
to the conversion of such shares as if it occurred at the beginning of 1998.
F-19
<PAGE>
[MapQuest Logo]
<PAGE>
PART II
INFORMATION NOT REQUIRED
IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Expenses in connection with the issuance and distribution of the securities
being registered, other than underwriting discounts and commissions, are
estimated as follows:
<TABLE>
<S> <C>
SEC registration fee............................................. $13,900
NASD filing fee.................................................. $ 5,500
Printing and engraving expenses.................................. $ *
Legal fees and expenses.......................................... $ *
Accountants' fees and expenses................................... $ *
Nasdaq listing fee............................................... $ *
Blue Sky fees and expenses....................................... $ *
Transfer Agent's fees and expenses............................... $ *
Miscellaneous costs.............................................. $ *
=======
Total.......................................................... $ [ ]
</TABLE>
- --------
* To be filed by amendment
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
The Registrant's Restated Certificate of Incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
The Registrant's Restated Bylaws provide for the indemnification of
officers, directors and third parties acting on behalf of the Registrant if the
person acted in good faith and in a manner reasonably believed to be in and not
opposed to the best interest of the Registrant, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for
in the Registrant's Restated Bylaws, and intends to enter into indemnification
agreements with any new directors and executive officers in the future.
Item 15. Recent Sales of Unregistered Securities.
Since March 1996, the Registrant has issued and sold the following
unregistered securities:
(1) In March 1996, the Registrant sold an aggregate of 35,000 shares of
Series A Preferred Stock at an aggregate purchase price of $35,000, or
$1.00 per share, to Perry Evans, the Registrant's then Vice President of
Sales and Marketing.
(2) In June 1996, in addition to options issuable under the 1995 stock
option plan, the Registrant issued Barbara Petersen an option to purchase
40,000 shares of common stock at an exercise price of $1.00 per share. The
option is exercisable at any time prior to June 11, 2006.
(3) In July 1997, the Registrant sold an aggregate of 3,431,498 shares
of Series C Preferred Stock for an aggregate purchase price of
$12,044,558, or $3.51 per share, to Highland Capital Partners III Limited
Partnership, Highland Entrepreneurs' Fund III Limited Partnership, Weston
Presidio Capital II, L.P., Trident Capital Partners Fund-I, L.P., Trident
Capital Partners Fund-I, C.V., The Roman Arch Fund, L.P., The Roman Arch
Fund II, L.P., Mr. Bart Faber and Stet & Query, L.P.
II-1
<PAGE>
(4) In November 1997, the Registrant sold 31,928 shares of Series C
Preferred Stock at a purchase price of $112,067.28, or $3.51 per share, to
James Thomas and sold 31,928 shares of Series C Preferred Stock at a
purchase price of $112,067.28, or $3.51 per share, to William Muenster.
(5) In April 1997 and in connection with a licensing and distribution
agreement, the Registrant issued National Geographic Holdings, Inc.
warrants to purchase 353,388 shares of the Registrant's common stock at an
exercise price of $2.81 per share. The warrants expire in April 22, 2002.
(6) In July 1997, the Registrant issued to Prudential Securities
Incorporated a warrant, for an aggregate purchase price of $1,000, to
purchase 150,633 shares of the Registrant's common stock at an exercise
price of $3.51 per share. The warrant expires in July 2002.
(7) In May 1998, the Registrant granted certain Series C Preferred Stock
investors an aggregate of 193,419 warrants to purchase common stock at an
exercise price of $0.01 per share, without the payment of additional
amounts to the Registrant. The warrants expire in April 2008.
(8) In September, 1998 the Registrant issued Ramsey/Beirne Associates a
warrant to purchase 15,284 shares of the Registrant's common stock at an
exercise price of $3.51 per share in partial consideration for services
performed on behalf of the Registrant. The warrant expires in September
2003.
(9) Since March 1996, the Registrant has issued 50,820 shares of common
stock to its employees upon the exercising of options granted under its
1995 stock option plan at an exercise price of $0.10 per share.
The sales of the securities described in Item 15(9) were deemed to be
exempt from registration under the Securities Act in reliance on Rule 701
promulgated under Section 3(b) of the Securities Act as transactions pursuant
to compensatory benefit plans and contracts relating to compensation as
provided under such Rule 701. The sale of the securities described in Items
15(1) through 15(8) were deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act, or Regulation
D promulgated thereunder, as transactions by an issuer not involving a public
offering. The recipients of securities in each such transaction represented
their intention to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates and other instruments issued in
such transactions. All recipients either received adequate information about
MapQuest or had access, through employment or other relationships, to such
information.
Item 16. Exhibits
(a)Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of MapQuest*
3.2 By-Laws of MapQuest*
4.1 Specimen common stock certificate*
Form of Opinion of Mayer, Brown & Platt as to legality of the
5.1 securities being issued*
10.1 Cartographic Product Development, Publishing, Marketing and
Distribution Agreement, dated as of April 22, 1997, between National
Geographic Society, National Geographic Holdings, Inc., and
MapQuest.com, Inc.*
10.2 Employment Agreement, dated as of August 10, 1998, between Michael
Mulligan and MapQuest.com, Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.3 Employment Agreement, dated as of October 31, 1994, between William
Muenster and MapQuest.com, Inc.
10.4 MapQuest.com, Inc. 1995 Stock Option Plan
10.5 Amendment No. 1 to 1995 Stock Option Plan of MapQuest.com, Inc.*
10.6 Amendment No. 2 to 1995 Stock Option Plan of MapQuest.com, Inc.
10.7 Amendment No. 3 to 1995 Stock Option Plan of MapQuest.com, Inc.
10.8 MapQuest 1999 Employee Stock Purchase Plan*
10.9 MapQuest 1999 Stock Option Plan*
21.1 Subsidiaries of MapQuest*
23.1 Consent of Independent Auditors
23.4 Consent of counsel (included in Exhibits 5.1 and 5.2)*
24.1 Power of Attorney (see page II-4)*
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
(b) Financial Statement Schedules.
Report of Independent Auditors
Schedule II: Valuation and Qualifying Accounts
Item 17. Undertakings
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, and will be governed by the final adjudication of such
issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act of 1933, the information omitted from
the form of prospectus as filed as part of the registration statement in
reliance upon Rule 430A and contained in the form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective, and (2) for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and this offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-1 TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
MOUNTVILLE, STATE OF PENNSYLVANIA, ON THE DAY OF FEBRUARY, 1999.
MAPQUEST.COM, INC.
By: _________________________________
Michael Mulligan Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Michael Mulligan and James Thomas
and each one of them, acting individually and without the other, as his or her
attorney-in-fact, each with full power of substitution, for him and her in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming
all that each of said attorneys-in-fact, or his substitute or substitutes may
do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
Signatures Title Date
/s/ Michael J. Mulligan Chief Executive February ,
- ------------------------------------- Officer (Principal 1999
Michael J. Mulligan Executive Officer)
and Chairman
/s/ James Thomas Chief Financial February ,
- ------------------------------------- Officer and Vice 1999
James Thomas President, Finance
and Administration
and Secretary
(Principal
Financial Officer
and Principal
Accounting Officer)
/s/ Robert McCormack Director February ,
- ------------------------------------- 1999
Robert McCormack
II-4
<PAGE>
Signatures Title Date
/s/ John Moragne Director February ,
- ------------------------------------- 1999
John Moragne
/s/ Dan Nova Director February ,
- ------------------------------------- 1999
Dan Nova
/s/ Carlo von Schroeter Director February ,
- ------------------------------------- 1999
Carlo von Schroeter
/s/ C. Richard Allen Director February ,
- ------------------------------------- 1999
C. Richard Allen
II-5
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
MapQuest.com, Inc.
We have audited the financial statements of MapQuest.com, Inc. as of
December 31, 1997 and 1998, and for each of the three years in the period ended
December 31, 1998, and have issued our report thereon dated February 18, 1999
(included elsewhere in this Registration Statement). Our audits also included
the financial statement schedule listed in Item 16(b) of this Registration
Statement. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Harrisburg, Pennsylvania
February 18, 1999
II-6
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
MapQuest.com, Inc.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------------ --------------------------------- ------------ -----------------
Additions
---------------------------------
Balance at Charged to Other
Beginning of Charged to Costs Accounts-- Deductions-- Balance at End of
Description Period and Expenses Describe Describe Period
----------- ------------ ---------------- ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1998:
Reserves and
allowances deducted
from asset
accounts:
Allowance for
uncollectible
accounts......... $407,136 $271,598 $209,008(1) $469,726
Year Ended December 31,
1997:
Reserves and
allowances deducted
from asset
accounts:
Allowance for
uncollectible
accounts......... $433,672 $262,388 $288,924(1) $407,136
Year Ended December 31,
1996:
Reserves and
allowances deducted
from asset
accounts:
Allowance for
uncollectible
accounts......... $263,171 $232,500 $ 61,999(1) $433,672
</TABLE>
- --------
(1) Uncollectible accounts written off, net of recoveries.
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
------- ----------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of MapQuest*
3.2 By-Laws of MapQuest*
4.1 Specimen common stock certificate*
Form of Opinion of Mayer, Brown & Platt as to legality of the
5.1 securities being issued*
5.2 Form of Opinion of Venable, Baetjer and Howard, LLP*
10.1 Cartographic Product Development, Publishing, Marketing and
Distribution Agreement, dated as of April 22, 1997, between
National Geographic Society, National Geographic Holdings,
Inc., and MapQuest.com, Inc.*
10.2 Employment Agreement, dated as of August 10, 1998, between
Michael Mulligan and MapQuest.com, Inc.
10.3 Employment Agreement, dated as of October 31, 1994, between
William Muenster and MapQuest.com, Inc.
10.4 MapQuest.com, Inc. 1995 Stock Option Plan
10.5 Amendment No. 1 to 1995 Stock Option Plan of MapQuest.com,
Inc.*
10.6 Amendment No. 2 to 1995 Stock Option Plan of MapQuest.com, Inc.
10.7 Amendment No. 3 to 1995 Stock Option Plan of MapQuest.com, Inc.
10.8 MapQuest 1999 Employee Stock Purchase Plan*
10.9 MapQuest 1999 Stock Option Plan*
21.1 Subsidiaries of MapQuest*
23.1 Consent of Independent Auditors
23.4 Consent of counsel (included in Exhibits 5.1 and 5.2)*
24.1 Power of Attorney (see page II-4)*
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of June
____, 1998, effective upon the resignation or separation of its current Chief
Executive Officer, and in no event later than August 10, 1998 by and between
Michael J. Mulligan ("Employee") and GeoSystems Global Corporation, a Delaware
corporation (the "Company").
RECITALS
A. The Company desires to have Employee's active services as Chief
Executive Officer of the Company in accordance with this Agreement.
B. The Company and Employee desire to enter into an Employment Agreement on
the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and in consideration of Employee's employment by the Company, the parties hereto
agree as follows:
1. Employment. The Company agrees to employ Employee as Chief Executive
Officer and Employee agrees to serve the Company as such, upon the terms and
conditions hereinafter set forth.
2. Duties. As Chief Executive Officer, Employee shall have responsibility
and authority for directing and managing the operations of the Company as may be
assigned to him by the Board of Directors within such guidelines, policies, and
directions as the Board of Directors may prescribe or direct, and shall perform
such duties and assume such responsibilities as the Board of Directors may
otherwise establish from time to time. Employee agrees that he will serve the
Company faithfully, diligently, and to the best of his abilities. Employee will
devote his full working time and creative energies to the performance of his
duties hereunder. Employee warrants that his employment by the Company will not:
(a) violate any non-disclosure agreements, covenants against competition or
other restrictive covenants made by Employee to or for the benefit of any
previous employer or partner, or (b) violate or constitute a breach or default
under any statute, law, judgment, order, decree, writ, injunction, deed,
instrument, contract, or permit to which Employee is a party or by which he is
bound. The Company acknowledges that Employee in his capacity as Chief Executive
Officer of the Company shall be entitled to all indemnification available to
officers of the Company under its Certificate of Incorporation, By-Laws, and the
Delaware Corporation Law, as in effect from time to time.
<PAGE>
3. Base Compensation. As compensation for all services rendered by Employee
to the Company, the Company shall pay to Employee the sum of $20,000.00 per
month, less any withholdings required by law ("Base Salary"). The Base Salary
shall be paid to Employee in equal, bi-monthly installments in accordance with
the regular payroll practices of the Company, and may be subject to annual
increases by the Board of Directors in its sole discretion.
4. Bonus. In addition to his Base Salary, Employee is eligible to earn
incentive compensation of up to $145,000.00 per year, based on objectives and
according to a plan to be mutually agreed to by Employee and the Board of
Directors from time to time. For calendar year 1998, Employee will be paid
incentive compensation of no less than $100,000.00. The bonus payment for 1998
will be payable at the time that the Company pays 1998 incentive compensation to
its employees who are eligible for incentive compensation. Bonus payments
subsequent to calendar year 1998 shall be paid at the time and in the manner
such payments are made to other eligible employees.
5. Employee Stock. Employee will be granted options to purchase 720,000
shares of common stock under the Company's 1995 Stock Option Plan (the "Plan"),
at an option exercise price of $1.00 per share. That certain Stock Option
Agreement, dated this date, between Employee and the Company (the "Stock Option
Agreement"), and the Plan will govern with respect to vesting, issuance, and
redemption and shall control over the terms of this or any other agreement
between the Employee and the Company, except that: (1) the stock will vest in
accordance with the following schedule:
16.67% at Employee's start date
16.67% at the end of year 1 of employment
16.67% at the end of year 2 of employment
33.33% at the end of year 3 of employment
16.67% at the end of year 4 of employment;
(2) in the event of an initial public offering ("IPO") (as defined in the Stock
Option Agreement), prior to the end of the third year of employment, 120,000
shares of the 240,000 shares vesting at the end of the third year of employment
will vest on the effective date of the IPO; (3) in the event Employee resigns
his employment within the first twelve (12) months of employment, the shares
vested at the time of his employment will be forfeited and he will relinquish
all claims to such shares; (4) in the event of a Change in Control (as defined
in Section 7(e) below), all shares will vest at the time of such change; (5) for
purposes of the Stock Option Agreement and the Plan, "Change in Control" shall
have the meaning set forth in Section 7(e) below; and (6) in the event
Employee's employment is terminated pursuant to Sections 7(b) or 7(e) below,
after one (1) year of employment, the shares will vest with Employee as if
Employee had continued employment through the end of the year in which Employee
was terminated, but not beyond.
-2-
<PAGE>
Employee understands that the vesting schedule is not a guarantee of continued
employment, and that the terms of the option are set forth specifically in the
Stock Option Agreement and the Plan.
6. Employee Benefits.
(a) Medical and Insurance Benefits. Employee will be entitled to receive
all employee benefits provided to employees of the Company generally from time
to time, including medical and dental (which plans will be comparable in
coverage and benefits to medical and dental plans maintained by companies of
similar size to the Company and in a similar geographic area), life insurance
and long-term disability, so long as and to the extent the same exist.
(b) Vacation, Sick Leave and Holidays. Employee shall be entitled to
vacation, sick leave and vacation in accordance with the policies of the Company
applicable to senior executives of the Company, as such policies are determined
by the Board of Directors from time to time in its discretion.
(c) 401(k). Employee shall be entitled to participate in a contributory
401(k) plan to be adopted by the Company in accordance with the plan and the
policies of the Company from time to time.
(d) Temporary Living Expenses. The Company agrees to pay reasonable
temporary living expenses during the period in which the Company's headquarters
are relocated to New York City, New York.
7. Termination Benefits.
(a) Employment At Will. Employee acknowledges that his employment shall be
"at will": either the Company or the Employee may terminate this Agreement and
Employee's employment at any time, with or without Cause (as defined in Section
7(c) below) in its or his sole discretion and without further liability
whatsoever, except as provided in this Section 7.
(b) Without Cause. The Company may terminate Employee's employment at any
time for whatever reason it deems appropriate or without reason. Provided that
such termination is without Cause (as defined in Section 7(c) below), the
Company agrees to pay Employee (i) his Base Salary and any earned bonus which
has been declared or earned pursuant to the mutually agreed upon plan
established in Section 4 and accrued through the date of such termination and
not theretofore paid to him and (ii) his base salary in equal monthly
installments, less any withholdings required by law, until the expiration of a
period of twelve (12) months from the effective date of such termination, and to
continue to provide Employee and his dependents with the health insurance
benefits provided to other employees at the Company, on the same basis that such
benefits are provided to other employees (including employer contributions),
until
-3-
<PAGE>
the expiration of a period of twelve (12) months from the date of such
termination. Rights and benefits of Employee under the benefit plans and
programs of the Company shall be determined in accordance with applicable law
and the provisions of such plans and programs. If the Employee terminates his
employment, the Company shall pay to the Employee his base salary accrued
through the date of such termination and not theretofore paid to him, along with
any bonus declared, prior to such termination, to the extent unpaid.
(c) With Cause. The Company may terminate Employee's employment at any time
for Cause. For purposes of this Agreement, "Cause" means gross negligence
willful misconduct, or other malfeasance by Employee in the performance of his
duties, Employee's commission of a felony or other offense involving moral
turpitude, or Employee's material breach of this Agreement, including without
limitation any material breach of Sections 9 through 12 hereof, inclusive, in
each case as determined by the Board of Directors in good faith and considering
applicable guidance or law in its discretion. In the event of such termination,
the Company shall pay to Employee his base salary accrued to the date of such
termination and not theretofore paid to him, along with any bonus declared or
earned, pursuant to the mutually agreed upon plan established in Section 4 prior
to such termination, to the extent unpaid. Rights and benefits of Employee under
the benefit plans and programs of the Company shall be determined in accordance
with applicable law and the provisions of such plans and programs.
(d) Resignation. If Employee resigns prior to the expiration of one (1)
year of employment, Employee will forfeit all vested stock options and will be
entitled only to his base salary through the date of termination. If Employee
resigns after the expiration of one (1) year of employment, Employee will be
entitled to the benefits in Section 7(c) above. Rights and benefits of Employee
under benefit plans and programs of the Company shall be determined under this
Section 7(d) in accordance with applicable law and the provisions of said plans
and programs.
(e) Change in Control. Employee may terminate his employment and receive
compensation as if the Company terminated him without Cause if there is a Change
in Control in the Company, unless the Company's successor has agreed to continue
to employ Employee on substantially similar terms and conditions. Employee is
entitled to any stock vesting contemplated in Section 5 in the event of a Change
in Control without regard to whether the Company's successor agrees to continue
to employ employee on substantially similar terms and conditions. For purposes
of this Agreement, "Change in Control" shall mean a change in control as defined
in the Company's 1995 Stock Option Plan, as amended.
(f) The provisions of this Section 7 are intended to be and are exclusive
and in lieu of any other rights or remedies to which Employee may otherwise be
entitled, either in law, tort, or contract, in the event of any termination of
Employee's employment. Employee shall not be entitled to any other benefits,
compensation, or
-4-
<PAGE>
other payments or rights upon termination other than those benefits and payments
set forth in paragraph (b), (c), (d) or (e), whichever is applicable.
8. Successors.
(a) Company's Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall be entitled to assume the rights and obligations of the Company under this
Agreement and shall agree to perform the Company's obligations under this
Agreement in the same manner and to the same extent as the Company would be
required to perform such obligations in the absence of a succession. For
purposes of this Agreement, the term "Company" shall include any successor to
the Company's business and/or assets which executes and delivers the assumption
agreement described in this subsection (a) or which becomes bound by the terms
of this Agreement by operation of law.
(b) Employee's Successors. The terms of this Agreement and all rights of
Employee hereunder shall inure to the benefit of, and be enforceable by,
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
9. Confidential Information.
(a) Employee acknowledges that the Confidential Information (as defined in
Section 9(b) below) relating to the business of the Company which Employee has
obtained or will obtain during the course of his association with the Company
and his performance under this Agreement are the property of the Company.
Employee agrees that he will not disclose or use at any time, either during or
after the term of his employment, any Confidential Information without the prior
written consent of the Board of Directors of the Company. Employee agrees to
deliver to the Company at the end of the term of his employment, or at any other
time that the Company may request, all memoranda, notes, plans, records,
documentation and other materials (and copies thereof) containing Confidential
Information relating to the business of the Company, no matter where such
material is located and no matter what form the material may be in, which
Employee may then possess or have under his control. If requested by the
Company, Employee shall provide to the Company written confirmation that all
such materials have been delivered to the Company or have been destroyed.
Employee shall take all appropriate steps to safeguard Confidential Information
and to protect it against disclosure, misuse, espionage, loss and theft.
(b) "Confidential Information" shall mean information which is not
generally known to the public and which is used, developed, or obtained by the
Company relating to the business of the Company including, but not limited to:
products or services; fees, costs and pricing structure; designs; analyses;
formulae; drawings; photographs; reports; computer software, including operating
systems, applications,
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<PAGE>
program listings, flow charts, manuals and documentation; data bases; accounting
and business methods; inventions and new developments and methods, whether
patentable or unpatentable and whether or not reduced to practice; all
copyrightable works; the customers of the Company and the Confidential
Information of any customer thereof; and all similar and related information in
whatever form. Confidential Information shall not include any information which
(i) was rightfully known by Employee prior to the term of his employment; (ii)
is publicly disclosed by law or in response to an order of a court or
governmental agency; (iii) becomes publicly available through no fault of
Employee or (iv) has been published in a form generally available to the public
prior to the date upon which Employee proposes to disclose such information.
Information shall not be deemed to have been published merely because individual
portions of the information have been separately published, but only if all the
material features comprising such information have been published in
combination.
10. Inventions and Patents. In the event that Employee, as a part of
Employee's activities on behalf of the Company, generates, authors or
contributes to any invention, new development or method, whether or not
patentable and whether or not reduced to practice, any copyrightable work, any
trade secret, any other Confidential Information, or any information that gives
the Company an advantage over any competitor, or similar or related developments
or information related to the present or future business of the Company
(collectively "Developments and Information"), Employee acknowledges that all
Developments and Information are the exclusive property of the Company. Employee
hereby assigns to the Company, its nominees, successors or assigns, all rights,
title and interest to Developments and Information. Employee shall cooperate
with the Company's Board of Directors to protect the interests of the Company in
Developments and Information. Employee shall execute and file any document
related to any Developments and Information requested by the Company's Board of
Directors including applications, powers of attorney, assignments or other
instruments which the Company's Board of Directors deems necessary to apply for
any patent, copyright or other proprietary right in any and all countries or to
convey any right, title or interest therein to any of the Company's nominees,
successors or assigns.
11. No Conflicts.
(a) During the term of his employment, Employee agrees that in his
individual capacity he will not enter into any agreement, arrangement or
understanding, whether written or oral, with any supplier, contractor,
distributor, wholesaler, sales representative, representative group or customer,
relating to the business of the Company, without the express written consent of
the Board of Directors of the Company.
(b) As long as Employee is employed by the Company, Employee agrees that he
will not, except with the express written consent of the Board of Directors of
the Company, become engaged in, render services for, or permit his name to be
used in connection with, any business other than the business of the Company,
any of its
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subsidiaries or any corporation or partnership in which the Company has an
equity interest.
12. Non-Competition and Non-Solicitation Agreements. Employee agrees with
the Company as follows;
(a) Until one (1) year following the termination of employment with the
Company, Employee shall not without the prior written approval of the Company,
directly or indirectly, under any circumstances whatsoever (i) own, manage,
operate, control or participate in the ownership, management, or control of, or
be connected with, whether as a partner, stockholder, director, officer or
principal of any business that is in competition with the business of the
Company as of the date of such termination (a "Competing Business") or (ii) be
employed or retained as an agent, employee or consultant or in any other
relation or capacity whatsoever by a Competing Business; except to the extent
the Company shall elect to extend the non-compete period to up to an additional
six (6) months by written notice to Employee not more than 90 days prior to the
expiration of the first (1st) year following termination. In the event of such
election, the Company shall pay to Employee one (1) month of base salary for
each month the Company continues to enforce this noncompetition restriction
after the first twelve (12) months of such restriction, up to a maximum of six
(6) additional months of non-compete payments.
(b) In addition, until one (1) year following termination of employment
with the Company, Employee shall not, directly or indirectly, solicit the
employment or engagement of the consulting or other services of any person who
shall then be employed by the Company or who shall have been employed by the
Company at any time within the then previous twelve (12) months.
(c) Employee acknowledges that compliance with the covenants contained in
this Section 12 and in Section 9 hereof are necessary to protect the value of
the business of the Company and that a breach of any such covenant would result
in irreparable and continuing damage for which there would be no adequate remedy
at law. Accordingly, Employee agrees that in the event of any breach of said any
such covenant, the Company shall be entitled to injunctive relief and to such
other and further relief as is proper under the circumstances. Employee agrees
to waive any requirement to post a bond.
(d) Employee agrees that these restrictions on competition and solicitation
shall be deemed to be a series of separate covenants not-to-compete and a series
of separate non-solicitation covenants for each state within the United States
and each country in the world, separate covenants not-to-compete for each area
of competition, and separate non-solicitation covenants with respect to each
employee of the Company. If any court of competent jurisdiction shall determine
any of the foregoing covenants to be unenforceable with respect to the term
thereof or the scope of the subject matter or geography covered thereby, such
remaining covenants shall nonetheless be
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<PAGE>
enforceable by such court against such other party or parties or upon such
maximum shorter term or within such maximum lesser scope as may be determined by
the court to be enforceable.
13. Miscellaneous Provisions.
(a) Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given (i)
when personally delivered, (ii) three (3) business days after deposit in U.S.
Mail, if mailed by U.S. registered or certified mail, return receipt requested,
or (iii) one (1) business day after the date of deposit with Federal Express or
similar overnight courier, freight prepaid. In the case of Employee, notices
shall be addressed to him for personal delivery at the office or at the home
address which he most recently communicated to the Company in writing or if
delivered by U.S. mail or courier, then to the home address which he most
recently communicated to the Company in writing. In the case of the Company,
notices shall be addressed to its corporate headquarters, to the attention of
its Corporate Secretary.
(b) Notice of Termination. Any termination by the Company or Employee shall
be communicated by a notice of termination to the other party hereto given in
accordance with paragraph (a) hereof. Such notice shall indicate the specific
termination provision in this Agreement relied upon.
(c) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by Employee and by an authorized officer of the Company (other than
Employee). No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.
(d) Entire Agreement. This Agreement shall supersede any and all
contemporaneous or prior agreements, representations or understandings (whether
oral or written and whether express or implied) between the parties with respect
to the subject matter hereof.
(e) Choice of Law. This Agreement will be governed and construed in
accordance with the laws of the State of New York, without regard to principles
of conflict of laws.
(f) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
(g) Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in New York,
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<PAGE>
New York, in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. Punitive damages shall not be awarded.
(h) No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this subsection (h) shall be void.
(i) Employment Taxes. All payments made pursuant to this Agreement will be
subject to withholding of applicable taxes.
(j) Assignment by Company. The Company may assign its rights under this
Agreement to an affiliate, and an affiliate may assign its rights under this
Agreement to another affiliate of the Company or to the Company. As used herein,
the term "Company" shall mean the Company and its subsidiaries. However, if the
Company assigns this Agreement without the prior written consent of the
Employee, such assignment shall be deemed a "Change in Control" as defined in
paragraph 7(e) above.
(k) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the date and year
first above written.
COMPANY: GEOSYSTEMS GLOBAL CORPORATION
By:
------------------------------
Name:
Title:
MICHAEL J. MULLIGAN
EMPLOYEE: /s/Michael J. Mulligan
---------------------------------
Name: Michael J. Mulligan
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<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of October
31, 1994 by and between William Muenster ("Employee") and GeoSystems Global
Corporation, a Delaware corporation (the "Company").
RECITALS
A. The Company desires to have Employee's active services as Chief
Operating Officer of the Company for the period set forth in this Agreement.
B. The Company and Employee desire to enter into an Employment Agreement on
the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and in consideration of Employee's continued employment by the Company, the
parties hereto agree as follows:
1. Employment. The Company agrees to employ Employee and Employee agrees to
serve the Company, upon the terms and conditions hereinafter set forth.
Employee agrees that this Agreement shall replace and supersede all other
agreements relating to the employment of Employee by the Company or R.R.
Donnelley & Sons Company ("Donnelley") entered into prior to the date hereof
between Employee and either the Company or Donnelley.
2. Duties. Employee agrees that he/she will serve the Company faithfully,
diligently and to the best of his/her ability during the Employment Term and
that he/she will devote his/her full-time efforts and attention to the business
of the Company, excluding reasonable vacation and sick leave in accordance with
Company policies. In the course of Employee's employment, Employee shall perform
the duties of Chief Operating Officer of the Company under the direction of the
Company's President.
3. Compensation. As compensation for the services rendered by Employee
under this Agreement, the Company shall pay to Employee a base salary of $6,875
per month ("Base Salary"), payable to Employee in equal bimonthly installments
during the Employment Term, subject to annual adjustments by the Board of
Directors in its sole discretion.
4. Bonus. In addition to his/her Base Salary, Employee shall be entitled
(i) to a bonus payable immediately in the amount of $10,000 (less applicable
withholding) and (ii) to participate in the Company's annual bonus program
hereafter, with the first bonus payable for and after the year ended December
31, 1995. The annual target bonus shall be payable as
<PAGE>
follows: (i) in the event that the Company achieves its annual budget (as
determined by management and the Board at the beginning of each fiscal year),
Employee shall be entitled to a bonus of 15% of base salary, and (ii) in the
event that the Company achieves further targets established by the Board,
Employee shall be entitled to an additional bonus of up to 15 % of base salary.
Employee agrees that to the extent Employee may from time to time be indebted to
the Company in connection with the purchase of securities of the Company, then
the lesser of (i) one-fifth of the aggregate sum if the initial principal
amounts of each such indebtedness to the Company, and (ii) one-half of the
annual bonus, (after applicable withholding) payable to Employee in any year
shall be applied immediately upon receipt by Employee to the payment of
principal and interest on such indebtedness.
5. Employee Benefits.
(a) Medical and Insurance Benefits. Employee will be entitled to receive
all employee benefits provided to employees of the Company and its subsidiaries
generally from time to time, including medical and dental (which plans will be
comparable in coverage and benefits to medical and dental plans maintained by
companies of similar size to the Company and in a similar geographic area), life
insurance and long-tern disability, so long as and to the extent the same exist;
provided, that in respect to each such plan Employee is otherwise eligible and
insurable at a commercially reasonable rate in accordance with the terms of such
plans.
(b) Vacation, Sick Leave and Holidays. Employee shall be entitled to
vacation, sick leave and vacation in accordance with the policies of the Company
and its subsidiaries as they exist from time to time, such policies to be
determined by the Board in good faith subsequent to the date hereof. Vacation
which is not used during any calendar year will not roll over to the following
year.
(c) 401(k). Employee shall be entitled to participate in a contributory
401(k) plan to be adopted by the Company as soon as is practicable (in the
determination of the Board acting in good faith) subsequent to the date hereof.
6. Employee Stock. Employee will be eligible to be granted stock options
under a stock option plan to be adopted by the Company (the "Plan"), upon the
approval of the Company's Board of Directors, in accordance with the grants
provided for in section 5.7 of the Stock Purchase Agreement dated October 31,
1994 by and among the Company, Donnelley, Trident Capital Partners Fund-I, L.P.,
Trident Capital Partners Fund-,I C.V., and various other parties. These options
will vest in five equal annual increments (assuming continuous service as an
employee of the Company), will be qualified as incentive stock options, will be
exercisable for shares of the Company's common stock at a purchase price of
$0.10 per share and will have a term of ten years. Employee understands that
this vesting schedule is not a guarantee of continued employment. The terms of
the option will be set forth with specificity in an option agreement and the
Plan.
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<PAGE>
7. Severance Benefits.
(a) Employee's employment shall be "at will." Either the Company or
Employee may terminate this Agreement and Employee's employment at any time,
with or without Business Reasons (as defined in Section 8(a) below), in its or
his/her sole discretion, upon two (2) weeks' written notice of termination,
provided that the Company may terminate the Agreement immediately upon notice to
Employee for Business Reasons as specified in Section 8(a).
(b) If the Company terminates Employee pursuant to this paragraph
involuntarily and without Business Reasons, or if Employee voluntarily
terminates his/her employment more than one year from the date hereof, then
Employee shall be entitled to the following: (i) salary and vacation accrued
through the Termination Date, (ii) any bonus declared with respect to Employee
prior to the Termination Date, to the extent unpaid, (iii) a severance payment
or payments in an aggregate amount equal to six months of base salary, which
severance shall be payable at the Company's option in one lump sum or in equal
monthly installments, (iv) to the extent COBRA shall be applicable to the
Company, continuation of group health plan benefits for a period of one (1) year
following the Termination Date if Employee makes the appropriate conversion and
payments, and (v) no further severance benefits or other compensation. All such
payments shall be subject to applicable tax withholding. At its option, the
Company may pay Employee two (2) weeks of additional compensation in lieu of
giving Employee the two (2) weeks notice as provided above or waiting two weeks
prior to accepting Employee's resignation. Notwithstanding the foregoing,
however, the Company shall not be required to pay the salary specified above for
any period following the Termination Date if Employee violates the
non-competition or non-solicitation agreements set forth in Section 13 hereof
during the period following the Termination Date.
(c) The Company may also terminate Employee at any time for Business
Reasons. If (i) Employee voluntarily terminates his/her employment within one
year of the date hereof, (ii) Employee's employment is terminated due to death
or Disability, or (iii) Employee is terminated involuntarily for Business
Reasons, then Employee shall be entitled to receive the following: (w) salary
and accrued vacation through the Termination Date only, (x) any bonus declared
with respect to Employee prior to the Termination Date, to the extent unpaid,
(y) to the extent COBRA shall be applicable to the Company, continuation of
group health plan benefits for a period of one (1) year following the
Termination Date if Employee makes the appropriate conversion and payments, and
(z) no further severance benefits or other compensation. All such payments shall
be subject to applicable tax withholding.
(d) The provisions of this Section 7 are intended to be and are exclusive
and in lieu of any other rights or remedies to which Employee or the Company may
otherwise be entitled, either at law, tort or contract, in equity, or under this
Agreement, in the event of any termination of Employee's employment. Employee
shall be entitled to no benefits, compensation
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<PAGE>
or other payments or rights upon termination of employment other than those
benefits expressly set forth in paragraph (b) or (c) of this Section 7,
whichever shall be applicable.
8. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:
(a) Business Reasons. "Business Reasons" means gross negligence, willful
misconduct or other willful malfeasance by Employee in the performance of
his/her duties, Employee's commission of a felony or other offense involving
moral turpitude, or Employee's material breach of this Agreement, including
without limitation any material breach of Sections 10 through 13 hereof,
inclusive.
(b) Disability. "Disability" shall mean that Employee has been unable to
perform his/her duties as an employee as the result of his/her incapacity due to
physical or mental illness, and such inability, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to Employee or Employee's legal
representative (such Agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at
least thirty (30) days written notice by the Company of its intention to
terminate Employee's employment. In the event that Employee resumes the
performance of substantially all of his/her duties hereunder before the
termination of his/her employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked.
(c) Termination Date. "Termination Date" shall mean (i) if this Agreement
is terminated on account of death, the date of death; (ii) if this Agreement is
terminated for Disability, the date specified in Section 8(b); (iii) if this
Agreement is terminated by the Company, two weeks following the date on which a
notice of termination is given to Employee, as provided in Section 7(a) (unless
Employee is being terminated for Business reasons, in which case the Termination
Date shall be the date on which the notice of termination is delivered to
Employee); (iv) if the Agreement is terminated by Employee, two weeks following
the date on which Employee delivers the notice of termination to the Company; or
(v) if this Agreement expires by its terms, then the last day of the term of
this Agreement.
9. Successors.
(a) Company's Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall be entitled to assume the rights and obligations of the Company under this
Agreement and shall agree to perform the Company's obligations under this
Agreement in the same manner and to the same extent as the Company would be
required to perform such obligations in the absence of a succession. For all
purposes under this Agreement, the term "Company" shall include any successor to
the Company's
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<PAGE>
business and/or assets which executes and delivers the assumption agreement
described in this subsection (a) or which becomes bound by the terms of this
Agreement by operation of law.
(b) Employee's Successors. The terms of this Agreement and all rights of
Employee hereunder shall inure to the benefit of, and be enforceable by,
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
10. Confidential Information.
(a) Employee acknowledges that the Confidential Information (as defined
below) relating to the business of the Company and its subsidiaries which
Employee has obtained or will obtain during the course of his/her association
with the Company and subsidiaries and his/her performance under this Agreement
are the property of the Company and its subsidiaries. Employee agrees that
he/she will not disclose or use at any time, either during or after the
Employment period, any Confidential Information without the written consent of
the Board of Directors of the Company. Employee agrees to deliver to the Company
at the end of the Employment period, or at any other time that the Company may
request, all memoranda, notes, plans, records, documentation and other materials
(and copies thereof) containing Confidential Information relating to the
business of the Company and its subsidiaries, no matter where such material is
located and no matter what form the material may be in, which Employee may then
possess or have under his/her control. If requested by the Company, Employee
shall provide to the Company written confirmation that all such materials have
been delivered to the Company or have been destroyed. Employee shall take all
appropriate steps to safeguard Confidential Information and to protect it
against disclosure, misuse, espionage, loss and theft.
(b) "Confidential Information" shall mean information which is not
generally known to the public and which is used, developed, or obtained by the
Company or its subsidiaries relating to the businesses of any of the Company and
its subsidiaries or the business of any customer thereof including, but not
limited to: products or services; fees, costs and pricing structure; designs;
analyses; formulae; drawings; photographs; reports; computer software, including
operating systems, applications, program listings, flow charts, manuals and
documentation; data bases; accounting and business methods; inventions and new
developments and methods, whether patentable or unpatentable and whether or not
reduced to practice; all copyrightable works; the customers of any of the
Company and its subsidiaries and the Confidential Information of any customer
thereof; and all similar and related information in whatever form. Confidential
Information shall not include any information which (i) was rightfully known by
Employee prior to the Employment Period; (ii) is publicly disclosed by law or in
response to an order of a court or governmental agency; (iii) becomes publicly
available through no fault of Employee or (iv) has been published in a form
generally available to the public prior to the date upon which Employee proposes
to disclose such information. Information shall not be deemed to have been
published merely because individual portions of the information have been
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<PAGE>
separately published, but only if all the material features comprising such
information have been published in combination.
11. Inventions and Patents. In the event that Employee, as a part of
Employee's activities on behalf of the Company, generates, authors or
contributes to any invention, new development or method, whether or not
patentable and whether or not reduced to practice, any copyrightable work, any
trade secret, any other Confidential Information, or any information that gives
any of the Company and its subsidiaries an advantage over any competitor, or
similar or related developments or information related to the present or future
business of any of the Company and its subsidiaries (collectively "Developments
and Information"), Employee acknowledges that all Developments and Information
are the exclusive property of the Company. Employee hereby assigns to the
Company, its nominees, successors or assigns, all rights, title and interest to
Developments and Information. Employee shall cooperate with the Company's Board
of Directors to protect the interests of the Company and its subsidiaries in
Developments and Information. Employee shall execute and file any document
related to any Developments and Information requested by the Company's Board of
Directors including applications, powers of attorney, assignments or other
instruments which the Company's Board of Directors deems necessary to apply for
any patent, copyright or other proprietary right in any and all countries or to
convey any right, title or interest therein to any of the Company's nominees,
successors or assigns.
12. No Conflicts.
(a) Employee agrees that in his/her individual capacity he/she will not
enter into any agreement, arrangement or understanding, whether written or oral,
with any supplier, contractor, distributor, wholesaler, sales representative,
representative group or customer, relating to the business of the Company or any
of its subsidiaries, without the express written consent of the Board of
Directors of the Company.
(b) As long as Employee is employed by the Company or any of its
subsidiaries, Employee agrees that he/she will not, except with the express
written consent of the Board of Directors of the Company, become engaged in,
render services for, or permit his/her name to be used in connection with, any
business other than the business of the Company, any of its subsidiaries or any
corporation or partnership in which the Company or any of its subsidiaries have
an equity interest.
13. Non-Competition and Non-Solicitation Agreements. Employee agrees with
the Company as follows:
(a) Until one (1) year following the Termination Date, Employee shall not
without the prior written approval of the Company, directly or indirectly, under
any circumstances whatsoever (i) own, manage, operate, control or participate in
the ownership,
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management, or control of, or be connected with, whether as a partner,
stockholder, director, officer or principal of any business that is in
competition with the business of the Company as of the date of such termination
(a "Competing Business") or (ii) be employed or retained as an agent, employee
or consultant or in any other relation or capacity whatsoever by a Competing
Business; provided that if Employee is terminated by the Company without
Business Reasons then the period of non-compete provided herein shall terminate
six (6) months following the termination date, except to the extent the Company
shall elect to extend the non-compete period to up to twelve (12) months
following the termination date by written notice to Employee not more than 90
days following the date of termination. In the event of such election, the
Company shall pay to Employee one month of base salary for each month the
Company continues to enforce this noncompetition restriction after the first six
months of such restriction, up to a maximum of six additional months of
non-compete payments.
(b) In addition, until two (2) years following the Termination Date,
Employee shall not, directly or indirectly, solicit the employment or engagement
of the consulting or other services of any person who shall then be employed by
the Company or who shall have been employed by the Company at any time within
the then previous twelve (12) months.
(c) Employee acknowledges that compliance with the covenants contained in
this Section 13 and in Section 10 hereof are necessary to protect the value of
the business of the Company and that a breach of any such covenant would result
in irreparable and continuing damage for which there would be no adequate remedy
at law. Accordingly, Employee agrees that in the event of any breach of said any
such covenant, the Company shall be entitled to injunctive relief and to such
other and further relief as is proper under the circumstances.
(d) Employee agrees that these restrictions on competition and solicitation
shall be deemed to be a series of separate covenants not-to-compete and a series
of separate non-solicitation covenants for each month within the specified
periods, separate covenants not-to-compete and non-solicitation covenants for
each state within the United States and each country in the world, separate
covenants not-to-compete for each area of competition, and separate
non-solicitation covenants with respect to each employee of the Company. If any
court of competent jurisdiction shall determine any of the foregoing covenants
to be unenforceable with respect to the term thereof or the scope of the subject
matter or geography covered thereby, such remaining covenants shall nonetheless
be enforceable by such court against such other party or parties or upon such
maximum shorter term or within such maximum lesser scope as may be determined by
the court to be enforceable.
14. Miscellaneous Provisions.
(a) Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given (i)
when personally delivered, (ii) three (3) business days after deposit in U.S.
Mail, if mailed by U.S. registered or certified mail, return receipt requested,
or (iii) one business day after the date of deposit with
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Federal Express or similar overnight courier, freight prepaid. In the case of
Employee, notices shall be addressed to him/her for personal delivery at the
office or at the home address which he/she most recently communicated to the
Company in writing or if delivered by U.S. mail or courier, then to the home
address which he/she most recently communicated to the Company in writing. In
the case of the Company, notices shall be addressed to its corporate
headquarters, to the attention of its Corporate Secretary.
(b) Notice of Termination. Any termination by the Company or Employee shall
be communicated by a notice of termination to the other party hereto given in
accordance with paragraph (a) hereof. Such notice shall indicate the specific
termination provision in this Agreement relied upon.
(c) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by Employee and by an authorized officer of the Company (other than
Employee). No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.
(d) Entire Agreement. This Agreement shall supersede any and all prior
agreements, representations or understandings (whether oral or written and
whether express or implied) between the parties with respect to the subject
matter hereof.
(e) Choice of Law. This Agreement will be governed and construed in
accordance with the laws of the State of New York as they apply to contracts
entered into and wholly to be performed within such state.
(f) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
(g) Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Philadelphia,
Pennsylvania, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction. Punitive damages shall not be awarded.
(h) No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this subsection (h) shall be void.
-8-
<PAGE>
(i) Employment Taxes. All payments made pursuant to this Agreement will be
subject to withholding of applicable taxes.
(j) Assignment by Company. The Company may assign its rights under this
Agreement to an affiliate, and an affiliate may assign its rights under this
Agreement to another affiliate of the Company or to the Company. As used herein,
the term "Company" shall mean the Company and its subsidiaries.
(k) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will constitute one
and the same instrument.
-9-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY: GEOSYSTEMS GLOBAL CORPORATION
By: /s/ Barry J. Glick
---------------------------------
Name: Barry J. Glick
Title: Pres.
EMPLOYEE: /s/ William Muenster
------------------------------------
Name:
-10-
<PAGE>
Exhibit 10.4
GEOSYSTEMS GLOBAL CORPORATION
1995 STOCK OPTION PLAN
I. THE PLAN
1. Purpose. The purpose of this Plan is to provide a means whereby
Geosystems Global Corporation (the "Company") may, through the grant of stock
options to Key Employees, as defined below, attract and retain persons of
ability as employees, and motivate such persons to exert their best efforts on
behalf of the Company or any present or future Subsidiary thereof. As used
herein, the term "Subsidiary" shall mean any corporation which at the time an
option is granted under this Plan qualifies as a subsidiary of the Company under
the definition of "subsidiary corporation" contained in Section 424(f) of the
Internal Revenue Code of 1954 (the "Code"), as amended from time to time, or any
similar provision hereafter enacted, except that such term shall not include any
corporation which is classified as a foreign corporation pursuant to Section
7701 of the Code. The term "Key Employees" shall mean those employees (including
officers who are also employees) of the Company or of any Subsidiary, who, in
the judgment of the Committee defined in Section 2 below, are considered
especially important to the future of the Company. The options to purchase
Common Stock, $0.001 par value, of the Company ("Stock") granted under the Plan
("Options") are intended to be either incentive stock options within the meaning
of Section 422 of the Code ("Incentive Stock Options") or options that do not
meet the requirements for Incentive Stock Options ("Nonqualified Stock
Options").
2. Administration of the Plan. The Plan shall be administered by the Stock
Option Committee (the "Committee") of the Board of Directors of the Company (the
"Board"). The function of the Committee may be performed by another standing
committee of the Company's Board or a portion thereof (provided that the members
are qualified hereunder) and all references hereunder to the Committee shall be
deemed to refer to such committee or portion thereof. The Committee shall
consist of not less than three members of the Board, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 (or any successor rule
or regulation) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Members of the Committee shall be appointed by the Board
and serve at the Board's pleasure. Each member of the Committee shall be a
member of the Board. Any vacancy occurring in the membership of the Committee
shall be filled by appointment by the Board. All decisions and selections by the
Committee pursuant to the provisions of the Plan shall be made by a majority of
its members. A member of the Committee who is eligible to receive a stock option
under the Plan shall not vote on any question relating specifically to that
member. Any decision reduced to writing and
<PAGE>
signed by all of the members shall be fully effective as if it had been
unanimously made at a duly held meeting of the Committee.
The Committee may interpret the Plan, prescribe, amend and rescind any
rules and regulations necessary or appropriate for the administration of the
Plan or for the continued qualification of any stock options granted to Key
Employees, and make such other determinations and take such other actions as it
deems necessary or advisable. Without limiting the generality of the foregoing,
the Committee may, in its discretion, treat all or any portion of any period
during which a Key Employee is on military leave or on an approved leave of
absence from the Company or a Subsidiary as a period of employment by the
Company or such Subsidiary, as the case may be, and not as an interruption of
employment, for purposes of maintaining the Key Employee's continuous status as
an employee and accrual of rights under any Options. Any interpretation,
determination or other action made or taken by the Committee shall be final,
binding and conclusive.
II. OPTIONS
1. Options. Subject to the provisions of the Plan, the Committee may grant
Options from time to time in accordance with provisions of this Article II.
2. Shares Subject to Options. Options may be granted by the Company from
time to time to Key Employees to purchase an aggregate of 657,000 shares of
Stock (subject to adjustment hereunder). The Company shall reserve said number
of shares for Options granted under the Plan subject to adjustment as provided
in Section 1 of Article VII. The shares issued upon the exercise of Options
granted under the Plan may be authorized and unissued shares or shares held by
the Company in its treasury. If any Options granted hereunder should expire or
become unexercisable for any reason without having been exercised in full, the
unpurchased shares which were subject to an Option shall, unless the Plan shall
have been terminated, be available for the grant of other Options under the
Plan.
3. Grant of Options to Key Employees. Subject to the provisions of the
Plan, and in particular this Article II, the Committee shall (i) determine and
designate from time to time those Key Employees to whom Options are to be
granted and the number of shares of Stock to be optioned to each such employee
and (ii) determine the time or times when and the manner in which each Option
shall be exercisable and the duration of the exercise period. Notwithstanding
the above, no option shall be granted pursuant to this Section 3 after the
expiration of ten (10) years
2
<PAGE>
from the effective date of the Plan as defined in Section 5 of Article IV
hereof.
Options need not be identical and in fixing the terms of any Option, the
Committee may take into account such individual factors bearing on the value of
an employee as it considers appropriate.
4. Terms and Conditions of Options. Each Option granted under the Plan to
a Key Employee pursuant to Section 3 hereof shall be evidenced by an agreement
with the Optionee (the "Option Agreement") in a form approved by the Committee.
Each Option and the Option Agreement shall be subject to the following express
terms and conditions and to such other terms and conditions as the Committee may
deem appropriate.
(a) Option Period. Subject to the terms of Section 3 hereof, each Option
Agreement shall specify the period for which the Option thereunder is granted
and exercisable, as determined by the Committee, and shall provide that the
Option shall expire at the end of such period. In no event shall any Incentive
Stock Option be exercisable after the termination of ten (10) years from the
date of grant provided, however, that if the exercise price is determined
pursuant to Section 4(c)(2) hereof, an Incentive Stock Option shall not be
exercisable after the expiration of five (5) years from the date of grant.
(b) Date of Grant. The date of grant of an Option to a Key Employee under
the Plan shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Notice of the determination shall be
given to each Key Employee to whom an Option is so granted within a reasonable
time after the date of such grant.
(c) Option Price.
(1) The option price per share of Stock shall be determined by the
Committee at the time any Option is granted and shall not be less than (A) in
the case of Incentive Stock Options, the fair market value of one share of Stock
on the date the Incentive Stock Option is granted or (B) in the case in the case
of Nonqualified Stock Options, the lesser of $0.10 per share or the fair market
value of one share of stock on the date the Nonqualified Stock Option is
granted. The Committee shall have full authority to determine the fair market
value of a share of stock. If the Stock is traded in the over-the-counter
market, then such fair market value shall be deemed to be the arithmetical mean
between the asked and the bid prices between the opening of the market and
closing on such date, as reported by any market makers in the Stock. If the
Stock is traded on an exchange, then such fair market value shall be deemed to
be the arithmetical mean of
3
<PAGE>
the high and low prices at which it is quoted or traded between the opening of
the market and closing on such day on the exchange on which it generally has the
greatest trading volume.
(2) If an Incentive Stock Option is granted to a Key Employee then
owning Stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary taking into account the
attribution rules of Section 424(d) of the Code, then the Committee shall set
the Incentive Stock Option price per share of Stock at 110% of the Incentive
Stock Option price determined pursuant to subsection (1) hereof.
(d) Exercise of Option. (1) Subject to subsection (2) below, the Option
Agreement may provide that the Option may be exercised in such installments as
the Committee may determine during the option period.
(2) In the event the aggregate fair market value (determined at the time
the option is granted) of stock with respect to which Incentive Stock Options
are exercisable hereunder for the first time by any Key Employee during any one
calendar year (under this Plan and all other Incentive Stock Option Plans of the
Company or any Subsidiary) shall exceed $100,000, such options shall be treated
in part as Incentive Stock Options and in part as Nonqualified Stock Options,
taking options into account in the order in which they were granted. In such a
case the Company may designate the shares of stock that are to be treated as
stock acquired pursuant to the exercise of an Incentive Stock Option by issuing
a separate certificate for such shares and identifying the certificate as
Incentive Stock Option shares in the stock transfer records of the Company.
(e) Exercise During Employment or Following Retirement, Termination,
Disability or Death. Unless otherwise provided in the terms of an Option
Agreement, an Option may be exercised by an Optionee only while the Optionee is
an employee of the Company or a Subsidiary and has maintained continuous status
as an employee since the date of the grant of the Option, except if the
Optionee's continuous employment ceases by reason of the Optionee's voluntary
termination of employment, retirement, involuntary termination due to staff
reduction or other internal reorganization, disability or death. If the
continuous employment of an Optionee ceases as a result of the Optionee's
voluntary termination of employment, retirement or involuntary termination due
to staff reduction or other internal reorganization, the Optionee may, but only
within a period of ninety (90) days beginning on the day following the date of
such termination of employment (and no later than the date the Option would
otherwise expire), exercise the option to the extent that Optionee was entitled
to exercise it at the date of such termination of continuous employment. If the
continuous employment
4
<PAGE>
of an Optionee is terminated as a result of the Optionee`s disability, such
Optionee may, but only within a one (1) year period from the date of such
termination of employment (and no later than the date that the Option would
otherwise expire), exercise the option to the extent the Optionee was entitled
to exercise the Option immediately prior to the Optionee's death, such Option of
the deceased Optionee may be exercised, but only within one (1) year from the
date of the Optionee's death (and no later than the date on which such Option
would otherwise expire), by the person or persons (including the Optionee's
estate) to whom the Optionee's rights under such Option shall have passed by
will or by the laws of descent and distribution. Termination of continuous
employment for any other reason, including termination for cause (under the
Company's then existing personnel policies), shall result in the immediate
cancellation of the Option.
The terms "continuous employment" and "continuous status as an employee"
mean the absence of any interruption or termination of employment with the
Company or with any present or future Subsidiary. Employment shall not be
considered interrupted in the case of transfers between the Company and any
Subsidiary or between Subsidiaries, nor in the case of any military leave or any
approved leave of absence which the Committee, in its discretion, treats as a
period of employment.
(f) Non-transferability. No Option granted to a Key Employee under the
Plan shall be transferable other than by will or by the laws of descent and
distribution. During the lifetime of the Optionee, an Option shall be
exercisable only by the Optionee.
(g) No Rights as Shareholder. No Optionee shall have any rights as a
shareholder with respect to any shares of Stock subject to the Optionee's Option
prior to the date of issuance to the Optionee of a certificate or certificates
for such shares.
(h) No Rights to Continued Employment. The Plan and any Option granted
pursuant to Section 3 of this Article II shall not confer upon any Key Employee
any right with respect to continuance of employment by the Company or any
Subsidiary nor shall they interfere in any way with the right of the Company or
any Subsidiary employing an Optionee to terminate the Optionee's employment at
any time.
5. Disposition of Shares by Key Employees. (1) With respect to shares of
Stock acquired as a result of the exercise of an Incentive Stock Option, any
disposition of such shares other than by will or by the laws of descent and
distribution before the later of the expiration of the two (2) year period
beginning on the date such Incentive Stock Option was granted or the expiration
of the one (1) year period beginning on the date of the transfer of such
5
<PAGE>
share pursuant to such exercise, will not be prohibited by the Plan, but may
disqualify the disposition from receiving favorable tax treatment under Section
421(a) of the Code.
(2) No share of Stock acquired as a result of the exercise of a
Nonqualified Stock Option granted under the Plan shall be subject to any
restrictions on transferability or otherwise on account of the Plan.
6. Code Requirements for Incentive Stock Options. Each Incentive Stock
Option Agreement shall contain such terms and provisions as the Committee may
determine to be necessary or desirable in order to qualify such Incentive Stock
Option as an Incentive Stock Option within the meaning of Section 422 of the
Code.
III. EXERCISE AND PURCHASE PROVISIONS
1. Limitation on Exercise of Options. Each Option granted under the Plan
shall provide that the option may not be exercised in whole or in part by the
Optionee for less than 100 shares of Stock unless only less than 100 shares of
Stock remain subject to the Option. In addition, an Option may not be exercised
for a fractional share.
2. Payment of Purchase Price upon Exercise of Option. Each Option granted
under the Plan shall provide that the purchase price of the shares as to which
an Option is exercised will be paid to the Company at the time of exercise,
either in cash, or in Stock already owned by the Optionee or to be acquired by
the Optionee upon exercise of the Option, and having a total fair market value,
as determined by the Committee, equal to the purchase price, or in a combination
of cash and Stock having a total fair market value, as so determined, equal to
the purchase price.
3. Procedure for Exercising Options. Each Option granted under the Plan
shall be exercisable at such times and under such conditions as shall be
permissible under the terms of the Plan and the Incentive Stock Option Agreement
or the Nonqualified Stock Option Agreement, as the case may be.
An option may be exercised, subject to the applicable provisions of this
Plan relative to its termination and limitations on its exercise, from time to
time only by (i) written notice of intent to exercise the Option with respect to
a specified number of shares and, contemporaneously with delivery of each such
notice, (ii) tender of the purchase price as provided in Section 2 hereof. Each
such notice and payment shall be delivered, or mailed by
6
<PAGE>
prepaid registered or certified mail, addressed to the Treasurer of the Company
at its executive offices.
In connection with the exercise of an option, the Optionee may complete
and sign an Option Exercise Form along with signed written instructions to the
Company instructing the Company to deliver the Stock to a broker or other party.
Upon receipt of such signed, completed Option Exercise Form, the written, signed
instructions, and full payment in cash for the Stock to be acquired, the Company
shall deliver the Stock to the broker or other party in accordance with the
written instructions.
IV. MISCELLANEOUS PROVISIONS
1. Adjustments in Event of Change in Common Stock. In the event of any
change in the Common Stock of the Company by reason of any stock dividend,
recapitalization, reorganization, merger, consolidation, split-up, combination,
or exchange of shares, or rights offering to purchase Common Stock at a price
substantially below fair market value, or of any similar change affecting the
Stock, the number and kind of shares which thereafter may be optioned and sold
under the Plan pursuant to Articles II and III hereof and the number and kind of
shares subject to Option in outstanding option agreements and the purchase price
per share thereof shall be appropriately adjusted consistent with such change in
such manner as the Committee may deem equitable to prevent substantial dilution
or enlargement of the rights granted to, or available for, participants in the
Plan.
2. Compliance With Other Laws and Regulations. The Plan, the grant and
exercise of Options thereunder and the obligations of the Company to sell and
deliver shares under such Options, shall be subject to all applicable federal
and state laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required. The Company shall not be required to issue
or deliver any certificates for shares of Stock prior to the completion of any
registration or qualification of such shares under any federal or state law, or
any ruling or regulation of any government body which the Company shall, in its
sole discretion, determine to be necessary or advisable.
3. Modification of Options. At any time and from time to time the Board of
the Company may authorize the modification of any outstanding Option, provided
no such modification, extension or renewal shall confer on the holder of said
Option any right or benefit which could not be conferred by the grant of a new
Option at such time or impair the Option without the consent of the holder of
the option.
7
<PAGE>
4. Amendment and Termination of the Plan. The Board of Directors of the
Company may amend, suspend or terminate the Plan except that no action of the
Board may increase (other than as provided in Section 1 hereof) the maximum
number of shares permitted to be optioned under the Plan, reduce the minimum
option price provided for in Section 4(c) of Article II or extend the period
within which Options may be exercised, unless such action of the Board shall be
subject to approval or ratification by the shareholders of the Company.
5. Effective Date of the Plan. The effective date of the Plan shall be the
date of its adoption by the Board of Directors of the Company, but such adoption
shall be subject to approval and ratification of a majority of the shareholders
of the Company entitled to vote within twelve (12) months of the date the Plan
is adopted.
6. Interpretation of Incentive Stock Options. The terms of this Plan which
relate to the grant of Incentive Stock Options to Key Employees are intended to
comply with rules and regulations regarding the qualification of Incentive Stock
Options under Section 422 of the Code, and the Plan shall be interpreted and
construed accordingly. Except with respect to certain disqualifying dispositions
of Stock acquired as a result of the exercise of an incentive Stock Option,
which are not prohibited by the Plan, if a provision of the Plan conflicts with
any such rule or regulation, then the provision of the Plan shall be void and of
no force and effect.
7. Options and Rights in Substitution for Stock Options Granted by Other
Corporations. Options may be granted under the Plan from time to time in
substitution for stock options held by employees of corporations who become or
are about the become key employee of the Company or a Subsidiary as the result
of a merger or consolidation of the employing corporation with the Company or a
Subsidiary, or the acquisition by the Company or a Subsidiary of the assets of
the employing corporation, or the acquisition by the Company or a Subsidiary of
stock of the employing corporation as the result of which it becomes a
Subsidiary. The terms and conditions of the Substitute Options so granted may
vary from the terms and conditions set forth in Section 4 of Article II of this
Plan to such extent as the Board of Directors at the time of grant may deem
appropriate to conform, in whole or in part, to the provisions of the options in
substitution for which they are granted.
8. Acceleration of Exercisability on Change in Control. Upon a Change in
Control of the Company, all Options theretofore granted and not previously
exercisable shall become fully exercisable to the same extent and in the same
manner as if they had become
8
<PAGE>
exercisable by passage of time in accordance with the provisions of the Plan
relating to periods of exercisability to termination of employment.
For purposes of the Plan, a "Change in Control" of the Company shall mean
a change in control of a nature that would be required to be reported in
response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act; provided that, without limitation, such a change in control shall
be deemed to have occurred if: (A) any "person" (as such term is used an Section
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, or
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding stock; (B) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board cases for any reason to constitute a majority thereof, unless the
election, or the nomination for election by the Company's shareholders, of each
new director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period; or (C) the
business of the Company for which the Optionee's services are principally
performed is disposed of by the Company pursuant to a partial or complete
liquidation of the Company, a sale of assets of the Company, or otherwise.
A Change in Control shall also be deemed to occur if (A) the Company
enters into an agreement, the consummation of which would result in the
occurrence of a Change of Control of the Company, (B) any person (including the
Company) publicly announces an intention to take or to consider taking actions
which if consummated would constitute a Change in Control of the Company, or (C)
the Board adopts a resolution to the effect that a potential Change in Control
of the Company for purposes of this Plan has occurred.
9. Successors and Assigns. This Plan shall be binding upon the legally
constituted successors of the Company. Upon the dissolution or merger of the
Company into a successor corporation, or any transaction resulting in the
transfer or exchange of shares involving the Company, this Plan shall be binding
upon and, if required, shall be adopted by the shareholders of said successor
entity. The obligations created under this Plan regarding adoption,
implementation and exercise under this Plan shall be binding upon said successor
entity.
9
<PAGE>
Exhibit 10.6
GEOSYSTEMS GLOBAL CORPORATION
1995 STOCK OPTION PLAN
AMENDMENT NO. 2
I. Purpose. Reference is made to that certain 1995 Stock Option Plan, as amended
by that certain Amendment No. 1 (collectively the "Plan") of GeoSystems Global
Corporation (the "Company"). To the extent not otherwise defined herein,
capitalized terms shall have the meaning accorded to them in the Plan. The Board
and the stockholders of the Company have determined it to be in the best
interest of the Company to amend certain provisions of the Plan, and in
accordance with applicable law, have adopted resolutions authorizing the
amendments set forth below. To the extent not expressly amended hereby, the Plan
shall remain in full force and effect, in accordance with its terms.
II. Amendment of Plan.
(a) The number of shares of Stock which may be granted by the Company from
time to time under Article II, Section 2 of the Plan (and all related Sections)
has been increased by 400,000 shares from 1,404,275 shares to a total of
1,804,275 shares.
(b) The definition of "Key Employee" set forth in the third sentence of
Article I, Section 1 of the Plan has been amended to include the phrase "and
consultants" immediately after the parenthetical clause.
(c) The second sentence of Article II, Section 4, paragraph (e) of the
Plan has been amended to delete the phrase "involuntary termination due to staff
reduction or other internal reorganization," and has had such deleted
<PAGE>
phrase replaced by "termination by the Company for any or no reason (other than
for cause as set forth below),". The final sentence of Article II, Section 4,
paragraph (e) of the Plan has been amended to delete the phrase "for any other
reason, including termination" and has had such phrase replaced by "by the
Company".
(d) A new paragraph (i) shall be inserted in Article II, Section 4
immediately after paragraph (h) as follows: "(i) Upon the termination of any
Optionee's employment with the Company any or no reason by either party, for a
period of ninety (90) days commencing upon the expiration of any applicable
exercise period under Article II, Section 4, paragraph (e) hereof, the Company
shall have an option to purchase all or any of the Stock then registered in the
Optionee's name (or in the name of any transferee or assignee) which the
Optionee received at any time as a result of the exercise of any Option under
the Plan (or otherwise issued in accordance with the Plan) (collectively, the
"Offered Stock"), at Fair Market Value, as defined below, payable in cash within
10 days of the exercise of such option. "Fair Market Value" for the Offered
Stock being purchased by the Company shall be determined by the Company's then
chief financial officer based on such assumptions, discounts and methodologies
as such officer determines in his sole discretion to be reasonable for such
calculation. The Fair Market Value for the Offered Stock determined in
accordance with this paragraph shall constitute the final and exclusive purchase
price of such offered Stock, binding for all purposes upon the Offeree."
<PAGE>
(e) The second paragraph of Article IV, Section 8 of the Plan has been
amended to delete the reference to "20%" in the tenth line thereof and has had
such deleted reference replaced by "50%".
III. Effect. The amendments to the Plan set forth in Article II, paragraphs (b)
and (c) of this Amendment shall have retroactive effect to the initial adoption
of the Plan shall remain in effect and at all times thereafter. The amendments
to the Plan set forth in Article II, paragraphs (a), (d) and (e) of this
Amendment shall be effective as of July 18, 1997, and shall remain in effect at
all times thereafter.
<PAGE>
Exhibit 10.7
GEOSYSTEMS GLOBAL CORPORATION
1995 STOCK OPTION PLAN
AMENDMENT NO. 3
I. Purpose. Reference is made to that certain 1995 Stock Option Plan (the
"Plan") of GeoSystems Global Corporation (the "Company"). To the extent not
otherwise defined herein, capitalized terms shall have the meaning accorded to
them in the Plan. The Board and the shareholders of the Company have determined
it to be in the best interest of the Company to amend certain provisions of the
Plan, and in accordance with applicable law, have adopted resolutions
authorizing the amendment set forth below. To the extent not expressly amended
hereby, the Plan shall remain in full force and effect, in accordance with its
terms.
II. Amendment of Plan. The number of shares of Stock which may be granted by the
Company from time to time under Article II, Section 2 of the Plan (and all
related Sections) has been increased by 504,476 shares from 1,804,275 shares to
a total of 2,308,751 shares, effective as of June 24, 1998.
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our reports dated February 18, 1999, in
the Registration Statement (Form S-1 No. 33- ) and related Prospectus of
MapQuest.com, Inc.
/s/ Ernst & Young LLP
Harrisburg, Pennsylvania
February 18, 1999
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 564
<SECURITIES> 0
<RECEIVABLES> 7,245
<ALLOWANCES> 470
<INVENTORY> 1,365
<CURRENT-ASSETS> 9,333
<PP&E> 5,278
<DEPRECIATION> 3,433
<TOTAL-ASSETS> 11,450
<CURRENT-LIABILITIES> 5,032
<BONDS> 0
26,186
0
<COMMON> 0
<OTHER-SE> (19,768)
<TOTAL-LIABILITY-AND-EQUITY> (14,736)
<SALES> 24,717
<TOTAL-REVENUES> 24,717
<CGS> 17,646
<TOTAL-COSTS> 17,646
<OTHER-EXPENSES> 10,524
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (3,155)
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<NET-INCOME> (3,155)
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