<PAGE>
THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 101(d) OF REGULATION
S-T.
As filed with the Securities and Exchange Commission on April 27, 1999
Registration Statement No. 333-72667
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
Amendment No. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
MapQuest.com, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 7374 363949110
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification No.)
of incorporation or organization) Classification Code Number)
</TABLE>
MapQuest.com, Inc. Michael J. Mulligan, Chief Executive Officer
3710 Hempland Road MapQuest.com, Inc.
Mountville, PA 17554 3710 Hempland Road
(717) 285-8500 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. Alexander D. Lynch, Esq.
Mayer, Brown & Platt Alan P. Blaustein, Esq.
1675 Broadway Brobeck, Phleger & Harrison LLP
New York, NY 10019 1633 Broadway
(212) 506-2500 New York, NY 10019
(212) 581-1600
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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)............................. $63,480,000 $17,648(3)
</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.
(3) Previously paid.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, 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 APRIL 27, 1999
[LOGO] MAPQUEST.COM(TM)
4,600,000 Shares
Common Stock
We are offering 4,600,000 shares of our common stock. This is our initial
public offering, and no public market currently exists for our shares. The
shares we are offering have been approved for quotation on the Nasdaq National
Market under the symbol "MQST." We anticipate that the initial public offering
price will be between $10.00 and $12.00 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 our common stock involves risks.
See "Risk Factors" beginning on page 8.
--------------
<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 690,000 shares of common stock to cover over-allotments.
--------------
BancBoston Robertson Stephens
Thomas Weisel Partners LLC
U.S. Bancorp Piper Jaffray
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>
[Back cover--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.
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
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Page
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 8
Forward-Looking Statements; Market Data.................................. 15
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Financial Data.................................................. 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 20
Business................................................................. 28
Management............................................................... 38
Optional Grants in Last Fiscal Year...................................... 43
Aggregated Stock Option Exercises in Fiscal 1998 and Fiscal Year-End
Option Values ......................................................... 44
Certain Transactions..................................................... 48
Principal Stockholders................................................... 51
Description of Capital Stock............................................. 53
Shares Eligible for Future Sale.......................................... 55
Underwriting............................................................. 57
Legal Matters............................................................ 59
Experts.................................................................. 59
Where You Can Find More Information...................................... 60
Index to Financial Statements............................................ F-1
</TABLE>
---------------------
MapQuest and GeoSystems are registered trademarks and service marks of
MapQuest.com. This prospectus contains other trade names, trademarks and
service marks of MapQuest.com and of other companies.
3
<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.
MapQuest
We are a leading online provider of mapping and destination information. By
effectively employing 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 February 1999, we delivered over 76.2 million maps and over 14.2 million
driving directions through our website and through third-party websites.
According to Media Metrix, Inc., in February 1999 mapquest.com had over 2.7
million unique visitors making it the number five 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 service offerings of their websites to attract and retain
users;
. Use outside sources to meet their map-generating and destination
information needs, thereby avoiding a significant portion of the
expenses normally associated with establishing and maintaining a map-
generating personnel and technology organization; and
. Provide potential customers with 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 the specific location 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-
generating software to provide mapping applications in these environments.
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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;
. Effectively employing 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 service offerings of their
websites and consumers seeking online map-related information.
The Offering
Common stock offered............ 4,600,000 shares
Common stock to be outstanding
after this offering............ 32,166,699 shares
Over-allotment option........... 690,000 shares
Use of proceeds................. We intend to use approximately $8.6 million
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.........................
Additional shares may be issued after this offering upon the exercise of
options and warrants.
You should be aware that we are permitted, and in some cases obligated, to
issue shares of common stock in addition to the common stock to be outstanding
after this offering. If and when we issue these shares, the percentage of
common stock you own may be diluted. The following is a summary of these
additional shares of common stock:
. 4,739,433 shares of common stock issuable upon exercise of outstanding
options, with a weighted average exercise price of $0.26 per share;
. 1,168,020 shares of common stock issuable upon exercise of outstanding
options, with an exercise price of the per share offering price of this
offering;
5
<PAGE>
. 2,314,611 shares of common stock issuable upon exercise of outstanding
warrants, with a weighted average exercise price of $0.69;
. 188,959 shares of common stock reserved for future issuance under
MapQuest's 1995 stock option plan;
. 3,645,000 shares of common stock that have been reserved for future
issuance under MapQuest's 1999 stock plan; and
. 1,755,000 shares of common stock that have been reserved for future
issuance under MapQuest's employee stock purchase plan.
Unless otherwise indicated, all information in this prospectus:
. reflects a 2.7-for-1 stock split of our common stock that will be
effected prior to the closing of this offering. This stock split of our
common stock will not impact the number of shares being offered and will
not have any impact on the purchasers of the shares in this offering;
. reflects the automatic conversion of all outstanding shares of our series
A preferred stock and series C preferred stock into 27,122,455 shares of
our common stock at the same time as the closing of this offering;
. reflects the redemption of all outstanding shares of our series B
preferred stock at the same time as the closing of this offering; and
. assumes that the underwriters do not exercise their option to purchase
additional shares after the closing of this offering.
--------------------
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 contained on our
website is not part of this prospectus.
6
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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." The pro forma as adjusted data
reflect the automatic conversion of all outstanding shares of our series A
preferred stock and series C preferred stock into 27,122,455 shares of our
common stock upon the closing of this offering. The pro forma as adjusted data
also reflect the sale of the common stock offered by this prospectus at an
assumed initial public offering price of $11.00 per share after deducting
underwriting discounts, estimated offering expenses payable by us, and the
redemption of all outstanding shares of our series B preferred stock. 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.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1996 1997 1998
------- -------- -------
<S> <C> <C> <C>
Statement of Operations Data:
Revenues
Business......................................... $ 7,020 $ 4,763 $ 6,536
Consumer......................................... 140 1,276 1,376
------- -------- -------
Total business and consumer revenues............ 7,160 6,039 7,912
Digital mapping.................................. 12,417 15,377 16,805
------- -------- -------
Total revenues................................. 19,577 21,416 24,717
Cost of revenues:
Business and consumer............................ 4,325 4,535 4,809
Digital mapping.................................. 7,995 10,767 12,837
------- -------- -------
Total costs of revenues........................ 12,320 15,302 17,646
------- -------- -------
Gross profit...................................... 7,257 6,114 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) (5,834) (667)
------- -------- -------
Net loss applicable to common stockholders........ $(1,801) $(13,433) $(3,822)
======= ======== =======
Basic and diluted loss per share.................. $ (8.84) $ (64.43) $(12.09)
Shares used to compute basic and diluted loss per
share........................................... 204 208 316
======= ======== =======
Pro forma basic and diluted loss per share........ $ (0.13)
=======
Shares used to compute pro forma basic and diluted
loss per share.................................. 27,439
=======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
---------------------
Pro Forma
Actual As Adjusted
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<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................... $ 564 $37,990
Working capital......................................... 4,301 41,727
Total assets............................................ 11,450 48,876
Cumulative redeemable preferred stock................... 8,332 --
Convertible redeemable preferred stock.................. 17,854 --
Stockholders' equity (deficit).......................... (19,768) 43,844
</TABLE>
7
<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. 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.
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 from which you can evaluate our business and prospects. As a
new entrant to the Internet business, we face risks and uncertainties relating
to our ability to successfully implement our business plan. If we are
unsuccessful in addressing these risks and uncertainties, our business, results
of operations and financial condition will be materially adversely affected.
We have a history of losses and we expect to continue to lose money in the
foreseeable future
We have not generated enough revenues to exceed the substantial amounts we
have spent to grow our business. We expect to continue to lose money for the
foreseeable future because we plan to continue to incur significant expenses.
Moreover, 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 to reflect slower revenue growth, 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.
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 a
short-term data license. Given the short terms 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. 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.
The success of our business depends on the accuracy of our products and
services
The accuracy of our products and services is substantially dependent on the
accuracy of data we license from third parties. We plan to update our
geographic databases periodically. However, in view of the complexity of
updating several databases, revising software and the need to obtain geocoding
for address data from third parties, we may not be able to perform these
updates as planned. This would adversely affect the accuracy of our products
and services.
The development of our brand is essential to our future success
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. In order to build our brand
awareness, we must succeed in our brand marketing efforts, provide high-quality
services and increase user traffic on mapquest.com. These efforts have
required, and will continue to require, significant
8
<PAGE>
expenses. 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,
our business, results of operations and financial condition will be adversely
affected.
Fluctuations in our operating results may negatively impact our stock price
Our quarterly operating results may fluctuate significantly in the future
due to a variety of factors that could affect our revenues or our expenses in
any particular quarter. 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.
You should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance. Factors that may affect our
quarterly results 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.
Seasonal factors may affect our operating results
Seasonality of our traffic on mapquest.com and our advertising revenues may
cause our revenues to fluctuate. Traffic levels on websites are typically lower
during the summer and year-end vacation and holiday 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. Our limited
Internet-related operating history and the rapid growth of our Internet
products and services makes it difficult to 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.
We will not be able to execute our business plan if the market for our Internet
products and services does not develop
To date, sales of our traditional and digital mapping products and services
have accounted for a significant portion of our revenues. However, our business
plan assumes that our Internet products and services will account for a
significant and growing portion of our revenues in the foreseeable future.
Given that 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, it is difficult to predict what pricing models, if any, for
Internet- related products and service will emerge as the industry standard.
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 Internet business is dependent on a small number of customers
In 1998, revenues from a limited number of business customers accounted for
a substantial portion of our Internet products and services revenues. The loss,
without replacement, of one or more of these customers could have a material
adverse effect on our revenues.
9
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We will not be able to execute our business plan if we cannot increase our
direct and indirect sales channels
In order to support our growth, we need to substantially increase our
direct and indirect sales channels. Our business would be harmed if we fail to
maintain an effective internal sales force. 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.
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.
We may be unable to protect our intellectual property rights and we may be
liable for infringing the intellectual property rights of others
If we fail to adequately protect our proprietary rights, third parties may
infringe or misappropriate our ownership of our intellectual property and this
could erode our market position and our operating results.
Currently we are a defendant in two pending litigations involving
allegations of infringements of third-party patents by our technologies. 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 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."
We may not be able to compete successfully
Competition could result in reduced margins on our products and services,
loss of market share or less user traffic to our website. 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.
We will only be able to execute our business plan if use of the Internet grows
Our business would be adversely affected if Internet usage does not
continue to grow. Internet usage may be inhibited for any of the following
reasons:
. the Internet infrastructure may not be able to support the demands
placed on it or its performance and reliability may decline as usage
grows;
10
<PAGE>
. 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.
The performance of mapquest.com is critical to our business and our reputation
Any system failure, including 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.
Qwest does not guarantee that our Internet access will be uninterrupted, error
free or secure. 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. 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.
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.
We may not be able to hire and retain qualified employees
Our future success depends on our 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 may not be able to successfully manage our expansion
In order to execute our business plan, we must grow significantly. 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.
11
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We are dependent 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. The departure of any of our officers or key employees
could materially adversely affect our ability to implement our business plan.
In addition, 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.
We may not be able to execute our business plan if we are not able to expand
internationally
In order to execute our business plan, we must expand our business
internationally. To date, we have limited experience in marketing our products
and services internationally, and we cannot predict our success in these
international markets. Our plans to expand internationally 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.
We may not be able to successfully introduce 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, 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.
We may not be able to adapt as Internet technologies and customer demands
continue to evolve
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.
We are susceptible to breaches of online commerce security
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 credit card numbers
and other proprietary information. The misappropriation of credit card numbers
or other proprietary personal information or the purchase of products through
the fraudulent use of credit cards could expose us to a risk of loss or
litigation and possible liability from the vendors of our products or from
cardholders themselves.
12
<PAGE>
We are susceptible to breaches of database security
A party who is able to circumvent our security measures could
misappropriate proprietary database information or cause interruptions in our
operations. As a result 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.
Regulatory and legal uncertainties could harm our business
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. 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. Please see "Business--Government Regulation and Legal
Uncertainties."
We would lose revenues and incur significant costs if our systems or material
third-party systems are not Year 2000 compliant
The failure of our internal systems, or any material third-party systems,
to be Year 2000 compliant would have a material adverse effect on our business,
results of operations and financial condition. Although we believe that each of
our material systems is Year 2000 compliant, we do not yet know whether our
internal system, as a whole, is Year 2000 compliant. We are also contacting our
third-party vendors, licensors and providers of hardware, software and services
regarding their Year 2000 readiness. Their failure to be compliant would
adversely affect our ability to deliver our service. Please see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000."
We cannot predict our future capital needs and we may not be able to secure
additional financing
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, you may experience significant dilution of your 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. 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 not be able to successfully make acquisitions of or investments in other
companies
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. We have no present understanding or agreement
relating to any acquisition of or investment in another company or its
business.
13
<PAGE>
Future sales of our common stock may negatively affect our stock price
Following the offering, we will have a large number of shares of common
stock outstanding and available for resale beginning at various points in time
in the future. The market price of our common stock could decline as a result
of sales of a large number of shares of our common stock in the market
following this offering, or the perception that such sales could occur. These
sales also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate. Please see "Shares
Eligible for Future Sale."
Our executive officers, directors and existing stockholders will have the
ability to exercise significant control over us
Our executive officers and directors and entities affiliated with them
will, in the aggregate, beneficially own approximately 82.0% 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 negatively affect
our stock price. Please see "Principal Stockholders."
You will suffer immediate and substantial 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 or warrants to purchase common stock are exercised,
there will be further dilution. Please see "Dilution."
Our management will have 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.
14
<PAGE>
FORWARD-LOOKING STATEMENTS; MARKET DATA
Many statements made in this prospectus under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere are forward-
looking statements that are not based on historical facts. Because these
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements, including those
discussed under "Risk Factors."
This prospectus contains market data related to MapQuest and the Internet.
This market data includes projections that are based on a number of
assumptions. The assumptions include that:
. no catastrophic failure of the Internet will occur;
. currency exchange fluctuations may occur;
. the number of people online and the total number of hours spent online
will increase significantly over the next five years;
. the value of online advertising dollars spent per online user hour will
increase;
. the download speed of content will increase dramatically; and
. Internet security and privacy concerns will be adequately addressed.
If any one or more of the foregoing assumptions turns out to be incorrect,
actual results may differ from the projections based on these assumptions. The
failure of these markets to grow at these projected rates may have a material
adverse effect on MapQuest's business, results of operations and financial
condition, and the market price of MapQuest's stock.
15
<PAGE>
USE OF PROCEEDS
The net proceeds to MapQuest from the sale of the shares offered by this
prospectus are estimated to be $45.8 million ($52.8 million if the over-
allotment option is exercised in full) at an assumed initial public offering
price of $11.00 per share and after deducting the underwriting discount and
estimated offering expenses payable by MapQuest. The principal purposes of this
offering are to obtain additional capital, to create a public market for the
common stock and to facilitate future access by MapQuest to public securities
markets.
MapQuest intends to use approximately $8.6 million of the net proceeds to
redeem the 1,398,835 outstanding shares of MapQuest's series B preferred stock.
MapQuest intends to use the remaining net proceeds to execute its business
plan. As part of this plan, MapQuest expects to increase its sales and
marketing efforts by hiring additional internal sales personnel and by
increasing its promotional and advertising spending. MapQuest estimates that
its capital expenditures will be approximately $4.0 million in 1999, which is
expected to be used for technical infrastructure improvements and for the
expansion of MapQuest's office space. 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.
16
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1998, the capitalization
of MapQuest on an actual basis, on a pro forma basis to reflect the automatic
conversion of all outstanding shares of series A preferred stock and series C
preferred stock into 27,122,455 shares of common stock upon the closing of this
offering, and on a pro forma as adjusted basis to reflect the sale of 4,600,000
shares offered by this prospectus at an assumed initial public offering price
of $11.00 per share, after deducting the underwriting discount and the
estimated offering expenses payable by MapQuest, and the redemption of the
series B preferred stock. 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>
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 and pro forma; no shares issued and
outstanding pro forma as adjusted........... $ 8,332 $ 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 and 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 and pro forma as adjusted............. 11,595 -- --
Notes receivable for convertible preferred
stock........................................ (291) -- --
Stockholders' Equity (Deficit) --
Preferred stock, par value $0.01 per share.
2,650,000 shares authorized, no shares
issued and outstanding, actual, pro forma
and pro forma as adjusted................... -- -- --
Common stock, par value $0.001 per share.
20,000,000 shares authorized, 336,028 shares
issued and outstanding, actual; 27,458,483
shares issued and outstanding pro forma; and
32,058,483 shares issued and outstanding pro
forma as adjusted........................... -- 27 32
Notes receivable for common stock............. -- (291) (291)
Additional paid-in capital.................... 140 18,263 64,011
Retained deficit.............................. (19,908) (19,913) (19,908)
-------- ------- -------
Total stockholders' equity (deficit).......... (19,768) (1,914) 43,844
-------- ------- -------
Total capitalization........................ $ 6,418 $ 6,418 $43,844
======== ======= =======
</TABLE>
17
<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 $6.2 million, or
$0.23 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. Pro forma net tangible book value is
equal to 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 $11.00 per share, after deducting the underwriting discounts,
estimated offering expenses payable by MapQuest, and the redemption of the
series B preferred stock, the pro forma net tangible book value of MapQuest as
of December 31, 1998 would have been $43.7 million, or $1.36 per share. This
represents an immediate increase in net tangible book value of $1.13 per share
to existing stockholders and an immediate dilution of $9.64 per share to new
investors purchasing shares at the initial public offering price. The following
table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price............................ $11.00
Pro forma net tangible book value as of December 31, 1998....... $.23
Pro forma increase in net tangible book value attributable to
new investors................................................. 1.13
----
Pro forma net tangible book value per share after this offering.. 1.36
------
Pro forma dilution per share to new investors.................... $ 9.64
======
</TABLE>
The following table summarizes on a pro forma basis, the total number of
shares of common stock purchased from MapQuest, the total consideration paid to
MapQuest and the average price per share paid by existing stockholders and by
new investors, based upon the number of shares of common stock outstanding as
of December 31, 1998 and assuming conversion of shares of preferred stock.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ----------------------Price-Per
Number Percent Amount Percent Share
---------- ------- ------------ ------------------
% $ % $
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 27,458,483 85.7 16,499,676 24.6 1.60
New Investors................ 4,600,000 14.3 50,600,000 75.4 11.00
---------- ----- ------------ ------- -----
Total...................... 32,058,483 100.0 67,099,676 100.0 2.09
========== ===== ============ ======= =====
</TABLE>
If the underwriters' over-allotment is exercised in full, the number of
shares held by new investors will increase to 5,290,000, or 16.2% of the total
shares of common stock to be outstanding after this offering.
18
<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. For an explanation of the methods used to determine the number of
shares used to compute historical and pro forma basic and diluted loss per
share see Note 7 to the Financial Statements. Pro forma as adjusted data give
effect to the completion of this offering and the application of the net
proceeds from this offering. Basic and diluted earnings (loss) per share
amounts are not presented for 1994; MapQuest was not an independent entity
until October 31, 1994. In addition, there was no common stock outstanding from
October 31, 1994 to December 31, 1994.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- -------- --------
(In thousands, except per share data)
<S> <C> <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 5,243
Product development... 642 1,395 2,619 5,048 2,955
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................. (4,190) 544 (1,276) (7,599) (3,155)
Provision for income
taxes................. -- 20 -- -- --
------- ------- ------- -------- --------
Net income (loss)....... (4,190) 524 (1,276) (7,599) (3,155)
Less preferred stock
dividends and
accretion............. (10) (458) (525) (5,834) (667)
------- ------- ------- -------- --------
Net income (loss)
applicable to common
stockholders.......... $(4,200) $ 66 $(1,801) $(13,433) $ (3,822)
======= ======= ======= ======== ========
Basic earnings (loss)
per share............. $ -- $ 0.79 $ (8.84) $ (64.43) $ (12.09)
Diluted earnings (loss)
per share............. $ -- $ 0.00 $ (8.84) $ (64.43) $ (12.09)
Shares used to compute
basic earnings (loss)
per share............. -- 84 204 208 316
Shares used to compute
diluted earnings
(loss) per share...... -- 19,313 204 208 316
Pro forma basic and
diluted loss per
share................. $ (0.13)
========
Shares used to compute
pro forma basic and
diluted loss per
share................. 27,439
========
<CAPTION>
December 31,
----------------------------------------------------------
Pro Forma
1994 1995 1996 1997 1998 as adjusted
------- ------- ------- -------- -------- -----------
(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 $37,990
Working capital....... 5,687 6,066 4,085 7,460 4,301 41,727
Total assets.......... 9,169 9,601 9,526 13,221 11,450 48,876
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) 43,844
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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. Beginning in 1991, MapQuest introduced map-generating products and
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 high-traffic websites offering users
a wide range of information and services on their websites, which are commonly
referred to as portal 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. MapQuest's Enterprise
Server is designed to provide mapping and routing capability to high volume
websites. 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 a 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. Typically, MapQuest completes the
installation service in less than a month from the signing of a contract with a
customer. As part of MapQuest's Enterprise Server, MapQuest licenses its data
and sub-licenses 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,
MapQuest has entered into revenue sharing arrangements 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. The percentage-of-completion method measures the number of
labor hours incurred to date as a percentage 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 from 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
20
<PAGE>
30.5% 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 likely. The average
term of MapQuest's advertising contracts is between one to two months. MapQuest
may guarantee its advertisers a pre-set level of impressions on mapquest.com.
Impression refers to a delivery of an advertisement to a user. 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 number of labor hours incurred to date as a
percentage of 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. With respect to the sale of mapping
products, MapQuest is paid negotiated amounts, depending on volume, from
retailers and distributors, subject to minimum sales and 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 Server 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.
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.
21
<PAGE>
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 Atlas. 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 lines 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. This increase was 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. These expense
reductions included a reduction in personnel, decreased travel expenses and
lower spending for sales promotions involving trade shows and public relations.
These expense reduction efforts were undertaken as MapQuest revised its
business strategy. 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 the expense reduction efforts described in the
preceding paragraph 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.
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.
22
<PAGE>
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. 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.
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. The increase was 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 resulting from expense reduction
efforts as MapQuest revised its business strategy.
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.
23
<PAGE>
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.
Selected Unaudited Quarterly
Results of Operations
The following table sets forth selected unaudited quarterly statement of
operations data for each of 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 1,530
Product development.... 1,143 1,633 1,138 1,134 877 813 728 537
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 61 52 23 14 8 9
Other income............ 49 118 74 26 47 70 117 10
------ ------- ------- ------- ------ ------ ------ -------
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 number of employees, as it
24
<PAGE>
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 technology, to
create, introduce and enhance its products and services offerings, to fund
increased sales and marketing expenses and to enter into new strategic
agreements. To the extent that these 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--Fluctuations in our operating
results may negatively impact our stock price."
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.
MapQuest's days sales outstanding in accounts receivable, calculated on a
quarterly basis, were 86 days and 87 days for the fourth quarter ended December
31, 1997 and 1998, respectively. However, due to revenues fluctuating on a
quarter-to-quarter basis, average days sales outstanding in accounts receivable
may periodically exceed 90 days. The average collection period is a result of
the payment practices of some of MapQuest's customers.
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. 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. See Note 14 to Financial Statements.
MapQuest has a revolving demand credit facility with First Union Bank, N.A.
in the amount of $5.0 million 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 $5.0 million 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
25
<PAGE>
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, 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 completed a preliminary assessment of its
information technology systems, which includes but is not limited to, the
hardware and software necessary to provide and deliver mapquest.com. MapQuest
is continuing to perform assessments of its non-information technology systems,
which include many of the building and office equipment and systems. To date,
MapQuest's assessment has consisted of the following steps:
. establishing a Year 2000 Committee in the third quarter of 1998
consisting of managers from all relevant functional areas of the
company;
. identifying and evaluating all software and hardware upon which
MapQuest is dependent;
. contacting third-party vendors of hardware, software and services,
including database providers that MapQuest utilizes;
. contacting material non-information technology systems and service
providers;
. developing and formalizing procedures to implement necessary remedial
measures; and
. assessing the need for and developing a business contingency plan.
As of the end of the first quarter of 1999 MapQuest has performed the
following:
. the Committee has reviewed all functional areas of MapQuest and has
identified various systems and software programs that are not Year
2000 compliant;
. 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;
. MapQuest is continuing to upgrade and test all other hardware and
software used in its operations;
. MapQuest's hosting service provider, Qwest, has stated that it has
established a dedicated Year 2000 Program Office to address the
compliance functions of its affected systems and is actively preparing
its systems for the Year 2000;
. 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 providers;
. Management is continuing the process of working with its hardware and
software providers to assure that MapQuest is prepared for the Year
2000; and
. MapQuest is currently assessing its non-IT systems.
26
<PAGE>
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.
27
<PAGE>
BUSINESS
Overview
MapQuest is a leading online provider of mapping and destination
information. By effectively employing 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 February 1999, MapQuest delivered
over 76.2 million maps and over 14.2 million driving directions through its own
website and through third-party websites. According to Media Metrix, Inc., in
February 1999 mapquest.com had over 2.7 million unique visitors, making it the
number five 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 the Internet 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 effectively employ 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.
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.
28
<PAGE>
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 service offerings to promote and extend
usage among existing and new users. Many of these sites have expanded their
websites 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 these expanded service offerings on a cost-effective basis. MapQuest
believes that businesses will increasingly seek to outsource products and
services to expand the service offerings 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
location 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 service
offerings 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 service offerings of their websites to attract and retain
users;
. Use outside sources to meet their map-generating and destination
information needs, thereby avoiding a significant portion of the
expenses normally associated with establishing and maintaining a map-
generating personnel and technology organization; and
. Provide potential customers with information regarding which of a
business' multiple locations is closest to the potential customer.
MapQuest's online products and services enable consumers to:
. Receive maps and destination information on a real-time basis based on
specific location 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.
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<PAGE>
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-generating 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 business and consumer 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 features 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
generate increased 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 use consumer-provided information to provide advertisers with the ability
to base their advertising and promotions on a consumer's geographic
information.
Use Existing Integrated Geographic Data as a Platform. MapQuest intends to
develop new products and services by effectively employing 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 a variety of data formats.
Pursue International Opportunities. MapQuest believes that significant
opportunities exist to expand 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 service offerings of their websites
and consumers seeking online map-related information.
30
<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.
. Enables 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 location
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 and weather
information 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
. 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.
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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 five 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.
32
<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 Retail/Services
-------------------- ---------------
American Automobile Association Blockbuster
American Express Border's Group
Avis Cybermeals
Bass Hotel and Resorts Home Depot
Best Western Kinko's
Budget Rent-A-Car Sears
Galileo International
Hertz Publishers/Advertising Agencies
Republic Industries -------------------------------
Ryder Transportation Services Classical Atlas
Sabre Group (Travelocity) DDB Needham
Sierra On-Line Harte Hanks
McGraw-Hill
Media Modem Media . Poppe Tyson
----- R.R. Donnelley
Denver Post
Los Angeles Times Real Estate
National Geographic -----------
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
Geographical Data Technologies ("GDT"). Data covering Canada is supplied by
Desktop 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.
33
<PAGE>
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 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. In addition, the information supplied by MapQuest on
mapquest.com is available for free through other websites.
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
34
<PAGE>
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, 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.
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.
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.
35
<PAGE>
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 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--We may not be able to successfully manage 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, approximately 11,600 square feet in Mount Joy,
Pennsylvania under a three-year lease expiring December 2000, and approximately
4,200 square feet in New York, New York under a seven-year lease expiring
January 2006. MapQuest intends to expand its sales and marketing staff and
therefore may require additional facilities in the foreseeable future.
36
<PAGE>
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 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.
37
<PAGE>
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, Chairman and
Director
*James Thomas.................... 48 Chief Operating Officer, Chief
Financial Officer, Chief Accounting
Officer, Treasurer and Secretary
*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, Assistant
Treasurer and Assistant Secretary
Robert McCormack (1)............. 59 Director
John Moragne (2)................. 42 Director
Daniel Nova (2).................. 37 Director
Carlo von Schroeter (1).......... 35 Director
C. Richard Allen................. 45 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 Financial Officer of MapQuest since July
1995 and as Chief Operating 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.
38
<PAGE>
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 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., a private equity investment
firm. Mr. McCormack serves on the boards of directors of Illinois Tool Works,
Inc. and DeVry, 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 a voting agreement between
MapQuest and some of MapQuest's stockholders which will be terminated upon the
closing of this offering.
John Moragne has served as a director of MapQuest since November 1994 and
was Chairman of the board of directors of MapQuest from November 1994 until
July 1997. Since 1993, Mr. Moragne has been a managing director of Trident
Capital, Inc., the general partner of Trident Capital, L.P., a private equity
investment firm. Mr. Moragne serves on the boards of directors of Daou Systems,
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 a voting agreement between MapQuest and
some of MapQuest's stockholders which will be terminated upon the closing of
this offering.
Daniel Nova has served as a director of MapQuest since July 1997. Since
August 1996, Mr. Nova has served as a general partner of Highland Capital
Partners, a venture capital firm. Previously, he was a general partner of
CMG@Ventures from January 1995 to August 1996 and a Senior Associate at Summit
Partners from June 1991 to January 1995. Mr. Nova is a director of eToys, an
online retailer of toys, Lycos, Inc., an online portal and several private
companies. Mr. Nova received a Bachelor of Science in Computer Science and
Marketing with honors from Boston College and a Masters in Business
Administration from Harvard Business School. Mr. Nova was elected to the board
of directors pursuant to a voting agreement between MapQuest and some of
MapQuest's stockholders which will be terminated upon the closing of this
offering.
39
<PAGE>
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 a voting agreement between
MapQuest and some of MapQuest's stockholders which will be terminated upon the
closing of this offering.
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 is the
nominee of the National Geographic Society to the board of directors pursuant
to an agreement between MapQuest and the National Geographic Society which will
be modified upon the closing of this offering so as to terminate the National
Geographic Society's right to nominate a director to the board of directors.
Please see "Certain Transactions--National Geographic Alliance" for a
description of this agreement.
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
The members of the board of directors of MapQuest are divided into three
classes, each of whose members will serve for a staggered three-year term. Upon
the expiration of the term of a class of directors, directors in that class
will be elected for three-year terms at the annual meeting of stockholders in
the year in which their term expires. 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.
Compensation Committee Interlocks and Insider Participation
Pursuant to a voting agreement which will be terminated upon the closing of
this offering, 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.
40
<PAGE>
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 failure to act in good faith in the best interests of 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; or
. any transaction from which the director derives an improper personal
benefit.
MapQuest's bylaws provide that MapQuest will 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.
41
<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 $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
--------------- Securities
Salary Bonus Underlying All Other
Name and Principal Position ($) ($) Options Compensation
--------------------------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Michael Mulligan,
Chief Executive Officer (1).... 94,769 100,000 1,944,000 --
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(2) 94,500 --
Michael Nappi, Vice President of
Business Solutions............. 107,508 69,814(3) 243,000 --
Barry Glick, Former Chief
Executive Officer (4).......... 131,256 -- -- 56,041(5)
</TABLE>
- --------
(1) 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.
(2) Consists of a $23,177 bonus accrued in 1997 and paid in 1998 and a $5,000
sales bonus earned and paid in 1998.
(3) Reflects sales commissions paid to Mr. Nappi.
(4) Mr. Glick served as MapQuest's Chief Executive Officer prior to Mr.
Mulligan's appointment and received salary payments for the period January
1, 1998 through September 30, 1998.
(5) Represents payments made in connection with Mr. Glick's voluntary
termination of employment. See "Certain Transactions--Other Transactions."
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 performance goals set by
the board of directors. Mr. Ingerman also received options to purchase 270,000
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 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 135,000 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.
42
<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 (1)
------------------------------------------- -----------------------
Percent of
Total
Number of Options
Securities Granted to Exercise
Underlying Employees Price
Options in Fiscal Per Expiration
Name Granted Year (2) Share Date 5% 10%
---- ---------- ---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael Mulligan (3).... 1,944,000 67.9% $0.37 8/10/08 $452,351 $1,146,347
James Thomas............ -- -- -- -- -- --
William Muenster........ -- -- -- -- -- --
James Hilliard.......... 54,000 1.9 0.37 2/1/08 12,565 31,843
40,500 1.4 11.00(4) 12/30/08 280,173(4) 710,012(4)
Michael Nappi........... 81,000 2.8 0.37 2/1/08 18,848 47,764
162,000 5.7 11.00(4) 12/30/08 1,120,690(4) 2,840,049(4)
Barry Glick............. -- -- -- -- -- --
</TABLE>
- --------
(1) 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 Securities and
Exchange 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.
(2) Based on options to purchase an aggregate of 2,863,620 shares of common
stock granted to MapQuest employees during the year ended December 31,
1998.
(3) 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.
(4) The exercise price of these options will be the initial public offering
price in this offering. For purposes of calculating the potential
realizable value, the exercise price is assumed to be $11.00 per share.
43
<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(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael Mulligan............ 324,064 1,619,936 $3,444,680 $17,219,311
James Thomas................ 202,769 312,905 2,208,282 3,382,957
William Muenster............ 224,940 287,977 2,451,351 3,109,660
James Hilliard.............. 47,250 155,250 513,050 1,226,950
Michael Nappi............... 16,200 253,800 177,600 979,400
Barry Glick................. 508,914 -- 5,567,382 --
</TABLE>
- --------
(1) 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 $11.00 per share, less the
applicable exercise price per share, multiplied by the number of shares
underlying such options.
Employment Agreements
William Muenster Employment Agreement. In October 1994, MapQuest entered
into an employment agreement with Mr. Muenster providing for:
. an initial base salary of $82,500, subject to annual increases at the
discretion of MapQuest's board of directors;
. incentive compensation of an immediately payable bonus of $10,000 and
the right to participate in MapQuest's annual bonus program;
. an annual bonus of 15% of his base salary if MapQuest achieves its
annual budget; and
. an additional bonus of up to 15% of his base salary for any other
target that the board of directors establishes.
If MapQuest terminates Mr. Muenster's employment without cause or if he
voluntarily terminates his employment, he is entitled to receive severance
benefits equal to:
. any salary and bonus earned through the date of his termination;
. base salary for the six-month period after the date of his
termination; and
. health plan benefits for one year following the date of his
termination.
If Mr. Muenster is terminated by MapQuest for cause, he is entitled to
receive:
. his base compensation;
. all earned and unpaid bonus compensation through the termination date
of his employment; and
. health plan benefits for one year following the date of his
termination.
In addition, Mr. Muenster has agreed to confidentiality, non-competition and
non-solicitation provisions.
44
<PAGE>
Michael Mulligan Employment Agreement. On August 10, 1998, MapQuest entered
into an employment agreement with Mr. Mulligan providing for:
. an initial base salary of $240,000, subject to annual increases at the
discretion of MapQuest's board of directors; and
. incentive compensation of an immediately payable bonus of $145,000 per
year, based on objectives and according to a plan to be agreed by Mr.
Mulligan and MapQuest's board of directors.
If MapQuest terminates Mr. Mulligan's employment without cause, he is
entitled to receive severance benefits equal to:
. any salary and bonus earned through the date of his termination; and
. health insurance benefits for one year following the date of is
termination.
If Mr. Mulligan is terminated by MapQuest for cause or if he resigns
following the first anniversary of his employment, he is entitled to receive:
. his base salary; and
. all earned and unpaid bonus compensation through his termination date.
In addition, Mr. Mulligan has agreed to confidentiality, non-competition and
non-solicitation provisions.
In addition, MapQuest granted Mr. Mulligan options to purchase 1,944,000
shares of common stock at an exercise price of $0.37 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. All of Mr. Mulligan's options will vest immediately
in the event of the takeover of MapQuest by another person or corporation.
Employee Benefit Plans
1995 Stock Option Plan
An aggregate of 6,233,627 shares are reserved for issuance under the 1995
stock option plan. MapQuest may grant stock options under the 1995 stock option
plan to its employees and officers and consultants. The board of directors
selects the individuals to whom options are granted and specifies the terms of
the 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 or stock options that do not qualify as incentive stock
options. As of December 31, 1998, options to purchase an aggregate of 4,847,650
shares of common stock had been granted, at a weighted average exercise price
of $0.26 per share and options to purchase an aggregate of 645,570 shares of
common stock had been granted, at an exercise price equal to the price per
share in this offering. Since December 31, 1998, MapQuest has granted options
to purchase an aggregate of 522,450 shares of common stock at an exercise price
equal to the price per share of this offering. Options to purchase 1,484,954
shares of common stock will vest and become exercisable on the closing of this
offering.
Incentive stock options granted under the 1995 stock option plan may not be
exercised more than 10 years after the date of grant. If an optionee leaves
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, if an optionee desires to exercise an option, the optionee must
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. The exercise price of nonqualified stock
options cannot be less than the lesser of $0.04 per share or the fair market
value of the common stock as of the date of the stock option grant. An optionee
may pay the exercise price in cash or in shares of MapQuest's common stock
having a total fair market value equal to the aggregate exercise price.
45
<PAGE>
The 1995 stock option plan provides for adjustments if a recapitalization
or other change in the common stock of MapQuest dilutes the rights of stock
option plan participants. If any person, directly or indirectly, acquires
securities of MapQuest representing 50% or more of the voting power of MapQuest
or other specified events constituting a change of control, each outstanding
option automatically vests and becomes fully exercisable.
Employee Stock Purchase Plan
Concurrently with this offering, MapQuest will establish an employee stock
purchase plan under which a total of 1,755,000 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 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 designated by the Board of Directors may
participate in the purchase plan. The purchase plan will permit 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. 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. An employee's participation ends on the employee's
termination of employment with MapQuest. The purchase plan will terminate in
2009 unless sooner terminated by MapQuest's Board of Directors.
1999 Stock Plan
At the closing of this offering, the board of directors of MapQuest will
adopt a 1999 stock plan. MapQuest has reserved 3,645,000 shares of common stock
for the 1999 stock plan. Pursuant to the 1999 stock plan, MapQuest may grant
any combination of the following to employees, officers and directors of
MapQuest and its subsidiaries:
. stock options;
. stock appreciation rights;
. restricted or unrestricted share awards;
. phantom stock; and
. performance awards.
However, incentive stock options may only be granted to employees of
MapQuest. The plan will be administered by a committee appointed by the board
of directors. The committee will select the individuals to whom options are
granted and will specify the terms of the options.
. Incentive Stock Options. These options may not be exercised more than 10
years after the date of grant. The exercise price must be at least equal
to the fair market value of MapQuest's common stock on the date of grant.
The purchase price of the shares issued upon exercise of these options
may be paid in cash or shares of common stock having a total fair market
value equal to the aggregate purchase price.
. Non-Qualified Stock Options. These options may not be exercised more than
10 years after the date of grant. The exercise price will be determined
by the stock option plan committee. The purchase price of shares issued
upon exercise of these 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. These rights may be granted on a free-standing
or tandem basis. The term of exercise will be determined by the board of
directors, but in no event will be more than 10 years
46
<PAGE>
from the date of grant. These rights 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 exercise 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.
. Phantom Stock, Restricted Shares and Performance Awards. These grants and
awards may be made at the discretion of the committee. The method of
payment of the exercise price will be determined by the committee and may
include a combination of cash and common stock having a fair market value
equal to the aggregate exercise price.
The 1999 stock plan will provide for adjustments if a recapitalization or
other change in the common stock of MapQuest which dilutes the rights of 1999
stock plan participants.
401(k) Plan
MapQuest has a tax-qualified employee savings 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. Eligible employees may
defer up to 15% of their pre-tax earnings, subject to the Internal Revenue
Service's annual contribution limit. The MapQuest 401(k) plan permits
additional discretionary matching contributions by MapQuest on behalf of all
participants in the MapQuest 401(k) plan in an amount determined by MapQuest.
The MapQuest 401(k) plan is intended to qualify under Section 401 of the
Internal Revenue Code of 1986 so that contributions by employees or by MapQuest
to the MapQuest 401(k) plan, and income earned on plan contributions, are not
taxable to employees until withdrawn from the plan, and so that contributions
by MapQuest, if any, will be deductible by MapQuest when made.
47
<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 1,321,033 shares of series B
preferred stock, which included accrued Series B preferred stock dividends. 77
Capital Corporation sold 220,798 shares of series C preferred stock. The
aggregate sale price for the shares sold in these transactions was $7 million
and the aggregate redemption value of all of the shares of series A preferred
stock, series B preferred stock and series C preferred stock sold was
$11,899,354, which included accrued series B preferred stock dividends.
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. During 1998, MapQuest paid $16,597 to R.R.
Donnelley & Sons Company, a then stockholder. 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.
48
<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. ("National Geographic"),
entered into a Cartographic Product Development, Publishing, Marketing and
Distribution Agreement in April 1997 (the "National Geographic Agreement")
which established a five-year alliance, commencing May 1997, to pursue
commercial opportunities involving mapping products and services using
trademarks and copyrighted materials of National Geographic. MapQuest is
authorized to be the primary, and in limited cases, exclusive, commercial
publisher of National Geographic mapping products and services, including
products such as maps, globes, road atlases, reference atlases, historical
atlases, and map guide products which are distributed other than by National
Geographic to its members or in promotion to prospective members. 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 954,147 shares of common stock with an
exercise price of $1.04 per share. The warrants were valued at $0 on the date
of grant using the "Black Scholes" option pricing model.
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 automatically extends provided that:
.MapQuest has not elected to terminate;
.MapQuest has not breached the National Geographic Agreement;
. 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
.minimum royalties have been negotiated in accordance with the National
Geographic Agreement.
Warrants
As of December 31, 1998, warrants to purchase 2,314,611 shares of common
stock were outstanding at a weighted-average exercise price of $0.69 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 dilutive issuances of securities at
prices below the then existing warrant exercise price. Set forth below is a
summary of the outstanding warrants.
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 406,709 shares of MapQuest's
common stock at an exercise price of $1.30 per share. The warrant is
exercisable prior to July 2002.
49
<PAGE>
National Geographic Warrant. In April 1997, in connection with the National
Geographic Agreement, MapQuest issued National Geographic warrants (the
"National Geographic Warrants") to purchase 954,147 shares of common stock at
an exercise price of $1.04 per share. The warrants were valued at $0 on the
date of grant using the "Black Scholes" option pricing model. 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. If National Geographic has exercised the National Geographic
Warrant prior to MapQuest terminating the National Geographic Agreement due to
a breach of the agreement by National Geographic, MapQuest has the option to
purchase the shares of common stock issued upon exercise of the warrant for a
period of 60 days after the termination of the National Geographic Agreement at
a purchase price equal to the lesser of $1.77 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
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 522,231
warrants to purchase common stock at an exercise price of $0.004 per share. The
warrants are exercisable prior to April 30, 2008.
Executive Search Firm Warrants. Effective September 22, 1998, MapQuest
issued to Ramsey/Beirne Associates a warrant to purchase 41,266 shares of
MapQuest common stock in partial consideration for executive search firm
services Ramsey/Beirne Associates performed. The warrant is exercisable at any
time prior to September 22, 2003 at an exercise price of $1.30 per share.
50
<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.
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 April 7, 1999, are
treated as outstanding. These shares, however, are not treated as outstanding
for the purpose of computing the percentage ownership of any other person.
Except as indicated in the footnotes to this table the following individuals
have sole voting and investment power with respect to the shares they
beneficially own.
<TABLE>
<CAPTION>
Beneficially Owned Securities
-----------------------------------------------------------------------
Number of Shares Percentage of Shares
Beneficially Owned Includes Beneficially Owned
Total --------------------------- ------------------------
Number of Shares Securities Securities
Beneficially Underlying Underlying Before After
Name (1) Owned Warrants Options Offering Offering
- -------- ---------------- ------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Trident Capital Partners
Fund - I, L.P.(1)..... 9,684,802 352,755 34.7% 29.8%
Trident Capital Partners
Fund - I, C.V.(1)..... 1,915,844 69,781 6.9 5.9
Robert
McCormack(2)(3)..... 11,600,646 422,536 41.4 35.6
John Moragne(2)(3).... 11,600,646 422,536 41.4 35.6
Rockwell Schnabel(3).. 11,600,646 422,536 41.4 35.6
Stephen Hall(3)....... 11,600,646 422,536 41.4 35.6
Donald Dixon(3)....... 11,600,646 422,536 41.4 35.6
Weston Presidio Capital
II, L.P.(4)........... 6,844,480 223,826 24.6 21.1
Carlo von
Schroeter(2)(5)..... 6,844,480 223,826 24.6 21.1
Michael Cronin(5)..... 6,844,480 223,826 24.6 21.1
Michael Lazarus(5).... 6,844,480 223,826 24.6 21.1
James McElwee(5)...... 6,844,480 223,826 24.6 21.1
Philip Halperin(5).... 6,844,480 223,826 24.6 21.1
Highland Capital
Partners III Limited
Partnership(5)........ 6,570,698 214,873 23.7 20.3
Highland Entrepreneurs'
Fund III, L.P.(5)..... 273,780 8,953 1.0 0.9
Daniel Nova(2)(7)..... 6,844,478 223,826 24.6 21.1
Robert Higgins(7)..... 6,844,478 223,826 24.6 21.1
Paul Maeder(7)........ 6,844,478 223,826 24.6 21.1
Wycliffe
Grousbeck(7)........ 6,844,478 223,826 24.6 21.1
Michael Mulligan ....... 958,608 648,064 3.4 2.9
James Thomas ........... 803,767 4,770 515,675 2.9 2.6
William Muenster ....... 806,393 4,770 512,915 2.9 2.6
James Hilliard ......... 162,000 162,000 0.6 0.5
Michael Nappi .......... 108,000 108,000 0.4 0.3
C. Richard Allen(2)(8).. 954,147 954,147 3.3 2.8
Barry Glick ............ 778,912 508,912 2.8 2.4
Directors & Executive
Officers as a group
(fifteen persons) .... 30,084,185 1,833,877 2,678,317 94.4 82.0
</TABLE>
51
<PAGE>
- --------
(1) The address of each of Trident Capital Partners Fund - I, L.P. and Trident
Capital Partners Fund - I, C.V. is 2480 Sand Hill Road, Suite 100, Menlo
Park, California 94025.
(2) Director of MapQuest.
(3) Includes 9,684,802 shares held by Trident Capital Partners and 1,915,844
shares held by Trident Capital Partners Fund--I, C. V. Messrs. McCormack,
Moragne, Schnabel, Hall and Dixon are officers 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., and therefore may be considered
to share beneficial ownership of the shares held by each of Trident Capital
Partner Fund-I, L.P. and Trident Capital Partners Fund-I, C.V. Messrs.
McCormack, Moragne, Schnabel, Hall and Dixon disclaim beneficial ownership
of shares held by Trident Capital, Inc. and its affiliates, except to the
extent of their pecuniary interests, if any.
(4) The address of Weston Presidio Capital II, L.P. is One Federal Street, 21st
Floor, Boston, Massachusetts 02110.
(5) Includes 6,844,480 shares held by Weston Presidio Capital II, L.P. Messrs.
Cronin, Lazarus, McElwee, von Schroeter and Halperin are the general
partners of Weston Presidio Capital Management II, L.P. the general partner
of Weston Presidio Capital II, L.P. and therefore may be considered to
share the beneficial ownership of the shares held by Weston Presidio
Capital II, L.P. Messrs. Cronin, Lazarus, McElwee, von Schroeter and
Halperin disclaim beneficial ownership of these shares, except to the
extent of their pecuniary interests, if any.
(6) The address of each of Highland Capital Partners III, L.P. and Highland
Entrepreneurs' Fund III, L.P. is Two International Place, Boston,
Massachusetts 02110.
(7) Includes 6,570,698 shares held by Highland Capital Partners III Limited
Partnership and 273,780 shares held by Highland Entrepreneur's Fund III,
L.P. Messrs. Higgins, Maeder, Nova and Grousbeck are the general partners
of Highland Management Partners III, L.P., the general partner of Highland
Capital Partners III Limited Partnership, and the members of HEF III,
L.L.C., the general partner of Highland Entrepreneurs' Fund III, L.P. and
therefore may be considered to share the beneficial ownership of the shares
held by each of Highland Capital Partners III, Limited Partnership and
Highland Entrepreneurs' Fund III, L.P. Messrs. Higgins, Maeder, Nova and
Grousbeck disclaim beneficial ownership of these shares, except to the
extent of their pecuniary interests if any.
(8) Includes 954,147 shares held by National Geographic Holdings, Inc., a
wholly-owned indirect subsidiary of National Geographic Society. Mr. Allen
disclaims beneficial ownership of these shares, except to the extent of his
pecuniary interest, if any. The address of National Geographic Holdings,
Inc. is 1145 17th Street, N.W., Washington, DC 20036.
52
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Following this offering, MapQuest will have the authority to issue an
aggregate of 105,000,000 shares of capital stock, consisting of 100,000,000
shares of common stock, par value $0.001 per share, and 5,000,000 shares of
preferred stock, par value $0.01 per share.
Common Stock
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 if and
when declared by MapQuest's board of directors out of assets legally available
for the payment of dividends, subject to the 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 after 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
Following 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 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. 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. 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 27,122,455 shares of
common stock and the holders of 954,147 warrants to purchase shares of common
stock will be entitled to have their shares registered under the Securities Act
of 1933. 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 that 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
MapQuest is eligible to use the form. All registration rights are subject to
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 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, which MapQuest will be after
the offering, 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
53
<PAGE>
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.
Annual meetings of stockholders will 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 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 is determined by the board of directors. The size
of the board of directors is currently six members and is divided into three
classes of directors serving staggered three-year terms. The directors will 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 (1) a majority of the
directors then in office, (2) a sole remaining director, or (3) the holders of
a majority of the voting power present and entitled to vote at a meeting of
stockholders.
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 for liability for:
. any failure to act in good faith in the best interests of MapQuest 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; or
. 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
The common stock has been approved for quotation on the Nasdaq National
Market under the trading symbol "MQST."
Transfer Agent and Registrar
The transfer agent and registrar for the common stock will be American
Securities Transfer & Trust Company, Denver, Colorado.
54
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for the common
stock, and MapQuest cannot predict 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
32,166,699 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 4,600,000 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 of 1933, may only be sold in compliance with the limitations described
below. The remaining 27,566,699 shares of common stock will be deemed
"restricted securities" as defined under Rule 144. Restricted securities may be
sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144, 144(k) or 701 promulgated under
the Securities Act, which rules are summarized below. Subject to the lock-up
agreements described below and the provisions of Rules 144, 144(k) and 701,
additional shares will be available for sale in the public market as follows:
<TABLE>
<CAPTION>
Number of
Shares Date
---------- ----
<S> <C>
674,770 After the date of this prospectus
129,924 After 90 days from the date of this prospectus
26,762,005 After 180 days from the date of this prospectus
(subject, in some cases, to volume limitations)
</TABLE>
In general, under Rule 144, as currently in effect, a person, including an
affiliate, who has beneficially owned shares for at least one year is entitled
to sell, within any three-month period commencing 90 days after the date of
this prospectus, a number of shares that does not exceed the greater of (1) 1%
of the then outstanding shares of common stock (approximately 321,667 shares
immediately after this offering) or (2) 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 selling 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 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 5,907,453
shares of common stock are outstanding, of which 3,443,438 will be exercisable
concurrent with this offering (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. Upon the
closing of this offering, 2,314,611 shares of common stock will be issuable
upon the exercise of outstanding warrants.
55
<PAGE>
MapQuest's directors and officers and certain stockholders who hold
30,363,386 shares and options in the aggregate, and the holders of warrants to
purchase 2,273,346 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 purchased as part of the directed share program in connection with this
offering) 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 27,122,455 shares of MapQuest's outstanding common stock
and the holders of 954,147 warrants to purchase shares of 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., Thomas Weisel Partners LLC, U.S. Bancorp
Piper Jaffray Inc. 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. ..............................
Thomas Weisel Partners LLC.......................................
U.S. Bancorp Piper Jaffray Inc. .................................
Volpe Brown Whelan & Company, LLC................................
-----------
Total.......................................................... 4,600,000
===========
</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 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 690,000
additional shares of common stock at the same price per share as MapQuest will
receive for the 4,600,000 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 4,600,000 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
4,600,000 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 net proceeds to MapQuest will be approximately
$ million, $ million and $ million, respectively.
Directed Share Program
At the request of MapQuest, the underwriters have reserved up to 460,000
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>
Thomas Weisel Partners LLC
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners has co-managed six public offerings of
equity securities and has acted as an underwriter in an additional seven public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with MapQuest or any of MapQuest's officers, directors or
controlling persons, except with respect to its contractual relationship with
MapQuest pursuant to the underwriting agreement entered into in connection with
this offering.
Indemnity
The Underwriting Agreement contains covenants of indemnity among the
underwriters and MapQuest against 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, including those 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 limited
exceptions, not to engage in particular activities without the prior written
consent of BancBoston Robertson Stephens Inc. Specifically they have agreed 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. 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 limited exceptions:
. 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;
. 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 or 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
. 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.
58
<PAGE>
Stabilization. The representatives of the underwriters have advised
MapQuest that, pursuant to Regulation M under the Securities Act of 1933,
particular 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.
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. Certain
other legal matters will be passed upon for MapQuest by Venable, Baetjer &
Howard, LLP.
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.
59
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
MapQuest has filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act of 1933 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. 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.
60
<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, except for Note 15, as to which the date is April , 1999
---------------------
The foregoing report is in the form that will be signed upon the completion
of the restatement of the capital accounts described in Note 15 to the
financial statements.
Ernst & Young LLP
Harrisburg, Pennsylvania
April 26, 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, 216,419 in 1997 and
336,028 in 1998; pro forma,
27,458,483 216 336 27,458
Notes receivable for common
stock............................ -- -- (290,835)
Additional paid-in capital......... -- 140,170 18,263,267
Retained deficit................... (16,237,344) (19,908,512) (19,913,555)
------------ ------------ ------------
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
----------- ------------ -----------
Total business and consumer
revenues.......................... 7,159,661 6,038,527 7,912,053
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
Business and consumer............... 4,325,166 4,535,153 4,808,764
Digital mapping..................... 7,994,347 10,767,256 12,837,036
----------- ------------ -----------
Total 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) (5,833,651) (667,223)
----------- ------------ -----------
Net loss applicable to common
stockholders........................ $(1,801,499) $(13,432,774) $(3,822,092)
=========== ============ ===========
Basic and diluted loss per share...... $ (8.84) $ (64.43) $ (12.09)
===========
Shares used to compute basic and
diluted loss per share.............. 203,779 208,499 316,202
=========== ============ ===========
Pro forma basic and diluted loss per
share............................... $ (0.13)
===========
Shares used to compute pro forma basic
and diluted loss per share.......... 27,438,658
</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 $ 199 $ 1,238,435 $ (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 7,074
options.............. -- -- -- -- -- 7 255 --
----------- ----------- ------------ ---------- -------- ----- ----------- -------------
Balance at December 31,
1996.................. -- 7,331,431 -- (87,832) 65,500 206 1,273,340 (2,804,570)
Net loss............... -- -- -- -- -- -- -- (7,599,123)
Payment on notes
receivable........... -- -- -- 21,132 -- -- -- --
Dividends.............. -- 484,306 -- -- -- -- -- (560,025)
Exercise of 10,314
options.............. -- -- -- -- -- 10 775 --
Addition of redemption
feature to Series A
preferred stock...... 6,550,000 -- -- -- (65,500) -- (1,274,115) (5,210,383)
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) $ -- $ 216 $ -- $ (16,237,344)
Net loss............... -- -- -- -- -- -- -- (3,154,869)
Dividends.............. -- 516,299 -- -- -- -- -- (516,299)
Exercise of 119,610
options.............. -- -- -- -- -- 120 7,444 --
Issuance of 522,234
warrants............. -- -- (192,000) -- -- -- 192,000 --
Issuance of 41,266
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) $ -- $ 336 $ 140,170 $ (19,908,512)
=========== =========== ============ ========== ======== ===== =========== =============
</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. Revenues recognized under this method are included in the
statements of operations as business revenues.
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. Substantially all revenues
recognized under this method are included in the statements of operations as
business revenues.
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. Revenues recognized under this
method are included in the statements of operations as digital mapping
revenues.
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. MapQuest may
guarantee its advertisers a pre-set level of impressions during the contract
period. To the extent minimum guaranteed impression levels are not met ratably
over the contract period, MapQuest defers recognition of the corresponding pro-
rata portion of the revenues relating to such unfulfilled obligations until the
guaranteed impression levels are achieved. Revenues recognized under this
method are included in the statements of operations as consumer revenues.
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 recognized under this method are included
in the statements of operations as consumer revenues.
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. Revenues recognized
under this method are included in the statements of operations as digital
mapping and business revenues.
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 MapQuest's product development process, technological
feasibility is established upon completion of a working model. Costs incurred
by MapQuest between completion of the working model and the point at which the
product is ready for general release have been insignificant. As a result,
MapQuest has expensed software development costs.
Statements of Cash Flows
For purposes of the statements of cash flows, MapQuest 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.
Investment in Joint Venture
The Company's 50 percent-owned joint venture, Donnelly Spatial Data
Partnership, is accounted for by the equity method. The joint venture is
engaged in providing, among other things, highway trip routing products and
services.
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, MapQuest 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
MapQuest in connection with this transaction. The operating results of
Interarts are included in MapQuest'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
MapQuest 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 MapQuest's qualified accounts receivable that are within 90 days of invoice.
Under the agreement, MapQuest 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)
MapQuest 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, MapQuest 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
MapQuest 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
MapQuest 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 2.7 shares 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 MapQuest'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, MapQuest 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 MapQuest 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. MapQuest has reserved 17,685,000 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, MapQuest sold 215,000 shares of its Series A Preferred Stock at a
purchase price of $1 per share to MapQuest'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 MapQuest'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
MapQuest 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 MapQuest 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 MapQuest recorded 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
MapQuest 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 2.7 shares 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 MapQuest'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 MapQuest equal at least $15,000,000
and in which the price per share of Common Stock equals or exceeds $2.60 per
share (as adjusted for stock splits, stock dividends, recapitalizations and
similar events). Each share of Series C Preferred Stock
F-11
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
issued and outstanding has a number of votes equal to the number of 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 9,437,456 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,
MapQuest 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, MapQuest 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, MapQuest has a total of 35,778,701 shares of
Common Stock reserved for future issuance.
6. Stock Options and Warrants
1995 Stock Option Plan
As of December 31, 1998, 6,233,627 shares of MapQuest'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
MapQuest 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>
Balance at January 1, 1996......................... 1,375,515 $ 0.04
Granted during 1996................................ 1,071,179 $ 0.04
Granted during 1996................................ 365,310 $ 0.06
Granted during 1996................................ 429,300 $ 0.37
Exercised.......................................... (7,074) $ 0.04
Forfeited.......................................... (27,216) $ 0.04
--------- -----------
Outstanding at December 31, 1996................... 3,207,014 $ .04-$0.37
Granted during 1997................................ 933,678 $ 0.37
Exercised.......................................... (3,240) $ 0.04
Exercised.......................................... (6,210) $ 0.06
Exercised.......................................... (864) $ 0.37
Forfeited.......................................... (268,855) $ 0.04
Forfeited.......................................... (24,840) $ 0.06
Forfeited.......................................... (80,022) $ 0.37
--------- -----------
Outstanding at December 31, 1997................... 3,756,661 $ .04-$0.37
Granted during 1998................................ 2,218,050 $ 0.37
Exercised.......................................... (78,570) $ 0.04
Exercised.......................................... (33,750) $ 0.06
Exercised.......................................... (7,290) $ 0.37
Forfeited.......................................... (551,855) $ 0.04
Forfeited.......................................... (135,000) $ 0.06
Forfeited.......................................... (320,596) $ 0.37
--------- -----------
Outstanding at December 31, 1998................... 4,847,650 $0.04-$0.37
========= ===========
</TABLE>
During June, 1998 MapQuest 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 MapQuest had accounted for its
employee stock options under the fair value method of that statement. As
permitted under the provisions of SFAS No. 123, and based on the historical
lack of a public market for MapQuest.com, Inc. options, no factor for
volatility has been reflected in the option pricing calculation. 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
MapQuest's common stock........................... 0% 0% 0%
Average risk free interest rate.................... 6.1% 6.1% 5.24%
Dividend yield..................................... 0.0% 0.0% 0.0%
Average life....................................... 5 years 5 years 5 years
</TABLE>
F-13
<PAGE>
MAPQUEST.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
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 require the
input of highly subjective assumptions including the expected stock price
volatility. Because MapQuest 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. MapQuest'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) $(13,432,774) $(3,822,092)
Pro forma basic and diluted loss
per share........................ $ (8.84) $ (64.43) $ (12.09)
</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>
$0.04.................................... 1,509,883 6.7 1,043,163
$0.06.................................... 165,510 7.5 89,640
$0.37.................................... 3,172,257 8.5 669,394
---------- ---------
$0.04 - $0.37............................ 4,847,650 1,802,197
========== =========
</TABLE>
The weighted average fair value of options granted during 1996, 1997 and
1998 was $0 in each year.
On December 31, 1998 MapQuest granted 645,570 options for which the
exercise price per share will be the initial public offering price determined
upon completion of the offering MapQuest 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 390,258 warrants outstanding under
which each warrant entitles the holder to purchase one share of MapQuest's
Common Stock for $.04 per share. The warrants were issued for $.004 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.
MapQuest has reserved 390,258 shares of common stock for issuance upon
exercise of the warrants.
As of December 31, 1998, there were 406,709 warrants outstanding under
which each warrant entitles the holder to purchase one share of MapQuest's
common stock for $1.30. 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. MapQuest has reserved 406,709 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 954,147 warrants outstanding under
which each warrant entitles the holder to purchase one share of MapQuest's
common stock for $1.04 per share. The warrants were issued in connection with a
distribution agreement MapQuest executed in 1997. These warrants were valued at
$0 on the date of grant using the "Black Scholes" option pricing model. The
warrants expire on the earlier of April 22, 2002 or upon termination of the
agreement. In the event that the holder shall have exercised the warrants prior
to the Company terminating the distribution agreement due to a breach of the
agreement by the holder, the Company shall have the option to purchase these
shares of common stock for a period of 60 days after the termination of the
distribution agreement at a purchase price which is the lesser of $1.77 or the
then fair market value of such shares. The Company has reserved 954,147 shares
of common stock for issuance upon exercise of the warrants.
As of December 31, 1998, there were 522,231 warrants outstanding under
which each warrant entitles the holder to purchase one share of MapQuest's
common stock for $.004 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. MapQuest has reserved 522,231 shares of common stock for issuance upon
exercise of the warrants.
As of December 31, 1998, there were 41,266 warrants outstanding under which
each warrant entitles the holder to purchase one share of MapQuest's common
stock for $1.30. 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)
Addition of redemption feature to
preferred stock................. -- (5,210,383) --
----------- ------------ -----------
Numerator for loss per share ap-
plicable to common stockhold-
ers............................. $(1,801,499) $(13,432,772) $(3,822,092)
=========== ============ ===========
Denominator:
Denominator for basic and diluted
loss per share--weighted-average
shares.......................... 203,779 208,499 316,202
Basic and diluted loss per common
share............................. $ (8.84) $ (64.43) $ (12.09)
=========== ============ ===========
</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............................... 3,207,014 3,756,661 4,847,650
Stock warrants.............................. 390,258 1,751,114 2,314,611
</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.................... 316,202
Assumed conversion of preferred shares to common shares..... 27,122,456
Assumed issuance of common shares to redeem Series B Pre-
ferred Stock............................................... --
-----------
Denominator for pro forma basic and diluted loss per share.. 27,438,658
Pro forma basic and diluted loss per share.................. $ 0.13
</TABLE>
8. Income Taxes
No provision for income taxes has been recorded as MapQuest 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 MapQuest's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
December 31
------------------------
1997 1998
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Depreciation................................... $ (385,093) $ (347,306)
Deferred tax assets:
Allowance for doubtful accounts................ 84,040 146,324
Other.......................................... 481,607 496,126
Net operating loss and credit carryforwards.... 3,486,589 4,746,255
----------- -----------
Total deferred tax assets........................ 4,052,236 5,388,705
----------- -----------
Net deferred tax assets.......................... 3,667,143 5,041,399
Valuation allowances for deferred tax assets..... (3,667,143) (5,041,399)
----------- -----------
Net deferred taxes............................. $ -- $ --
=========== ===========
</TABLE>
Due to the uncertainty of the realization of the assets, a valuation
allowance has been provided. The valuation allowance was increased by
$1,374,256, $2,618,565 and $1,239,780 for the years ended December 31, 1996,
1997 and 1998, respectively.
As of December 31, 1998, MapQuest 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
MapQuest 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. Business and Consumer revenues and costs are
combined for this segment because a significant portion of the costs, primarily
compensation for operations personnel and related operations costs, are common
to both Business and Consumer revenues and are not allocated. 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. MapQuest 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.
MapQuest'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
MapQuest leases certain office and warehouse space from one of its
stockholders under operating leases. MapQuest 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
MapQuest sponsors a defined contribution retirement savings plan for
substantially all of its employees. Employees may elect to defer up to 15% of
their salary. MapQuest 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
MapQuest 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. MapQuest 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. MapQuest recorded sales to its stockholders of
$475,000, $432,320 and $513,626 during 1996, 1997 and 1998, respectively. Also,
MapQuest 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,
MapQuest's accounts receivable - affiliates was $127,989.
13. Concentration of Credit Risk
For the years ended December 31, 1996, 1997 and 1998, sales to MapQuest'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
MapQuest 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 MapQuest, and/or the patent 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's 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's
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 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 MapQuest's financial position, results of operations, or
liquidity.
15. Subsequent Events and Unaudited Pro Forma Adjustments
During February 1999, the Board of Directors authorized MapQuest to file a
registration statement with the Securities and Exchange Commission for an
initial public offering of shares of its common stock. In connection with the
above, in April 1999, the Board of Directors authorized MapQuest to do the
following: (1) amend and restate its Certificate of Incorporation such that it
will have the authority to issue an aggregate of 105,000,000 shares of capital
stock, consisting of 100,000,000 shares of common stock, par value $0.001 per
share, and 5,000,000 shares of preferred stock, par value $0.01 per share; (2)
effect a 2.7 for 1 common stock split; (3) establish an employee stock purchase
plan under which a total of 1,755,000 shares of common stock will be made
available for sale; and (4) adopt the 1999 stock plan for which 3,645,000
shares of common stock will be reserved for future issuances. The above items
were approved by the stockholders during April 1999 and will be adopted by
MapQuest upon and subject to the effectiveness of the registration statement.
All references to common shares, per common share and par value per common
share, except for references to authorized common shares, in the financial
statements have been restated to give effect to the common stock split and
change in par value per common share.
MapQuest 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 $2.60, 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>
[LOGO] MAPQUEST.COM(TM)
<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............................................... 6,848
Printing and engraving expenses............................... 150,000
Legal fees and expenses....................................... 450,000
Accountants' fees and expenses................................ 550,000
Nasdaq listing fee............................................ 100,000
Transfer Agent's fees and expenses............................ 10,000
Miscellaneous costs........................................... 19,252
----------
Total....................................................... $1,300,000
==========
</TABLE>
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
108,000 shares of common stock at an exercise price of $.37 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 954,147 shares of the Registrant's common stock at an
exercise price of $1.04 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 406,709 shares of the Registrant's common stock at an exercise
price of $1.30 per share. The warrant expires in July 2002.
(7) In May 1998, the Registrant granted certain Series C Preferred Stock
investors warrants to purchase an aggregate of 522,231 shares of common
stock at an exercise price of $0.004 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 41,266 shares of the Registrant's common stock at an
exercise price of $1.30 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 137,214 shares of common
stock to its employees upon the exercising of options granted under its
1995 stock option plan at an exercise price of $0.06 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, as
transactions by an issuer not involving a public offering, or Rule 506 under
Regulation D.
Item 16. Exhibits
(a) Exhibits
A list of exhibits filed herewith is contained on the Exhibit Index
immediately preceding such exhibits and is incorporated herein by reference.
(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
II-2
<PAGE>
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 amended 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 April 27, 1999.
MAPQUEST.COM, INC.
/s/ Michael J. Mulligan
By: _________________________________
Michael J. Mulligan Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amended registration statement has been signed by the following persons
in the capacities and on April 27, 1999.
Signatures Title
* Chief Executive Officer (Principal
- ------------------------------------- Executive Officer) and Chairman
Michael J. Mulligan
*
- ------------------------------------- Chief Financial Officer and Vice
James Thomas President, Finance and
Administration and Secretary
(Principal Financial Officer and
Principal Accounting Officer)
* Director
- -------------------------------------
Robert McCormack
* Director
- -------------------------------------
John Moragne
* Director
- -------------------------------------
Daniel Nova
* Director
- -------------------------------------
Carlo von Schroeter
* Director
- -------------------------------------
C. Richard Allen
/s/ Michael J. Mulligan
By: ______________________________________
Michael J. Mulligan Attorney-in-Fact
II-4
<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
except for Note 15 as to which the date is April , 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
---------------------
The foregoing report is in the form that will be signed upon the completion
of the restatement of the capital accounts described in Note 15 to the
financial statements.
Ernst & Young LLP
Harrisburg, Pennsylvania
April 26, 1999
II-5
<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-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement
+3.1 Restated Certificate of Incorporation, as currently in effect
+3.2 Form of Amendment No. 2 to the Amended and Restated Certificate
of Incorporation of MapQuest, to be filed prior to consummation
of the offering
+3.3 Form of Amended and Restated Certificate of Incorporation of
MapQuest, to be effective immediately prior to the consummation
of the offering
+3.4 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.
+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 Amendment No. 4 to 1995 Stock Option Plan of MapQuest.com, Inc.
+10.9 MapQuest 1999 Employee Stock Purchase Plan
+10.10 MapQuest 1999 Stock Plan
+10.11 Form of Recapitalization Agreement among MapQuest and the
stockholders named therein
+10.12 Agreement between MapQuest and Qwest Communications, dated May
18, 1998
+10.13 Lease Agreement, dated December 9, 1996 between Donnerville
Associates and MapQuest in respect of the Mountville facility
23.1 Consent of Independent Auditors
23.4 Consent of counsel (included in Exhibit 5.1)
+24.1 Power of Attorney
+27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
+ Previously filed.
<PAGE>
EXHIBIT 1.1
MAPQUEST.COM, INC.
Common Stock
Underwriting Agreement
----------------------
April __, 1999
BancBoston Robertson Stephens Inc.
Thomas Weisel Partners LLC
U.S. Bancorp Piper Jaffray Inc.
Volpe Brown Whelan & Company, LLC
As Representatives of the several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, CA 94104
Ladies and Gentlemen:
Introductory. MapQuest.com, Inc., a Delaware corporation (the
"Company), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of 4,600,000 shares (the "Firm
- ----------
Shares") of its common stock, par value $0.001 per share (the "Common Stock").
In addition, the Company has granted to the Underwriters an option to purchase
up to an additional 690,000 Common Stock (the "Option Shares") as provided in
Section 2. The Firm Shares and, if and to the extent such option is exercised,
the Option Shares are collectively called the "Shares". BancBoston Robertson
Stephens Inc., Thomas Weisel Partners LLC, U.S. Bancorp Piper Jaffray Inc. and
Volpe Brown Whelan & Company, LLC have agreed to act as Representatives of the
several Underwriters (in such capacity, the "Representatives") in connection
with the offering and sale of the Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-72667), which contains a form of prospectus to be used in connection with
the public offering and sale of the Shares. Such registration statement, as
amended, including the financial statements, exhibits and schedules thereto, in
the form in which it was declared effective by the Commission under the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (collectively, the "Securities Act"), including any information
deemed to be a part thereof at the time of effectiveness pursuant to Rule 430A
or Rule 434 under the Securities Act, is called the "Registration Statement".
Any registration statement filed by the Company pursuant to Rule 462(b) under
the Securities Act is called the "Rule 462(b) Registration Statement", and from
and after the date and time of filing of the Rule 462(b) Registration Statement
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form first used by the Underwriters to
confirm sales of the Shares, is called the "Prospectus"; provided, however, if
the Company has, with the consent of BancBoston Robertson Stephens Inc., elected
to rely upon Rule 434 under the Securities Act, the term "Prospectus" shall mean
the Company's prospectus subject to completion (each, a "preliminary
prospectus") dated April 12, 1999 (such preliminary prospectus is called the
<PAGE>
"Rule 434 preliminary prospectus"), together with the applicable term sheet (the
"Term Sheet") prepared and filed by the Company with the Commission under Rules
434 and 424(b) under the Securities Act and all references in this Agreement to
the date of the Prospectus shall mean the date of the Term Sheet. All references
in this Agreement to the Registration Statement, the Rule 462(b) Registration
Statement, a preliminary prospectus, the Prospectus or the Term Sheet, or any
amendments or supplements to any of the foregoing, shall include any copy
thereof filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR").
The Company hereby confirms its agreements with the Underwriters as
follows:
Section 1. Representations and Warranties of the Company.
The Company hereby represents, warrants and covenants to each
Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has complied
to the Commission's satisfaction with all requests of the Commission for
additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied
in all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Shares. Each
of the Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus, as
amended or supplemented, as of its date and at all subsequent times, did not and
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by the Representatives expressly
for use therein. There are no contracts or other documents required to be
described in the Prospectus or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representatives four complete conformed copies of the
Registration Statement and of each consent and certificate of experts filed as a
part thereof, and conformed copies of the Registration Statement (without
exhibits) and preliminary prospectuses and the Prospectus, as amended or
supplemented, in such quantities and at such places as the Representatives have
reasonably requested for each of the Underwriters.
2.
<PAGE>
(c) Distribution of Offering Material By the Company. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(d) The Agreements. Each of this Agreement and the [Recapitalization
Agreement] has been duly authorized, executed and delivered by, and is a valid
and binding agreement of the Company, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by applicable law
and except as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.
(e) Authorization of the Shares. The Shares to be purchased by the
Underwriters from the Company have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(g) No Material Adverse Change. Subsequent to the respective dates as
of which information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company (any such change
or effect, where the context so requires, is called a "Material Adverse Change"
or a "Material Adverse Effect"); (ii) the Company has not incurred any material
liability or obligation, indirect, direct or contingent, not in the ordinary
course of business nor entered into any material transaction or agreement not in
the ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
capital stock or repurchase or redemption by the Company of any class of capital
stock.
(h) Independent Accountants. Ernst & Young LLP, who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) and supporting schedule filed
with the Commission as part of the Registration Statement and included in the
Prospectus, are independent public or certified public accountants as required
by the Securities Act.
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the financial position of the Company as of and
at the dates indicated and the results of its operations and cash flows for the
periods specified. The supporting schedule included in the Registration
Statement presents fairly the information required to be stated therein. Such
financial statements and supporting schedule have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules are
required to be included in the Registration Statement. The financial data set
forth in the Prospectus under the captions "Prospectus Summary--Summary
Financial
3.
<PAGE>
Data", "Selected Financial Data" and "Capitalization" fairly present the
information set forth therein on a basis consistent with that of the audited
financial statements contained in the Registration Statement (other than for
statement of operations related financial data for the year ended December 31,
1994 which is derived from the unaudited financial statements of the Company).
The pro forma financial information present fairly the information contained
therein, have been prepared in accordance with the Commission's rules and
guidelines and have been properly presented on the bases described therein, and
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions and
circumstances referred to therein. No other financial information is required to
be included in the Registration Statement pursuant to Regulation S-X.
(j) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(k) Subsidiaries of the Company. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
its 50 percent owned join venture, Donnelly Spatial Data Partnership. The
Company has no subsidiaries.
(l) Incorporation and Good Standing of the Company. The Company has
been duly organized and is validly existing as a corporation in good standing
under the laws of Delaware with full corporate power and authority to own its
properties and conduct its business as described in the Prospectus, and is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction which requires such qualification except where the
failure to be so qualified or to be in good standing would not reasonably be
expected to result in a Material Adverse Change.
(m) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in the
Prospectus). The Common Stock (including the Shares) and the Company's
outstanding shares of Preferred Stock (the "Preferred Stock") conform in all
material respects to the description thereof contained in the Prospectus. All of
the issued and outstanding Common Stock and Preferred Stock have been duly
authorized and validly issued, are fully paid [(other than stock of the Company
issued in consideration for promissory notes)] and nonassessable and have been
issued in compliance with federal and state securities laws in all material
respects. None of the outstanding Common Stock or Preferred Stock were issued in
violation of any preemptive rights, rights of first refusal or other similar
rights to subscribe for or purchase securities of the Company except to the
extent where such violation would not reasonably be expected to have a material
adverse effect on the condition, financial or otherwise, or in the earnings,
business, operations or prospects, whether or not arising from transactions in
the ordinary course of business, of the Company (a "Material Adverse Effect").
There are no authorized or outstanding options, warrants, preemptive rights,
rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable or exercisable for, any capital
stock of the Company other than those accurately described in
4.
<PAGE>
the Prospectus or provided for therein. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the options or
other rights granted thereunder, set forth in the Prospectus accurately
describes in all material respects the information required to be shown with
respect to such plans, arrangements, options and rights.
(n) Stock Exchange Listing. The Shares have been approved for listing
on the Nasdaq National Market, subject only to official notice of issuance.
(o) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters in the manner contemplated here and in the Prospectus, (ii) by
the National Association of Securities Dealers, LLC, (iii) by the federal and
provincial laws of Canada [and (iv) such as may be required under the securities
laws of the United Kingdom].
(p) Non-Contravention of Existing Instruments Agreements. Neither the
issue and sale of the Shares nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company pursuant to (i) the
charter or by-laws of the Company, (ii) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which the Company is
a party or bound or to which its property is subject or (iii) any statute, law,
rule, regulation, judgment, order or decree applicable to the Company of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or any of its properties,
except in each of clauses (ii) [and (iii)] which would not reasonably be
expected to have a Material Adverse Effect.
(q) No Defaults or Violations. The Company is not in violation or
default of (i) any provision of its charter or by-laws, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which it is a party or bound or to which its property is subject or (iii) any
statute, law, rule, regulation, judgment, order or decree of any court,
regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or any of its properties, as
applicable, except any such violation or default which would not, singly or in
the aggregate, reasonably be expected to result in a Material Adverse Change.
(r) No Actions, Suits or Proceedings. Except as otherwise disclosed in
the Prospectus, no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or its property is pending or, to the best knowledge of the Company, threatened
that (i) could reasonably be expected to have a Material Adverse Effect on the
performance of this Agreement or the consummation of any of the transactions
contemplated hereby or (ii) could reasonably be expected to result in a Material
Adverse Effect.
(s) All Necessary Permits, Etc. The Company possesses such valid and
current certificates, authorizations or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct business
except for those certificates, authorizations or permits, the failure of which
to possess would not reasonably be expected to
5.
<PAGE>
result in a Material Adverse Effect, and the Company has not received any notice
of proceedings relating to the revocation or modification of, or non-compliance
with, any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, could
reasonably be expected to result in a Material Adverse Change.
(t) Title to Properties. The Company has good and marketable title to
all the properties and assets reflected as owned in the financial statements
referred to in Section 1(i) above (or elsewhere in the Prospectus), in each case
free and clear of any security interests, mortgages, liens, encumbrances,
equities, claims and other defects, except such as do not materially and
adversely affect the value of such property and do not materially interfere with
the use made or proposed to be made of such property by the Company. The real
property, improvements, equipment and personal property held under lease by the
Company are held under valid and enforceable leases, with such exceptions as are
not material and do not materially interfere with the use made or proposed to be
made of such real property, improvements, equipment or personal property by the
Company.
(u) Tax Law Compliance. The Company has filed all necessary federal,
state and foreign income and franchise tax returns and has paid all taxes shown
to be due on such returns and, if due and payable, any related or similar
assessment, fine or penalty levied against it. The Company has made adequate
charges, accruals and reserves in the applicable financial statements referred
to in Section 1(i) above in respect of all federal, state and foreign income and
franchise taxes for all periods as to which the tax liability of the Company has
not been finally determined. The Company is not aware of any tax deficiency that
has been or might be asserted or threatened against the Company that could
result in a Material Adverse Change.
(v) Intellectual Property Rights. The Company owns or possesses
adequate rights to use all patents, patent rights or licenses, inventions,
collaborative research agreements, trade secrets, know-how, trademarks, service
marks, trade names and copyrights which are necessary to conduct its businesses
as described in the Registration Statement and Prospectus; the expiration of any
patents, patent rights, trade secrets, trademarks, service marks, trade names or
copyrights would not result in a Material Adverse Change that is not otherwise
disclosed in the Prospectus; the Company has not received any notice of, and has
no knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights that is
not otherwise discussed in the Prospectus; and the Company has not received any
notice of, and has no knowledge of, any infringement of or conflict with
asserted rights of others with respect to any patent, patent rights, inventions,
trade secrets, know-how, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, might have a Material Adverse Change that is not otherwise
disclosed in the Prospectus. There is no claim being made against the Company
regarding patents, patent rights or licenses, inventions, collaborative
research, trade secrets, know-how, trademarks, service marks, trade names or
copyrights that is not otherwise disclosed in the Prospectus. Except as
disclosed in the Prospectus, the Company does not in the conduct of its business
as now or proposed to be conducted as described in the Prospectus infringe or
conflict with any right or patent of any third party, or any discovery,
invention, product or process which is the subject of a patent application filed
by any third party, known to the Company, which such infringement or conflict is
reasonably likely to result in a Material Adverse Change.
6.
<PAGE>
(w) Year 2000 Preparedness. There are no issues related to the
Company's preparedness for the Year 2000 that (i) are of a character required to
be described or referred to in the Registration Statement or Prospectus by the
Securities Act which have not been accurately described in the Registration
Statement or Prospectus in all material respects or (ii) might reasonably be
expected to result in any Material Adverse Change or that might materially
affect its properties, assets or rights. All internal computer systems and each
Constituent Component (as defined below) of those systems and all computer-
related products and each Constituent Component (as defined below) of those
products of the Company fully comply with Year 2000 Qualification Requirements.
"Year 2000 Qualifications Requirements" means that the internal computer systems
and each Constituent Component (as defined below) of those systems and all
computer-related products and each Constituent Component (as defined below) of
those products of the Company (i) have been reviewed to confirm that they store,
process (including sorting and performing mathematical operations, calculations
and computations), input and output data containing date and information
correctly regardless of whether the date contains dates and times before, on or
after January 1, 2000, (ii) have been designated to ensure date and time entry
recognition and calculations, and date data interface values that reflect the
century, (iii) accurately manage and manipulate data involving dates and times,
including single century formulas and multi-century formulas, and will not cause
an abnormal ending scenario within the application or generate incorrect values
or invalid results involving such dates, (iv) accurately process any date
rollover, and (v) accept and respond to two-digit year date input in a manner
that resolves any ambiguities as to the century. "Constituent Component" means
all software (including operating systems, programs, packages and utilities),
firmware, hardware, networking components, and peripherals provided as part of
the configuration. The Company has inquired of material vendors as to their
preparedness for the Year 2000 and has disclosed in the Registration Statement
or Prospectus any issues that might reasonably be expected to result in any
Material Adverse Change.
(x) No Transfer Taxes or Other Fees. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the Shares.
(y) Company Not an "Investment Company". The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after receipt of
payment for the Shares will not be, an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act and will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(z) Insurance. The Company is insured by recognized, financially sound
and reputable institutions with policies in such amounts and with such
deductibles and covering such risks as are generally deemed adequate and
customary for its business including, but not limited to, policies covering real
and personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and earthquakes, general liability and Directors
and Officers liability. The Company has no reason to believe that it will not be
able (i) to renew its existing insurance coverage as and when such policies
expire or (ii) to obtain comparable coverage from similar institutions as may be
necessary or appropriate to conduct its business as now conducted and at a cost
that would not reasonably be expected to result in a Material Adverse Change.
The Company has not been denied any insurance coverage which it has sought or
for which it has applied.
7.
<PAGE>
(aa) Labor Matters. To the best of Company's knowledge, no labor
disturbance by the employees of the Company exists or is imminent; and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers that might be expected to result in
a Material Adverse Change.
(bb) No Price Stabilization or Manipulation. The Company has not taken
and will not take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
(cc) Lock-Up Agreements. Each officer and director of the company and
each beneficial owner of issued share capital of the Company listed on Exhibit A
---------
has agreed to sign an agreement substantially in the form attached hereto as
Exhibit A (the "Lock-up Agreements"). The Company has provided to counsel for
- ---------
the Underwriters a complete and accurate list of all securityholders of the
Company and the number and type of securities held by each securityholder. The
Company has provided to counsel for the Underwriters true, accurate and complete
copies of all of the Lock-up Agreements presently in effect or effected hereby.
The Company hereby represents and warrants that it will not release any of its
officers, directors or other stockholders from any Lock-up Agreements currently
existing or hereafter effected without the prior written consent of BancBoston
Robertson Stephens Inc. until __________.
(dd) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any other person required to
be described in the Prospectus which have not been described as required.
(ee) No Unlawful Contributions or Other Payments. None of the Company
nor, to the best of the Company's knowledge, any employee or agent of the
Company, has made any contribution or other payment to any official of, or
candidate for, any federal, state or foreign office in violation of any law or
of the character required to be disclosed in the Prospectus.
(ff) Environmental Laws. (i) the Company is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Change, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) the Company will not be required to make
future material capital expenditures to comply with Environmental Laws and (iv)
no property which is owned, leased or occupied by the Company has been
designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. (S) 9601,
et seq.), or otherwise designated as a contaminated site under applicable
- ------
state or local law.
(gg) ERISA Compliance. The Company and any "employee benefit plan" (as
defined under the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder (collectively,
"ERISA")) established or maintained by the Company or their "ERISA Affiliates"
(as defined below) are in compliance in all material respects with ERISA. "ERISA
Affiliate" means, with respect to the Company, any member of any group of
organizations described in Sections 414(b),(c),(m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company is a member. No
"reportable event" (as defined under ERISA)
8.
<PAGE>
has occurred or is reasonably expected to occur with respect to any "employee
benefit plan" established or maintained by the Company or any of its ERISA
Affiliates. No "employee benefit plan" established or maintained by the Company
or any of its ERISA Affiliates, if such "employee benefit plan" were terminated,
would have any "amount of unfounded benefit liabilities" (as defined under
ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company or any of its ERISA Affiliates that is
intended to be qualified under Section 401(a) of the Code is so qualified and
nothing has occurred, whether by action or failure to act, which would cause the
loss of such qualification.
Any certificate signed by an officer of the Company and delivered to
the Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
Section 2. Purchase, Sale and Delivery of the Shares.
(a) The Firm Shares. The Company agrees to issue and sell to the
several Underwriters the Firm Shares upon the terms herein set forth. On the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Underwriters
agree, severally and not jointly, to purchase from the Company the respective
number of Firm Shares set forth opposite their names on Schedule A. The
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purchase price per Firm Share to be paid by the several Underwriters to the
Company shall be $[___] per share.
(b) The First Closing Date. Delivery of the Firm Shares to be purchased
by the Underwriters and payment therefor shall be made by the Company and the
Representatives at 9:00 a.m. New York time, at the offices of Mayer, Brown &
Platt, 1675 Broadway, 19th Floor, New York, NY 10019 (or at such other place as
may be agreed upon among the Representatives and the Company), (i) on the third
(3rd) full business day following the first day that Shares are traded, (ii) if
this Agreement is executed and delivered after 4:30 P.M., New York time, the
fourth (4th) full business day following the day that this Agreement is executed
and delivered or (iii) at such other time and date not later that seven (7) full
business days following the first day that Shares are traded as the
Representatives and the Company may determine (or at such time and date to which
payment and delivery shall have been postponed pursuant to Section 8 hereof),
such time and date of payment and delivery being herein called the "Closing
Date;" provided, however, that if the Company has not made available to the
Representatives copies of the Prospectus within the time provided in Section
4(d) hereof, the Representatives may, in its sole discretion, postpone the
Closing Date until no later that two (2) full business days following delivery
of copies of the Prospectus to the Representatives.
(c) The Option Shares; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of 690,000 Option Shares from the Company at the
purchase price per share to be paid by the Underwriters for the Firm Shares. The
option granted hereunder is for use by the Underwriters solely in covering any
over-allotments in connection with the sale and distribution of the Firm Shares.
The option granted hereunder may be exercised at any time upon notice by the
Representatives to the Company, which notice may be given at any time within 30
days from the date of this
9.
<PAGE>
Agreement. The time and date of delivery of the Option Shares, if subsequent to
the First Closing Date, is called the "Second Closing Date" and shall be
determined by the Representatives and shall not be earlier than three nor later
than five full business days after delivery of such notice of exercise. If any
Option Shares are to be purchased, each Underwriter agrees, severally and not
jointly, to purchase the number of Option Shares (subject to such adjustments to
eliminate fractional shares as the Representatives may determine) that bears the
same proportion to the total number of Option Shares to be purchased as the
number of Firm Shares set forth on Schedule A opposite the name of such
----------
Underwriter bears to the total number of Firm Shares. The Representatives may
cancel the option at any time prior to its expiration by giving written notice
of such cancellation to the Company.
(d) Public Offering of the Shares. The Representatives hereby advise
the Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in its sole judgment, has determined
is advisable and practicable.
(e) Payment for the Shares. Payment for the Shares shall be made at the
First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer in immediately available-funds to the order of the Company.
It is understood that the Representatives has been authorized, for
its own account and the accounts of the several Underwriters, to accept delivery
of and receipt for, and make payment of the purchase price for, the Firm Shares
and any Option Shares the Underwriters have agreed to purchase. BancBoston
Robertson Stephens Inc., individually and not as a Representative of the
Underwriters, may (but shall not be obligated to) make payment for any Shares to
be purchased by any Underwriter whose funds shall not have been received by the
Representatives by the First Closing Date or the Second Closing Date, as the
case may be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any of its obligations under this Agreement.
(f) Delivery of the Shares. The Company shall deliver, or cause to be
delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representatives for the
accounts of the Representatives and the several Underwriters at the First
Closing Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company shall
also deliver, or cause to be delivered a credit representing the Option Shares
the Underwriters have agreed to purchase at the First Closing Date (or the
Second Closing Date, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Representatives for the accounts
of the Representatives and the several Underwriters, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
(g) Delivery of Prospectus to the Underwriters. Not later than 12:00
noon on the second business day following the date the Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause to
be delivered copies of the Prospectus in such quantities and at such places as
the Representatives shall request.
10.
<PAGE>
Section 3. Covenants of the Company.
The Company further covenants and agrees with each Underwriter as
follows:
(a) Registration Statement Matters. The Company will (i) use its best
efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934 (the
"Exchange Act") to become effective simultaneously with the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective or, if the procedure in Rule 430A of the Securities Act is
followed, to prepare and timely file with the Commission under Rule 424(b) under
the Securities Act a Prospectus in a form approved by the Representatives
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Securities Act, (iii) not
file any amendment to the Registration Statement or supplement to the Prospectus
of which the Representatives shall not previously have been advised and
furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance in all material respects with
the Securities Act and (iv) not file a registration statement with respect to
shares issued or issuable under any of its stock option plans or any other
employee benefit plan for a period of at least one-hundred eighty (180) days
from the date hereof. If the Company elects to rely on Rule 462(b) under the
Securities Act, the Company shall file a Rule 462(b) Registration Statement with
the Commission in compliance with Rule 462(b) under the Securities Act prior to
the time confirmations are sent or given, as specified by Rule 462(b)(2) under
the Securities Act, and shall pay the applicable fees in accordance with Rule
111 under the Securities Act.
(b) Securities Act Compliance. The Company will advise the
Representatives promptly (i) when the Registration Statement or any post-
effective amendment thereto shall have become effective, (ii) of receipt of any
comments from the Commission, (iii) of any request of the Commission for
amendment of the Registration Statement or for supplement to the Prospectus or
for any additional information and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the use
of the Prospectus or of the institution of any proceedings for that purpose. The
Company will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) Blue Sky Compliance. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(d) Amendments and Supplements to the Prospectus and Other Securities
Act Matters. The Company will comply with the Securities Act and the Exchange
Act, and the rules and regulations of the Commission thereunder, so as to permit
the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the
11.
<PAGE>
Representatives or counsel for the Underwriters, it becomes necessary to amend
or supplement the Prospectus in order to make the statements therein, in the
light of the circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading, or, if it is necessary at any time to amend or
supplement the Prospectus to comply with any law, the Company promptly will
prepare and file with the Commission, and furnish at its own expense to the
Underwriters and to dealers, an appropriate amendment to the Registration
Statement or supplement to the Prospectus so that the Prospectus as so amended
or supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.
(e) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the period
beginning on the date hereof and ending on the later of the First Closing Date
or such date, as in the opinion of counsel for the Underwriters, the Prospectus
is no longer required by law to be delivered in connection with sales by an
Underwriter or dealer (the "Prospectus Delivery Period"), as many copies of the
Prospectus and any amendments and supplements thereto as the Representatives may
reasonably request.
(f) Insurance. The Company shall (i) obtain Directors and Officers
liability insurance in the minimum amount of $10 million which shall apply to
the offering contemplated hereby and (ii) shall cause BancBoston Robertson
Stephens Inc. to be added as an additional insured to such policy in respect of
the offering contemplated hereby.
(g) Notice of Subsequent Events. If at any time during the ninety (90)
day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Shares has been or is
likely to be materially affected (regardless of whether such rumor, publication
or event necessitates a supplement to or amendment of the Prospectus), the
Company will, after written notice from you advising the Company to the effect
set forth above, forthwith prepare, consult with you concerning the substance of
and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication or
event.
(h) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
(i) Transfer Agent. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Company Shares.
(j) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month period
ending [June 30, 2000] that satisfies the provisions of Section 11(a) of the
Securities Act.
(k) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act.
(l) Agreement Not to Offer or Sell Additional Securities. The Company
will not, without the prior written consent of BancBoston Robertson Stephens
Inc., for a period of 180 days
12.
<PAGE>
following the date of the Prospectus, offer, sell or contract to sell, or
otherwise dispose of or enter into any transaction which is designed to, or
could be expected to, result in the disposition (whether by actual disposition
or effective economic disposition due to cash settlement or otherwise by the
Company or any affiliate of the Company or any person in privity with the
Company or any affiliate of the Company) directly or indirectly, or announce the
offering of, any other Common Stock or any securities convertible into, or
exchangeable for, Common Stock; provided, however, that the Company may (i)
issue and sell Common Stock pursuant to any director or employee stock option
plan, stock ownership plan or dividend reinvestment plan of the Company in
effect at the date of the Prospectus and described in the Prospectus so long as
none of those shares may be transferred during the period of 180 days from the
date that the Registration Statement is declared effective (the "Lock-Up
Period") and the Company shall enter stop transfer instructions with its
transfer agent and registrar against the transfer of any such Common Stock and
(ii) the Company may issue Common Stock issuable upon the conversion of
securities or the exercise of warrants and options outstanding at the date of
the Prospectus and described in the Prospectus.
(m) Future Reports to the Representatives. During the period of five
years hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of operations, stockholders' equity and cash flows
for the year then ended and the opinion thereon of the Company's independent
public or certified public accountants; (ii) as soon as practicable after the
filing thereof, copies of each proxy statement, Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed
by the Company with the Commission, the National Association of Securities
Dealers, LLC or any securities exchange; and (iii) as soon as available, copies
of any report or communication of the Company mailed generally to holders of its
capital stock.
(n) Exchange Act Compliance. During the Prospectus Delivery Period, the
Company will file all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within
the time periods required by the Exchange Act.
Section 4. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Option
Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Option Shares, as of the Second Closing Date as
though then made, to the timely performance by the Company of its covenants and
other obligations hereunder, and to each of the following additional conditions:
(a) Compliance with Registration Requirements; No Stop Order; No
Objection from the National Association of Securities Dealers, LLC. The
Registration Statement shall have become effective prior to the execution of
this Agreement, or at such later date as shall be consented to in writing by
you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of Underwriters' Counsel; and the National Association
of Securities Dealers, LLC shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
13.
<PAGE>
(b) Corporate Proceedings. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(c) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement and prior to the First Closing Date, or the Second
Closing Date, as the case may be, there shall not have been any Material Adverse
Change in the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company from that set forth in the Registration
Statement or Prospectus, which, in your sole judgment, is material and adverse
and that makes it, in your sole judgment, impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the Prospectus
(d) Opinion of Counsel for the Company. You shall have received on the
First Closing Date, or the Second Closing Date, as the case may be, an opinion
of Mayer, Brown & Platt, counsel for the Company, substantially in the form of
Exhibit B attached hereto, dated the First Closing Date, or the Second
- ---------
Closing Date, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Representatives.
Counsel rendering the opinion contained in Exhibit B may rely as to
---------
questions of law not involving the laws of the United States or the States of
New York and Delaware upon opinions of local counsel, and as to questions of
fact upon representations or certificates of officers of the Company, and of
government officials, in which case their opinion is to state that they are so
relying and that they have no knowledge of any material misstatement or
inaccuracy in any such opinion, representation or certificate. Copies of any
opinion, representation or certificate so relied upon shall be delivered to you,
as Representatives of the Underwriters, and to Underwriters' Counsel.
(e) Opinion of Counsel for the Company. You shall have received on the
First Closing Date, or the Second Closing Date, as the case may be, an opinion
of Venable, Baetjer, Howard & Civiletti, LLP, special counsel for the Company
substantially in the form of Exhibit C attached hereto.
---------
(f) Opinion of Counsel for the Underwriters. You shall have received on
the First Closing Date or the Second Closing Date, as the case may be, an
opinion of Brobeck, Phleger & Harrison LLP, substantially in the form of
Exhibit D hereto. The Company shall have furnished to such counsel such
- ---------
documents as they may have requested for the purpose of enabling them to pass
upon such matters.
(g) Accountants' Comfort Letter. You shall have received on the First
Closing Date and on the Second Closing Date, as the case may be, a letter from
Ernst & Young LLP addressed to the Underwriters, dated the First Closing Date or
the Second Closing Date, as the case may be, confirming that they are
independent certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations and based
upon the procedures described in such letter delivered to you concurrently with
the execution of this Agreement (herein called the "Original Letter"), but
carried out to a date not more than four (4) business days prior to the First
Closing Date or the Second Closing Date, as the case may be, (i) confirming, to
the extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the First Closing Date or the Second Closing Date, as
the case may
14.
<PAGE>
be, and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter which are necessary to reflect any
changes in the facts described in the Original Letter since the date of such
letter, or to reflect the availability of more recent financial statements, data
or information. The letter shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes it, in your
sole judgment, impracticable or inadvisable to proceed with the public offering
of the Shares as contemplated by the Prospectus. The Original Letter from Ernst
& Young LLP shall be addressed to or for the use of the Underwriters in form and
substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations, (ii) set forth their opinion with respect to their examination
of the balance sheet of the Company as of December 31, 1997 and 1998 and related
statements of operations, changes in redeemable preferred stock, common stock,
and other stockholders' equity (deficit), and cash flows for each of the years
ended December 31, 1996, 1997 and 1998. [In addition, you shall have received
from Ernst & Young, LLP a letter addressed to the Company and made available to
you for the use of the Underwriters stating that their review of the Company's
system of internal accounting controls, to the extent they deemed necessary in
establishing the scope of their examination of the Company's financial
statements as of December 31, 1998, did not disclose any weaknesses in internal
controls that they considered to be material weaknesses.]
(h) Officers' Certificate. You shall have received on the First Closing
Date and the Second Closing Date, as the case may be, a certificate of the
Company, dated the First Closing Date or the Second Closing Date, as the case
may be, signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the First
Closing Date or the Second Closing Date, as the case may be, and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
First Closing Date or the Second Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Securities Act and in all material respects
conformed to the requirements of the Securities Act, the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
did not and does not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and, since the effective
date of the Registration Statement, there has occurred no event required
to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
15.
<PAGE>
(iv) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been (a) any
material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company (b)
any transaction that is material to the Company, except transactions
entered into in the ordinary course of business, (c) any obligation,
direct or contingent, that is material to the Company, incurred by the
Company, except obligations incurred in the ordinary course of business,
(d) any change in the capital stock or outstanding indebtedness of the
Company that is material to the Company, (e) any dividend or
distribution of any kind declared, paid or made on the capital stock of
the Company, or (f) any loss or damage (whether or not insured) to the
property of the Company which has been sustained or will have been
sustained which has a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company.
(i) Lock-up Agreement from Certain Stockholders of the Company. The
Company shall have obtained and delivered to you an agreement substantially in
the form of Exhibit A attached hereto from each officer and director of the
---------
Company and each beneficial owner issued share capital of the Company listed on
Exhibit A.
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(j) Stock Exchange Listing. The Shares shall have been approved for
listing on the Nasdaq National Market, subject only to official notice of
issuance.
(k) Compliance with Prospectus Delivery Requirements. The Company shall
have complied with the provisions of Sections 2(g) and 3(e) hereof with respect
to the furnishing of Prospectuses.
(l) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, as the case may be, the Representatives and counsel
for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as contemplated herein, or in
order to evidence the accuracy of any of the representations and warranties, or
the satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied when
and as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.
Section 5. Payment of Expenses. The Company agrees to pay costs, fees
and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Common Stock (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Shares to the Underwriters, (iv) all fees and expenses of the
Company's counsel, independent public or certified public accountants and other
advisors, (v) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of
16.
<PAGE>
the Registration Statement (including financial statements, exhibits, schedules,
consents and certificates of experts), each preliminary prospectus and the
Prospectus, and all amendments and supplements thereto, and this Agreement, (vi)
all filing fees, attorneys' fees and expenses incurred by the Company or the
Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Shares for offer and sale under the state securities or blue sky laws or the
provincial securities laws of Canada or any other country, and, if requested by
the Representatives, preparing and reproducing a "Blue Sky Survey", an
"International Blue Sky Survey" or other memorandum, and any supplements
thereto, advising the Underwriters of such qualifications, registrations and
exemptions, (vii) the filing fees incident to, and the reasonable fees and
expenses of counsel for the Underwriters in connection with, the National
Association of Securities Dealers, LLC review and approval of the Underwriters'
participation in the offering and distribution of the Common Stock, (viii) the
fees and expenses associated with listing the Common Stock on the Nasdaq
National Market, (ix) all costs and expenses incident to the preparation and
undertaking of "road show" preparations to be made to prospective investors, and
(x) all other fees, costs and expenses referred to in Item 13 of Part II of the
Registration Statement. Except as provided in this Section 5, Section 6, and
Section 7 hereof, the Underwriters shall pay their own expenses, including the
fees and disbursements of their counsel.
Section 6. Reimbursement of Underwriters' Expenses. If this Agreement
is terminated by the Representatives pursuant to Section 4, Section 7, Section 8
or Section 9, or if the sale to the Underwriters of the Shares on the First
Closing Date is not consummated because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or to comply with any
provision hereof, the Company agrees to reimburse the Representatives and the
other Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all out-of-pocket expenses
that shall have been reasonably incurred by the Representatives and the
Underwriters in connection with the proposed purchase and the offering and sale
of the Shares, including but not limited to fees and disbursements of counsel,
printing expenses, travel expenses, postage, facsimile and telephone charges.
Section 7. Indemnification and Contribution.
(a) Indemnification of the Underwriters. The Company agrees to
indemnify and hold harmless each Underwriter, its officers and employees, and
each person, if any, who controls any Underwriter within the meaning of the
Securities Act and the Exchange Act against any loss, claim, damage, liability
or expense, as incurred, to which such Underwriter or such controlling person
may become subject, under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, or at common law or otherwise (including
in settlement of any litigation, if such settlement is effected with the written
consent of the Company, which consent shall not be unreasonably withheld),
insofar as such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based (i) upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, including any information
deemed to be a part thereof pursuant to Rule 430A or Rule 434 under the
Securities Act, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading; or (ii) upon any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; or (iii)
in whole or in part upon any
17.
<PAGE>
inaccuracy in the representations and warranties of the Company contained
herein; or (iv) in whole or in part upon any failure of the Company to perform
its obligations hereunder or under law; or (v) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or relating
in any manner to, the Shares or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon any matter covered by clause (i), (ii),
(iii) or (iv) above, provided that the Company shall not be liable under this
clause (v) to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its bad faith or willful
misconduct; and to reimburse each Underwriter and each such controlling person
for any and all expenses (including the fees and disbursements of counsel chosen
by BancBoston Robertson Stephens Inc.) as such expenses are reasonably incurred
by such Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the foregoing indemnity
agreement shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Representatives expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The indemnity agreement
set forth in this Section 7(a) shall be in addition to any liabilities that the
Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by the
Representatives expressly for use therein; and to reimburse the Company, or any
such director, officer or controlling
18.
<PAGE>
person for any legal and other expense reasonably incurred by the Company, or
any such director, officer or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. The indemnity agreement set forth in this
Section 7(b) shall be in addition to any liabilities that each Underwriter may
otherwise have.
(c) Information Provided by the Underwriters. The Company hereby
acknowledges that the only information that the Underwriters have furnished to
the Company expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth in the table in the [first paragraph and the second]
paragraph under the caption "Underwriting" in the Prospectus and in the
paragraphs with the subcaptions "Thomas Weisel Partners LLC" and "Stabilization"
under the caption "Underwriting"; and the Underwriters confirm that such
statements are correct.
(d) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (BancBoston Robertson Stephens Inc. in the case of Section
7(b) and Section 8), representing the indemnified parties who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying party.
19.
<PAGE>
(e) Settlements. The indemnifying party under this Section 7 shall not
be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes (i) an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(f) Contribution. If the indemnification provided for in this Section 7
is unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then each indemnifying party shall contribute to such amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bears to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 7(f) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7(f). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 7(f) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
20.
<PAGE>
Notwithstanding the provisions of this subsection (f), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this Section 7(f) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(g) Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than thirty
(30) days of invoice to the indemnifying party.
(h) Survival. The indemnity and contribution agreements contained in
this Section 7 and the representation and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor to
any Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 7.
(i) Acknowledgements of Parties. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Securities Act and the Exchange Act.
Section 8. Default of One or More of the Several Underwriters. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Shares that
it or they have agreed to purchase hereunder on such date, and the aggregate
number of Common Stock which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase does not exceed 10% of the aggregate number of
the Shares to be purchased on such date, the other Underwriters shall be
obligated, severally, in the proportions that the number of Firm Shares set
forth opposite their respective names on Schedule A bears to the aggregate
----------
number of Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as may be specified by the
Representatives with the consent of the non-defaulting Underwriters, to purchase
the Shares which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase on such date. If, on the First Closing Date or the Second
Closing Date, as the case may be, any one or more of the Underwriters shall fail
or refuse to purchase Shares and the aggregate number of Shares with respect to
which such default occurs exceeds 10% of the aggregate number of Shares to be
purchased on such date, and arrangements satisfactory to the Representatives and
the Company for the purchase of such Shares are not made within 48 hours after
such default, this Agreement shall terminate without liability of any party to
any other party except that the provisions of Section 4, and Section 7 shall at
all times be effective
21.
<PAGE>
and shall survive such termination. In any such case either the Representatives
or the Company shall have the right to postpone the First Closing Date or the
Second Closing Date, as the case may be, but in no event for longer than seven
days in order that the required changes, if any, to the Registration Statement
and the Prospectus or any other documents or arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
8. Any action taken under this Section 8 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
Section 9. Termination of this Agreement. Prior to the First Closing
Date, this Agreement may be terminated by the Representatives by notice given to
the Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq Stock Market, or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the National Association of
Securities Dealers, LLC; (ii) a general banking moratorium shall have been
declared by any of federal, New York, Delaware or California authorities; (iii)
there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective change in United States' or international
political, financial or economic conditions, as in the judgment of the
Representatives is material and adverse and makes it impracticable or
inadvisable to market the Common Stock in the manner and on the terms described
in the Prospectus or to enforce contracts for the sale of securities; (iv) in
the judgment of the Representatives there shall have occurred any Material
Adverse Change; or (v) the Company shall have sustained a loss by strike, fire,
flood, earthquake, accident or other calamity of such character as in the
judgment of the Representatives may interfere materially with the conduct of the
business and operations of the Company regardless of whether or not such loss
shall have been insured. Any termination pursuant to this Section 9 shall be
without liability on the part of (a) the Company to any Underwriter, except that
the Company shall be obligated to reimburse the expenses of the Representatives
and the Underwriters pursuant to Sections 5 and 6 hereof, (b) any Underwriter to
the Company, or (c) of any party hereto to any other party except that the
provisions of Section 7 shall at all times be effective and shall survive such
termination.
Section 10. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Shares sold hereunder and any termination of this Agreement.
Section 11. Notices. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
BancBoston Robertson Stephens Inc.
555 California Street
22.
<PAGE>
San Francisco, California 94104
Facsimile: (415) 676-2696
Attention: General Counsel
If to the Company:
MapQuest.com, Inc.
3710 Hempland Road
Mountville Pennsylvania 17554-1542
Facsimile: (717) 285-8577
Attention: Chief Executive Officer
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
Section 12. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 9 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 7, and to their
respective successors, and no other person will have any right or obligation
hereunder. The term "successors" shall not include any purchaser of the Shares
as such from any of the Underwriters merely by reason of such purchase.
Section 13. Partial Unenforceability. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
Section 14. Governing Law Provisions.
(a) Governing Law. This agreement shall be governed by and construed in
accordance with the internal laws of the state of New York applicable to
agreements made and to be performed in such state.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of New York or the
courts of the State of New York in each case located in the City and County of
New York (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains a San Francisco office at 49 Stevenson Street, San Francisco,
California 94105, United States of
23.
<PAGE>
America, as its agent to receive service of process or other legal summons for
purposes of any such suit, action or proceeding that may be instituted in any
state or federal court in the City and County of San Francisco.
(c) Waiver of Immunity. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in the Specified Courts, and with respect
to any Related Judgment, each party waives any such immunity in the Specified
Courts or any other court of competent jurisdiction, and will not raise or claim
or cause to be pleaded any such immunity at or in respect of any such Related
Proceeding or Related Judgment, including, without limitation, any immunity
pursuant to the United States Foreign Sovereign Immunities Act of 1976, as
amended.
Section 15. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
[The remainder of this page has been intentionally left blank.]
24.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company [and the Custodian] the
enclosed copies hereof, whereupon this instrument, along with all counterparts
hereof, shall become a binding agreement in accordance with its terms.
Very truly yours,
MAPQUEST. COM, INC.
By:__________________________________
Mr. Michael Mulligan,
Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Representatives as of the date first above written.
BancBoston Robertson Stephens Inc.
Thomas Weisel Partners LLC
U.S. Bancorp Piper Jaffray Inc.
Volpe Brown Whelan & Company, LLC
On their behalf and on behalf of each of the several underwriters named in
Schedule A hereto.
- ----------
By BANCBOSTON ROBERTSON STEPHENS INC.
By:__________________________________
Authorized Signatory
25.
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm Common
Underwriters Stock To be Purchased
------------ ---------------------
<S> <C>
BANCBOSTON ROBERTSON STEPHENS INC........................................... [___]
Thomas Weisel Partners LLC.................................................. [___]
U.S. Bancorp Piper Jaffray Inc.............................................. [___]
Volpe Brown Whelan & Company, LLC........................................... [___]
Total.................................................................. 4,600,000
</TABLE>
S-A
<PAGE>
Exhibit A
Lock-Up Agreement
March 8, 1999
BancBoston Robertson Stephens Inc.
As Representatives of the Several Underwriters
555 California Street
San Francisco, California 94104
Ladies & Gentlemen:
The undersigned understands that you, as Representatives of the
several underwriters (the "Underwriters"), propose to enter into an Underwriting
Agreement (the "Underwriting Agreement") with MapQuest.com, Inc. (the "Company")
providing for the initial public offering (the "Public Offering") by the
Underwriters, including yourselves, of Common Stock of the Company (the "Common
Stock") pursuant to the Company's Registration Statement on Form S-1 to be filed
with the Securities and Exchange Commission on or about February 17, 1999 (the
"Registration Statement").
In consideration of the Underwriters' agreement to purchase and make
the Public Offering of the Common Stock, and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned hereby
agrees, for a period of 180 days after the effective date of the Registration
Statement (the "Lock-Up Period"), not to offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") 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 (collectively, "Securities"),
now owned or hereafter acquired directly by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, provided the donee or donees
thereof agree in writing to be bound by this Lock-Up Agreement, (ii) as a
distribution to limited partners or shareholders of the undersigned, provided
that the distributees thereof agree in writing to be bound by the terms of this
Lock-Up Agreement, (iii) with the prior written consent of BancBoston Robertson
Stephens Inc. The foregoing restriction is expressly agreed to preclude the
holder of the Securities from engaging in any hedging or other transaction which
is designed to or reasonably expected to lead to or result in a Disposition of
Securities during the Lock-up Period even if such Securities would be disposed
of by someone other than the undersigned. Such prohibited hedging or other
transactions would include without limitation any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including without
limitation any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
included, relates to or derives any significant part of its value from
Securities. Notwithstanding the foregoing, this Lock-Up Agreement does not
prohibit the sale of shares of the Common Stock that the undersigned or
nominated friends or associates or family members of the undersigned acquire
directly from the Underwriters as part of the "friends and family program."
Furthermore, the undersigned hereby agrees and consents to the entry
of stop transfer instructions with the Company's transfer agent against the
transfer of Securities held by the undersigned except in compliance with this
Lock-Up Agreement. In the even that the
A-1
<PAGE>
Registration Statement shall not have been declared effective on or before
September 30, 1999 this Lock-Up Agreement shall be of no further force or
effect.
Very truly yours,
_____________________________
(signature)
Name:
Address:_____________________
______________________
Accepted as of the date
first set forth above:
BancBoston Robertson Stephens
As Representatives of the Several Underwriters
BancBoston Robertson Stephens
By:_____________________________
(authorized signatory)
A-2
<PAGE>
Exhibit B
Matters to be Covered in the Opinion of Company Counsel
[TBD]
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation;
(ii) The Company has the corporate power and authority to own, lease
and operate its properties and to conduct its business as described in
the Prospectus;
(iii) The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction, if any, in
which the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure to be so
qualified or be in good standing would not have a Material Adverse
Effect. To such counsel's knowledge, the Company does not own or
control, directly or indirectly, any corporation, association or other
entity;
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and
outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and nonassessable, and, to such
counsel's knowledge, will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration right,
right of first refusal or other similar right;
(v) The Firm Shares or the Option Shares, as the case may be, to be
issued by the Company pursuant to the terms of this Agreement have been
duly authorized and, upon issuance and delivery against payment therefor
in accordance with the terms hereof, will be duly and validly issued and
fully paid and nonassessable, and will not have been issued in violation
of or subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right.
(vi) The Company has the corporate power and authority to enter into
this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(vii) Each of this Agreement and the [Recapitalization Agreement] has
been duly authorized by all necessary corporate action on the part of
the Company and has been duly executed and delivered by the Company and
is a valid and binding agreement of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder
may be limited by applicable law and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting creditors' rights generally or by general
equitable principles;
(viii) The Registration Statement has become effective under the Act
and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
threatened under the Securities Act;
B-1
<PAGE>
(ix) The 8-A Registration Statement complied as to form in all
material respects with the requirements of the Exchange Act; the 8-A
Registration Statement has become effective under the Exchange Act; and
the Firm Shares or the Option Shares have been validly registered under
the Securities Act and the Rules and Regulations of the Exchange Act and
the applicable rules and regulations of the Commission thereunder;
(x) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements
(including supporting schedules) and financial data derived therefrom as
to which such counsel need express no opinion), as of the effective date
of the Registration Statement, complied as to form in all material
respects with the requirements of the Act and the applicable Rules and
Regulations;
(xi) The information in the Prospectus under the caption "Description
of Capital Stock," to the extent that it constitutes matters of law or
legal conclusions, has been reviewed by such counsel and is a fair
summary of such matters and conclusions; and the forms of certificates
evidencing the Common Stock and filed as exhibits to the Registration
Statement comply with Delaware law;
(xii) The description in the Registration Statement and the Prospectus
of the charter and bylaws of the Company and of statutes are accurate
and fairly present the information required to be presented by the
Securities Act;
(xiii) To such counsel's knowledge, there are no agreements, contracts,
leases or documents to which the Company is a party of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement
which are not described or referred to therein or filed as required;
(xiv) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the
Company's indemnification obligations hereunder, concerning which no
opinion need be expressed) will not (a) result in any violation of the
Company's charter or bylaws or (b) to such counsel's knowledge, result
in a material breach or violation of any of the terms and provisions of,
or constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or
instrument known to such counsel to which the Company is a party or by
which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any
order, writ or decree of any court, government or governmental agency or
body having jurisdiction over the Company, or over any of its properties
or operations;
(xv) No consent, approval, authorization or order of or qualification
with any court, government or governmental agency or body having
jurisdiction over the Company, or over any of their properties or
operations is necessary in connection with the consummation by the
Company of the transactions herein contemplated, except (i) such as have
been obtained under the Securities Act, (ii) such as may be required
under state or other securities or Blue Sky laws in connection with the
purchase and the distribution of the Shares by the Underwriters, (iii)
such as may be required by the National Association of Securities
Dealers, LLC and (iv) such as may be required under the federal or
provincial laws of Canada;
B-2
<PAGE>
(xvi) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company or any of its
subsidiaries of a character required to be disclosed in the Registration
Statement or the Prospectus, by the Securities Act other than those
described therein;
(xvii) To such counsel's knowledge, the Company is not presently (a) in
violation of its charter or bylaws, or (b) in material breach of any
applicable statute, rule or regulation known to such counsel or, to such
counsel's knowledge, any order, writ or decree of any court or
governmental agency or body having jurisdiction over the Company, or
over any of its properties or operations;
(xviii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Company Shares or
other securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company
having rights known to such counsel to registration of such shares of
Company Shares or other securities, because of the filing of the
Registration Statement by the Company have, with respect to the offering
contemplated thereby, waived such rights or such rights have expired by
reason of lapse of time following notification of the Company's intent
to file the Registration Statement or have included securities in the
Registration Statement pursuant to the exercise of and in full
satisfaction of such rights;
(xix) The Company is not and, after giving effect to the offering and
the sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as
such term is defined in the Investment Company Act of 1940, as amended;
and
(xx) To such counsel's knowledge, the Company owns or possesses
sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to conduct its
business as now conducted; and the expected expiration of any such
Intellectual Property Rights would not result in a Material Adverse
Effect. The Company has not received any notice of infringement or
conflict with asserted Intellectual Property Rights of others, which
infringement or conflict, if the subject of an unfavorable decision,
would result in a Material Adverse Effect. To such counsel's knowledge,
the Company's discoveries, inventions, products, or processes referred
to in the Registration Statement or Prospectus do not infringe or
conflict with any right or patent which is the subject of a patent
application known to the Company.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other Representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the First Closing Date or Second Closing Date,
as the case may be, the Registration Statement and any amendment or supplement
thereto (other than the financial statements including supporting schedules and
other financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any untrue statement of a material
fact or omitted
B-3
<PAGE>
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the First Closing Date or the Second
Closing Date, as the case may be, the Registration Statement, the Prospectus and
any amendment or supplement thereto [and any Incorporated Document] (except as
aforesaid) contained any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
B-4
<PAGE>
Exhibit C
Matters to be Covered in the Opinion of Venable, Baetjer, Howard & Civiletti,
LLP
(i) the information in the Prospectus under the captions "Risk Factor We
are Dependent on a Limited Number of Third Parties for a Significant Portion of
our Primary Geographic Data," " Uncertain Protection of Intellectual Property
and Risk of Infringement," "Business Technology and Infrastructure" and "-
Intellectual Property," to the extent that any of the foregoing contains
summaries of documents or matters of law or legal conclusions, has been reviewed
by such counsel and is a fair summary of such matters and conclusions.
In addition, such counsel shall state that such counsel has participated in
conferences with officials and other representatives of the Company, the
Representatives, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the Closing Date and on any later date on which Option Shares are to
be purchased, the Registration Statement and any amendment or supplement thereto
(other than the financial statements including supporting schedules and other
financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or at the Closing Date
or any later date on which the Option Shares are to be purchased, as the case
may be, the Registration Statement, the Prospectus and any amendment or
supplement thereto (except as aforesaid) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The opinion of Venable, Baetjer, Howard & Civiletti, LLP,
described in this subsection shall be rendered to the Underwriters at the
request of the Company and shall so state.
<PAGE>
Exhibit D
Matters to be Covered in the Opinion of Underwriters' Counsel
(i) The Firm Shares have been duly authorized and, upon issuance and
delivery and payment therefor in accordance with the terms of the
Underwriting Agreement, will be validly issued, fully paid and non-
assessable.
(ii) The Registration Statement complied as to form in all material
respects with the requirements of the Act; the Registration Statement
has become effective under the Act and, to such counsel's knowledge, no
stop order proceedings with respect thereto have been instituted or
threatened or are pending under the Act.
(iii) The 8-A Registration Statement complied as to form in all
material respects with the requirements of the Exchange Act; the 8-A
Registration Statement has become effective under the Exchange Act; and
the Firm Shares or the Option Shares have been validly registered under
the Securities Act and the Rules and Regulations of the Exchange Act and
the applicable rules and regulations of the Commission thereunder;
(iv) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
Such counsel shall state that such counsel has reviewed the
opinions addressed to the Representatives from each dated the date hereof, and
furnished to you in accordance with the provisions of the Underwriting
Agreement. Such opinions appear on their face to be appropriately responsive to
the requirements of the Underwriting Agreement.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other Representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the First Closing Date or Second Closing Date,
as the case may be, the Registration Statement and any amendment or supplement
thereto (other than the financial statements including supporting schedules and
other financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or at the First Closing
Date or the Second Closing Date, as the case may be, the Registration Statement,
the Prospectus and any amendment or supplement thereto (except as aforesaid)
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
<PAGE>
EXHIBIT 4.1
MAPQUEST.COM, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK CUSIP 565644
SEE REVERSE FOR CERTAIN DEFINITIONS
[NUMBERS] [SHARES]
THIS CERTIFIES THAT
Is the owner of
FULLY-PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE, OF
MAPQUEST.COM, INC.
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized attorney or legal representative, upon the surrender of
this Certificate properly endorsed.
This Certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
In Witness Whereof, the said Corporation has caused this Certificate to
be executed by the facsimile signatures of its duly authorized officers and has
caused a facsimile of its Corporate Seal to be hereunto affixed.
Dated:
MapQuest.com, Inc.
CORPORATE SEAL 1994
OF DELAWARE
/S/Secretary /S/ President
COUNTERSIGNED AND REGISTERED:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
P.O. Box 1596
Denver, Colorado 80201
TRANSFER AGENT AND REGISTRAR AUTORIZED SIGNATURE
<PAGE>
MapQuest.com, Inc.
Mountville, PA 17554
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT-____________Custodian_____________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - - as joint tenants with right of survivorship under Uniform Gifts to Minors
and not as tenants in common Act_____________________
(State)
Additional abbreviations may also be used though not in the above list
For Value Received,______________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[_______________________________]
[_______________________________]
____________________________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
____________________________________________________________________________________________________
____________________________________________________________________________________________________
_______________________________________________________________________________________________Shares
of the common stock represented by the within Certificate and do hereby irrevocably constitute
and appoint
______________________________________________________________________________
to transfer the said shares on the books of the within named Corporation with full
power of substitution in the premises.
Dated___________
X_____________________________________________________________
X____________________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER
Signature(s) Guaranteed:
_________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY ELIGIBLE
GUARANTOR INSTITUTION, (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM).
PURSUANT TO S.E.C. RULE 17Ad-15
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF
INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR: DAVID SOKOLOFF: 215-83--2197
680 BLAIR MILL ROAD PROOF OF APRIL 8, 1999
HORSHAM, PA 19044 MAPQUEST
(215) 657-3480 H 61411back
SALES: C. SHARKEY: 302-731-7088 OPERATOR: eg
/NET/BANKNOTE/HOME 13/MAPQUEST\H61411 NEW
</TABLE>
<PAGE>
EXHIBIT 5.1
_________,1999
BancBoston Robertson Stephens Inc.
Thomas Weisel Partners LLC
US Bancorp Piper Jeffray
Volpe Brown Whelan & Company
c/o BancBoston Robertson Stephens
555 California Street
San Francisco, CA 96104
Re: MapQuest.com, Inc.
------------------
Ladies and Gentlemen:
We have acted as special counsel to MapQuest.com, Inc., a Delaware
corporation (the "Company"), in connection with the purchase by you of an
aggregate of 4,600,000 shares of common stock, par value $0.001 per share (the
"Shares"), of the Company from the Company pursuant to the Underwriting
Agreement between you and the Company dated _____________, 1999 (the
"Underwriting Agreement"). Capitalized terms used and not otherwise defined
herein shall have the meaning given those terms in the Underwriting Agreement.
We have examined the Registration Statement on Form S-1 (File No. 333-
72667) filed by the Company under the Securities Act of 1933, as amended (the
"Act"), as it became effective under the Act (the "Registration Statement") and
the Company's prospectus dated _____________, 1999 (the "Prospectus") filed by
the Company pursuant to Rule 424(b) of the rules and regulations of the
Securities and Exchange Commission (the "Commission") under the Act. In
addition, we have examined, and have relied as to matters of fact upon, the
documents delivered to you at the closing (except the certificates representing
the Shares, of which we have examined a specimen) and upon originals or copies,
certified or otherwise identified to our satisfaction, of such corporate
records, agreements, documents and other instruments and such certificates or
comparable documents of public officials and of officers and representatives of
the Company, and have made such other and further investigations, as we have
deemed relevant and necessary as a basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity
<PAGE>
BancBoston Robertson Stephens, et al
Page 2
April 23, 1999
to original documents of all documents submitted to us as certified or
photostatic copies, and the authenticity of the originals of such latter
documents.
Whenever our opinion with respect to the existence or absence of facts is
indicated to be based on our knowledge or awareness, we are referring solely to
the actual knowledge of the particular Mayer, Brown & Platt attorneys who have
represented the Company in connection with the preparation of the Registration
Statement, the Prospectus and the Recapitalization Agreement (as defined
herein). Except as expressly set forth herein, we have not undertaken any
independent investigation to determine the existence or absence of any factual
matters and no inference as to our knowledge concerning such facts should be
drawn.
As you are aware, we have represented the Company in connection with
preparation of the Registration Statement and the Prospectus and are not
generally familiar with the day-to-day business, operations, properties or
activities of the Company.
Based upon the foregoing, and subject to the qualifications and limitations
stated herein, we are of the opinion that:
1. The Company is validly existing as a corporation in good standing
under the laws of the state of Delaware.
2. The Company has the corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus.
3. The Company is duly qualified to do business as a foreign corporation
in the states of California, Colorado, New York, Pennsylvania and Maryland and
is in good standing in the states of California, Colorado, New York,
Pennsylvania and Maryland. To our knowledge, the Company does not own or
control, directly or indirectly, any corporation, association or other entity
other than its fifty percent-owned joint venture interest in Donnelley Spatial
Data Partnership.
4. The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" as of the
dates stated therein, the issued and outstanding shares of capital stock of the
Company have been duly and validly issued and are fully paid (other than capital
stock of the Company issued in consideration for promissory notes and as to
which we express no opinion) and nonassessable, and, to our knowledge, have not
been issued in violation of or subject to any preemptive right, co-sale right,
registration right, right of first
<PAGE>
BancBoston Robertson Stephens, et al
Page 3
April 23, 1999
refusal or other similar right except to the extent set forth in the Consent and
Waiver, dated as of April __, 1999 (the "Consent and Waiver"), among the Company
and the security holders named therein relating to the Amended and Restated
Rights Agreement, dated as of July 17, 1997, among the Company and the holders
of Preferred Stock party thereto or where such noncompliance would not
reasonably be expected to have a Material Adverse Effect.
5. The Firm Shares or the Option Shares, as the case may be, to be issued
by the Company pursuant to the terms of the Underwriting Agreement have been
duly authorized and, upon issuance and delivery against payment therefor in
accordance with the terms hereof, will be duly and validly issued and fully paid
and nonassessable, and, upon the effectiveness of the Registration Statement,
will not have been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal or other similar
right.
6. The Company has the corporate power and authority to enter into the
Underwriting Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it thereunder.
7. Each of the Recapitalization Agreement, dated as of ________, 1999
(the "Recapitalization Agreement"), among the Company and the security holders
named therein and the Underwriting Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been duly executed
and delivered by the Company and each such agreement is a valid and binding
agreement of the Company, enforceable in accordance with its terms, except as
rights to indemnification thereunder may be limited by applicable law and except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights generally
or by general equitable principles.
8. The Registration Statement has become effective under the Securities
Act and the Prospectus was filed on _______, 1999 pursuant to Rule 424(b) of the
rules and regulations of the Commission under the Securities Act and, to our
knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Securities Act.
9. The 8-A Registration Statement complied as to form in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); the 8-A Registration Statement has become
effective under the Exchange Act; and the Shares have been validly registered
under the Securities Act and the rules and regulations promulgated under the
Exchange Act.
<PAGE>
BancBoston Robertson Stephens, et al
Page 4
April 23, 1999
10. The Registration Statement and the Prospectus (other than the
financial statements (including supporting schedules) and financial data derived
therefrom and statistical data as to which we express no opinion), as of the
effective date of the Registration Statement, complied as to form in all
material respects with the requirements of the Securities Act and the applicable
rules and regulations.
11. The information in the Prospectus under the caption "Description of
Capital Stock," to the extent that it constitutes matters of law or legal
conclusions, has been reviewed by us and is an accurate summary of such matters
and conclusions; and the form of certificates evidencing the Common Stock and
filed as an exhibit to the Registration Statement complies with the Delaware
General Corporation Law.
12. The description in the Registration Statement and the Prospectus of
the Amended and Restated Certificate of Incorporation and the Amended and
Restated By-Laws of the Company are accurate and contain the information
required to be presented by the Securities Act.
13. To our knowledge, there are no agreements, contracts, leases or
documents to which the Company is a party of a character required to be
described or referred to in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement which are not described or
referred to therein or filed as required.
14. The Company's performance of the Underwriting Agreement (other than
performance of the Company's indemnification obligations hereunder, as to which
we express no opinion) and compliance by the Company with its provisions will
not (a) result in any violation of the Amended and Restated Certificate of
Incorporation or the Amended and Restated By-Laws of the Company or (b) to our
knowledge, result in a material breach or violation of any of the terms and
provisions of, or constitute a default under, any bond, debenture, or any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument filed as an Exhibit to the Registration Statement,
or any applicable New York or Federal statute, rule or regulation known to us
or, to our knowledge, any order, writ or decree of any court, government or
governmental agency or body having jurisdiction over the Company, or over any of
its properties or operations.
15. No consent, approval, authorization or order of or qualification with
any New York or Federal court, government or governmental agency or body having
jurisdiction over the Company, or over any of its properties or operations is
necessary in connection with the Company's execution of, and compliance with,
the Underwriting Agreement except (i) such as
<PAGE>
BancBoston Robertson Stephens, et al
Page 5
April 23, 1999
have been obtained under the Securities Act, (ii) such as may be required under
state or other securities or Blue Sky laws in connection with the purchase and
the distribution of the Shares by the Underwriters, (iii) such as may be
required by the National Association of Securities Dealers, LLC, (iv) such as
may be required under the federal or provincial laws of Canada and (v) such as
may be required under the securities laws of the United Kingdom.
16. To our knowledge, the Company is not presently (a) in violation of its
Amended and Restated Certificate of Incorporation or its Amended and Restated
By-Laws of the Company or (b) in material breach of any applicable New York or
Federal statute, rule or regulation known to us or, to our knowledge, any order,
writ or decree of any court or governmental agency or body having jurisdiction
over the Company or over any of its properties or operations, except for those
breaches which, either individually or in the aggregate, would not reasonably be
likely to produce a Material Adverse Effect.
17. To our knowledge, except as set forth in the Registration Statement
and Prospectus, no holders of Common Stock or other securities of the Company
have registration rights with respect to securities of the Company and, except
as set forth in the Registration Statement and Prospectus, all holders of
securities of the Company having rights known to us to registration of such
shares of Common Stock or other securities because of the filing of the
Registration Statement by the Company have, with respect to the offering
contemplated thereby, waived such rights to the extent set forth in the
Recapitalization Agreement.
18. The Company is not and, after giving effect to the offering and the
sale of the Firm Shares and the application of the proceeds thereof as described
in the Prospectus, will not be, an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended.
We have not independently verified the accuracy, completeness or fairness
of the statements made or included in the Registration Statement or the
Prospectus and take no responsibility therefor, except as and to the extent set
forth in paragraphs 11 and 12 above. In the course of the preparation by the
Company for the Registration Statement and the Prospectus, we participated in
conferences with certain officers and employees of the Company, with
representatives of Ernst & Young LLP and with Venable, Baetjer, Howard &
Civiletti, LLP, counsel to the Company. Based upon our examination for the
Registration Statement and the Prospectus, our investigations made in connection
with the preparation of the Registration Statement and the Prospectus and our
participation in the conferences referred to above, (i) we are of the opinion
that the Registration Statement, as of its effective date, and the Prospectus,
as
<PAGE>
BancBoston Robertson Stephens, et al
Page 6
April 23, 1999
of ____________ __, 1999 complied as to form in all material respects with
the requirements of the Securities Act and the applicable rules and regulations
of the Commission thereunder in all, except that in each case we express no
opinion with respect to the financial statements or other financial or
statistical data contained or incorporated by reference in the Registration
Statement and the Prospectus and (ii) we have no reason to believe that the
Registration Statement as of its effective date contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading or
that the Prospectus contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that in each case we express no belief with respect to the financial
statements or other financial or statistical data contained or incorporated by
reference in the Registration Statement or the Prospectus.
With respect to any matters concerning the Delaware General Corporation Law
involved in the opinions set forth above, we draw your attention to the fact
that we are not admitted to practice in the State of Delaware and are not
experts in the law of such jurisdiction, and that any such opinions concerning
the Delaware General Corporation Law are based upon our reasonable familiarity
with the Delaware General Corporation Law and as a result of our prior
involvement in transactions concerning such law.
We are members of the Bar of the State of New York, and we do not express
any opinion herein concerning any law other than the law of the State of New
York and the federal law of the United States and the Delaware General
Corporation Law.
This opinion letter is rendered to you in connection with the above
described transactions. This opinion letter may not be relied upon by you for
any other purpose, or relied upon, by or relied upon by, or furnished to, any
other person, firm or corporation without our prior written consent.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the caption "Legal Matters."
Very truly yours,
<PAGE>
EXHIBIT 10.1
CARTOGRAPHIC PRODUCT DEVELOPMENT, PUBLISHING,
MARKETING AND DISTRIBUTION AGREEMENT
BETWEEN
NATIONAL GEOGRAPHIC SOCIETY,
NGE, INC. D/B/A NATIONAL GEOGRAPHIC MAPS
AND
GEOSYSTEMS GLOBAL CORPORATION
<PAGE>
Table of Contents
-----------------
1. DEFINITIONS
-----------
1.1 "Cartographic Products" .................................. 1
1.2 "Direct Channels" ........................................ 1
1.3 "Education Channels" ..................................... 2
1.4 "GeoSystems Equity" ...................................... 2
1.5 "GeoSystems Products" .................................... 2
1.6 "Intellectual Property Rights" ........................... 2
1.7 "International Channels" ................................. 2
1.8 "Licensed Products" ...................................... 2
1.9 "Modified and Remanufactured NG Products"................. 2
1.10 "Moral Rights" ........................................... 3
1.11 "National Park Channel" .................................. 3
1.12 "Net Revenues" ........................................... 3
1.13 "NG Affiliates" .......................................... 3
1.14 "NG Content" ............................................. 3
1.15 "NG Data" ................................................ 3
1.16 "NG Membership Channels" ................................. 3
1.17 "NG Name" ................................................ 3
1.18 "NG Products" ............................................ 3
1.19 "Non-NG Channels" ........................................ 4
1.20 "Non-NG Products" ........................................ 4
1.21 "Teacher Supply Stores" .................................. 4
1.22 "Products" ............................................... 4
1.23 "Retail Channels" ........................................ 4
1.25 "Premium Channels" ....................................... 4
1.26 "Restricted Products" .................................... 4
1.27 "SRP" .................................................... 5
1.28 "Third Party Products" ................................... 5
1.29 "Unrestricted Products" .................................. 5
2. DISTRIBUTION RIGHTS............................................ 5
-------------------
2.1 Products in NG Membership Channels ....................... 5
----------------------------------
2.2 Rights in Non-NG Channels ................................ 5
-------------------------
2.3 Approval by NG of Non-NG Products ........................ 8
---------------------------------
2.4 Royalties, Etc ........................................... 8
--------------
(a) Minimum Annual Royalties ............................. 8
------------------------
(b) Royalty Rates ........................................ 9
-------------
(c) Price of Non-NG Products ............................. 9
------------------------
(d) Royalty Reports and Payments ......................... 10
----------------------------
<PAGE>
(e) Records............................................... 10
-------
(f) Audit Rights.......................................... 10
------------
3. LICENSES.......................................................... 10
--------
3.1 Grant of Licenses............................................. l0
-----------------
3.2 Title to the Name and Material................................ 11
------------------------------
3.3 Title to the Products......................................... 11
---------------------
3.4 Credits....................................................... 11
-------
3.5 Trademark Usage Records....................................... 11
-----------------------
3.6 Trademark Usage Generally..................................... 11
-------------------------
4. CARTOGRAPHIC SERVICES............................................. 12
---------------------
4.1 Use of NGE by GeoSystems...................................... 12
------------------------
4.2 Right of First Negotiation to GeoSystems...................... 12
----------------------------------------
5. AVAILABILITY OF GEOSYSTEMS EQUITY TO NG........................... 12
---------------------------------------
5.1 Issuance of GeoSystems Warrant to NG......................... 12
------------------------------------
(a) Number of Shares......................................... 12
----------------
(b) Exercise Price........................................... 13
--------------
(c) Term..................................................... 13
----
5.2 General Provisions Relating to GeoSystems Equity............. 13
------------------------------------------------
(a) Additional Provisions.................................... 13
---------------------
(b) No Offer................................................ 14
--------
6. DATA RESELLING.................................................... 14
--------------
6.1 Cartographic Data Reselling................................... 14
---------------------------
6.2 Effect of Termination Agreement............................... 14
-------------------------------
7. REPRESENTATIONS AND WARRANTIES: PRODUCT WARRANTIES................ 15
--------------------------------------------------
7.l NG Representations and Warranties............................ 15
---------------------------------
(a) Authority................................................ 15
---------
(b) Original Development..................................... 15
--------------------
(c) No Infringement.......................................... 15
---------------
(d) No Material Litigation................................... 15
----------------------
7.2 GeoSystems Representations and Warranties.................... 15
-----------------------------------------
(a) Authority................................................ 15
---------
(b) Original Development..................................... 15
--------------------
(c) No Infringement.......................................... 16
---------------
(d) No Material Litigation................................... 16
----------------------
7.3 Product Warranties........................................... 16
------------------
7.4 Indemnification.............................................. 16
---------------
<PAGE>
8. TERM; TERMINATION................................................. 17
-----------------
8.1 Term......................................................... 17
----
8.2 Termination.................................................. 17
-----------
8.3 Obligations Upon Termination................................. 18
----------------------------
8.4 No Elimination of Prior Liabilities.......................... 18
-----------------------------------
8.5 Survival of Certain Conditions............................... 18
------------------------------
9. RELATIONSHIP OF THE PARTIES; MANAGEMENT.......................... 18
---------------------------------------
9.1 Relationship of Parties.................................... 18
-----------------------
9.2 Management of the Alliance................................. 18
--------------------------
(a) Day-to-Day Management................................. 19
---------------------
(b) Annual Publishing Plan................................ 19
----------------------
(c) Quality Control....................................... 19
---------------
(d) Joint Advisory Committee.............................. 22
------------------------
(e) Status Meetings and Reports........................... 22
---------------------------
(f) Conditions Impairing Performance...................... 22
--------------------------------
10. DISPUTE RESOLUTION............................................... 22
------------------
10.1 Basic Dispute Resolution Procedures......................... 22
-----------------------------------
10.2 Escalation Procedures....................................... 23
---------------------
10.3 Arbitration................................................. 23
-----------
(a) Procedure............................................... 23
---------
(b) Exceptions.............................................. 24
----------
10.4 Continuation of Performance................................. 24
---------------------------
11. CONFIDENTIALITY.................................................. 24
---------------
12. ACKNOWLEDGMENTS.................................................. 25
---------------
13. GENERAL PROVISIONS............................................... 25
------------------
13.1 Notice...................................................... 25
------
13.2 Assignment.................................................. 26
----------
13.3 Severability................................................ 27
------------
13.4 Force Majeure............................................... 28
-------------
13.5 Governing Law .............................................. 28
-------------
13.6 Successors and Assigns...................................... 28
---------------------
13.7 Complete Agreement.......................................... 28
------------------
13.8 Amendments and Revisions.................................... 28
-----------------------
13.9 Partial Waiver.............................................. 28
--------------
13.10 Counterparts............................................... 28
------------
13.11 Headings .................................................. 29
--------
13.12 Nonperformance............................................. 29
--------------
13.13 Agreement Not To Be Construed Against Any Party............ 29
-----------------------------------------------
<PAGE>
Exhibits
--------
A. Licensed Trademarks
B. Existing NG Products
C. Existing NG Stores and Kiosks
D. Existing NG Agreements
E. Copyright and Trademark Credits
F. Investment Agreement
G. Warrant
<PAGE>
CARTOGRAPHIC PRODUCT DEVELOPMENT,
---------------------------------
PUBLISHING, MARKETING AND DISTRIBUTION AGREEMENT
-------------------------------------------------
THIS AGREEMENT is made as of April 22, 1997 (the "Effective Date"), by
and between NATIONAL GEOGRAPHIC SOCIETY ("NGS"), a District of Columbia not for
profit corporation, whose principal address is 1145 Seventeenth Street, N.W.,
Washington, D.C. 20036, NGE, Inc. ("NGE"), a Delaware corporation whose
principal address is 1145 Seventeenth Street, N.W., Washington, D.C. 20036,
(and, with NGS, collectively "NG"), and GeoSystems GLOBAL CORPORATION
("GeoSystems"), a Delaware corporation whose principal address is 227 Granite
Run, Lancaster, Pennsylvania 17601.
WITNESSETH:
WHEREAS, GeoSystems and NGS have previously cooperated on various
cartographic projects, including pursuant to a World Atlas Database System
Development Agreement dated September 29, 1995;
WHEREAS, GeoSystems, NGS and NGE, a second tier subsidiary of NGS and
acting through its cartographic division also known as "NG Maps," have agreed to
enter into this Agreement for the purpose of establishing an arrangement (the
"Alliance") pursuant to which the parties will pursue commercial opportunities
involving Cartographic Products, using certain trademarks and copyrighted
materials of NGE under license from NGS;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. DEFINITIONS
-----------
In addition to the capitalized terms which are defined elsewhere in this
Agreement, the following definitions shall apply to this Agreement:
1.1 "Cartographic Products" shall include products in the print medium
where cartography represents the central theme or majority content of such
products, such as maps, globes, road atlases, reference atlases, historical
atlases, and map guide (but not travel guides) products.
1
<PAGE>
1.2 "Direct Channels" means and refers to direct marketing distribution
channels in North America for Cartographic Products including, without
limitation, individual mailings, catalog programs and the lnternet market, other
than NG Membership Channels.
1.3 "Education Channels" means and refers to distribution channels in
North America for Cartographic Products to schools, educational institutions and
teachers including, without limitation, key catalog wholesalers, cooperative
sales through parent/teacher catalogs and direct marketing to school and
teachers (including mailings, telemarketing, conference exhibits and MapQuest-
linked Internet programs); provided, however, that specialty retail stores e.g.,
Zany Brainy, Noodle Kadoodle) shall be included in Retail Channels and
parent/teacher supply stores shall be included in the separate channel of
Teacher Supply Stores.
1.4 "GeoSystems Equity" means and refers to the equity in GeoSystems made
available to NG pursuant to Section 5 herein.
1.5 "GeoSystems Products" means and refers to GeoSystems Cartographic
Products, whether existing or developed or acquired in the future, containing
content of GeoSystems and carrying the NG Name as a result of the rights granted
pursuant hereto.
l.6 "Intellectual Property Rights" shall mean, collectively, all
worldwide copyright rights, know-how, trade secrets, design rights, patent
rights, patent applications, Moral Rights and any other inventions or
discoveries, whether patentable or not.
1.7 "International Channels" shall mean all non-NG Membership Channels
for Cartographic Products outside of North America.
l.8 "Licensed Products" shall mean sublicensing arrangements for Products
or NG Content put into place by GeoSystems from time to time. NG Maps shall have
prior approval of any such sublicense, including, without limitation, the terms
and duration of any such sublicense; provided, however, that the timing and
approval standards for NG's approval of Licensed Products shall be consistent
with the provisions of Section 9 herein.
l.9 "Modified and Remanufactured NG Products" means and refers to NG
Products substantially modified or remanufactured by GeoSystems as permitted
under this Agreement.
1.10 "Moral Rights" shall mean any right to claim authorship of work, any
right to object to any distortion or other modification of a work, and any
similar right existing under the law of any country in the world, or under any
treaty. The term "Moral Rights" includes the right to prevent others from being
named as the author of a work, the right to prevent others from falsely
attributing to one the authorship of work that one has not in fact written, the
right to prevent others from making deforming changes in a work, the right to
withdraw a published work
2
<PAGE>
from distribution if it no longer represents the views of the author, and the
right to prevent others from using a work or the author's name in such a way as
to reflect on the author's professional standing.
1.11 "National Park Channel" shall mean the distribution channel for
Cartographic Products in public lands cooperating associations retail outlets,
concessionaire retail outlets in national parks as well as gateway city stores.
1.12 "Net Revenues" shall mean the gross revenues actually received by
GeoSystems from sales of the Products less credits (including promotional
allowances), reasonable reserves for returns, bad debt, product discounts,
shipping and handling charges, and sales taxes or custom duties, if applicable.
1.13 "NG Affiliates" means and refers to all entities currently, or in
the future, controlling, controlled by or under common control with, NG.
1.14 "NG Content" means and refers to the content of NG Products
including, without limitation the pictures, text and maps therein.
1.15 "NG Data" means and refers to certain cartographic data of NG, which
is being digitized by GeoSystems pursuant to a separate agreement, and other
digitized cartographic data as designated from time to time by NG Maps.
1.16 "NG Membership Channels" means and refers to existing or future (not
to include the distribution channels in which GeoSystems has been granted
distribution rights herein) distribution channels of NGS for NG Products to itS
members or in promotion to prospective members.
1.17 "NG Name" means and refers individually and collectively to the name
of NGS ("National Geographic Society"), "National Geographic", "National
Geographic Magazine", and the individual trademarks, services marks, tradenames,
tradedress and/or logos of or associated with NG. The specific trademarks of NG
licensed for use hereunder are set forth in Exhibit A, and as modified or
---------
reconfigured from time to time by NG, and shall include, individually and as a
part of a composite mark, "NATIONAL GEOGRAPHIC" and the YELLOW BORDER DESIGN.
1.18 "NG Products" means and refers to all of the Cartographic Products
of NG Maps carrying the NG Name, through development or acquisition by NG Maps
or under license or sublicense to NG Maps by NGS, whether existing or developed,
acquired or licensed in the future, including the map supplements of National
Geographic Magazine; provided, however, that NG Products does not include (i)
any Cartographic Products produced by NGE for National
3
<PAGE>
Geographic Magazine (except for the map supplements which are included in NG
Products), National Geographic Traveler, National Geographic World, nor any
other periodical magazine publication of NGS, in any language or in any country,
or for any National Geographic book; (ii) any Cartographic Product by or for the
Publications Division of National Geographic Society; (iii) any Cartographic
Product by or for Trails Illustrated or any other NG Affiliate; or (iv) the
World Atlas of NG Maps. Exhibit B attached hereto sets forth the NG
---------
Products existing as of the date of this Agreement.
1.19 "Non-NG Channels" means all distribution channels for Cartographic
Products other than the NG Membership Channels.
1.20 "Non-NG Products" means and refers to GeoSystems Products, Modified
and Remanufactured NG Products (subject to NG's rights therein) and Third Party
Products.
1.21 "Teacher Supply Stores" means stores specializing in the sale of
educational materials to parents and teachers.
1.22 "Products" means and refers to NG Products, Modified and
Remanufactured NG Products, GeoSystems Products, and Third Party Products.
1.23 "Retail Channels" means and refers to all retail and wholesale
distribution channels for Cartographic Products in North America. Specifically,
retail and wholesale distribution channels shall refer to all available retail
outlets for Cartographic Products in North America including, but not limited
to, book stores (chains & independents), gift, museum and nature/discovery
stores, map & travel stores, mass merchandisers (discount, drug & grocery),
newsstands, office supply & stationery stores, outdoor sports stores,
poster/framing shops, mail order and on-line retailers (including book clubs),
and retail school supply & learning/entertainment stores; provided, however,
that the NG stores and NG kiosks identified in the footnote to the table of
rights in Section 2.2(a) shall be excluded from "Retail Channels."
1.25 "Premium Channels" means and refers to all corporate, premium and
ASI distribution channels for Cartographic Products in North America. In the
context of corporate, premium and ASI channels, "premium" refers to a product
that is produced by a company to give away or sell in exchange for action by a
consumer and ASI refers to imprinting existing product stock in smaller
quantities, such as 100 to 5,000 units (ASI sales are typically created through
distributors who deal with the end-user companies). Premium sales of Restricted
Products shall not be for resale under any circumstances.
1.26 "Restricted Products" shall be reference atlases, historical
atlases, and related book products designed for any audience (e.g., adult,
family, children, education).
4
<PAGE>
1.27 "SRP" of any Product means and refers to a Product's suggested
retail price as listed by GeoSystems or NG, as the case may be, in its price
list or catalogs or as otherwise established by GeoSystems or NG in its
discretion.
1.28 "Third Party Products" means and refers to Cartographic Products of
third parties, whether existing or developed or acquired in the future, selected
by GeoSystems or NGE and approved by NG to carry the NG Name.
1.29 "Unrestricted Products" shall mean all Products other than
Restricted Products.
2. DISTRIBUTION RIGHTS
-------------------
2.1 Products in NG Membership Channels. NG reserves the exclusive right
----------------------------------
to sell and distribute the Products in the NG Membership Channels; provided,
however, that, as to NG's promotion to prospective members, such activities
shall be primarily directed at soliciting new NG members and not for selling
Cartographic Products in competition with the rights granted GeoSystems
hereunder.
2.2 Rights in Non-NG Channels.
---------------------------
(a) NG hereby grants to GeoSystems the following rights to sell and
distribute the Products in the Non-NG Channels:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PRODUCTS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Modified or
Remanufactured GeoSystems Third Party
NG Products Products Products Products
- ------------------------------------------------------------------------------------------------------------
C U R U R U R U R
---------------------------------------------------------------------------------------------------------
H Retail/(1)/ E None E None E None E None
A Premium/(2)/ E E E E E E E E
N Teacher Supply Stores N None N None N None N None
N Education/(3)/ None None None None None None None None
E International/(4)/ None None None None None None None None
L Direct/(4)/ E E E E E E E E
S National Park N None N None N N N None
</TABLE>
U = Unrestricted Products
R = Restricted Products
E = Exclusive
N = Non-Exclusive
5
<PAGE>
____________________________________________
/(1)/ The exclusive rights granted in the Retail Channels exclude NG's existing
retail store in Washington, D.C., NG's kiosks and stores at Destination
Cinema locations and NG's other kiosks and stores. All existing kiosks
and retail stores of NG are set forth on Exhibit C hereto. NG does not
---------
anticipate a substantial expansion in the number of its kiosks and
stores. For the purposes of the foregoing, kiosks shall be deemed to
refer only to independent, free-standing kiosks.
/(2)/ The rights granted to GeoSystems hereunder with respect to the Premium
Channels shall be subject to a non-exclusive arrangement with respect to
premium rights granted to Random House/PGW by NG under pre-existing
agreements as listed on Exhibit D hereto.
---------
/(3)/ Notwithstanding the exclusion of distribution rights in the table above,
GeoSystems shall have the right of first negotiation with respect to
Unrestricted Products to pursue international development and
distribution opportunities under this Agreement on a country by country
basis, subject to conflicting rights that may exist in agreements or
negotiations between NG and a third party.
/(4)/ The exclusive rights granted in the Direct Channels (i) are subject to
the direct marketing rights of NGE's Trails Illustrated division pursuant
to an existing agreement listed on Exhibit D hereto and (ii) shall
---------
exclude direct marketing to schools. With respect to the exclusive rights
granted in Direct Channels for Restricted Products, NG shall have the
right to approve GeoSystems' marketing efforts relating to such
Restricted Products; provided, however, that the timing and approval
standards for NG's approval shall be consistent with the provisions of
Section 9 herein.
(b) The scope of the distribution rights granted hereunder, if any, in
terms of the exclusivity as to particular Products in specified distribution
channels, shall be as indicated in the table above. The rights granted above
shall be subject to rights already granted to Book-of-the-Month Club as listed
on Exhibit D hereto.
---------
(c) NG agrees that any exclusivity granted to GeoSystems hereunder shall
prohibit the grant of distribution rights by NG or any NG Affiliates to any
third party with respect to Products subject to such exclusivity, other than the
distribution of Products in NG Membership Channels (including, but subject to
Section 2.1 herein), such distribution in connection with the solicitation of
new members by NG).
(d) In the case of any Products subject to non-exclusive rights granted
herein, NG shall not grant any exclusive distribution rights, or lower royalty
rates, to any party for such Products in such Non-NG Channel(s) (NG shall exert
its best efforts to list all existing and material
6
<PAGE>
commercial licensing, distribution or marketing agreements for Products on
Exhibit D attached hereto).
- ---------
(e) In the case of Products or distribution channels in which GeoSystems
has been granted no distribution rights hereunder, other than the distribution
of Products in NG Membership Channels (including, but subject to Section 2.1
herein, such distribution in connection with the solicitation of new member by
NG) by NG and NG Affiliates, GeoSystems shall have a right of first negotiation
in the event NG wishes to grant any distribution rights therein during the term
of this Agreement.
(f) NG acknowledges that it is the parties' intent to make GeoSystems its
primary (and in some cases, as indicated above, its exclusive) commercial
publisher of Products during the term of this Agreement and thus shall cause the
NG Affiliates to comply with such intent (and exclusivity, as applicable) as if
such NG Affiliates were parties hereto. The parties agree that they shall use
their best efforts, and cooperate with each other, in order to make the Alliance
successful. Thus, for example, NG agrees, without limitation, to (i) reconsider
the distribution restrictions on the Restricted Products hereunder during the
term of this Agreement in the event it appears that such restrictions prohibit
GeoSystems from the ability to reach the minimum annual royalties or minimum
royalties required for automatic renewal under Section 8.1 herein; (ii) not to
develop or acquire publishing activities of Cartographic Products under the NG
Name competitive with the interests of the Alliance; and (iii) refrain from
selling Products, whether through "warehouse sales" or otherwise, at low price
levels which could be expected to have an adverse effect on sales of such
Products.
(g) Subject to Section 2.2(f) herein, in the event NG Maps proposes an
idea or concept for a Cartographic Product carrying the NG Name to GeoSystems,
and within ninety (90) days thereafter GeoSystems does not agree that such
Cartographic Product should be distributed under this Agreement, NG Maps shall
be free to develop and distribute such Cartographic Product without any
involvement of GeoSystems; provided, however, that GeoSystems shall have a right
of first refusal, exercisable within ten (10) business days after receipt of
written notice from NG, to develop and distribute such Cartographic Product on
the same general terms and conditions as agreed to with any third party;
provided, however, that Geosystems shall exceed any proposed advance of
royalties payable by such third party by ten percent (10%), and provided
further, that GeoSystems shall pay a royalty rate of fifteen percent (15%) for
any such Product, regardless of the type of Product involved or the royalty rate
offered by the third party. Should GeoSystems agree to distribute such
Cartographic Product, it shall dedicate the same level of effort and commitment
to such Cartographic Product as any other Product under this Agreement, and
shall be subject to the proviso of Section 12. Royalties with respect to such
Cartographic Products shall be as set forth in Section 2.4(b) herein.
7
<PAGE>
(h) The parties agree that this Agreement shall not restrict the
activities of any party or anY of its affiliates except as explicitly set forth
herein.
2.3 Approval by NG of Non-NG Products. NG shall have the right to approve
---------------------------------
or disapprove the sale and distribution by GeoSystems of all Products hereunder,
including the effect of the marketing and the content of the proposed Products
on the integrity of the NG Name, in accordance with the procedures set forth in
Section 9 herein.
2.4 Royalties, Etc..
---------------
(a) Minimum Annual Royalties.
--------------------------
(i) GeoSystems guarantees NG the following minimum annual
royalties (the "Minimum Annual Royalties") for each year during the initial term
hereof:
Year/(l)/ Minimum Annual Royalty
--------- ----------------------
Year One $ 250,000
Year Two $ 350,000
Year Three $ 500,000
Year Four $ 500,000
Year Five $ 500,000
----------
Total $2,100,000
- ---------------------------------------------
/(1)/ Each year during the term of this Agreement shall begin on May 1 and end
on April 30 of the next year, with the Year One beginning on May 1, 1997.
Upon execution of this Agreement, GeoSystems agrees to pay the Minimum
Annual Royalty for Year One; such payment shall serve as an advance
royalty payment such that no quarterly royalty payments shall be due
during Year One unless royalties payable as a result of Net Revenues in
Year One exceed such Minimum Annual Royalty (in which case any such
excess shall be payable at the end of the quarter in which the aggregate
royalties for Year One first exceed the Minimum Annual Royalty).
(ii) In addition to all actual royalties paid during the course
of the year and payable for the last quarter of the year, GeoSystems shall pay,
as part of the last quarterly installment payment for each year (other than Year
One) during the term of this Agreement as set forth in Subsection (d) below, an
amount equal to the excess, if any, of (i) the Minimum Annual Royalties for
such year over (ii) the sum of (A) the actual royalties paid to NG hereunder for
such
8
<PAGE>
year and (B) all royalties paid to NG hereunder in excess of the Minimum Annual
Royalties for prior years during the term of this Agreement less any Rebates
paid with respect to such excess pursuant to subsection (iii) below.
(iii) To the extent GeoSystems pays NG a royalty which exceeds
the Minimum Annual Royalty in any year during the term of this Agreement,
GeoSystems may require NG to rebate (a "Rebate") ten percent (10%) of such
excess (but in no case more than $50,000 per year) to GeoSystems for the purpose
of defraying direct expenses for promotion and advertising payable to third
parties that are directly related to the marketing or distribution of Products
hereunder in accordance with an NG approved marketing and distribution plan.
(b) Royalty Rates. GeoSystems shall pay royalties to NG based on the
-------------
following royalty rates on the Net Revenues derived by GeoSystems from the sale
of the Products:
Product Royalty Rate
------- ------------
i. NG Products 15.0%/(1)/
ii. GeoSystems Products 7.5%
iii. Third Party Products 7.5%
iv. Modified or Remanufactured Products 12.5%/(2)/
v. Licensed Products 50.0%/(3)/
- --------------------------------------------
/(1)/ At GeoSystems' option, in the case of sales of NG Products, GeoSystems
may (i) purchase such Products at 110% of NG's actual cost of printing,
paper and binding with respect to the manufacture of such Products and
pay a royalty of 15% of Net Revenues, or (ii) manufacture the NG Product
and pay a royalty of 15% of Net Revenues (in which case GeoSystems shall
allow NG to purchase such NG Products at 110% of GeoSystems' actual cost
of printing, paper and binding).
/(2)/ At GeoSystems' option, in the case of Modified or Remanufactured
Products, it may (i) request NG to make the required modifications and
manufacturing (at GeoSystems' expense) and pay NG a royalty of 12.5% of
Net Revenues or (ii) make the required modifications and manufacturing
and pay a royalty of 12.5% of Net Revenues.
/(3)/ For the purposes of calculating the royalties on Licensed Products, Net
Revenues shall be reduced by the out-of-pocket costs for developing and
manufacturing such Products.
(c) Price of Non-NG Products. GeoSystems shall (i) sell Non-NG
------------------------
Products to NG for distribution in the NG Membership Channels pursuant to
Section 3.3 herein at an
9
<PAGE>
agreed upon percentage of such Product's SRP and (ii) pay the applicable royalty
on such Non-NG Products upon their sale.
(d) Royalty Reports and Payments. GeoSystems shall render to NG
----------------------------
during the term of this Agreement, a written account of all Products sold by
GeoSystems during the previous quarter, and a calculation of royalties,
including sufficient data for NG to verify the calculation, and shall
simultaneously pay to NG the royalty due with respect to such Net Revenues. If
no Products subject to royalty hereunder have been sold by GeoSystems during
such calendar quarter, GeoSystems shall so report in writing to NG within forty-
five (45) days after the end of such calendar quarter. Quarterly reports and
payments will be issued within forty-five (45) days after the closing of the
quarterly periods ending approximately each March 31, June 30, September 30 and
December 3l.
(e) Records. GeoSystems shall keep full, true and accurate books of
-------
accounts containing all particulars relating to sales, licenses, sublicenses and
other activities of GeoSystems which may be necessary for the purpose of
ascertaining and verifying the royalties payable to NG by GeoSystems. Said books
and accounts shall be kept at GeoSystems' principal place of business.
(f) Audit Rights. At NG's request, GeoSystems shall permit an
-------------
independent certified public accountant selected by NG (except for one for whom
GeoSystems has a reasonable objection) to have access once each year during the
regular business hours of GeoSystems to such records, as well as to all actual
inventory of Products, to determine, for the preceding four calendar quarters
the correct report and/or payment made. In the event that any such audit by NG
reveals that GeoSystems underpaid the royalties payable with respect to the
period for which the audit is performed by an amount in excess of 5% of the
royalties payable with respect to such period, GeoSystems shall promptly pay to
NG the amount of such underpayment plus interest from the date such underpayment
was payable until it is paid. Interest shall be calculated at the prime rate of
CoreStates Bank, N.A. plus three percent (3%) per annum. The reasonable costs
and expenses incurred in conducting this audit shall be paid by NG unless the
audit revealed that GeoSystems underpaid royalties by an amount in excess of 5 %
in which event GeoSystems shall be responsible for the reasonable expenses of
the audit up to the amount of the underpayment.
3. LICENSES
--------
3.1 Grant of Licenses. Subject to the terms of this Agreement, NG grants to
-----------------
GeoSystems, for the term of this Agreement, (a) a license (or sublicense, as the
case may be) to the NG Name, in the form specified in Exhibit E, for the
---------
purposes of distributing the Products and the Licensed Products pursuant hereto
(including, without limitation, in publicity, promotions, marketing,
advertising, packaging or other materials related to the Products) and (b) a
license (or sublicense, as the case may be) to the NG Content for the purposes
of including the NG Content
10
<PAGE>
in the GeoSystems Products. The scope of the foregoing licenses (or sublicense,
as the case may be), for each Product, in terms of exclusivity and distribution
channels, shall correspond to scope of the distribution rights granted by NG to
GeoSystems under Section 2.2 herein, and shall be subject to the quality
controls and rights of approval by NG set forth in Section 9.
3.2 Title to the Name and Material. The NG Name, the NG Content
------------------------------
(including any derivative works (e.g., any Modified or Remanufactured Product))
and the NG Products shall remain the sole and exclusive property of NGS and NGS
shall retain all right, title and interest in and to the NG Name, NG Content and
NG Products, including, without limitation, Intellectual Property Rights, Moral
Rights, and any rights under United States or foreign copyright laws. All
trademark uses of the NG Name under this Agreement, and any goodwill generated
thereby, shall inure to the benefit of NGS, which shall own all the trademarks
and trademark rights created by such uses. GeoSystems acknowledges that all such
rights shall inure solely to the benefit of NGS, that GeoSystems will make no
claim of ownership of such rights, and hereby assigns and transfers to NGS all
such trademark rights. All rights not specifically granted hereunder by NGS with
respect to the NG Name and NG Content are expressly reserved by NGS.
3.3 Title to the Products. Except as specifically set forth herein,
---------------------
GeoSystems (or the appropriate third party in the case of Third Party Products)
shall have sole and exclusive title to all components of the Non-NG Products
(other than the NG Name or any NG Content that may be incorporated in the Non-NG
Product), including, without limitation, Intellectual Property Rights, all
patents, copyrights, trademarks, trade secrets and other proprietary rights
therein.
3.4 Credits. NGS shall be given the copyright and trademark notices and
-------
credits as provided on Exhibit E attached hereto and subject to approval by NG
---------
in accordance with the procedures set forth in Section 9.
3.5 Trademark Usage Records. GeoSystems shall keep appropriate records
-----------------------
(including copies of pertinent invoices and correspondence) relating to the
dates when each of the Products to be distributed hereunder is first placed or
sold in each country, which GeoSystems will make available (along with specimens
of usage) to NG upon request for registration or trademark defense purposes.
3.6 Trademark Usage Generally. GeoSystems shall not use the NG Name in any
-------------------------
form other than the form specifically permitted under this Agreement and for the
specific purposes permitted under this Agreement. Any other use of the NG Name
shall require the prior written approval of NG. GeoSystems shall strictly adhere
to NG's guidelines concerning usage of the marks (e.g., typeface, exact yellow,
dimensions of yellow border, no graphic overlay on yellow border). NG shall
supply GeoSystems with a copy of its Style Manual concerning proper trademark
usage.
11
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4. CARTOGRAPHIC SERVICES
---------------------
4.1 Use of NGE by GeoSystems. GeoSystems agrees that it will consider in good
------------------------
faith the use of the services of the personnel of NG Maps for the provision of
design, editorial and research work outsourced by GeoSystems in connection with
future cartographic product development by GeoSystems.
4.2 Right of First Negotiation to GeoSystems. NGE hereby grants GeoSystems a
----------------------------------------
right of first negotiation to provide cartographic services for any outsourced
cartographic production work by NG Maps (excluding Trails Illustrated) during
the term of this Agreement.
5. AVAILABILITY OF GEOSYSTEMS EQUITY TO NG
---------------------------------------
As more fully set forth in the Investment Agreement attached hereto as
Exhibit F (the terms of which, along with the terms of the Warrant described
below, shall control over the summary of the provisions herein relating to the
GeoSystems Equity), GeoSystems shall make equity in GeoSystems available to NGE,
in order to allow NGE to participate in the potential growth in GeoSystems as a
result of the Alliance described herein and otherwise, as follows:
5.1 Issuance of GeoSystems Warrant to NG.
------------------------------------
(a) Number of Shares. (i) Pursuant to the Warrant attached hereto as
----------------
Exhibit G (the "Warrant"), GeoSystems shall issue NGS the right to purchase
- ---------
shares of GeoSystems common stock. The number of shares of common stock
available for issuance under the Warrant shall be 250,265 (the "Warrant
Shares"), which represents three percent (3%) of the total number of
outstanding shares (8,342,173) of GeoSystems voting capital stock as of the date
of this Agreement (taking into consideration the issuance of the Warrant),
calculated on a fully-diluted basis taking into consideration shares of other
classes of GeoSystems voting capital stock outstanding and outstanding rights to
acquire GeoSystems voting capital stock (including without limitation options,
convertible notes or convertible securities).
(ii) In the event that a Private Placement (as such term is
defined in Section 5.2(d) herein) is effected on or before the date which is one
year from the date of this Agreement, the number of Warrant Shares shall be
increased by adding three percent (3%) of the number of shares of capital stock
issued (or issuable upon conversion of the securities issued in the Private
Placement) in the Private Placement to the then current number of Warrant Shares
(provided that the term of the Warrant shall remain unchanged). Such increase in
the number of Warrant Shares in the event of a Private Placement shall apply
only to the first Private Placement effected within one year of the date of this
Agreement unless the Private Placement raises gross proceeds (the "Actual
Proceeds") of less than $10 million (the "Minimum Proceeds"). In the event the
first Private Placement raises less than the Minimum Proceeds, the foregoing
adjustment to the Warrant Shares shall apply to any subsequent Private
Placement(s) effected during the one-year period following the date of the
initial Private Placement. The increase in the number of Warrant Shares shall be
equal to the product of (A) the Proceeds Differential, i.e. a fraction the
12
<PAGE>
numerator of which is the difference between the Minimum Proceeds and the Actual
Proceeds (on a cumulative basis) and the denominator of which is the gross
proceeds raised in such subsequent Private Placement and (B) 3% of the number
of shares to be issued (or issuable upon conversion of the securities offered in
the Private Placement) in such subsequent Private Placement. The exercise price
under Section 5.l(b) shall be determined by applying the provisions of such
Section to each Private Placement. The foregoing adjustments shall be
illustrated by the following example (assuming, for the purposes of the exercise
price, that neither Private Placement is an Insider Private Placement):
(I) Private Placement of $9 million in gross proceeds through the
sale of 2,250,000 shares at $4.00 per share - the Warrant Shares shall be
increased by 67,500 (3% of 2,250,000) under Section 5.2(a) and the exercise
price for such additional Warrant Shares shall be $3.20 (80% of $4.00).
(II) Subsequent Private Placement of $3 million in gross proceeds
through the sale of 375,000 shares at $8.00 per share - the Warrant Shares
shall be increased by 3,750 shares (($10 million - $9 million)/$3 million x
(3% of 375,000)) and the exercise price for such additional Warrant Shares
shall be $4.79 ($4.79 is less than 80% of $8.00).
(b) Exercise Price. The exercise price payable upon exercise of the
---------------
rights under the Warrant shall be equal to $4.79 per share; provided, however,
in the event a Private Placement is effected on or before the date which is one
year from the date of this Agreement and the offering price in such Private
Placement is less than $4.79, the exercise price of the Warrant shall be
adjusted to be equal to (i) in the case of an Insider Private Placement (as such
term is defined in Section 5.2(d) herein), the issue price in such Private
Placement and (ii) in the case of a Private Placement other than an Insider
Private Placement, eighty percent (80%) of the issue price in such Private
Placement.
(c) Term. The exercise period of the Warrant shall begin on the date
----
the Warrant is issued and shall end on the earlier of (i) five years from the
date of the Warrant or (ii) in the event of termination of this Agreement by
GeoSystems under Section 8.2 or by NG under Section 8.2 without cause, upon the
termination date (with the expiration date of the exercise period relating to
back to notification of breach by GeoSystems in the event of termination under
Section 8.2).
5.2 General Provisions Relating to GeoSystems Equity.
------------------------------------------------
(a) Additional Provisions. The parties shall be subject to the
----------------------
provisions of the Investment Agreement and the Warrant with respect to other
rights and restrictions set forth therein relating to the GeoSystems Equity. The
Investment Agreement shall include provisions allowing GeoSystems to repurchase
the GeoSystems Equity upon termination of the Agreement as a result of the
occurrence of an event set forth in Section 5. l(c)(ii) herein at the lower of
the
13
<PAGE>
(i) exercise price, or (ii) the Fair Market Value (as defined and calculated in
the Investment Agreement and taking into consideration a termination of this
Agreement) of the GeoSystems Equity.
(b) No Offer. Nothing in this Agreement or in the Proposal shall be
--------
deemed to be (i) a solicitation of an offer to purchase securities or (ii) an
offer to sell securities.
(c) Appointment of NG Director. GeoSystems shall, on or before
--------------------------
August 31, 1997, appoint to GeoSystems' Board of Directors a designee of NG
(subject to the reasonable approval of GeoSystems), to serve as a director of
GeoSystems. During the term of this Agreement and provided that NGE shall
continue to own GeoSystems Equity, the GeoSystems' Board of Directors shall
nominate such designee for election, and support his election, at each annual
meeting of shareholders of GeoSystems at which such designee's term expires.
During such period, in the event such designee shall cease to serve as a
director of GeoSystems, NG shall have the right to designate one other person to
serve as a director of GeoSystems (subject to the reasonable concurrence of
GeoSystems as to the person designated).
(d) Definitions. For the purposes of this Section 5, (i) the term
------------
"Private Placement" shall be deemed to refer to an offering of GeoSystems'
capital stock (or securities convertible into capital stock) which (A) does not
involve registration under the Securities Act of 1933, as amended, (B) does not
relate solely to employee benefit plans or a Rule 145 transaction and (C) is
effected within one year of the date of this Agreement or, in the case of a
Private Placement(s) following an initial Private Placement which does not raise
the Minimum Proceeds, within one year of the date of the initial Private
Placement, (ii) the term "Insider Private Placement" shall be deemed to refer to
a Private Placement made solely through GeoSystems' existing shareholders or
their affiliates (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended) and (iii) the term "GeoSystems Equity" shall
be deemed to refer to the Warrant and the Warrant Shares.
6. DATA RESELLING
--------------
6.1 Cartographic Data Reselling: NG may, through written permission to
---------------------------
GeoSystems from time to time, grant GeoSystems a nonexclusive, worldwide license
to resell NG Data to the commercial marketplace (with the goal of generating
revenues for NG to offset its former and ongoing data base development
activities) and GeoSystems shall provide NG with royalties to be mutually agreed
on a case by case basis.
6.2 Effect of Termination of Agreement: In the event of termination of
----------------------------------
this Agreement, any license granted pursuant to Section 6.2 herein shall
terminate and the right of GeoSystems to resell NG's Data shall terminate.
14
<PAGE>
7. REPRESENTATIONS AND WARRANTIES: PRODUCT WARRANTIES INDEMNIFICATION.
------------------------------------------------------------------
7.1 NG Representations and Warranties. NG represents and warrants to
---------------------------------
GeoSystems that:
(a) Authority. NG has the full right, power and authority to enter
---------
into this Agreement, to assign, transfer and otherwise grant to GeoSystems the
rights assigned, transferred and otherwise granted herein and to perform its
obligations hereunder. A11 rights assigned, transferred or granted to GeoSystems
by NG are free and clear of all liens, claims, demands and encumbrances of any
kind whatsoever. This Agreement does not conflict with, result in a breach of,
or constitute a default under any agreement, contract, instrument, order or
decree to which NG is a party or by which NG is otherwise bound;
(b) Original Development. All NG Products (and components thereof)
--------------------
are and shall be the original authorship of NG or its authorized subcontractors,
except for public domain materials or licensed materials;
(c) No infringement. No NG Products (or components thereof) shall
----------------
infringe or misappropriate any Intellectual Property Right, privacy right, or
other proprietary right or Moral Rights of any third party.
(d) No Material Litigation. No suit, action, litigation,
-----------------------
investigation, or proceeding of or before any court, arbitrator or any
governmental authority is pending or, to the knowledge of NG, threatened by,
against or affecting NG which challenges or affects NG's ability to enter into
this Agreement or which, if adversely determined, is likely to have a material
adverse effect on the ability of NG to pursue the Alliance contemplated herein.
7.2 GeoSystems Representations and Warranties. GeoSystems represents and
-----------------------------------------
warrants to NG that:
(a) Authority. GeoSystems has the full right, power and authority to
----------
enter into this Agreement, and to perform its obligations hereunder. This
Agreement does not conflict with, result in a breach of, or constitute a default
under any agreement, contract, instrument, order or decree to which GeoSystems
is a party or by which GeoSystems is otherwise bound;
(b) Original Development. All Non-NG Products (and components
--------------------
thereof) are and shall be the original authorship of GeoSystems or its
authorized subcontractors (or the appropriate third party in the case of Third
Party Products), except for public domain materials;
15
<PAGE>
(c) No Infringement. No Non-NG Products (or components thereof)
---------------
shall infringe or misappropriate any Intellectual Property Right, privacy right,
or other proprietary right or Moral Rights of any third party; and
(d) No Material Litigation. No suit, action, litigation,
----------------------
investigation, or proceeding of or before any court, arbitrator or any
governmental authority is pending or, to the knowledge of GeoSystems, threatened
by, against or affecting GeoSystems which challenges or affects GeoSystems'
ability to enter into this Agreement or which, if adversely determined, is
likely to have a material adverse effect on the ability of GeoSystems to pursue
the Alliance contemplated herein.
7.3 Product Warranties. Each party warrants to the other that, at the
------------------
time of delivery of any Product hereunder and except as otherwise set forth
herein, such Product shall be free from defects in workmanship and materials and
shall perform substantially in accordance with applicable published
descriptions of such Products. As with all commercial map makers, however, it is
dependent upon information furnished from public sources, maps and aerial
photography and thus the party supplying the Product in question does not assume
responsibility for inconsistencies and inaccuracies in data furnished by these
sources. In the event any portion of a Product fails to conform with the
specifications described herein, a party's sole liability will be to furnish a
replacement Product incorporating the correction. THE FOREGOING PRODUCT WARRANTY
IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, WHETHER IMPOSED BY CONTRACT, STATUTE, COURSE OF DEALING,
CUSTOM OR USAGE OR OTHERWISE. Each party further agrees not to make any
warranties to any third party concerning the Products which are not in
accordance with the foregoing.
7.4 Indemnification. Each party (the "Indemnifying Party") will indemnify
---------------
and hold harmless the other party (the "Indemnified Party") from and against all
claims, damages, losses and expenses (including court costs and reasonable fees
and expenses of attorneys, expert witnesses and other professionals), from any
third party against the Indemnified Party arising out of or resulting from a
breach by the Indemnifying Party of any of the warranties, representations or
agreements hereunder. In the event that the Indemnified Party subsequently
determines that the Indemnifying Party has failed to pursue such defense
diligently, the Indemnified Party shall have the right to assume control of the
defense, and the Indemnifying Party shall fully indemnify the Indemnified Party
in accordance herewith for all costs, damages, losses and expenses, (including
court costs and fees and expenses of attorneys, expert witnesses and other
professionals), arising out of or resulting from the Indemnified Party's
assumption of control of defense.
16
<PAGE>
8. TERM: TERMINATION
-----------------
8.1 Term. The initial term of this Agreement is for five years, commencing on
----
the Effective Date of this Agreement (the "Initial Term"). This Agreement shall
be automatically renewed for an additional five (5) year term at the end of the
Initial Term; provided, however, that NG may elect to terminate this Agreement
if (a) GeoSystems is in breach of the terms of this Agreement or (b) in the
case of the Initial Term only, the earned aggregate royalties hereunder by NG in
the last three (3) years of the Initial Term do not equal or exceed $2,000,000
(GeoSystems shall have the option of making up any shortfall in such minimum
aggregate royalties through a payment to NG); and provided further, that this
Agreement shall not automatically renew if written notice of intent not to renew
has been given by GeoSystems to NG at least six (6) months prior to the
expiration of the Initial Term. In the event of such a renewal of this
Agreement, all of the terms and provisions of this Agreement shall continue to
apply unamended; provided, however, that the royalty rates and prices under
Sections 2.4(b) and (c) hereunder and the Minimum Annual Royalties and minimum
royalties required for automatic renewal under Section 8.1 herein shall be
negotiated by the parties in good faith based on the revenues and royalties
generated during the Initial Term, but in no event shall such minimum annual
royalties required for automatic renewal under this Section 9.1 be less than the
Minimum Annual Royalties set forth in this Agreement.
8.2 Termination. This Agreement may be terminated by either party in the
-----------
event that:
(a) Any representation or warranty made by the other party herein shall
be inaccurate or incomplete in any material respect on or as of the date made or
shall subsequently become inaccurate or incomplete in any material aspect (the
cure provisions in subparagraph (b) above shall apply to such subsequent event);
(b) The other party commits a material breach of any obligation hereunder
which is not remedied to the reasonable satisfaction of the other party within
sixty (60) days (except for a breach of payment of royalties or fees due
hereunder, in which case the cure period shall be limited to fifteen (15) days)
after receipt of written notice specifying such breach, such obligations to
include but not be limited to the payment of royalties or fees due and the
delivery of contracted goods and services according to agreed-upon schedules;
provided, however, that if it is possible for such breach (except for a breach
for payment of royalties or fees due hereunder) to be cured, but not within such
sixty (60) day period, the breaching party may be afforded an additional
reasonable amount of time (as determined by the nonbreaching party in its sole
reasonable discretion) to cure such breach, provided the breaching party shall
have promptly commenced to cure such breach and shall diligently prosecute the
cure of such breach to completion; or
17
<PAGE>
(c) The other party engages in a course of conduct that has injured
the reputation of the other party, the Products or the NG Name, as the case may
be, and such party does not discontinue said conduct within ten (10) days after
receipt of written notice thereof.
8.3 Obligations Upon Termination. Upon expiration or termination of this
-----------------------------
Agreement, all the licenses granted hereunder shall terminate, GeoSystems shall
be deemed to have assigned, transferred and re-conveyed to NG all licenses,
rights, title and interest in and to the NG Name and the NG Content.
Notwithstanding the foregoing, upon the expiration or termination of this
Agreement: (a) GeoSystems shall be entitled to distribute those NG Products
already manufactured (subject to the payment of royalties related thereto) for a
period of six months following termination (the "Sell-Off Period"), and the
amount of royalty (i.e., not the percentage) to be paid to NG on a per unit
basis shall be no less than the average amount or royalty on a per unit basis
paid during the twelve month period prior to termination; (b) GeoSystems may
sell GeoSystems Products and Third Party Products and (i) shall not be obligated
to pay any royalties to NG in connection therewith provided that no use of the
NG Name or NG Content is used in connection therewith and (ii) shall be
obligated to pay fifty percent (50%) of the royalties set forth herein in the
event NG Content (but not the NG Name) is used in connection therewith and
provided that such use (and payment) shall be limited to a period of two (2)
years; (c) NG shall retain ownership of all Modified and Remanufactured Products
but shall be required to pay GeoSystems royalties at a rate of twelve and one-
half percent (12.5%) of Net Revenues upon the sale or distribution of such
Products; (d) all rights of first negotiation of either party hereunder shall
terminate; and (e) the rights of the parties with respect to the GeoSystems
Equity shall be as set forth in the Investment Agreement, the Warrant and
Article 5 herein.
8.4 No Elimination of Prior Liability. Any termination or expiration of
--------------------------------
this Agreement shall not serve to eliminate any liability arising out of conduct
prior to the actual date of termination or expiration, and either party may,
following such termination or expiration, pursue such remedies as may be
available with respect to such liabilities.
8.5 Survival of Certain Conditions. Notwithstanding anything to the
------------------------------
contrary contained in this Agreement, Sections 3.2, 3.3, 7.4, 8.3, 8.4, 10 and
11 shall in all cases survive any expiration or termination of this Agreement.
9. RELATIONSHIP OF THE PARTIES; MANAGEMENT
---------------------------------------
9.1 Relationship of Parties. Each party hereto is an independent contractor
-----------------------
and is not an agent or employee of, and has no authority to bind, the other by
contract or otherwise. No agency, partnership, joint venture or employment
relationship is created as result of this Agreement.
9.2 Management of the Alliance.
--------------------------
18
<PAGE>
(a) Day-to-Day Management. Subject to the editorial quality controls
---------------------
of NG Maps outlined below, GeoSystems shall manage and staff all aspects of the
publishing process for the Alliance on a day-to-day basis, including development
of business and publishing plans, product design and development, product
creation, product manufacturing, sales and marketing and distribution and
fulfillment.
(b) Annual Publishing Plan. GeoSystems, in consultation with NG
----------------------
Maps, shall develop a detailed annual publishing plan (with updates twice each
year to coincide with the release of spring and fall lists) for sales,
marketing, and production (the "Annual Plan"). The proposed Annual Plan will
include an outline of new products, product revisions and re-releases, plus any
new sales, marketing or promotion efforts. This Annual Plan shall be submitted
for approval by NG Maps no later than one month prior to planned implementation.
NG Maps will provide any comments or objections to the proposed Annual Plan no
later than ten (10) business days following receipt of the proposed Annual Plan.
NG Maps' consent to the proposed Annual Plan shall not be unreasonably withheld;
provided, however, that NG Maps may withhold its consent, exercised in good
faith, with respect to any part of the proposed plan that NG Maps believes, in
its sole discretion, would impair, negatively affect or denigrate the NG Name or
the goodwill and reputation of National Geographic Society. In any case in which
NG Maps withholds its consent pursuant hereto, it shall stipulate its specific
objection(s) and negotiate in good faith with GeoSystems to resolve such
objection(s).
(c) Quality Control. With respect to any Product developed,
---------------
published and distributed under this Agreement that bears the NG Name ("Branded
Product"), and with respect to promotional, publicity, marketing, advertising,
packaging of any Product or other materials bearing the NG Name (such material
collectively referred to as "Branded Material"), and with respect to a
Cartographic Product offered as a premium hereunder in the Premium Channels
bearing the NG Name ("Branded Premium"), NG Maps shall have the following
approval rights:
(1) Branded Product.
---------------
(i) NG Product. Any NG Product will require no further
-----------
approval by NG following completion of the NG Product by NG Maps. In the event
that GeoSystems participates in the development or production of an NG Product,
no further approval from NG Maps will be necessary if NG Maps retains editorial
control over such development and production. If NG Maps does not have editorial
control over the content of a product, such product is either a GeoSystems
Product or a Third Party Product.
(ii) Modified and Remanufactured NG Products. GeoSystems
---------------------------------------------------
Product and Third Party Product. The parties shall mutually agree on any
- -------------------------------
Modified and Remanufactured NG Product, GeoSystems Product or Third Party
Product concept or idea before substantial expense is incurred by either party
in the development of such product. After mutual
19
<PAGE>
approval of a product concept or idea, the following shall be submitted by
GeoSystems to NG Maps for approval for each such product in the order stated:
(A) a prototype or early sample of the Branded Product and any
revised prototype at each major stage of development of the
Branded Product; and
(B) finished artwork, showing the design and cartographic content of
the Branded Product and the exact use of the NG Name on the
Branded Product;
NG Maps agrees to provide GeoSystems with any comments or objections or approval
within fifteen (15) business days of receipt of the materials specified above.
GeoSystems agrees not tO proceed with the next step in the development process
until written approval has been provided by NG Maps, which will be granted in
accordance with the approval standards set forth below.
GeoSystems shall inform NG Maps prior to any manufacturing or printing
activities. Such notice shall be in writing no later than ten (10) business days
prior to the manufacturing or printing activity. NG Maps shall have the right to
attend and approve products for manufacturing quality. Should NG Maps decide not
to exercise its right to attend Product approved by GeoSystems "at press" shall
be considered approved by NG Maps; provided, however, that the manufactured or
printed Product shall in any event conform to the prototype and artwork
previously approved by NG Maps.
GeoSystems shall provide NGS with ten (lO) samples of finished product within
five (5) days of manufacturing.
(2) Branded Materials. With respect to any Branded Material
-----------------
that GeoSystems proposes to use under this Agreement, GeoSystems shall submit
for review and approval by NG Maps the following materials in the order stated:
(A) proposed written copy for the item of Branded Material, with
attached rough art showing how the NG Name and any NG Content will
be used; and
(B) final copy for the item of Branded Material, showing the use of
the NG Name.
GeoSystems will provide NG Maps with a final printed sample of the item, where
feasible (for example, printed advertisements, brochures, posters, hangtags,
catalogs).
20
<PAGE>
NG Maps agrees to provide GeoSystems with any comments or objections or
approval within fifteen (15) business days of receipt of the materials specified
above. GeoSystems agrees not to proceed with the next step in the development
process until written approval has been provided by NG Maps, which will be
granted in accordance with the approval standards set forth below.
(3) Branded Premiums. The parties shall mutually agree on any
----------------
Branded Premium concept or idea before substantial expense is incurred by either
party in the development of such product. NG Maps shall have the right to
withhold approval of any Product Premium that would constitute a direct or
indirect product endorsement that would be contrary to the policies, reputation
or goodwill of the Society as determined by NG in its sole discretion. After
mutual approval of a Branded Premium concept or idea, the following shall be
submitted by GeoSystems to NG Maps for approval for each such product in the
order stated:
(A) a prototype or early sample of the Branded Premium and any
revised prototype at each major stage of development of the
Branded Premium; and
(B) finished artwork, showing the design and cartographic content of
the Branded Premium and the exact use of the NG Name on the
Branded Premium;
NG Maps agrees to provide GeoSystems with any comments or objections or
approval within five (5) business days of receipt of the materials specified
above. GeoSystems agrees not to proceed with the next step in the development
process until written approval has been provided by NG Maps, which will be
granted in accordance with the approval standards set forth below.
GeoSystems shall inform NG Maps prior to any manufacturing or printing
activities. Such notice shall be in writing no later than ten (10) business days
prior to the manufacturing or printing activity. NG Maps shall have the right to
attend and approve products for manufacturing quality. Should NG Maps decide not
to exercise its right to attend, Product approved by GeoSystems "at press" shall
be considered approved by NG Maps; provided, however, that the manufactured or
printed product shall in any event conform to the prototype and artwork
previously approved by NG Maps.
GeoSystems shall provide NGS with ten (10) samples of finished product within
five (5) days of manufacturing.
(4) Approval Standards. As a general matter, NG Maps will not
-------------------
unreasonably withhold its approval; provided, however, that NG Maps may withhold
its approval with respect to any Branded Product or Branded Material that NG
Maps believes, in its sole discretion exercised in good faith, would impair,
negatively affect or denigrate the NG Name or
21
<PAGE>
the goodwill and reputation of National Geographic Society. In any such case, NG
Maps agrees to specify the problem and help suggest a solution. Once approval
has been given for each stage of the development process of either a Branded
Product or Branded Material, NG Maps agrees that such approval cannot be later
revoked, and that approval cannot be withheld at a later stage for a specific
problem that reasonably could have been identified at an earlier stage in the
approval process.
(d) Joint Advisory Committee. The parties shall establish a joint
------------------------
advisory committee comprised of individuals designated by each party to assure
consistency of the Alliance's efforts with NG's mission, image and standards
(while at the same time achieving the Alliance's business goals) and to resolve
problems and coordination of activities between NG and GeoSystems.
(e) Status Meetings and Reports. The representatives on the advisory
---------------------------
committee shall review and approve a semi-annual publishing plan for the
Alliance and shall determine the frequency and nature of other status meetings
and reports they deem appropriate or necessary to maintain quality and achieve
milestones on a timely basis. The status meetings may be held in person, by
telephone or by such other manner as the parties deem appropriate.
(f) Conditions Impairing Perforrnance. Each party shall give written
---------------------------------
notice to the other of any condition(s) which arise at any time during the term
of this Agreement which could impair its proper and timely performance of this
Agreement, within forty-eight (48) hours of encountering the condition(s).
10. DISPUTE RESOLUTION.
------------------
10.1 Basic Dispute Resolution Procedures. Any dispute among the parties
-----------------------------------
either with respect to the interpretation of any provision of the Agreement
with respect to the performance of any party shall be resolved as specified
in this Section.
(a) Upon the written request of any party, the parties' representatives
to the advisory committee established pursuant to Section 10.2 herein shall meet
for the purpose of endeavoring to resolve any dispute hereunder.
(b) The designated representatives shall meet as often as necessary
during a fifteen (15) day period (or such other time as the parties may agree)
to gather and furnish to the other all information with respect to the matter in
issue which is appropriate and germane in connection with its resolution.
(c) Such representatives shall discuss the problem and negotiate in good
faith in an effort to resolve the dispute without the necessity of any formal
proceeding relating thereto.
22
<PAGE>
(d) During the course of such negotiation, all reasonable requests made
by one party to the other for non-privileged information reasonably related to
this Agreement, will be honored in order that each of the parties may be fully
advised of the other's position.
(e) The specific format for such discussions will be left to the
discretion of the designated representatives, but may include the preparation of
agreed upon statements of fact or written statements of position furnished to
the other party.
10.2 Escalation Procedures. If the designated representatives cannot
---------------------
resolve the dispute, it shall be escalated to the President of GeoSystems and
the designated officer of NG, for their review and resolution. If the dispute
cannot be resolved by such officers, then the parties may initiate formal
proceedings; however, formal proceedings for the resolution of any such dispute
may not be commenced until the earlier of:
(a) The designated representatives concluding in good faith that amicable
resolution through continued negotiation of the matter in issue does not appear
likely; or
(b) Sixty (60) days after the initial request to negotiate such dispute
(unless preliminary or temporary relief of an emergency nature is sought by one
of the parties); or
(c) Thirty (30) days before the statute of limitations governing any
cause of action relating to such dispute would expire.
10.3 Arbitration.
-----------
(a) Procedure. Except as otherwise provided in subsection (b) below,
----------
any dispute or claim arising in connection with this Agreement, or the breach,
validity, or enforceability of any provision of this Agreement, which is not
resolved pursuant to the procedures specified above, will be resolved by final
and binding arbitration conducted in accordance with and subject to the
Commercial Arbitration Rules of the American Arbitration Association by three
arbitrators selected in accordance with those rules. The arbitration proceeding
shall be held in the District of Columbia. The arbitrators will allow such
discovery as is appropriate, consistent with the purposes of arbitration in
accomplishing fair, speedy, and cost-effective resolution of disputes. All
discovery will be completed, and the arbitration hearing will commence, within
forty-five (45) days after appointment of all the arbitrators, and the
arbitration hearing will conclude within thirty (30) days after it commences.
The arbitrators will make every effort to enforce these times requirements
strictly, but may extend the time periods upon a showing that exceptional
circumstances require extension to prevent manifest injustice. The decision of
the arbitrators will be rendered in writing and will explain the reasons
therefor. The arbitrators shall have no power or authority to add or detract
from the agreements of the parties. The arbitrators may render awards of
monetary damages, direct to take or refrain from
23
<PAGE>
taking action, or both, and may, at their discretion, order one party to
reimburse the other for attorneys' fees and other expenses reasonably incurred
by the other party in connection with the arbitration. Judgment upon the award
rendered in any such arbitration may be entered in any court having jurisdiction
thereof, or application may be made to such court for a judicial acceptance of
the award and an enforcement, as the law of such jurisdiction may require or
allow.
(b) Exceptions. Notwithstanding the provision of subsection (a)
-----------
above, neither party shall have any obligation to arbitrate any claim or dispute
for infringement of its Intellectual Property Rights. Either party, before or
during arbitration, may apply to a court having jurisdiction for a temporary
retraining order or preliminary injunction where such relief is necessary to
protect its interests pending completion of the arbitration proceedings.
10.4 Continuation of Performance. Except when clearly prevented by the
---------------------------
area in dispute, both parties agree to continue performing their respective
obligations under this Agreement while the dispute is being resolved unless and
until such obligations are terminated or expire in accordance with the
provisions hereof.
11. CONFIDENTIALITY. Except to the extent GeoSystems or NG may be required to
---------------
make appropriate disclosures in connection with its financing activities, or as
required by law, the terms of the Agreement are confidential and shall not be
disclosed to any other party without the written consent of the other party.
Each party shall (and shall take such reasonable action to ensure that its
employees) preserve in strict confidence any information obtained by the other
party or its employees, concerning its business or any of its affiliates
including, without limitation to, trade secrets, proprietary information and
business plans and agrees, except as expressly permitted herein, to refrain (and
shall take such reasonable action to assure that its employees refrain) from
disclosing, during the term of this Agreement or at any time thereafter, any
such information to any person or persons, or business organizations. In the
event that any party to this Agreement receives a request to disclose any
confidential information of the Alliance or of a party pursuant to a request by
a shareholder of GeoSystems under Delaware corporate law or under the terms of a
valid and effective subpoena or order issued by a court of competent
jurisdiction or by a governmental body, such party agrees to (i) immediately
notify the other party of the existence, terms and circumstances surrounding
such a request, so that the parties may seek an appropriate protective order
and/or waive compliance with the provisions of the Agreement (and, if the
parties seek such an order, to provide such cooperation as the other party shall
reasonably request), and (ii) if disclosure of such information is required in
the written opinion of counsel to the party receiving such request, make all
reasonable efforts, the costs of which shall be borne equally by the parties, to
obtain an order or other reliable assurance that confidential treatrnent will be
accorded to such confidential information. Disclosure by a party of confidential
information of the other party or of the Alliance to a Competitive Enterprise
(as such term is defined in Section 13.2 herein) in violation of the foregoing
provisions shall be, in the absence of a court order requiring such disclosure,
a breach of this Agreement permitting termination by such other party
24
<PAGE>
pursuant to Section 8.2 herein. Each party agrees that any breach of this
Section by the other may cause irreparable damage and that, in the event of such
breach, in addition to any and all remedies at law, such party shall have the
right to seek an injunction, specific performance or other equitable relief to
prevent the continuous violations of these terms.
12. ACKNOWLEDGMENTS. Each party hereby acknowledges and agrees that the other
---------------
has reasonable discretion with respect to the marketing of the Products pursuant
to this Agreement (including under the licenses granted hereunder) including,
but not limited to, the licensing of the Products, alone or as part of a bundle
of other products, the pricing of the Products and the distribution of the
Products, but subject to the limitations of quality control and approvals as
specifically set forth in this Agreement. Each party also acknowledges that
nothing in this Agreement shall require a party to begin to market, or, once
begun, to continue to market, a Product if such party, in its sole discretion,
determines that it would not be commercially reasonable to do so; provided,
however, that in the event that NG has commenced or completed development of a
Product pursuant to an Annual Plan or other agreement or approval from
GeoSystems, and GeoSystems subsequently determines that it would not be
commercially reasonable to distribute such Product hereunder, NG shall have the
option of either (i) receiving reimbursement from GeoSystems of the actual costs
of development of such Product up to that time, or (ii) completing the
development of the Product and distributing such Product itself pursuant to
Section 2.2(f) herein.
13. GENERAL PROVISIONS.
------------------
13.1 Notice. Any notice, request, demand, or other cornmunication
------
required or permitted hereunder shall be sent to the parties and their counsel
at the addresses set forth below (unless and until such addresses shall have
been changed by notice provided hereunder) and shall be deemed to be properly
given upon the earlier of (a) actual receipt by the addressee, (b) five (5)
business days after deposit in the U.S. mail, postage prepaid, when mailed by
registered or certified mail, return receipt requested, (c) two (2) business
days after being sent via private industry courier to the respective party or
(d) the day confirmation of deliver is received if sent by facsimile
transmission, telegram, telex or other form of electronic message.
NG:
--
National Geographic Maps
1145 Seventeenth Street, N.W.
Washington, D.C. 20036
Attention: Allen T. Carroll
25
<PAGE>
With a copy to:
Angelo M. Grima, Esquire
National Geographic Society
1145 17th Street, N.W.
Washington, D.C. 20036-4688
GeoSystems:
----------
GeoSystems Global Corporation
227 Granite Run
Lancaster, PA 17601
Attention: Barry J. Glick, President & Chief Executive Officer
and
GeoSystems Global Corporation
3710 Hempland Road
Mountville, PA 17554
Attention: William F. Muenster,
President of the Mapping Products and Services Division
With a copy to:
Paul G. Mattaini, Esq.
Barley, Snyder, Senft & Cohen, LLP
126 East King Street
Lancaster, PA 17692
13.2 Assignment.
----------
Neither party may assign this Agreement or delegate its obligations
hereunder in whole or in part without the prior written consent of the other
party, such consent not to be unreasonably withheld or delayed. A Special
Assignment Event (as defined below) also shall constitute an assignment under
this section requiring the prior written consent of the other party. Either
party shall have the right to terminate this Agreement with sixty (60) days'
written notice in the event an assignment is made by, or a Special Assignment
Event occurs with respect to, one party without the prior written approval of
the other party. A party may withhold its consent for any reasonable cause, and
the withholding of consent by such party shall be deemed reasonable in the event
that the third party to an assignment or a Special Assignment Event is (i) a
person, entity or group which has a significant part of its operations in the
manufacture and/or sale of cartographic or map-related products or production of
documentary films, programs and publications concerning nature, geography,
exploration or history (a "Competitive Enterprise"),
26
<PAGE>
(ii) in the case of a Special Assignment Event described in subsection (d)
below, an affiliate of a Competitive Enterprise, or (iii) a person, entity or
group whose business or reputation would have a negative effect on the
reputation or goodwill of a party or the Alliance as determined in good faith by
such party. A "Special Assignment Event" shall be defined hereunder as (a) a
material change in the day-to-day management and control of a party (other than
as part of ordinary management succession processes) which affects, or
reasonably may be expected to affect, the ability of such party to capably and
vigorously pursue the success of the Alliance (subject to the rights of such
party to replace, within one hundred twenty (120) days, to the reasonable
satisfaction of the other party, any manager(s) whose unavailability might be
deemed to constitute a Special Assigmnent Event); (b) the sale or issuance by a
party of a block of common stock (or any security possessed of voting rights)
equaling or exceeding twenty percent (20%) of such party's outstanding common
stock to an entity, person or group (as defined under Rule 13d-l(b)(H) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) that is not a
shareholder of such party as of the date hereof; (c) the sale, hypothecation or
transfer of outstanding shares of common stock of a party equal to or
exceeding twenty percent (20%) of the outstanding common stock (or any security
possessed of voting rights) of such party to an entity, person or group (as
defined under Rule 13d-l(b)(H) of the Exchange Act) that is not a shareholder of
such party as of the date hereof; (d) nomination for election as a director of a
party, or appointment to fill the remaining term of any then-current director of
a party, of any person who is an affiliate (as defined under Rule 12b-2 of the
Exchange Act) of a Competitive Enterprise, or (e) the sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of (A) a party or (B) in the case of
GeoSystems, its division currently known as its Mapping Products and Services
Division, to a third party which is not controlled by, or under common control
with, such party or one of its current shareholders. For the purposes of (I)
subsection (b) or (c) above, the percentages set forth therein shall be
interpreted to refer a party's outstanding common stock (or any security
possessing voting rights) as of the date of this Agreement unless the other
party has previously consented to a transaction under subsection (b), in which
case the outstanding common stock (or any security possessing voting rights)
shall include shares issued pursuant to such consent, and (II) subsections (a)
and (b) above, NG, in exercising its right of approval under this Section, shall
respond within ten (10) business days to a written request by GeoSystems to
approve proposed new management personnel or investors, as the case may be, with
failure to respond to such a request within such time period to be deemed to be
an approval. GeoSystems represents and warrants that the shareholders of
GeoSystems as of the date hereof (prior to the issuance of the Warrant) are the
following entities and people (with appropriate percentages of GeoSystems'
voting capital stock): (A) R. R. Donnelley & Sons Company (37%); (B) Trident
Capital, L.P. (39%); (C) management and employees of GeoSystems (21 %); and (D)
other investors (3%). For the purposes of this Section 13.2, the parties shall
be deemed to be limited to NGE and GeoSystems.
13.3 Severability. If any part of this Agreement, for any reason, is
------------
declared by a court of competent jurisdiction to be invalid, it shall be deemed
omitted. The remainder of this
27
<PAGE>
Agreement shall continue in effect as if the Agreement had been entered into
without the invalid portion.
13.4 Force Majeure. No party shall be liable for any damages or penalty
-------------
for any delay in performance of, or failure to perform, any obligation hereunder
or for failure to give the other party prior notice thereof when such delay or
failure is due causes beyond that party's reasonable control, such as the
elements, act of God, unavoidable delays in transportation, and unavoidable
delays in delivery by vendors.
13.5 Governing Law. This Agreement will be governed by and construed in
--------------
accordance with the laws of the District of Columbia, without regard to or
application of choice of law rules or principles.
13.6 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their respective successors and assigns.
13.7 Complete Agreement. This Agreement, including the Exhibits hereto,
------------------
sets forth the full understanding among the parties and may only be changed in
writing. The parties acknowledge that this Agreement, together with the Exhibits
and all documents incorporated herein, sets forth the complete, exclusive and
integrated understanding of the parties which supersedes all proposals or prior
agreements, oral or written, and all other prior communications between the
parties relating to the subject matter of this Agreement.
13.8 Amendments and Revisions. Changes or modifications to this Agreement
------------------------
and Exhibits may not be made orally, but only by a written amendment or revision
signed by all parties. Any terms and conditions varying from this Agreement and
Exhibits on any order, invoice or other written notification from either party
are not binding on the other party unless specifically accepted in writing by
the other party. Notwithstanding the foregoing, the parties agree and
acknowledge that the Exhibits hereunder may be updated or revised by mutual
consent of the parties.
13.9 Partial Waiver If any party waives or modifies any term or condition
--------------
of this Agreement, such waiver or modification will not void, waive or change
any other term or condition or shall any delay or omission on the part of either
party to exercise or avail itself of or remedy that it has or may have hereunder
operate as a waiver of any right or remedy. If any party waives a default by the
other, such waiver does not mean that any party will waive future, or other,
defaults.
13.10 Counterparts. This Agreement may be executed in multiple
-------------
counterparts. Each such counterpart shall be an original and all together shall
constitute but one and the same Agreement.
28
<PAGE>
13.11 Headings. The section headings and the table of contents used
---------
herein are for reference and convenience only and shall not enter into the
interpretation hereof.
13.12 Nonperformance. To the extent any nonperformance by any party of
--------------
its obligations under this Agreement results from or is caused by the other
party's failure to perform its obligations under this Agreement, such
nonperformance shall be excused.
13.13 Agreement Not To Be Construed Against Any Party. The parties
-----------------------------------------------
acknowledge and agree that each has been represented by legal counsel of its
choice throughout the negotiation and drafting of this Agreement, that each has
participated in the drafting thereof, and that this Agreement shall not be
construed in favor of or against either party solely on the basis of a party's
drafting or participation in the drafting of any portion of this Agreement.
29
<PAGE>
IN WITNESS WHEREOF,the parties hereto have each caused this Agreement to
be fully executed by their duly authorized representative on the date shown
below.
NATIONAL GEOGRAPHIC SOCIETY
By: /s/ John M. Fahey, Jr.
-------------------------------------
Name: JOHN M. FAHEY, JR.
-------------------------------------
Title: EXECUTIVE VICE PRESIDENT
-------------------------------------
Date: APRIL 22, 1997
-------------------------------------
NGE, INC., D/B/A NATIONAL GEOGRAPHIC MAPS
By: /s/ Allen T. Carroll
-------------------------------------
Name: ALLEN T. CARROLL
--------------------------------------
Title: SENIOR VICE PRESIDENT
-------------------------------------
Date: APRIL 22, 1997
------------------------------------
GEOSYSTEMS GLOBAL CORPORATION
By: /s/ Barry J. Glick
------------------------------------
Name: BARRY J. GLICK
------------------------------------
Title: CEO
------------------------------------
Date: 22 APRIL 1997
------------------------------------
30
<PAGE>
EXHIBIT A
LICENSED TRADEMARKS
NATIONAL GEOGRAPHIC and YELLOW BORDER DESIGN
NATIONAL GEOGRAPHIC SOCIETY
NATIONAL GEOGRAPHIC MAPS (Specimen Attached)
Specimens will be provided by NG Maps; all trademarks to be used in accordance
with the restrictions set forth in the Agreement.
<PAGE>
NATIONAL
GEOGRAPHIC
----------
MAPS
<PAGE>
EXHIBIT B
EXISTING NG PRODUCTS
List of Supplemental Maps dated December 1996 previously provided to GeoSystems
by NG Maps incorporated herein by reference herein.
<PAGE>
EXHIBIT C
EXISTING NG STORES AND KIOSKS
Stores: Store at National Geographic headquarters in Washington, DC; store
planned for National Airport in Washington, DC.
Kiosks: Free-standing kiosks in shopping malls for the Christmas season; last
year, there were two in New Jersey.
<PAGE>
EXHIBIT D
EXISTING NG AGREEMENTS
Book of the Month Club
Random House
Publishers Group West
RBA Publicaciones
Distribution Agreement between GeoSystems and the Trails Illustrated/National
Geographic
Maps unit of NGE, Inc.
<PAGE>
EXHIBIT E
COPYRIGHT AND TRADEMARK CREDITS
Copyright: (C) National Geographic Society
Trademark: (R) following Society trademarks; further instructions in Style
Manual and as provided by NG from time to time
<PAGE>
EXHIBIT F
INVESTMENT AGREEMENT
--------------------
THIS INVESTMENT AGREEMENT (the "Agreement") made as of this day of
April, 1997, by and between NGE, INC. ("NGE"), a Delaware corporation whose
principal address is 1145 Seventeenth Street, N.W., Washington, D.C. 20036, and
GeoSystems Global Corporation ("GeoSystems"), a Delaware corporation whose
principal address is 227 Granite Run, Lancaster, Pennsylvania, 17601.
WITNESSETH:
-----------
WHEREAS, National Geographic Society, NGE and GeoSystems have entered
into a Cartographic Products Development, Publishing, Marketing and Distribution
Agreement of even date (the "Cartographic Agreement"); and
WHEREAS, pursuant to the Cartographic Agreement, GeoSystems has agreed to
issue a warrant (the "Warrant") to NGE under which NGE shall have the right to
purchase up to 250,265 shares (the "Warrant Shares") of GeoSystems' common
stock, subject to certain anti-dilution provisions set forth in the Warrant; and
WHEREAS, the Warrant and the Warrant Shares are collectively referred to
herein as the "Securities";
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and representations set forth in this Agreement, and for other good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, GeoSystems and NGE hereby agree as follows:
1. Agreements with Respect to the Issuance of the Securities.
---------------------------------------------------------
(a) Warrant.
--- -------
(i) Number of Shares. (A) Subject to the terms and conditions of
----------------
this Agreement and the Warrant in the form of Exhibit A attached
---------
hereto, NGE shall have the right to purchase a maximum of 250,265
shares of GeoSystems' capital stock, which represents three percent
(3%) of the total number of outstanding shares (8,342,173) of
GeoSystems' voting capital stock as of the
<PAGE>
date of this Agreement (taking into consideration the issuance of the Warrant),
calculated on a fully-diluted basis taking into consideration shares of other
classes of GeoSystems' voting capital stock outstanding and outstanding rights
to acquire GeoSystems' voting capital stock (including, without limitation,
options, convertible notes or convertible securities).
(B) In the event that the Private Placement (as such term is defined in
subsection (b) below) is effected on or before the date which is one (1) year
from the date of this Agreement, the number of Warrant Shares shall be increased
by adding three percent (3%) of the number of shares of capital stock (or
issuable upon conversion of the Securities issued in the Private Placement)
issued in the Private Placement to the then current number of Warrant Shares
(provided that the term of the Warrant shall remain unchanged). Such increase in
the number of Warrant Shares in the event of a Private Placement shall apply
only to the first Private Placement effected within one year of the date of this
Agreement unless the Private Placement raises gross proceeds (the "Actual
Proceeds") of less than $10 million (the "Minimum Proceeds"). In the event the
first Private Placement raises less than the Minimum Proceeds, the foregoing
adjustment to the Warrant Shares shall apply to any subsequent Private
Placement(s) effected during the one-year period following the date of the
initial Private Placement. The increase in the number of Warrant Shares shall be
equal to the product of (A) the Proceeds Differential, i.e. a fraction the
numerator of which is the difference between the Minimum Proceeds and the Actual
Proceeds (on a cumulative basis) and the denominator of which is the gross
proceeds raised in such subsequent Private Placement and (B) 3% of the number of
shares to be issued (or issuable upon conversion of the securities offered in
the Private Placement) in such subsequent Private Placement. The exercise price
under subsection (ii) below shall be determined by applying the provisions of
such subsection to each Private Placement. The foregoing adjustments shall be
illustrated by the following example (assuming, for the purposes of the exercise
price, that neither Private Placement is an Insider Private Placement):
(I) Private Placement of $9 million in gross proceeds through the sale
of 2,250,000 shares at $4.00 per share - the Warrant Shares shall be
increased by 67,500 (3% of 2,250,000) and the exercise price for such
additional Warrant Shares shall be $3.20 (80% of $4.00).
(II) Subsequent Private Placement within one year of the date of the
initial Private Placement of $3 million in gross proceeds through the sale
of 375,000 shares at $8.00 per share - the Warrant Shares shall be
increased by 3,750 shares (($10 million - $9 million)/$3 million x (3% of
375,000)and the exercise price for such additional Warrant Shares shall be
$4.79 ($4.79 is less than 80% of $8.00).
-2-
<PAGE>
(ii) Exercise Price. The exercise price payable upon exercise of the
--------------
Warrant shall be equal to $4.79 per share; provided, however, in the event
a Private Placement is effected on or before the date which is one year
from the date of this Agreement and the offering price in such Private
Placement is less than $4.79, the exercise price of the Warrant shall be
adjusted to be equal to (i) in the case of an Insider Private Placement (as
such term is defined in subsection (b) below), the issue price in such
Private Placement and (ii) in the case of a Private Placement other than an
Insider Private Placement, eighty percent (80%) of the issue price in such
Private Placement.
(iii) Term. The Warrant shall be exercisable beginning on the date
----
the exercise price thereunder is determined as set forth above and ending
on the earlier of: (i) five (5) years from the date of the warrant; or (ii)
in the event of termination of the Cartographic Agreement by GeoSystems
under Section 8.2 or by NGE without cause, upon the termination date (with
the expiration date of the exercise period relating back to notification of
breach by GeoSystems in the event of termination under Section 8.2).
(b) Definitions. For the purposes of this Section l, (i) the term
------------
"Private Placement" shall be deemed to refer to an offering of GeoSystems'
capital stock (or securities convertible into capital stock) which (A) does not
involve registration under the Securities Act of 1933, as amended, (B) does not
relate solely to employee benefit plans or a Rule 145 transaction and (C) is
effected within one year of the date of this Agreement or, in the case of a
Private Placement(s) following an initial Private Placement which does not raise
the Minimum Proceeds, within one year of the date of the initial Private
Placement, (ii) the term "Insider Private Placement" shall be deemed to refer to
a Private Placement made solely through GeoSystems' existing shareholders or
their affiliates (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended) and (iii) the term "GeoSystems Equity" shall
be deemed to refer to the Warrant and the Warrant Shares.
2. Representations of GeoSystems. GeoSystems hereby represents to NGE as
-----------------------------
follows:
(a) Organization and Standing. GeoSystems is a corporation duly
-------------------------
organized, validly existing, and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as presently conducted, and to enter into and perform this
Agreement and to carry out the transactions contemplated by this Agreement.
True, correct and complete copies of GeoSystems'
-3-
<PAGE>
Articles of Incorporation (the "Articles") and Bylaws (the "Bylaws") have been
delivered to NGE.
(b) Capitalization. As of the date hereof, the authorized capital stock
---------------
of GeoSystems consists of (i) 20,000,000 shares of non-cumulative, convertible,
voting Series A Preferred Stock, (ii) 2,000,000 shares of non-voting Series B
Preferred Stock and (iii) 20,000,000 shares of common stock, of which (i)
6,550,000 shares of Series A Preferred Stock, (ii) 1,118,233 shares of Series B
Preferred Stock and (iii) 1,792,173 shares of common stock (on a fully-diluted
basis) are issued and outstanding. All outstanding shares have been duly
authorized, and all such issued and outstanding shares have been validly issued
and are fully paid and nonassessable. Except as reflected above, there are no
outstanding options, warrants or other rights to purchase or acquire any of
GeoSystems' capital stock from GeoSystems.
(c) Issuance of Shares. The issuance, sale and delivery of the Securities
-------------------
in accordance with this Agreement have been duly authorized by all necessary
corporate action on the part of GeoSystems and the Securities, when so issued,
sold, and delivered against payment therefor in accordance with the provisions
of this Agreement, will be duly and validly issued, fully paid and
nonassessable.
(d) Authority: Enforceability. The execution, delivery and performance by
------------------------
GeoSystems of this Agreement have been duly authorized by all necessary
corporate action and this Agreement has been duly executed and delivered by
GeoSystems. This Agreement constitutes a valid and binding obligation of
GeoSystems enforceable in accordance with its terms.
(e) Disclosure. No statement by GeoSystems contained in this Agreement and
----------
the exhibits attached hereto, and no written statement or certificate furnished
or to be furnished to NGE pursuant hereto or in connection with the transactions
contemplated hereby (when read together) contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made.
3. Representations of NGE. NGE hereby represents to GeoSystems as follows:
-----------------------
(a) Investment Representations.
----------------------------
(i) NGE acknowledges that it is purchasing the Securities without being
furnished any offering literature or memorandum. NGE has been afforded the
opportunity by GeoSystems to ask questions and request information in order to
acquire detailed knowledge and information concerning the business affairs and
-4-
<PAGE>
operations of GeoSystems and its financial condition and prospects; and, as a
result of such opportunity to ask questions and review information and NGE's
business background, training, and expertise, NGE is in a position to
comprehend, weigh, and assess such knowledge and information in a meaningful
fashion.
(ii) NGE acknowledges that any business and financial projections of
GeoSystems that may have been provided by or on behalf of GeoSystems are solely
for purposes of describing GeoSystems' future business and financial goals and
are not intended to be, nor are they, representations or guaranties of
GeoSystems' future performance.
(iii) NGE understands that none of the Securities have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or any
state securities act, that the Securities are offered in reliance on exemptions
for private offerings under such acts and that GeoSystems' reliance on such
exemption is predicated on NGE's representations set forth herein.
(iv) The Securities are being acquired by NGE solely for NGE's own
account, for investment, and are not being purchased with a view to or for the
resale, distribution, subdivision or fractionalization thereof. NGE further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Shares.
(v) NGE understands: (A) there are substantial restrictions on the
transferability of the Securities; (B) the Securities will not be, and investors
in GeoSystems have no rights to require that the Securities be, registered under
the Securities Act or any state securities act; and (C) there will be no public
market for the Securities.
(vi) The offer and sale of the Securities to NGE was made solely in the
Commonwealth of Pennsylvania and the District of Columbia.
(vii) NGE: (A) has sufficient knowledge and experience in business and
financial matters and is capable of evaluating the merits and risks of an
investment in the Securities; and (B) qualifies as an "accredited investor" (as
the term is defined under Regulation D promulgated under the Securities Act).
-5-
<PAGE>
(viii) NGE agrees that because the Securities have not been registered
under the Securities Act or relevant state securities laws, they cannot be
resold or transferred unless:
(A) They are subsequently registered thereunder or exemptions from
such registrations are available; and
(B) GeoSystems receives an opinion of counsel satisfactory to it and
its counsel that such transfer complies with federal and state securities
laws.
NGE acknowledges that any certificates representing the Securities shall
bear a legend reflecting the foregoing restrictions.
(ix) Except as otherwise provided herein, neither GeoSystems nor any of
its officers, directors or shareholders has agreed or represented to NGE that
the Securities will be purchased or redeemed from NGE at any time in the future.
Further, except as otherwise provided herein, there have been no
representations, promises or agreements that the Securities will be registered
under the Securities Act or relevant state securities laws at any time in the
future or otherwise qualified for sale under applicable securities laws.
GeoSystems does not intend to make available to the public information
concerning itself so as to permit shareholders to use Rule 144 of the Rules and
Regulations under the Securities Act for transfer of the Securities.
(b) Authority: Enforceability. This Agreement constitutes the valid and
--------------------------
binding obligation of NGE enforceable in accordance with its terms.
(c) No Other Representations and Warranties. NGE acknowledges that, other
----------------------------------------
than the representations and warranties by GeoSystems set forth in this
Agreement, including the Exhibits hereto, no oral or written representations
have been made, or were authorized to be made, by or on behalf of GeoSystems by
its officers, directors or anyone else, or by any brokers, and that NGE is not
entitled to and will not rely on any such representations and warranties not set
forth in either this Agreement or the Exhibits hereto.
-6-
<PAGE>
4. Agreements Between and Among GeoSystems and NGE.
------------------------------------------------
(a) Termination. If the Cartographic Agreement is terminated as a result
------------
of the occurrence of an event set forth in Section 5.1(c)(ii) of the
Cartographic Agreement:
(i) If the Warrant has not been fully exercised at the time of the
termination, all rights of NGE under the Warrant shall terminate immediately;
(ii) If the Warrant has been previously exercised, GeoSystems shall have
the option to purchase the Warrant Shares for a period of sixty (60) days
after such termination of the Cartographic Agreement. The purchase price for
such Warrant Shares shall be the lesser of the exercise price under the
Warrant or Fair Market Value (taking into consideration the termination of
the Cartographic Agreement). Fair Market Value shall be determined by a
single appraiser agreed to by the parties to determine the Fair Market Value
(without any illiquidity or minority discounts) and the Fair Market Value
shall be so determined. If the parties do not agree within thirty (30) days
to a single appraiser, then GeoSystems shall, by notice to NGE, appoint one
appraiser and NGE shall, by notice to GeoSystems, appoint one appraiser, both
experienced in the appraisal of companies engaged in the ownership and
operation of the business in which GeoSystems is engaged. If either side
shall fail to appoint such appraiser within thirty (30) days after the lapse
of such thirty day period, then the appraiser appointed by the other side
shall make the appraisal of the Fair Market Value and such appraisal shall
govern. If said two appraisers cannot reach agreement within thirty (30) days
after the appointment of the last appraiser to be appointed, the two
appraisers selected shall promptly, within thirty (30) days, appoint a third
appraiser experienced in the appraisal of companies engaged in the ownership
and operation of the business in which GeoSystems is engaged and the agreed
decision of the three appraisers shall govern, or if the three appraisers
cannot agree as to such Fair Market Value, then the average of the values
determined by the two appraisers which are closest to each other in value
shall be considered such Fair Market Value. All appraisal reports shall be
rendered in writing and shall be signed by the appraisers. The appraised Fair
Market Value determined as herein provided shall be final and conclusive on
the parties and shall be enforceable in any court having jurisdiction over a
proceeding brought to seek such enforcement. The costs of any appraisal
hereunder shall be borne one-half (1/2) by GeoSystems and one-half (1/2) by
NGE.
-7-
<PAGE>
(b) Transfer Restrictions.
---------------------
(i) NGE shall not transfer any Securities to any other person unless NGE
shall have first made the offer to sell required by subsection (ii) below.
(ii) (A) In the event that any NGE desires to sell or transfer all or any
portion of the Securities, NGE shall first deliver to GeoSystems a written
notice (the "Notice of Proposed Transfer") specifying the name and address of
the proposed purchaser or transferee of the Securities (hereinafter sometimes
referred to as the "Proposed Purchaser"), the identity and total amount of
Securities which NGE then desires to sell or transfer to said Proposed
Purchaser (which Securities are hereinafter referred to as the "Offered
Securities"), all of the terms, including the price, upon which NGE proposes
to sell the Offered Securities to the Proposed Purchaser and stating that
GeoSystems has the right to purchase the Offered Securities at said price and
payable in accordance with the terms set forth in the Notice of Proposed
Transfer; provided, however, in the event the Proposed Purchaser is a
GeoSystems Competitor, GeoSystems shall have the right to purchase the
Offered Securities at the lesser of (I) the price indicated in the Notice of
Proposed Transfer or (II) Fair Market Value (as defined and determined under
Section 4(a)(ii) herein but without consideration of the parenthetical in the
second sentence thereof). A GeoSystems Competitor shall be defined as a
person, entity or group which directly or through an affiliate has a material
part of its operations in the manufacture and/or sale of cartographic or map-
related products or in software and systems primarily utilizing geographic
information and software, including Internet-related activities..
(B) During the sixty (60) day period following receipt of the Notice of
Proposed Transfer, GeoSystems shall have the right to elect to purchase all,
but not less than all, of the Offered Securities at the price hereinafter
specified, before the same may be transferred to the Proposed Purchaser.
(C) If GeoSystems elects to purchase Offered Securities under clause (B),
it shall give written notice to NGE of such election to purchase the Offered
Securities within the period provided.
(D) If GeoSystems does not so purchase the Offered Securities, then NGE
shall have the right, for a period of sixty (60) days after the expiration of
the period provided in clause (B), to transfer said securities to the
Proposed Purchaser at the price and on the terms specified in the notice of
Proposed Transfer. If for any reason the Offered Securities are not sold to
the Proposed Purchaser within such period, at such stated price and on such
terms, the provisions of this Section 4(b) shall continue to be applied to
said securities with respect to any subsequent attempts to transfer the
Offered Securities.
-8-
<PAGE>
(E) Offered Securities sold to a Proposed Purchaser pursuant to the
provisions of clause (D) above shall continue to be subject to the provisions
of this Agreement, and GeoSystems shall not issue any Securities in the name
of such Proposed Purchaser unless and until such person shall have agreed in
writing to become bound by the terms of this Agreement.
(F) Upon acceptance by GeoSystems of NGE's offer to sell the Offered
Securities, GeoSystems shall be obligated to tender payment (under the terms
specified in the Notice of Proposed Transfer) for the securities at the
offices of GeoSystems at 11:00 a.m. on the twentieth (20th) business day
following acceptance of the offer and GeoSystems shall be obligated to
tender, at the same time, delivery of the Offered Securities being sold with
proper endorsements for transfer.
(G) The purchase price for the Securities to be purchased and sold in
accordance with this Section 4(b), shall, unless otherwise agreed in writing
by the parties to such transaction, be paid at GeoSystems' option either in
cash or by certified check at the date of the closing or on the same basis
and terms set forth in the Notice of Proposed Transfer.
(iii) GeoSystems shall not honor or give effect on its books to any
transfer of any Securities until GeoSystems is reasonably satisfied that the
requirements of this Section 4(b) have been met and any transfer in violation
of this Section 4(b) (including an involuntary transfer) shall be void.
(iv) The restrictions of this Section 4(b) shall terminate in the event
GeoSystems completes an initial public offering of its capital stock.
(c) NGE's Confidentiality Obligations.
---------------------------------
(i) So long as NGE retains, in any form, an investment in the Securities,
NGE shall receive any documents delivered to the other shareholders of
GeoSystems and shall have full access to GeoSystems' records and financial
information.
(ii) NGE acknowledges that, as a shareholder of GeoSystems, NGE may be
given or have access to certain information relating to GeoSystems' business
that is not generally known to persons outside GeoSystems. This information
(the "Confidential Information") may include, but is not limited to,
financial information, marketing and sales information, customer information
(including the identity of GeoSystems' customers and prospects), product
information, and any information of any third party that has been provided to
GeoSystems in confidence. Confidential Information does not include any
information that is: (1) voluntarily disclosed to the public by GeoSystems or
by the third party providing the information in confidence to GeoSystems; (2)
independently developed and disclosed by others; or (3) otherwise enters the
public domain through lawful means.
-9-
<PAGE>
(iii) NGE understands and agrees that the Confidential Information is
valuable and that NGE has no property interest in it. NGE agrees that, both
so long as NGE owns any Securities of GeoSystems and thereafter until
dissolution of GeoSystems, NGE will not, without prior written authorization
from GeoSystems, either give, disclose, provide access to, or otherwise make
available any Confidential Information to any person not employed by
GeoSystems.
(d) Registration Rights. With respect to the Private Placement Shares and
--------------------
the Warrant Shares, (i) NGE shall have the same registration rights as the
Management Holders (as identified in the Rights Agreement dated October 31,
1994 (the "Rights Agreement") by and among GeoSystems, R.R. Donnelley & Sons
Company, the Purchasers and the Management Holders (as such terms are defined
in the Rights Agreement)) have under Section 5 of the Rights Agreement, (ii)
the Private Placement Shares and the Warrant Shares shall be deemed to be
Registrable Common Stock for the purposes of such Section 5 and (iii) NGE
shall be deemed a Holder for the purposes of such Section 5.
5. Conditions to the Obligations of GeoSystems. GeoSystems' obligation to
-------------------------------------------
sell and issue the Securities on any date in the future (an "Investment Date")
is, at the option of GeoSystems subject to the fulfillment of the following
conditions:
(a) Representations. The representations made by NGE in Section 3 hereof
---------------
shall be true and correct in all material respects when made, and shall be
true and correct on such Investment Date.
(b) Covenants. All covenants, agreements and conditions contained in this
----------
Agreement to be performed by NGE on or prior to such Investment Date shall
have been performed or complied with in all respects.
(c) Securities Laws. GeoSystems shall have obtained all necessary federal
----------------
and Blue Sky law permits and qualifications, or secured an exemption
therefrom, required by any federal agency or any state for the offer and
sale of the Securities.
6. Brokers. All parties represent and warrant to the other that neither
--------
has incurred any liability for any broker's commission, finders' fee or the like
in connection with this Agreement and the purchase and sale of common stock
hereunder.
7. Fees and Expenses. Subject to the specific provisions herein
-----------------
(including any provisions requiring indemnification) each party to this
Agreement shall pay any and al fees and expenses incurred by him or it in
connection with the execution and performance of this
-10-
<PAGE>
Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, attorney's fees and accountants' fees.
8. General Provisions.
------------------
(a) Cartographic Agreement Provisions. The General Provisions set
---------------------------------
forth in Section 13 of the Cartographic Agreement are incorporated herein
by reference.
(b) Survival of Covenants and Representations. All covenants and
-----------------------------------------
representations of the parties contained in this Agreement shall survive
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
-11-
<PAGE>
IN WITNESS WHEREOF, the undersigned parties hereto have executed this
Agreement as of the date first above-written.
NGE, INC., d/b/a NATIONAL GEOGRAPHIC MAPS
By:______________________________________
Name:____________________________________
Title:___________________________________
GEOSYSTEMS GLOBAL CORPORATION
By:______________________________________
Name:____________________________________
Title:___________________________________
-12-
<PAGE>
EXHIBIT G
---------
Neither this Warrant nor the shares of Common Stock issuable hereunder
have been registered under the Securities Act of 1933, the laws of Pennsylvania
or the laws of any other state, and neither may be sold or otherwise transferred
without such registration or an opinion of counsel satisfactory to GeoSystems
that an exemption therefrom is available.
This Warrant and the shares of Common Stock issuable hereunder are
subject to the repurchase rights of GeoSystems and the transfer restrictions set
forth in the Investment Agreement referenced herein.
No. of Shares: 250,265 Warrant No. 1
WARRANT
To Purchase up to 250,265 Shares of Common Stock of
GeoSystems Global Corporation
THIS CERTIFIES THAT, for value received, NGE, Inc. ("NGE") is entitled to
purchase from GeoSystems Global Corporation ("GeoSystems"), at any time after
the date hereof and on or before the Expiration Date, 250,265 shares of Common
Stock of GeoSystems, at the Purchase Price (as hereinafter defined) in lawful
money of the United States of America, subject to the provisions, limitations
and restrictions hereof. The number of shares of Common Stock purchasable
hereunder and the Purchase Price therefor are subject to adjustment as
hereinafter set forth in Section 5 herein. This Warrant is being issued pursuant
to the terms of Cartographic Product Development, Publishing, Marketing and
Distribution Agreement of even date (the "Cartographic Agreement") among
National Geographic Society, NGE and GeoSystems and an Investment Agreement of
even date (the "Investment Agreement") between GeoSystems and NGE.
Section 1. Certain Definitions. For all purposes of this Warrant the
following terms shall have the meanings indicated:
"Basic Purchase Price" shall mean the initial purchase price per share of
Common Stock set forth in Section 2.
"Common Stock" shall mean the shares of GeoSystems' authorized Common
Stock, as constituted at the date of issuance of this Warrant.
<PAGE>
"Expiration Date" shall mean the earlier of: (i) five (5) years from the
date of this Warrant; or (ii) in the event of termination of the Cartographic
Agreement by GeoSystems under Section 8.2 or by NGE without cause, upon the
termination date (with the Expiration Date relating back to notification of
breach by GeoSystems in the event of termination under Section 8.2).
"GeoSystems" shall include any corporation which shall succeed to or
assume the obligations of GeoSystems hereunder.
"Insider Private Placement" shall have the meaning set forth in Section
5.1 herein.
"Private Placement" shall have the meaning set forth in Section 5.1
herein.
"Purchase Price" shall mean the Basic Purchase Price or such Basic
Purchase Price as adjusted from time to time pursuant to the provisions hereof.
"Warrant Holder" shall mean the holder of this Warrant.
"Warrant" shall mean this Warrant and all Warrants issued in exchange or
replacement thereof.
"Warrant Shares" shall mean the shares of Common Stock purchased or
purchasable by the holder of this Warrant upon the exercise thereof pursuant to
Section 3 thereof.
All terms in this Warrant which are not defined in Section 1 have the
meanings respectively set forth therefor elsewhere in this Warrant.
Section 2. Basic Purchase Price. The Basic Purchase Price at which a
holder may exercise this Warrant shall be a price per share initially equal to
$4.79; provided, however, in the event a Private Placement is effected on or
before the date which is one year from the date of this Warrant and the offering
price in such Private Placement is less than $4.79, the Basic Purchase Price of
the Warrant shall be adjusted to be equal to (i) in the case of an Insider
Private Placement, the issue price in such Private Placement and (ii) in the
case of a Private Placement other than an Insider Private Placement, eighty
percent (80%) of the issue price in such Private Placement.
Section 3. Exercise of Warrant, Etc.
3.l Procedure for Exercise of Warrant.
---------------------------------
(a) The rights represented by this Warrant may be exercised by the holder
in whole, or from time to time in part, by the (i) surrender of this Warrant,
accompanied by an Exercise Form in substantially the form of Exhibit A hereto
---------
(the "Exercise Form") duly executed by the holder and specifying the number of
Warrant Shares to be purchased, and (ii) delivery of payment, for the account of
the Company, of the purchase price for the number of Warrant Shares specified in
the Exercise Form (in the amount of the Exercise Price, as then adjusted, for
the number of Warrant Shares specified in the Exercise Form), which shall be
payable either
2
<PAGE>
(A) in cash,
(B) by certified check or bank cashier's check payable to the order
of the Company in the amount of such purchase price,
(C) by delivery to GeoSystems of common stock, including any common
stock issuable upon the exercise of this Warrant (it being the
intention of the parties hereto to permit so-called "cashless
exercises" of the Warrant by simultaneous exercise of the Warrant
and issuances of common stock thereunder having a fair market
value (determined in accordance with Section 3.1(b) of this
Warrant) equal to and applied as payment for such purchase price,
otherwise known as "net securities issues"), or
(D) by an combination of the methods of payment described in (A)
through (C) above,
to Geosystems at its principal office (or such other office or agency of
GeoSystems as GeoSystems any designate by notice to the holder), during normal
business hours on any day (a "Business Day") other than a Saturday, Sunday or a
day on which national banks are authorized to closed in Lancaster, Pennsylvania,
at any time permitted under the terms of this Warrant.
(b) The "fair market value" of common stock shall be calculated, in
connection with the operation of Section 3.l(a)(ii)(C) above, at the time of a
cashless exercise, by an independent reputable appraisal firm satisfactory to
GeoSystems and the holder(s) engaged in such cashless exercise. The fees,
expenses and other costs of such appraisal firm to make the valuations described
shall by paid by GeoSystems; provided, however, that if more than one such
valuation in any twelve (12) month period is required because of cashless
exercises, the holder(s) exercising in such excess cashless exercises (occurring
after the first cashless exercise with such twelve month period) shall pay such
fees, expenses and other costs in connection with such excess cashless
exercises.
3.2 Acknowledgement of Continuing Obligation. GeoSystems will, at the
----------------------------------------
time of the exercise of this Warrant, in whole or in part, upon request of the
holder hereof, acknowledge in writing its continuing obligation to such holder
in respect of any rights to which such holder shall continue to be entitled
after such exercise in accordance with this Warrant, provided, that the failure
of such holder to make any such request shall not affect the continuing
obligation of GeoSystems to such holder in respect of such rights.
3.3 Character of Warrant Shares. All shares of Common Stock issuable upon
---------------------------
the exercise of this Warrant shall be duly authorized, validly issued, fully
paid and non-assessable; and without limiting the generality of the foregoing,
GeoSystems covenants and agrees that it will reserve a sufficient number of
shares of Common Stock for issuance upon exercise of this Warrant.
3
<PAGE>
Section 4. Exchange and Replacement.
(a) The holder shall not transfer or assign this Warrant except (i) to
the holder's successor by merger or consolidation or (ii) to the purchaser of
all or substantially all the assets of the holder; provided, however, that any
such transfer shall be subject to compliance with applicable securities laws
and, on request by GeoSystems, the transferor shall furnish to GeoSystems an
opinion of the transferor's counsel to the effect that the transfer is in
compliance with such securities laws. Any attempted or purported assignment or
transfer of this Warrant without compliance with the preceding sentence shall be
void. In the event of any transfer permitted by this Section 4, GeoSystems shall
register or shall cause its agent to register the transfer or assignment on its
warrant register upon surrender of this Warrant, duly endorsed, or accompanied
by a written instrument of transfer duly executed by the holder or by the duly
appointed legal representative or attorney thereof. On any such registration of
transfer, GeoSystems shall issue a new Warrant or Warrants, of like tenor, in
lieu of the transferred or assigned Warrant. In no event will GeoSystems be
required to effect a registration of transfer, assignment or exchange that would
result in the issuance of a fraction of a share.
(b) Subject to the provisions of subsection (a) of this Section 4, this
Warrant is exchangeable, upon the surrender hereof by the holder to GeoSystems
at its office or agency described in Section 3, for new Warrants of like tenor
and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder, each of such new Warrants to represent the right
to purchase such number of shares as shall be designated by said registered
holder at the time of such surrender. Upon receipt by GeoSystems of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon surrender and cancellation of
this Warrant, if mutilated, GeoSystems will make and deliver a new Warrant of
like tenor, in lieu of this Warrant. This Warrant shall be promptly canceled by
GeoSystems upon the surrender hereof in connection with any exchange or
replacement. GeoSystems shall pay all expenses, taxes (other than stock transfer
taxes) and other charges payable in connection with the preparation, execution
and delivery of Warrants pursuant to this Section 4.
Section 5. Adjustment of Purchase Price and Warrant Shares, etc.
5.l Increase in Number of Warrant Shares upon Private Placement.
-----------------------------------------------------------
(a) In the event that the Private Placement is effected on or before the
date which is one year from the date hereof, the number of Warrant Shares shall
be increased by adding three percent (3 %) of the number of shares of capital
stock (or issuable upon conversion of the securities issued in the Private
Placement) issued in the Private Placement to the then current number of Warrant
Shares (provided that the term of this Warrant shall remain unchanged). Such
increase in the number of Warrant Shares in the event of a Private Placement
shall apply only to the first Private Placement effected within one year of the
date of this Agreement unless the Private Placement raises gross proceeds (the
"Actual Proceeds") of less than $10 million (the "Minimum Proceeds"). In the
event the first Private Placement raises less than the Minimum Proceeds, the
foregoing adjustment to the Warrant Shares shall apply to any subsequent Private
4
<PAGE>
Placement(s) effected during the one-year period following the date of the
initial Private Placement. The increase in the number of Warrant Shares shall be
equal to the product of (A) the Proceeds Differential, i.e. a fraction the
numerator of which is the difference between the Minimum Proceeds and the Actual
Proceeds (on a cumulative basis) and the denominator of which is the gross
proceeds raised in such subsequent Private Placement and (B) 3 % of the number
of shares to be issued (or issuable upon conversion of the securities offered in
the Private Placement) in such subsequent Private Placement. The exercise price
under Section 2 herein shall be determined by applying the provisions of such
Section to each Private Placement. The foregoing adjustments shall be
illustrated by the following example (assuming, for the purposes of the
exercise price, that neither Private Placement is an Insider Private Placement):
(I) Private Placement of $9 million in gross proceeds through the
sale of 2,250,000 shares at $4.00 per share - the Warrant Shares shall be
increased by 37,500 (3% of 2,250,000) and the exercise price for such
additional Warrant Shares shall be $3.20 (80% of $4.00).
(II) Subsequent Private Placement within one year of the initial
Private Placement of $3 million in gross proceeds through the sale of
375,000 shares at $8.00 per share - the Warrant Shares shall be increased
by 3,750 shares ((9 million - $4 million)/$3 million x (3% of 375,000) and
the exercise price for such additional Warrant Shares shall be $4.79 ($4.79
is less than 80% of $8.00).
(b) For the purposes of this Section 5.1, (i) the term "Private Placement"
shall be deemed to refer to an offering of GeoSystems' capital stock (or
securities convertible into capital stock) which (A) does not involve
registration under the Securities Act of 1933, as amended, (B) does not relate
solely to employee benefit plans or a Rule 145 transaction and (C) is effected
within one year of the date of this Agreement or, in the case of a Private
Placement(s) following an initial Private Placement which does not raise the
Minimum Proceeds, within one year of the date of the initial Private Placement,
(ii) the term "Insider Private Placement" shall be deemed to refer to a Private
Placement made solely through GeoSystems' existing shareholders or their
affiliates (as such term is defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended) and (iii) the term "GeoSystems Equity" shall be deemed
to refer to the Warrant and the Warrant Shares.
5.2 Stock Dividends, Stock Splits, Reverse Splits, Etc. The price at
---------------------------------------------------
which Warrant Shares may be purchased hereunder, and the number of Warrant
Shares then purchasable upon exercise hereof, are subject to change or
adjustment as follows:
(a) In the event the outstanding shares of common stock of GeoSystems are
hereafter increased or decreased, or changed into or exchanged for a different
number or kind of shares or other securities of GeoSystems or of another entity,
but only in any such case by reason of a recapitalization, merger or
consolidation in which GeoSystems or a subsidiary thereof is the surviving
parent entity, stock split-up, combination of shares, or dividend or other
distribution payable in common stock, the number of Warrant Shares purchasable
upon exercise of this
5
<PAGE>
Warrant shall be adjusted so that the holder shall be entitled to receive the
kind and number of Warrant Shares which it would have owned or have been
entitled to receive after the happening of any of the events described above,
had this Warrant been exercised immediately prior to the happening of such
event or any record date with respect thereto. An adjustment made pursuant to
this subsection (a) shall become effective immediately after the effective date
of such event retroactive to the record date, if any, of such event.
(b) Whenever the number of Warrant Shares purchasable upon the exercise
of this Warrant is adjusted as provided in paragraph (a) above, the Basic
Purchase Price payable upon the exercise of this Warrant shall be adjusted by
multiplying such Basic Purchase Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of Warrant Shares
purchasable (at such time or in the future) upon the exercise of this Warrant
immediately prior to such adjustment, and the denominator of which shall be the
number of Warrant Shares purchasable (at such time or in the future) immediately
thereafter.
Whenever the number of Warrant Shares or the Basic Purchase Price of
such Warrant Shares is to be adjusted as provided in Section 5.2, GeoSystems
shall, immediately following the event which causes such adjustment, provide the
holder with notice of such adjustment or adjustments, setting forth the number
of Warrant Shares and the Basic Purchase Price of such Warrant Shares after such
adjustment, a statement of the facts requiring such adjustment, and the
computation by which such adjustment was made.
5.3 No Fractional Shares. No fractional shares shall be issuable upon
--------------------
exercise of the Warrants, and the number of shares of Common Stock to be issued
shall be rounded to the nearest whole share.
5.4 Reservation of Stock Issuable Upon Exercise. GeoSystems shall at all
-------------------------------------------
times reserve and keep available out of its authorized but unissued shares of
Common Stock solely for the purpose of effecting the exercise of this Warrant
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the full exercise of this Warrant; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the full exercise of this Warrant, then GeoSystems will take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
Section 6. Preservation of Purchase Rights upon Merger, Consolidation or
Other Event when GeoSystems does not Survive.
(a) Dissolution or Liquidation. In the event of the dissolution or
--------------------------
liquidation of GeoSystems, this Warrant shall terminate upon the
occurrence of such event.
(b) Reorganization. In the event of a Reorganization (as
--------------
hereinafter defined), then
6
<PAGE>
(i) If there is no plan or agreement with respect to the
Reorganization ("Reorganization Agreement"), or if the Reorganization
Agreement does not specifically provide for the change, conversion or
exchange of the Warrant for cash or other property or securities of another
entity in accordance with a majority of the holders' prior written consent
to such change, conversion or exchange, then this Warrant shall terminate
upon the occurrence of such event; or
(ii) If there is a Reorganization Agreement, and the Reorganization
Agreement specifically provides for the change, conversion or exchange of
the Warrant for cash or other property or securities of another entity, in
accordance with a majority of the holders' prior written consent to such
change, conversion or exchange, then the Warrant shall be changed,
converted or exchanged in a manner not inconsistent with the provisions of
the Reorganization Agreement for the adjustment, change, conversion or
exchange of such Warrant.
The term "Reorganization"" as used in this Section 6(b) shall mean any merger,
consolidation, share exchange or other business combination pursuant to which
GeoSystems or a subsidiary of GeoSystems is not the surviving parent entity
after the effective date of the Reorganization, or any sale or lease of all or
substantially all of the assets of GeoSystems. Nothing herein shall require
GeoSystems to adopt a Reorganization Agreement.
(c) Notice and Right to Exercise. GeoSystems shall provide the
----------------------------
holder with a notice of the planned dissolution or liquidation, or the planned
Reorganization, of GeoSystems, as described in paragraphs (a) or (b) of this
Section 6, respectively, along with all relevant information relating thereto,
at least thirty (30) calendar days prior to the effective date of such event.
Section 7. No Rights as Stockholder; Limitation of Liability. This Warrant
shall not entitle the holder hereof to any of the rights of a stockholder of
GeoSystems. No provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Purchase Price or as a stockholder of
GeoSystems whether such liability is asserted by GeoSystems or by creditors of
GeoSystems.
Section 8. Investment Agreement Provisions. This Warrant and the Warrant
Shares shall be subject to the provisions of the Investment Agreement. The
General Provisions of the Investment Agreement in Section 8 therein are
incorporated herein by reference.
7
<PAGE>
IN WITNESS WHEREOF, GeoSystems Global Corporation has caused this Warrant
to be signed by its duly authorized officer under its corporate seal, attested
by its duly authorized officer, and to be dated as of April _, 1997.
Attest: GeoSystems Global Corporation
_________________________________ By:_________________________________
8
<PAGE>
INVESTMENT AGREEMENT
--------------------
THIS INVESTMENT AGREEMENT (the "Agreement") made as of this _______ day
of April, 1997, by and between NGE, INC. ("NGE"), a Delaware corporation whose
principal address is 1145 Seventeenth Street, N.W., Washington, D.C. 20036, and
GeoSystems Global Corporation ("GeoSystems"), a Delaware corporation whose
principal address is 227 Granite Run, Lancaster, Pennsylvania, 17601.
WITNESSETH:
----------
WHEREAS, National Geographic Society, NGE and GeoSystems have entered
into a Cartographic Products Development, Publishing, Marketing and Distribution
Agreement of even date (the "Cartographic Agreement"); and
WHEREAS, pursuant to the Cartographic Agreement, GeoSystems has agreed to
issue a warrant (the "Warrant") to NGE under which NGE shall have the right to
purchase up to 250,265 shares (the "Warrant Shares") of GeoSystems' common
stock, subject to certain anti dilution provisions set forth in the Warrant; and
WHEREAS, the Warrant and the Warrant Shares are collectively referred to
herein as the "Securities";
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and representations set forth in this Agreement, and for other good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, GeoSystems and NGE hereby agree as follows:
1. Agreements with Respect to the Issuance of the Securities.
---------------------------------------------------------
(a) Warrant.
--- -------
(i) Number of Shares. (A) Subject to the terms and conditions of this
-----------------
Agreement and the Warrant in the form of Exhibit A attached hereto, NGE shall
---------
have the right to purchase a maximum of 250,265 shares of GeoSystems' capital
stock, which represents three percent (3%) of the total number of outstanding
shares (8,342,173) of GeoSystems' voting capital stock as of the
<PAGE>
date of this Agreement (taking into consideration the issuance of the Warrant),
calculated on a fully-diluted basis taking into consideration shares of other
classes of GeoSystems' voting capital stock outstanding and outstanding rights
to acquire GeoSystems' voting capital stock (including, without limitation,
options, convertible notes or convertible securities).
(B) In the event that the Private Placement (as such term is defined in
subsection (b) below) is effected on or before the date which is one (I) year
from the date of this Agreement, the number of Warrant Shares shall be increased
by adding three percent (3%) of the number of shares of capital stock (or
issuable upon conversion of the Securities issued in the Private Placement)
issued in the Private Placement to the then current number of Warrant Shares
(provided that the term of the Warrant shall remain unchanged). Such increase in
the number of Warrant Shares in the event of a Private Placement shall apply
only to the first Private Placement effected within one year of the date of this
Agreement unless the Private Placement raises gross proceeds (the "Actual
Proceeds") of less than $10 million (the "Minimum Proceeds"). In the event the
first Private Placement raises less than the Minimum Proceeds, the foregoing
adjustment to the Warrant Shares shall apply to any subsequent Private
Placement(s) effected during the one-year period following the date of the
initial Private Placement. The increase in the number of Warrant Shares shall be
equal to the product of (A) the Proceeds Differential, i.e. a fraction the
numerator of which is the difference between the Minimum Proceeds and the Actual
Proceeds (on a cumulative basis) and the denominator of which is the gross
proceeds raised in such subsequent Private Placement and (B) 3% of the number of
shares to be issued (or issuable upon conversion of the securities offered in
the Private Placement) in such subsequent Private Placement. The exercise price
under subsection (ii) below shall be determined by applying the provisions of
such subsection to each Private Placement. The foregoing adjustments shall be
illustrated by the following example (assuming, for the purposes of the exercise
price, that neither Private Placement is an Insider Private Placement):
(I) Private Placement of $9 million in gross proceeds through the sale
of 2,250,000 shares at $4.00 per share - the Warrant Shares shall be
increased by 67,500 (3% of 2,250,000) and the exercise price for such
additional Warrant Shares shall be $3.20 (80% of $4.00).
(II) Subsequent Private Placement within one year of the date of the
initial Private Placement of $3 million in gross proceeds through the sale
of 375,000 shares at $8.00 per share - the Warrant Shares shall be
increased by 3,750 shares (($10 million - $9 million)/$3 million x (3% of
375,000)and the exercise price for such additional Warrant Shares shall be
$4.79 ($4.79 is less than 80% of $8.00).
-2-
<PAGE>
(ii) Exercise Price. The exercise price payable upon exercise of the
--------------
Warrant shall be equal to $4.79 per share; provided, however, in the event
a Private Placement is effected on or before the date which is one year
from the date of this Agreement and the offering price in such Private
Placement is less than $4.79, the exercise price of the Warrant shall be
adjusted to be equal to (i) in the case of an Insider Private Placement (as
such term is defined in subsection (b) below), the issue price in such
Private Placement and (ii) in the case of a Private Placement other than an
Insider Private Placement, eighty percent (80%) of the issue price in such
Private Placement.
(iii) Term. The Warrant shall be exercisable beginning on the date
----
the exercise price thereunder is determined as set forth above and ending
on the earlier of: (i) five (5) years from the date of the warrant; or (ii)
in the event of termination of the Cartographic Agreement by GeoSystems
under Section 8.2 or by NGE without cause, upon the termination date (with
the expiration date of the exercise period relating back to notification of
breach by GeoSystems in the event of termination under Section 8.2).
(b) Definitions. For the purposes of this Section 1, (i) the term
-----------
"Private Placement" shall be deemed to refer to an offering of GeoSystems'
capital stock (or securities convertible into capital stock) which (A) does not
involve registration under the Securities Act of 1933, as amended, (B) does not
relate solely to employee benefit plans or a Rule 145 transaction and (C) is
effected within one year of the date of this Agreement or, in the case of a
Private Placement(s) following an initial Private Placement which does not raise
the Minimum Proceeds, within one year of the date of the initial Private
Placement, (ii) the term "Insider Private Placement" shall be deemed to refer to
a Private Placement made solely through GeoSystems' existing shareholders or
their affiliates (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended) and (iii) the term "GeoSystems Equity" shall
be deemed to refer to the Warrant and the Warrant Shares.
2. Representations of GeoSystems. GeoSystems hereby represents to NGE as
------------------------------
follows:
(a) Organization and Standing. GeoSystems is a corporation duly
--------------------------
organized, validly existing, and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as presently conducted, and to enter into and perform this
Agreement and to carry out the transactions contemplated by this Agreement.
True, correct and complete copies of GeoSystems'
-3-
<PAGE>
Articles of Incorporation (the "Articles") and Bylaws (the "Bylaws") have been
delivered to NGE.
(b) Capitalization. As of the date hereof, the authorized capital stock
---------------
of GeoSystems consists of (i) 20,000,000 shares of non-cumulative, convertible,
voting Series A Preferred Stock, (ii) 2,000,000 shares of non-voting Series B
Preferred Stock and (iii) 20,000,000 shares of common stock, of which (i)
6,550,000 shares of Series A Preferred Stock, (ii) 1,118,233 shares of Series B
Preferred Stock and (iii) 1,792,173 shares of common stock (on a fully-diluted
basis) are issued and outstanding. All outstanding shares have been duly
authorized, and all such issued and outstanding shares have been validly issued
and are fully paid and nonassessable. Except as reflected above, there are no
outstanding options, warrants or other rights to purchase or acquire any of
GeoSystems' capital stock from GeoSystems.
(c) Issuance of Shares. The issuance, sale and delivery of the Securities
------------------
in accordance with this Agreement have been duly authorized by all necessary
corporate action on the part of GeoSystems and the Securities, when so issued,
sold, and delivered against payment therefor in accordance with the provisions
of this Agreement, will be duly and validly issued, fully paid and
nonassessable.
(d) Authority; Enforceability. The execution, delivery and performance by
-------------------------
GeoSystems of this Agreement have been duly authorized by all necessary
corporate action and this Agreement has been duly executed and delivered by
GeoSystems. This Agreement constitutes a valid and binding obligation of
GeoSystems enforceable in accordance with its terms.
(e) Disclosure. No statement by GeoSystems contained in this Agreement and
-----------
the exhibits attached hereto, and no written statement or certificate furnished
or to be furnished to NGE pursuant hereto or in connection with the transactions
contemplated hereby (when read together) contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made.
3. Representations of NGE. NGE hereby represents to GeoSystems as follows:
-----------------------
(a) Investment Representations.
--------------------------
(i) NGE acknowledges that it is purchasing the Securities without being
furnished any offering literature or memorandum. NGE has been afforded the
opportunity by GeoSystems to ask questions and request information in order
to acquire detailed knowledge and information concerning the business
affairs and
-4-
<PAGE>
operations of GeoSystems and its financial condition and prospects; and, as a
result of such opportunity to ask questions and review information and NGE's
business background, training, and expertise, NGE is in a position to
comprehend, weigh, and assess such knowledge and information in a meaningful
fashion.
(ii) NGE acknowledges that any business and financial projections of
GeoSystems that may have been provided by or on behalf of GeoSystems are solely
for purposes of describing GeoSystems' future business and financial goals and
are not intended to be, nor are they, representations or guaranties of
GeoSystems' future performance.
(iii) NGE understands that none of the Securities have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or any
state securities act, that the Securities are offered in reliance on exemptions
for private offerings under such acts and that GeoSystems' reliance on such
exemption is predicated on NGE's representations set forth herein.
(iv) The Securities are being acquired by NGE solely for NGE's own
account, for investment, and are not being purchased with a view to or for the
resale, distribution, subdivision or fractionalization thereof. NGE further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Shares.
(v) NGE understands: (A) there are substantial restrictions on the
transferability of the Securities; (B) the Securities will not be, and investors
in GeoSystems have no rights to require that the Securities be, registered under
the Securities Act or any state securities act; and (C) there will be no public
market for the Securities.
(vi) The offer and sale of the Securities to NGE was made solely in the
Commonwealth of Pennsylvania and the District of Columbia.
(vii) NGE: (A) has sufficient knowledge and experience in business and
financial matters and is capable of evaluating the merits and risks of an
investment in the Securities; and (B) qualifies as an "accredited investor"
(as the term is defined under Regulation D promulgated under the Securities
Act).
-5-
<PAGE>
(viii) NGE agrees that because the Securities have not been registered
under the Securities Act or relevant state securities laws, they cannot be
resold or transferred unless:
(A) They are subsequently registered thereunder or exemptions from
such registrations are available; and
(B) GeoSystems receives an opinion of counsel satisfactory to it and
its counsel that such transfer complies with federal and state securities
laws.
NGE acknowledges that any certificates representing the Securities shall
bear a legend reflecting the foregoing restrictions.
(ix) Except as otherwise provided herein, neither GeoSystems nor any of
its officers, directors or shareholders has agreed or represented to NGE that
the Securities will be purchased or redeemed from NGE at any time in the
future. Further, except as otherwise provided herein, there have been no
representations, promises or agreements that the Securities will be registered
under the Securities Act or relevant state securities laws at any time in the
future or otherwise qualified for sale under applicable securities laws.
GeoSystems does not intend to make available to the public information
concerning itself so as to permit shareholders to use Rule 144 of the Rules
and Regulations under the Securities Act for transfer of the Securities.
(b) Authority; Enforceability. This Agreement constitutes the valid and
--------------------------
binding obligation of NGE enforceable in accordance with its terms.
(c) No Other Representations and Warranties. NGE acknowledges that, other
---------------------------------------
than the representations and warranties by GeoSystems set forth in this
Agreement, including the Exhibits hereto, no oral or written representations
have been made, or were authorized to be made, by or on behalf of GeoSystems by
its officers, directors or anyone else, or by any brokers, and that NGE is not
entitled to and will not rely on any such representations and warranties not set
forth in either this Agreement or the Exhibits hereto.
-6-
<PAGE>
4. Agreements Between and Among GeoSystems and NGE.
-----------------------------------------------
(a) Termination. If the Cartographic Agreement is terminated as a result
------------
of the occurrence of an event set forth in Section 5.1(c)(ii) of the
Cartographic Agreement:
(i) If the Warrant has not been fully exercised at the time of the
termination, all rights of NGE under the Warrant shall terminate
irnmediately;
(ii) If the Warrant has been previously exercised, GeoSystems shall have
the option to purchase the Warrant Shares for a period of sixty (60) days
after such termination of the Cartographic Agreement. The purchase price
for such Warrant Shares shall be the lesser of the exercise price under the
Warrant or Fair Market Value (taking into consideration the termination of
the Cartographic Agreement). Fair Market Value shall be determined by a
single appraiser agreed to by the parties to determine the Fair Market
Value (without any illiquidity or minority discounts) and the Fair Market
Value shall be so determined. If the parties do not agree within thirty
(30) days to a single appraiser, then GeoSystems shall, by notice to NGE,
appoint one appraiser and NGE shall, by notice to GeoSystems, appoint one
appraiser, both experienced in the appraisal of companies engaged in the
ownership and operation of the business in which GeoSystems is engaged. If
either side shall fail to appoint such appraiser within thirty (30) days
after the lapse of such thirty day period, then the appraiser appointed by
the other side shall make the appraisal of the Fair Market Value and such
appraisal shall govern. If said two appraisers cannot reach agreement
within thirty (30) days after the appointment of the last appraiser to be
appointed, the two appraisers selected shall promptly, within thirty (30)
days, appoint a third appraiser experienced in the appraisal of companies
engaged in the ownership and operation of the business in which GeoSystems
is engaged and the agreed decision of the three appraisers shall govern, or
if the three appraisers cannot agree as to such Fair Market Value, then the
average of the values determined by the two appraisers which are closest to
each other in value shall be considered such Fair Market Value. All
appraisal reports shall be rendered in writing and shall be signed by the
appraisers. The appraised Fair Market Value determined as herein provided
shall be final and conclusive on the parties and shall be enforceable in
any court having jurisdiction over a proceeding brought to seek such
enforcement. The costs of any appraisal hereunder shall be borne one-half
(1/2) by GeoSystems and one-half (1/2) by NGE.
-7-
<PAGE>
(b) Transfer Restrictions.
---------------------
(i) NGE shall not transfer any Securities to any other person unless NGE
shall have first made the offer to sell required by subsection (ii) below.
(ii) (A) In the event that any NGE desires to sell or transfer all or any
portion of the Securities, NGE shall first deliver to GeoSystems a written
notice (the "Notice of Proposed Transfer") specifying the name and address
of the proposed purchaser or transferee of the Securities (hereinafter
sometimes referred to as the "Proposed Purchaser"), the identity and total
amount of Securities which NGE then desires to sell or transfer to said
Proposed Purchaser (which Securities are hereinafter referred to as the
"Offered Securities"), all of the terms, including the price, upon which
NGE proposes to sell the Offered Securities to the Proposed Purchaser and
stating that GeoSystems has the right to purchase the Offered Securities at
said price and payable in accordance with the terms set forth in the Notice
of Proposed Transfer; provided, however, in the event the Proposed
Purchaser is a GeoSystems Competitor, GeoSystems shall have the right to
purchase the Offered Securities at the lesser of (I) the price indicated in
the Notice of Proposed Transfer or (II) Fair Market Value (as defined and
determined under Section 4(a)(ii) herein but without consideration of the
parenthetical in the second sentence thereof). A GeoSystems Competitor
shall be defined as a person, entity or group which directly or through an
affiliate has a material part of its operations in the manufacture and/or
sale of cartographic or map-related products or in software and systems
primarily utilizing geographic information and software, including
Internet-related activities.
(B) During the sixty (60) day period following receipt of the Notice of
Proposed Transfer, GeoSystems shall have the right to elect to purchase
all, but not less than all, of the Offered Securities at the price
hereinafter specified, before the same may be transferred to the Proposed
Purchaser.
(C) If GeoSystems elects to purchase Offered Securities under clause (B),
it shall give written notice to NGE of such election to purchase the Offered
Securities within the period provided.
(D) If GeoSystems does not so purchase the Offered Securities, then NGE
shall have the right, for a period of sixty (60) days after the expiration
of the period provided in clause (B), to transfer said securities to the
Proposed Purchaser at the price and on the terms specified in the notice of
Proposed Transfer. If for any reason the Offered Securities are not sold to
the Proposed Purchaser within such period, at such stated price and on such
terms, the provisions of this Section 4(b) shall continue to be applied to
said securities with respect to any subsequent attempts to transfer the
Offered Securities.
-8-
<PAGE>
(E) Offered Securities sold to a Proposed Purchaser pursuant to the
provisions of clause (D) above shall continue to be subject to the
provisions of this Agreement, and GeoSystems shall not issue any Securities
in the name of such Proposed Purchaser unless and until such person shall
have agreed in writing to become bound by the terms of this Agreement.
(F) Upon acceptance by GeoSystems of NGE's offer to sell the Offered
Securities, GeoSystems shall be obligated to tender payment (under the
terms specified in the Notice of Proposed Transfer) for the securities at
the offices of GeoSystems at 11:00 a.m. on the twentieth (20th) business
day following acceptance of the offer and GeoSystems shall be obligated to
tender, at the same time, delivery of the Offered Securities being sold
with proper endorsements for transfer.
(G) The purchase price for the Securities to be purchased and sold in
accordance with this Section 4(b), shall, unless otherwise agreed in
writing by the parties to such transaction, be paid at GeoSystems' option
either in cash or by certified check at the date of the closing or on the
same basis and terms set forth in the Notice of Proposed Transfer.
(iii) GeoSystems shall not honor or give effect on its books to any
transfer of any Securities until GeoSystems is reasonably satisfied that
the requirements of this Section 4(b) have been met and any transfer in
violation of this Section 4(b) (including an involuntary transfer) shall be
void.
(iv) The restrictions of this Section 4(b) shall terminate in the event
GeoSystems completes an initial public offering of its capital stock.
(c) NGE's Confidentiality Obligations.
---------------------------------
(i) So long as NGE retains, in any form, an investment in the Securities,
NGE shall receive any documents delivered to the other shareholders of
GeoSystems and shall have full access to GeoSystems' records and financial
information.
(ii) NGE acknowledges that, as a shareholder of GeoSystems, NGE may be
given or have access to certain information relating to GeoSystems' business
that is not generally known to persons outside GeoSystems. This information
(the "Confidential Information'') may include, but is not limited to,
financial information, marketing and sales information, customer information
(including the identity of GeoSystems' customers and prospects), product
information, and any information of any third party that has been provided
to GeoSystems in confidence. Confidential Information does not include any
information that is: (1) voluntarily disclosed to the public by GeoSystems
or by the third party providing the information in confidence to GeoSystems;
(2) independently developed and disclosed by others; or (3) otherwise enters
the public domain through lawful means.
-9-
<PAGE>
(iii) NGE understands and agrees that the Confidential
Information is valuable and that NGE has no property interest in it. NGE
agrees that, both so long as NGE owns any Securities of GeoSystems and
thereafter until dissolution of GeoSystems, NGE will not, without prior
written authorization from GeoSystems, either give, disclose, provide access
to, or otherwise make available any Confidential Inforrnation to any person
not employed by GeoSystems.
(d) Registration Rights. With respect to the Private Placement Shares and
-------------------
the Warrant Shares, (i) NGE shall have the same registration rights as the
Management Holders (as identified in the Rights Agreement dated October 31,
1994 (the "Rights Agreement") by and among GeoSystems, R.R. Donnelley &
Sons Company, the Purchasers and the Management Holders (as such terms are
defined in the Rights Agreement)) have under Section 5 of the Rights
Agreement, (ii) the Private Placement Shares and the Warrant Shares shall be
deemed to be Registrable Common Stock for the purposes of such Section 5 and
(iii) NGE shall be deemed a Holder for the purposes of such Section 5.
5. Conditions to the Obligations of GeoSystems. GeoSystems' obligation to
--------------------------------------------
sell and issue the Securities on any date in the future (an "Investment Date")
is, at the option of GeoSystems, subject to the fulfillment of the following
conditions:
(a) Representations. The representations made by NGE in Section 3 hereof
---------------
shall be true and correct in all material respects when made, and shall be
true and correct on such Investment Date.
(b) Covenants. All covenants, agreements and conditions contained in this
---------
Agreement to be performed by NGE on or prior to such Investment Date shall
have been performed or complied with in all respects.
(c) Securities Laws. GeoSystems shall have obtained all necessary federal
----------------
and Blue Sky law permits and qualifications, or secured an exemption
therefrom, required by any federal agency or any state for the offer and
sale of the Securities.
6. Brokers. All parties represent and warrant to the other that neither
-------
has incurred any liability for any broker's commission, finders' fee or the like
in connection with this Agreement and the purchase and sale of common stock
hereunder.
7. Fees and Expenses. Subject to the specific provisions herein (including
-----------------
any provisions requiring indemnification) each party to this Agreement shall pay
any and all fees and expenses incurred by him or it in connection with the
execution and performance of this
-10-
<PAGE>
Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, attorney's fees and accountants' fees.
8. General Provisions.
------------------
(a) Cartographic Agreement Provisions. The General Provisions set
---------------------------------
forth in Section 13 of the Cartographic Agreement are incorporated herein
by reference.
(b) Survival of Covenants and Representations. All covenants and
-----------------------------------------
representations of the parties contained in this Agreement shall survive
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
-11-
<PAGE>
IN WITNESS WHEREOF, the undersigned parties hereto have executed this
Agreement as of the date first above-written.
NGE, INC., d/b/a NATIONAL GEOGRAPHIC MAPS
By: /s/ Allen T. Carroll
-------------------------------------
Name: ALLEN T. CARROLL
------------------------------------
Title: SENIOR VICE PRESIDENT
-----------------------------------
GEOSYSTEMS GLOBAL CORPORATION
By: /s/ Barry J. Glick
-------------------------------------
Name: BARRY J. GLICK
------------------------------------
Title: CHIEF EXECUTIVE OFFICER
-----------------------------------
-12-
<PAGE>
Neither this Warrant nor the shares of Common Stock issuable hereunder
have been registered under the Securities Act of 1933, the laws of Pennsylvania
or the laws of any other state, and neither may be sold or otherwise transferred
without such registration or an opinion of counsel satisfactory to GeoSystems
that an exemption therefrom is available.
This Warrant and the shares of Common Stock issuable hereunder are
subject to the repurchase rights of GeoSystems and the transfer restrictions set
forth in the Investment Agreement referenced herein.
No. of Shares: 250,265 Warrant No. 1
WARRANT
To Purchase up to 250,265 Shares of Common Stock of
GeoSystems Global Corporation
THIS CERTIFES THAT, for value received, NGE, Inc. ("NGE") is entitled to
purchase from GeoSystems Global Corporation ("GeoSystems"), at any time after
the date hereof and on or before the Expiration Date, 250,265 shares of Common
Stock of GeoSystems, at the Purchase Price (as hereinafter defined) in lawful
money of the United States of America, subject to the provisions, limitations
and restrictions hereof. The number of shares of Common Stock purchasable
hereunder and the Purchase Price therefor are subject to adjustment as
hereinafter set forth in Section 5 herein. This Warrant is being issued pursuant
to the terms of Cartographic Product Development, Publishing, Marketing and
Distribution Agreement of even date (the "Cartographic Agreement") among
National Geographic Society, NGE and GeoSystems and an Investment Agreement of
even date (the "Investment Agreement") between GeoSystems and NGE.
Section 1. Certain Definitions. For all purposes of this Warrant the
following terms shall have the meanings indicated:
"Basic Purchase Price" shall mean the initial purchase price per share of
Common Stock set forth in Section 2.
"Common Stock" shall mean the shares of GeoSystems' authorized Common
Stock, as constituted at the date of issuance of this Warrant.
<PAGE>
"Expiration Date" shall mean the earlier of: (i) five (5) years from the
date of this Warrant; or (ii) in the event of termination of the
Cartographic Agreement by GeoSystems under Section 8.2 or by NGE without
cause, upon the termination date (with the Expiration Date relating back to
notification of breach by GeoSystems in the event of termination under
Section 8.2).
"GeoSystems" shall include any corporation which shall succeed to or
assume the obligations of GeoSystems hereunder.
"Insider Private Placement" shall have the meaning set forth in Section
5.1 herein.
"Private Placement" shall have the meaning set forth in Section 5.1
herein.
"Purchase Price" shall mean the Basic Purchase Price or such Basic
Purchase Price as adjusted from time to time pursuant to the provisions
hereof.
"Warrant Holder" shall mean the holder of this Warrant.
"Warrant" shall mean this Warrant and all Warrants issued in exchange or
replacement thereof.
"Warrant Shares" shall mean the shares of Common Stock purchased or
purchasable by the holder of this Warrant upon the exercise thereof
pursuant to Section 3 thereof.
All terms in this Warrant which are not defined in Section 1 have the
meanings respectively set forth therefor elsewhere in this Warrant.
Section 2. Basic Purchase Price. The Basic Purchase Price at which a
holder may exercise this Warrant shall be a price per share initially equal
to $4.79; provided, however, in the event a Private Placement is effected
on or before the date which is one year from the date of this Warrant and
the offering price in such Private Placement is less than $4.79, the Basic
Purchase Price of the Warrant shall be adjusted to be equal to (i) in the
case of an Insider Private Placement, the issue price in such Private
Placement and (ii) in the case of a Private Placement other than an Insider
Private Placement, eighty percent (80%) of the issue price in such Private
Placement.
Section 3. Exercise of Warrant, Etc.
3.1 Procedure for Exercise of Warrant.
---------------------------------
(a) The rights represented by this Warrant may be exercised by the holder
in whole, or from time to time in part, by the (i) surrender of this Warrant,
accompanied by an Exercise Form in substantially the form of Exhibit A hereto
---------
(the "Exercise Form") duly executed by the holder and specifying the number of
Warrant Shares to be purchased, and (ii) delivery of payment, for the account of
the Company, of the purchase price for the number of Warrant Shares specified in
the Exercise Form (in the amount of the Exercise Price, as then adjusted, for
the number of Warrant Shares specified in the Exercise Form), which shall be
payable either
2
<PAGE>
(A) in cash,
(B) by certified check or bank cashier's check payable to the order
of the Company in the amount of such purchase price,
(C) by delivery to GeoSystems of common stock, including any common
stock issuable upon the exercise of this Warrant (it being the
intention of the parties hereto to permit so-called "cashless
exercises" of the Warrant by simultaneous exercise of the Warrant
and issuances of common stock thereunder having a fair market
value (determined in accordance with Section 3.1(b) of this
Warrant) equal to and applied as payment for such purchase price,
otherwise known as "net securities issues"), or
(D) by a combination of the methods of payment described in (A)
through (C) above
to Geosystems at its principal office (or such other office or agency of
GeoSystems as GeoSystems may designate by notice to the holder), during normal
business hours on any day (a "Business Day") other than a Saturday, Sunday or a
day on which national banks are authorized to closed in Lancaster, Pennsylvania,
at any time permitted under the terms of this Warrant.
(b) The "fair market value" of common stock shall be calculated, in
connection with the operation of Section 3.1(a)(ii)(C) above, at the time of a
cashless exercise, by an independent reputable appraisal firm satisfactory to
GeoSystems and the holder(s) engaged in such cashless exercise. The fees,
expenses and other costs of such appraisal firm to make the valuations described
shall by paid by GeoSystems; provided, however, that if more than one such
valuation in any twelve (12) month period is required because of cashless
exercises, the holder(s) exercising in such excess cashless exercises (occurring
after the first cashless exercise with such twelve month period) shall pay such
fees, expenses and other costs in connection with such excess cashless
exercises.
3.2 Acknowledgment of Continuing Obligation. GeoSystems will, at the time
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of the exercise of this Warrant, in whole or in part, upon request of the holder
hereof, acknowledge in writing its continuing obligation to such holder in
respect of any rights to which such holder shall continue to be entitled after
such exercise in accordance with this Warrant, provided, that the failure of
such holder to make any such request shall not affect the continuing obligation
of GeoSystems to such holder in respect of such rights.
3.3 Character of Warrant Shares. A11 shares of Common Stock issuable upon
---------------------------
the exercise of this Warrant shall be duly authorized, validly issued, fully
paid and non-assessable; and without limiting the generality of the foregoing,
GeoSystems covenants and agrees that it will reserve a sufficient number of
shares of Common Stock for issuance upon exercise of this Warrant.
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Section 4. Exchange and Replacement.
(a) The holder shall not transfer or assign this Warrant except (i) to
the holder's successor by merger or consolidation or (ii) to the purchaser of
all or substantially all the assets of the holder; provided, however, that any
such transfer shall be subject to compliance with applicable securities laws
and, on request by GeoSystems, the transferor shall furnish to GeoSystems an
opinion of the transferor's counsel to the effect that the transfer is in
compliance with such securities laws. Any attempted or purported assignment or
transfer of this Warrant without compliance with the preceding sentence shall be
void. In the event of any transfer permitted by this Section 4, GeoSystems shall
register or shall cause its agent to register the transfer or assignment on its
warrant register upon surrender of this Warrant, duly endorsed, or accompanied
by a written instrument of transfer duly executed by the holder or by the duly
appointed legal representative or attorney thereof. On any such registration of
transfer, GeoSystems shall issue a new Warrant or Warrants, of like tenor, in
lieu of the transferred or assigned Warrant. In no event will GeoSystems be
required to effect a registration of transfer, assignment or exchange that would
result in the issuance of a fraction of a share.
(b) Subject to the provisions of subsection (a) of this Section 4, this
Warrant is exchangeable, upon the surrender hereof by the holder to GeoSystems
at its office or agency described in Section 3, for new Warrants of like tenor
and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder, each of such new Warrants to represent the right
to purchase such number of shares as shall be designated by said registered
holder at the time of such surrender. Upon receipt by GeoSystems of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon surrender and cancellation of
this Warrant, if mutilated, GeoSystems will make and deliver a new Warrant of
like tenor, in lieu of this Warrant. This Warrant shall be promptly canceled by
GeoSystems upon the surrender hereof in connection with any exchange or
replacement. GeoSystems shall pay all expenses, taxes (other than stock transfer
taxes) and other charges payable in connection with the preparation, execution
and delivery of Warrants pursuant to this Section 4.
Section 5. Adjustment of Purchase Price and Warrant Shares, etc.
5.1 Increase in Number of Warrant Shares upon Private Placement.
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(a) In the event that the Private Placement is effected on or before the
date which is one year from the date hereof, the number of Warrant Shares shall
be increased by adding three percent (3 %) of the number of shares of capital
stock (or issuable upon conversion of the securities issued in the Private
Placement) issued in the Private Placement to the then current number of Warrant
Shares (provided that the term of this Warrant shall remain unchanged). Such
increase in the number of Warrant Shares in the event of a Private Placement
shall apply only to the first Private Placement effected within one year of the
date of this Agreement unless the Private Placement raises gross proceeds (the
"Actual Proceeds") of less than $10 million (the "Minimum Proceeds"). In the
event the first Private Placement raises less than the Minimum Proceeds, the
foregoing adjustment to the Warrant Shares shall apply to any subsequent Private
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<PAGE>
Placement(s) effected during the one-year period following the date of the
initial Private Placement. The increase in the number of Warrant Shares shall be
equal to the product of (A) the Proceeds Differential, i.e. a fraction the
numerator of which is the difference between the Minimum Proceeds and the Actual
Proceeds (on a cumulative basis) and the denominator of which is the gross
proceeds raised in such subsequent Private Placement and (B) 3% of the number of
shares to be issued (or issuable upon conversion of the securities offered in
the Private Placement) in such subsequent Private Placement. The exercise price
under Section 2 herein shall be determined by applying the provisions of such
Section to each Private Placement. The foregoing adjustments shall be
illustrated by the following example (assuming, for the purposes of the exercise
price, that neither Private Placement is an Insider Private Placement):
(I) Private Placement of $9 million in gross proceeds through the
sale of 2,250,000 shares at $4.00 per share - the Warrant Shares shall be
increased by 37,500 (3% of 2,250,000) and the exercise price for such
additional Warrant Shares shall be $3.20 (80% of $4.00).
(II) Subsequent Private Placement within one year of the initial
Private Placement of $3 million in gross proceeds through the sale of
375,000 shares at $8.00 per share - the Warrant Shares shall be increased
by 3,750 shares ((9 million - $4 million)/$3 million x (3% of 375,000) and
the exercise price for such additional Warrant Shares shall be $4.79 ($4.79
is less than 80% of $8.00).
(b) For the purposes of this Section 5.1, (i) the term "Private Placement"
shall be deemed to refer to an offering of GeoSystems' capital stock (or
securities convertible into capital stock) which (A) does not involve
registration under the Securities Act of 1933, as amended, (B) does not relate
solely to employee benefit plans or a Rule 145 transaction and (C) is effected
within one year of the date of this Agreement or, in the case of a Private
Placement(s) following an initial Private Placement which does not raise the
Minimum Proceeds, within one year of the date of the initial Private Placement,
(ii) the term "Insider Private Placement" shall be deemed to refer to a Private
Placement made solely through GeoSystems' existing shareholders or their
affiliates (as such term is defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended) and (iii) the term "GeoSystems Equity" shall be deemed
to refer to the Warrant and the Warrant Shares.
5.2 Stock Dividends, Stock Splits, Reverse Splits. Etc. The price at
--------------------------------------------------
which Warrant Shares may be purchased hereunder, and the number of Warrant
Shares then purchasable upon exercise hereof, are subject to change or
adjustment as follows:
(a) In the event the outstanding shares of common stock of GeoSystems are
hereafter increased or decreased, or changed into or exchanged for a different
number or kind of shares or other securities of GeoSystems or of another entity,
but only in any such case by reason of a recapitalization, merger or
consolidation in which GeoSystems or a subsidiary thereof is the surviving
parent entity, stock split-up, combination of shares, or dividend or other
distribution payable in common stock, the number of Warrant Shares purchasable
upon exercise of this
5
<PAGE>
Warrant shall be adjusted so that the holder shall be entitled to receive the
kind and number of Warrant Shares which it would have owned or have been
entitled to receive after the happening of any of the events described above,
had this Warrant been exercised immediately prior to the happening of such event
or any record date with respect thereto. An adjustment made pursuant to this
subsection (a) shall become effective immediately after the effective date of
such event retroactive to the record date, if any, of such event.
(b) Whenever the number of Warrant Shares purchasable upon the exercise
of this Warrant is adjusted as provided in paragraph (a) above, the Basic
Purchase Price payable upon the exercise of this Warrant shall be adjusted
by multiplying such Basic Purchase Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of
Warrant Shares purchasable (at such time or in the future) upon the
exercise of this Warrant immediately prior to such adjustment, and the
denominator of which shall be the number of Warrant Shares purchasable (at
such time or in the future) immediately thereafter.
Whenever the number of Warrant Shares or the Basic Purchase Price of
such Warrant Shares is to be adjusted as provided in Section 5.2,
GeoSystems shall, immediately following the event which causes such
adjustment, provide the holder with notice of such adjustment or
adjustments, setting forth the number of Warrant Shares and the Basic
Purchase Price of such Warrant Shares after such adjustment, a
statement of the facts requiring such adjustment, and the computation
by which such adjustment was made.
5.3 No Fractional Shares. No fractional shares shall be issuable upon
--------------------
exercise of the Warrants, and the number of shares of Common Stock to be
issued shall be rounded to the nearest whole share.
5.4 Reservation of Stock Issuable Upon Exercise. GeoSystems shall at all
-------------------------------------------
times reserve and keep available out of its authorized but unissued shares
of Common Stock solely for the purpose of effecting the exercise of this
Warrant such number of its shares of Common Stock as shall from time to time
be sufficient to effect the full exercise of this Warrant; and if at any
time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the full exercise of this Warrant, then GeoSystems
will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
Section 6. Preservation of Purchase Rights upon Merger, Consolidation or
Other Event when GeoSystems does not Survive.
(a) Dissolution or Liquidation. In the event of the dissolution
--------------------------
or liquidation of GeoSystems, this Warrant shall terminate
upon the occurrence of such event.
(b) Reorganization. In the event of a Reorganization (as
--------------
hereinafter defined), then
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<PAGE>
(i) If there is no plan or agreement with respect to the
Reorganization ("Reorganization Agreement"), or if the
Reorganization Agreement does not specifically provide for the
change, conversion or exchange of the Warrant for cash or other
property or securities of another entity in accordance with a
majority of the holders' prior written consent to such change,
conversion or exchange, then this Warrant shall terminate upon the
occurrence of such event; or
(ii) If there is a Reorganization Agreement, and the
Reorganization Agreement specifically provides for the change,
conversion or exchange of the Warrant for cash or other property or
securities of another entity, in accordance with a majority of the
holders' prior written consent to such change, conversion or
exchange, then the Warrant shall be changed, converted or exchanged
in a manner not inconsistent with the provisions of the
Reorganization Agreement for the adjustment, change, conversion or
exchange of such Warrant.
The term "Reorganization"" as used in this Section 6(b) shall mean any merger,
consolidation, share exchange or other business combination pursuant to which
GeoSystems or a subsidiary of GeoSystems is not the surviving parent entity
after the effective date of the Reorganization, or any sale or lease of all or
substantially all of the assets of GeoSystems. Nothing herein shall require
GeoSystems to adopt a Reorganization Agreement.
(c) Notice and Right to Exercise. GeoSystems shall provide the
----------------------------
holder with a notice of the planned dissolution or liquidation, or the planned
Reorganization, of GeoSystems, as described in paragraphs (a) or (b) of this
Section 6, respectively, along with all relevant information relating thereto,
at least thirty (30) calendar days prior to the effective date of such event.
Section 7. No Rights as Stockholder; Limitation of Liability. This
Warrant shall not entitle the holder hereof to any of the rights of a
stockholder of GeoSystems. No provision hereof, in the absence of affirmative
action by the holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Purchase Price or as a stockholder
of GeoSystems whether such liability is asserted by GeoSystems or by creditors
of GeoSystems.
Section 8. Investment Agreement Provisions. This Warrant and the Warrant
Shares shall be subject to the provisions of the Investment Agreement. The
General Provisions of the Investment Agreement in Section 8 therein are
incorporated herein by reference.
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IN WITNESS WHEREOF, GeoSystems Global Corporation has caused this Warrant
to be signed by its duly authorized officer under its corporate seal, attested
by its duly authorized officer, and to be dated as of April ___, 1997.
Attest: GeoSystems Global Corporation
By: /s/ Barry Glick
------------------------------------ ------------------------------
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EXHIBIT A
-------
EXERCISE FORM
-------------
[To be signed only upon exercise of Warrant]
To GeoSystems Global Corporation:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder _________________ shares of Common Stock of GeoSystems
Global Corporation and herewith makes payment of $__________________ therefor,
and requests that the certificates for such shares be issued in the name of,
and delivered to, the undersigned whose address is:
--------------------------------------
--------------------------------------
--------------------------------------
and if such shares shall not be all of the shares purchasable hereunder, that a
new Warrant of like tenor for the balance of the shares purchasable hereunder be
delivered to the undersigned.
Dated:
------------------------------- ----------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
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EXHIBIT 10.5
GEOSYSTEMS GLOBAL CORPORATION
-----------------------------
April 11, 1997
WRITTEN CONSENT OF SHAREHOLDERS TO CORPORATE ACTIONS
----------------------------------------------------
Pursuant to Section 228 of the Delaware General Corporation Law, the
undersigned, being all of the shareholders entitled to vote shares of equal
stock of GeoSystems Global Corporation, a Delaware corporation (the "Company"),
hereby consent in writing to the following corporate action:
VOTED: The number of options that may be granted pursuant to the 1995 Stock
Option Plan be increased by 747,725 shares for a total of 1,404,275
shares.
<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
except for Note 15, as to which the date is April , 1999, in Amendment No. 2 to
the Registration Statement (Form S-1 No. 333-72667) and related Prospectus of
MapQuest.com, Inc.
Ernst & Young LLP
Harrisburg, Pennsylvania
April , 1999
The foregoing consent is in the form that will be signed upon the completion of
the restatement of the capital accounts described in Note 15 to the financial
statements.
/s/ Ernst & Young LLP
Harrisburg, Pennsylvania
April 26, 1999
