<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1999.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
JUPITER COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 8700 11-3497726
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
627 BROADWAY
NEW YORK, NY 10012
TELEPHONE: (212) 780-6060
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GENE DEROSE
CHIEF EXECUTIVE OFFICER
JUPITER COMMUNICATIONS, INC.
627 BROADWAY
NEW YORK, NY 10012
TELEPHONE: (212) 780-6060
FACSIMILE: (212) 780-6075
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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<S> <C>
ALEXANDER D. LYNCH, ESQ. JOHN M. WESTCOTT, JR., ESQ.
KENNETH R. MCVAY, ESQ. HALE AND DORR LLP
BROBECK, PHLEGER & HARRISON LLP 60 STATE STREET
1633 BROADWAY, 47TH FLOOR BOSTON, MA 02109
NEW YORK, NY 10019 (617) 526-6000
(212) 581-1600
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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,
check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
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<S> <C> <C>
Common stock, par value $0.001 per share........... $57,500,000 $15,985
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION -- JULY 30, 1999
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PROSPECTUS
, 1999
JUPITER LOGO
SHARES OF COMMON STOCK
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JUPITER COMMUNICATIONS, INC.:
- - We are a leading provider of research on Internet commerce.
- - Jupiter Communications, Inc.
627 Broadway
New York, New York 10012
(212) 780-6060
PROPOSED SYMBOL & MARKET:
- - JPTR/Nasdaq National Market
THE OFFERING:
- - We are offering shares of our common stock.
- - The underwriters have an option to purchase an additional
shares from us to cover over-allotments.
- - We currently estimate that the price of the shares will be between $ and $
.
- - This is our initial public offering, and no public market currently exists for
our shares.
- - We plan to use the proceeds from this offering for product development,
international expansion, research, sales and marketing expansion, leasehold
and technology improvements, potential acquisitions and general corporate
purposes.
- - Closing: , 1999.
<TABLE>
<CAPTION>
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PER SHARE TOTAL
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<S> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to Jupiter Communications:
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</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
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NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS DETERMINED WHETHER THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. NOR HAVE THEY MADE, NOR WILL THEY MAKE, ANY
DETERMINATION AS TO WHETHER ANYONE SHOULD BUY THESE SECURITIES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
DEUTSCHE BANC ALEX. BROWN
THOMAS WEISEL PARTNERS LLC
The undersigned is facilitating Internet distribution.
DLJdirect Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY US FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE> 3
TABLE OF CONTENTS
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PAGE
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 8
Forward-Looking Statements............. 16
Use of Proceeds........................ 17
Dividend Policy........................ 17
Capitalization......................... 18
Dilution............................... 19
Selected Financial and Operating
Data................................. 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 22
Business............................... 30
</TABLE>
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PAGE
<S> <C>
Management............................. 45
Certain Transactions................... 52
Principal Stockholders................. 53
Description of Capital Stock........... 54
Shares Eligible for Future Sale........ 57
Underwriting........................... 59
Legal Matters.......................... 62
Experts................................ 62
Where You Can Find Additional
Information.......................... 62
Index to Financial Statements.......... F-1
</TABLE>
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<PAGE> 4
PROSPECTUS SUMMARY
The information below is only a summary of more detailed information
included in other sections of this prospectus. This summary may not contain all
the information that is important to you or that you should consider before
buying shares in the offering. The other information is important, so please
read this entire prospectus carefully. Information contained on our Web site is
not part of this prospectus.
JUPITER COMMUNICATIONS, INC.
OUR BUSINESS
We are a leading provider of research on Internet commerce. Senior
executives at client companies utilize our research to make informed business
decisions in a complex and rapidly changing Internet economy. Our research,
which is solely focused on the Internet economy, provides our clients with
comprehensive views of industry trends, forecasts and best practices. Our
analysis, supported by proprietary data, emphasizes specific, actionable
findings.
Our research services are provided primarily through our continuous
subscription product, Strategic Planning Services, which we call SPS. SPS is a
combination of proprietary written analysis, supporting data and access to our
analysts. We typically bill clients annually in advance and deliver the products
and services over the term of the contract. We generate our research through
seven focused teams of research analysts and associates. Our proprietary
research is informed and supported by a dedicated data research group. We
increasingly deliver our products via the Internet.
We have a highly diversified client base, including companies in the
Internet, media, telecommunications, technology, financial services, retail,
travel, consumer products and professional services industries. We have
successfully increased the number of SPS clients and our total contract value,
which is the annualized value of all SPS contracts at a given point in time. As
of March 31, 1999, we had 514 SPS contracts, an increase from 421 on December
31, 1998 and 145 on December 31, 1997. Our total contract value has increased
from $2.5 million on December 31, 1997, to $11.7 million on December 31, 1998
and to $15.2 million on March 31, 1999. In addition, approximately 71% of the
SPS contracts that expired during the 12 months prior to March 31, 1999 were
renewed.
We also produce a wide range of conferences which offer senior executives
the opportunity to hear first-hand the insights of our analysts and the leading
decision makers in the Internet and technology industries. Because over 75% of
the attendees are not SPS clients, these conferences provide a unique
opportunity to promote our SPS research to potential clients. These conferences
also allow us to increase the public profile of our analysts, generate favorable
press and otherwise promote the Jupiter brand.
MARKET OPPORTUNITY
We believe that the growth of the Internet, and the growth of Internet
commerce in particular, will continue to expand rapidly for the foreseeable
future both in the United States and abroad. A recent report by the University
of Texas' Center for Research in Electronic Commerce estimated that the Internet
economy generated approximately $300 billion in U.S. revenue and was responsible
for 1.2 million jobs in 1998. A recent study by the Organization for Economic
Cooperation and Development predicted that worldwide Internet commerce will grow
to $1 trillion by 2005. In addition, billion dollar markets are emerging on the
Internet for many different industry sectors. Specifically, for the U.S. we
project that by 2003 the online travel industry will grow to approximately $17
billion, online advertising will grow to approximately $12 billion, overall
consumer online shopping will grow to approximately $43 billion and that total
assets held in online brokerage accounts will grow to approximately $3 trillion.
The rapid growth of Internet commerce and the related increase in
innovative products, services and technologies have made it difficult for
companies to understand and evaluate the steps they should take to engage in and
expand their Internet commerce activities, promote their online businesses and
compete
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effectively. Thus, demand is growing for timely and credible research to assist
companies in identifying revenue models and success criteria, analyzing consumer
adoption trends, developing effective sales and marketing strategies, assessing
market trends and analyzing the competitive landscape. Demand for research,
analysis and advice is also expected to increase as the growth in Internet
commerce and consumer use of new technologies impacts more industries and
expands into other geographic areas.
OUR STRATEGY
Our objective is to be the premier global research company focusing on
Internet commerce. Key elements of our business strategy include the following:
- Staying at the forefront of research innovation;
- Increasing our client base in the United States and abroad;
- Increasing the level of sales to existing clients;
- Pursuing international opportunities;
- Continuing to strengthen the Jupiter brand;
- Increasing the number of conferences that we produce; and
- Enhancing our Web delivery platform.
OUR HISTORY
Our business was formed on December 1, 1994 with the creation of Jupiter
Communications, LLC, a New York limited liability company. Upon the closing of
this offering, Jupiter Communications, LLC will change its structure from a
limited liability company to a corporation. This change will be made by merging
Jupiter Communications, LLC with and into Jupiter Communications, Inc., a
Delaware corporation. Membership units in Jupiter Communications, LLC will be
exchanged in the merger for shares of common stock of Jupiter Communications,
Inc.
Our principal executive offices are located at 627 Broadway, New York, New
York 10012. Our telephone number is (212) 780-6060. Our Web site is www.jup.com.
References in this prospectus to "Jupiter," "Jupiter Communications," "we,"
"our" and "us" refer to Jupiter Communications, Inc. and its predecessor
entities.
We have applied for or received trademark and/or service mark registration
for, among others, the marks "Jupiter," "Jupiter Communications," "SPS" and
"Internet Business Report". Any other trademark, trade name or service mark of
any other company appearing in this prospectus belongs to its holder.
------------------------------
Unless otherwise indicated, all information in this prospectus:
- reflects the merger of Jupiter Communications, LLC with and into Jupiter
Communications, Inc., which will be completed upon the closing of this
offering; and
- assumes no exercise of the underwriters' over-allotment option.
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THE OFFERING
Common stock offered by Jupiter.... shares
Common stock to be outstanding
after the offering................. shares
Use of proceeds.................... We plan to use the proceeds from this
offering for product development,
international expansion, research, sales
and marketing expansion, leasehold and
technology improvements, potential
acquisitions and general corporate
purposes.
Proposed Nasdaq National Market
symbol............................. JPTR
The outstanding share information is based on our shares outstanding as of
, 1999. This information excludes shares of common stock
issuable upon the exercise of stock options outstanding as of ,
1999, with a weighted average exercise price of $ per share.
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SUMMARY FINANCIAL AND OPERATING DATA
The following tables summarize financial and operating data for our
business. The summary financial and operating data set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our financial statements and related
notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------- --------------------
1995 1996 1997 1998 1998 1999
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Strategic Planning Services........... $ 237 $ 566 $ 1,850 $ 6,183 $ 762 $ 3,447
Conferences........................... 2,024 2,686 3,426 4,890 888 1,724
Other................................. 1,439 3,000 3,246 3,729 959 848
------ ------ ------- ------- ------- -------
Total revenues..................... 3,700 6,252 8,522 14,802 2,609 6,019
Cost of services and fulfillment........ 2,893 4,687 6,259 9,676 2,091 2,955
------ ------ ------- ------- ------- -------
Gross profit.......................... 807 1,565 2,263 5,126 518 3,064
Other operating expenses:
Sales and marketing................... 254 514 1,558 3,173 611 1,750
General and administrative............ 1,025 1,664 2,955 4,090 911 1,635
------ ------ ------- ------- ------- -------
Total other operating expenses..... 1,279 2,178 4,513 7,263 1,522 3,385
------ ------ ------- ------- ------- -------
Net loss................................ $ (472) $ (613) $(2,250) $(2,137) $(1,004) $ (321)
====== ====== ======= ======= ======= =======
Pro forma basic and diluted net loss per
common share(1).......................
Pro forma weighted average common shares
outstanding(1)........................
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
----------------------------------- --------------------
1995 1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Number of SPS contracts................. 13 66 145 421 145 514
Total contract value (in thousands)..... $ 315 $ 923 $ 2,509 $11,666 $ 3,017 $15,188
Number of employees..................... 18 61 88 142 109 167
Capital expenditures (in thousands)..... $ 99 $ 199 $ 207 $ 838 $ 104 $ 447
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 851 $
Working capital (4).................................... (3,943)
Total assets........................................... 8,925
Members'/stockholders' equity (deficiency)............. (2,450)
</TABLE>
(Footnotes on following page)
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- ------------------------------
(1) Pro forma basic and diluted net loss per common share is computed by
dividing net loss by the pro forma weighted average number of shares of
common stock. Pro forma weighted average shares do not include any common
stock equivalents because inclusion of common stock equivalents would have
been anti-dilutive.
(2) The pro forma balance sheet data give effect to our reorganization from an
LLC to a corporation as though the reorganization had occurred as of March
31, 1999.
(3) Pro forma as adjusted amounts reflect the sale of shares of common
stock in this offering, after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us.
(4) Our working capital balances are typically negative because of the timing of
cash collections from clients. SPS contracts are typically annual and paid
in advance. Accordingly, a substantial portion of our billings is initially
recorded as deferred revenue and amortized into revenue during the term of
the contract to which such billings relate.
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RISK FACTORS
Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide to
buy our common stock. If any of the following events actually occurs, our
business and financial results may suffer. In this case, the market price of our
common stock could decline, and you could lose all or part of your investment in
our common stock.
IF WE ARE UNABLE TO ATTRACT AND RETAIN EXPERIENCED PERSONNEL, THE QUALITY OF OUR
RESEARCH PRODUCTS AND SERVICES MAY DECLINE, AND OUR ABILITY TO SELL OUR PRODUCTS
AND SERVICES MAY BE HARMED.
Our success depends in large part on the continued contributions of our
senior management team, research analysts and sales representatives. As of June
30, 1999, we had 38 research analysts and 40 sales representatives. We expect to
increase our hiring of research analysts and sales representatives significantly
in the next few years. We face intense competition in hiring and retaining
personnel from, among others, technology and Internet companies, market research
and consulting firms, print and electronic publishing companies and financial
services companies. Many of these firms have substantially greater financial
resources than we do to attract and retain qualified personnel from a limited
pool of attractive candidates. In addition, some people that we may attempt to
hire could be subject to non-competition agreements that could impede our
recruitment efforts. To the extent that we are unable to retain our existing
management, research analysts or sales representatives or that we are unable to
increase the number of research analysts and sales representatives that we hire,
our business and financial results may suffer.
BECAUSE WE HAVE RECENTLY INTRODUCED MANY OF OUR PRODUCTS AND SERVICES, YOU HAVE
LIMITED INFORMATION UPON WHICH YOU CAN EVALUATE OUR BUSINESS.
We have recently launched many of the practices and market modules that we
offer. As a result, we have a limited operating history upon which you can
evaluate our business and the products and services that we offer.
You must consider the risks and uncertainties frequently encountered by
companies in new and rapidly evolving markets such as ours. Some of these risks
and uncertainties relate to our ability to:
- attract and retain clients to our research products and services;
- employ and retain a growing number of qualified personnel, especially
research analysts and sales representatives;
- anticipate, understand and properly analyze market trends and the
changing needs of our clients;
- develop, introduce and market new research products and services;
- respond to actions taken by our competitors;
- implement an effective marketing strategy to promote awareness of the
Jupiter brand;
- attract attendees to our conferences; and
- integrate acquired businesses and services.
We cannot assure you that we will be successful in addressing these risks
and uncertainties. Our failure to do so could cause our business and financial
results to suffer.
RAPID GROWTH IN OUR BUSINESS COULD STRAIN OUR MANAGERIAL, OPERATIONAL AND
FINANCIAL RESOURCES.
The anticipated future growth of our business will place a significant
strain on our managerial, operational and financial resources. We had 61
employees at December 31, 1996, 88 employees at December 31, 1997, 142 employees
at December 31, 1998 and 196 employees at June 30, 1999. We anticipate hiring a
substantial number of research analysts, sales representatives and other
employees in the foreseeable future to expand our product and service offerings
and to expand our sales of such products
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<PAGE> 10
and services. We may also decide to open additional offices in the United States
and abroad. As we expand, we expect that we will need to continually improve our
financial and managerial controls, billing systems, reporting systems and
procedures. In addition, as we expand we will also need to increase our employee
training efforts. If we are unable to manage our growth effectively, our
business and financial results may suffer.
WE HAVE A HISTORY OF OPERATING LOSSES WHICH MAY CONTINUE FOR THE FORESEEABLE
FUTURE.
We have incurred substantial costs to create, market and distribute our
products and services, to retain qualified personnel, including management,
research analysts and sales representatives, and to grow our business. As a
result, we incurred net losses of approximately $613,000 in 1996, $2.3 million
in 1997, $2.1 million in 1998 and $321,000 for the first calendar quarter of
1999. As of March 31, 1999, our accumulated net losses totaled $6.0 million.
We intend to invest heavily in new products and services, leasehold and
technology improvements, new research and sales personnel and international
expansion. As a result, we will need to achieve significant revenue increases to
achieve and maintain profitability. The number of clients for our research
products and services, as well as the number of attendees to our conferences,
may grow more slowly than we anticipate or may even decrease in the future. In
addition, even if we become profitable, we may not sustain or increase our
profits on a quarterly or annual basis in the future.
OUR OPERATING RESULTS MAY FLUCTUATE IN FUTURE PERIODS, WHICH MAY CAUSE
VOLATILITY OR A DECLINE IN THE PRICE OF OUR STOCK.
Our revenues, expenses and operating results have varied in the past and
may fluctuate significantly in the future due to a variety of factors, many of
which are outside of our control. These factors include, among others:
- the level and timing of new business and renewals of subscriptions to our
research products and services;
- the timing of the introduction and marketing of new research products and
services;
- changes in the market demand for research products or analysis regarding
Internet commerce;
- the timing of our Internet conferences and the levels of attendance at
such events;
- changes in operating expenses;
- the impact of possible acquisitions both on our operations and on our
reported operating results; and
- the extent to which we experience increased competition.
The sales of our research products and services and the success of our
conferences are difficult to forecast accurately. If our revenues fall short of
expectations, we may not be able to adjust our fixed expenses to compensate for
this shortfall on a timely basis. Further, as a strategy for remaining
competitive, we may have to make certain pricing, service or marketing decisions
that could cause our business and financial results to suffer.
Due to all the foregoing factors and other risks discussed in this section,
you should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance. It is possible that in some
future periods our results of operations may be below the expectations of public
market analysts and investors. In this event, the price of our common stock is
likely to fall.
BECAUSE OUR REVENUES ARE SUBSTANTIALLY DEPENDENT ON THE SALE OF OUR STRATEGIC
PLANNING SERVICES, OUR BUSINESS MAY SUFFER IF WE HAVE DIFFICULTY IN ACQUIRING OR
RETAINING SUBSCRIBERS TO THIS PROGRAM.
Our business and financial results are dependent on our ability to attract
and retain clients for our Strategic Planning Services. In addition, our
business model assumes that we will be able to increase the
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level of SPS sales over time to our existing clients. Revenues from
subscriptions to SPS, as a percentage of our total revenues, were 41.8% in 1998
and 57.3% in the three months ended March 31, 1999.
Our ability to acquire and retain SPS clients and our ability to increase
sales to existing clients is subject to a number of risks, including the
following:
- We may be unsuccessful in delivering high-quality and timely research
analysis to our clients;
- We may be unsuccessful in anticipating and understanding market trends
and the changing needs of our clients;
- The use of the Internet as a medium for commerce, both in the United
States and abroad, may not continue to grow as we currently anticipate;
- Our marketing programs designed to attract and retain clients may not
succeed; and
- We may not be able to hire and retain a sufficiently large number of
research and sales personnel in a very competitive job market.
If we are unable to retain existing clients, increase sales to existing
clients or attract a significant number of new SPS clients, our business and
financial results may suffer.
OUR BUSINESS MAY SUFFER IF WE PROVE UNABLE TO ANTICIPATE MARKET TRENDS OR IF WE
FAIL TO PROVIDE INFORMATION THAT IS USEFUL TO OUR CLIENTS.
Our success depends in large part on our ability to anticipate, research
and analyze rapidly changing technologies and industries and on our ability to
provide this information in a timely and cost-effective manner. If we are unable
to continue to provide credible and reliable information that is useful to
companies engaged in online commerce, our business and financial results may
suffer.
Our research products and services, as well as our conferences, focus on
Internet commerce. Internet commerce is relatively new and is undergoing
frequent and dramatic changes, including the introduction of new products and
the obsolescence of others, shifting business strategies and revenue models, the
formation of numerous new companies and high rates of growth. Because of these
rapid and continuous changes in the Internet commerce markets, we face
significant challenges in providing timely analysis and advice. Many of the
industries and areas on which we focus are relatively new, and it is very
difficult to provide predictions and projections as to the future marketplace,
revenue models and competitive factors. In addition, many companies have not
embraced the use of the Internet as a medium for commerce and are unclear as to
how to allocate corporate resources effectively. As a result, certain companies
may conclude that our research products are not useful to their businesses.
Further, the need to continually update our research requires the commitment of
substantial financial and personnel resources.
If our predictions or projections prove to be wrong, or if we are unable to
continually update our information, our reputation may suffer and demand for our
research products and services may decline. In addition, if companies do not
agree with our analysis of market trends and the areas on which we choose to
focus our efforts, our business and financial results may suffer.
WE FACE INTENSE COMPETITION IN PROVIDING OUR RESEARCH PRODUCTS AND SERVICES, AS
WELL AS IN PRODUCING CONFERENCES, AND SUCH COMPETITION IS LIKELY TO INCREASE IN
THE FUTURE.
We may not be able to compete successfully against current or future
competitors, and the competitive pressures that we face may cause our business
and financial results to suffer. Our principal current competitor is Forrester
Research, Inc. Recently Gartner Group, Inc. announced its intention to compete
directly in providing research products related to Internet commerce. A number
of other companies compete with us in providing research and analysis related to
a specific industry or geographic area. In addition, our indirect competitors
include information technology research firms, business consulting and
accounting firms, electronic and print publishing companies and equity analysts
employed
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by financial services companies. Some of these indirect competitors could choose
to compete directly against us in the future.
Our ability to compete both in the United States and abroad depends upon
many factors, many of which are outside of our control. We believe that the
primary competitive factors determining success in our markets include the
quality and timeliness of our research and analysis, our ability to offer
products and services that meet the changing needs of our customers, the prices
we charge for our various research products and general economic conditions.
We expect competition to increase because of the business opportunities
presented by the growth of Internet commerce around the world. Competition may
also intensify as a result of industry consolidation, because the markets in
which we operate face few substantial barriers to entry or because some of our
competitors may provide additional or complementary services, such as consulting
services. Increased competition may result in reduced operating margins, loss of
market share and diminished value in our products and services, as well as
different pricing, service or marketing decisions.
Our current and potential competitors include many companies that have
substantially greater financial, information gathering and marketing resources
than we have. This may allow them to devote greater resources than we can to the
promotion of their brand and to the development and sale of their products and
services. We cannot assure you that we will be able to compete successfully
against current and future competitors.
WE EXPECT GARTNER GROUP, OUR LARGEST SHAREHOLDER, TO COMPETE DIRECTLY WITH US.
Gartner Group, which historically has focused on information technology
research, has recently announced its intention to begin offering broader
research products and services related to Internet commerce. These products and
services are likely to compete directly with the products and services that we
offer. Under the operating agreement governing Jupiter Communications, LLC,
Gartner Group has the right to appoint two of the five representatives of the
board of members and has the right to consent to various actions taken by us.
Following the closing of this offering, Gartner Group will not retain the right
to appoint a member of our board of directors or any other specific rights,
other than piggyback registration rights and limited indemnification rights.
Following this offering, Gartner Group will be our largest shareholder, owning
approximately % of our outstanding common stock. However, for a period of one
year following the closing of this offering, Gartner Group and its affiliates
may not acquire, directly or indirectly, any additional common stock, if the
acquisition would cause Gartner Group and its affiliates to own more than 32% of
our common stock.
Although Gartner Group has not been actively involved in our day-to-day
operations since it first invested in our company in October 1997, it has been
provided with our confidential and proprietary data during most of this period.
As a result, Gartner Group could use our confidential and proprietary data in
developing and marketing competing products and services. Gartner Group could
also use its voting power in a way that would negatively affect our ability to
operate our business or have the effect of delaying, deterring or preventing a
change in control, or impeding a merger, consolidation, takeover or other
business combination. Gartner Group has substantially greater financial
resources than we do, which may allow it to devote greater resources than we can
to the development and sale of their Internet commerce research.
IF INTERNET USAGE DOES NOT GROW, OR IF THE INTERNET DOES NOT CONTINUE TO EXPAND
AS A MEDIUM FOR COMMERCE, OUR BUSINESS AND FINANCIAL RESULTS MAY SUFFER.
Our company focuses solely on Internet commerce. Internet usage may be
inhibited for a number of reasons, including:
- inadequate network infrastructure;
- inconsistent quality of service; and
11
<PAGE> 13
- lack of availability of cost-effective, high-speed service.
The continued development and acceptance of the Internet as a widely-used
medium for commerce and communication is also uncertain. A number of factors
could prevent such continued development and acceptance, including the
following:
- unwillingness of companies and consumers to shift their purchasing from
traditional vendors to online vendors;
- security and authentication concerns with respect to the transmission of
confidential information, such as credit card numbers, over the Internet;
- privacy concerns, including those related to the ability of Web sites to
gather user information without the user's knowledge or consent; and
- significant uncertainty about the demand and market acceptance for
Internet advertising and the lack of standards to measure the
effectiveness of Internet advertising.
Laws and regulations regarding Internet companies and commercial
transactions conducted over the Internet could also slow the growth in use of
the Internet generally and decrease the acceptance of the Internet as a
commercial medium. For example, as the popularity and use of the Internet
increases, it is possible that a number of laws and regulations may be adopted
in the United States or in other countries covering issues such as taxation,
intellectual property matters, advertising and other areas.
WE COULD FACE ADDITIONAL RISKS AND CHALLENGES IF WE CONTINUE TO EXPAND
INTERNATIONALLY.
Our business plan calls for increased international growth. Expansion into
new geographic territories requires considerable management and financial
resources and may negatively impact our near-term results of operations.
Our current international operations, as well as any future international
operations, are subject to numerous challenges and risks, including, but not
limited to, the following:
- political and economic conditions in various jurisdictions;
- fluctuations in currency exchange rates;
- tariffs and other trade barriers;
- adverse tax consequences; and
- difficulties in protecting intellectual property rights in international
jurisdictions.
We cannot assure you that one or more of these factors would not harm any
current or future international operations.
OUR BUSINESS MAY SUFFER IF WE ARE UNABLE TO MAINTAIN OR ENHANCE AWARENESS OF THE
JUPITER BRAND OR IF WE INCUR EXCESSIVE EXPENSES ATTEMPTING TO PROMOTE THE
JUPITER BRAND.
We expect to use a portion of the proceeds of this offering to expand our
marketing activities to promote and strengthen the Jupiter brand. Promoting and
strengthening the Jupiter brand is critical to our efforts to attract and retain
clients for our research products, as well as to increase attendance at our
conferences. We believe that the importance of brand recognition will likely
increase due to the increasing number of competitors entering our markets. In
order to promote the Jupiter brand, in response to competitive pressures or
otherwise, we may find it necessary to increase our marketing budget, hire
additional marketing and public relations personnel or otherwise increase our
financial commitment to creating and maintaining brand loyalty among our
clients. If we fail to effectively promote and maintain the Jupiter brand, or
incur excessive expenses attempting to promote and maintain the Jupiter brand,
our business and financial results may suffer.
12
<PAGE> 14
WE FACE POTENTIAL LIABILITY FOR INFORMATION THAT WE PUBLISH, PROVIDE AT
CONFERENCES OR DISSEMINATE THROUGH OUR RESEARCH ANALYSTS.
As a publisher and distributor of original research, market projections and
trend analyses, we face potential liability based on a variety of theories,
including defamation, negligence, copyright or trademark infringement or other
legal theories based on the nature, publication or distribution of this
information. Such claims, whether brought in the United States or abroad, would
likely divert management time and attention and result in significant cost to
investigate and defend, regardless of the merit of any such claims. The filing
of any such claims may also damage our reputation as a high-quality provider of
unbiased, timely analysis and result in client cancellations or overall
decreased demand for our products and services. In addition, if we become
subject to these types of claims and are not successful in our defense, we may
be forced to pay substantial damages. Our insurance may not adequately protect
us against these claims.
DISRUPTION OF OUR WEB SITE DUE TO SECURITY BREACHES AND SYSTEM FAILURES COULD
HARM OUR BUSINESS AND RESULT IN CLIENT CANCELLATIONS.
Our infrastructure and the infrastructure of our service providers are
vulnerable to security breaches, computer viruses or similar disruptive problems
and system failures. These systems are also subject to telecommunications
failures, power loss and various other events. Any of these events, whether
intentional or accidental, could lead to interruptions or disruptions in the
general operation of our business. In addition, any of these events could also
lead to interruptions, delays or cessation of operation of our Web site, which
provides access to and distribution of many of our research products and
services. For example, many of our SPS clients pay us so that their employees
can read our research solely on our Web site. As a result, providing unimpeded
access to our Web site is critical to servicing our clients and providing
superior customer service. Our inability to provide continuous access to our Web
site could cause some of our clients to discontinue purchasing our research
products and services, prevent or deter some people from purchasing our research
products and services and harm our business reputation.
WE ARE DEPENDENT ON KEY MANAGEMENT PERSONNEL FOR OUR FUTURE SUCCESS.
Our future success will depend in part on the continued service of a number
of key management personnel. We do not carry key person life insurance on any of
our management personnel. The loss of key management personnel, in particular
Gene DeRose, our Chief Executive Officer, or Kurt Abrahamson, our President and
Chief Operating Officer, could harm our business and financial results.
IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY OR FACE A CLAIM OF
INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, WE MAY LOSE OUR
INTELLECTUAL PROPERTY RIGHTS AND BE LIABLE FOR SIGNIFICANT DAMAGES.
To protect our rights to our intellectual property, we rely on a
combination of trademark and copyright law, trade secret protections and
confidentiality agreements and other contractual arrangements with our employees
and third parties. We have registered the Jupiter, Jupiter Communications and
Internet Business Report marks in the United States, and we have pending
trademark applications for other trademarks in the United States, including SPS.
We also have pending trademark applications for the Jupiter and Jupiter
Communications marks in various foreign jurisdictions. We provide our
proprietary research products to hundreds of different companies throughout the
world, including some companies that compete with us in some manner. As a
result, the protective steps we have taken may be inadequate to protect our
intellectual property and to deter misappropriation of the original research and
analysis that we develop. We also may be unable to detect the unauthorized use
of our intellectual property or take appropriate steps to enforce our
intellectual property rights. Moreover, effective trademark, copyright and trade
secret protection may not be available in every country in which we offer our
research products and services to the extent these protections are available in
the United States.
Our failure to adequately protect our intellectual property, either in the
United States or abroad, could harm the Jupiter brand or our trademarks, devalue
our proprietary research and analysis and affect our
13
<PAGE> 15
ability to compete effectively. Defending our intellectual property rights could
result in the expenditure of significant financial and managerial resources,
which could harm our financial results.
Furthermore, although we believe that our proprietary rights do not
infringe on the intellectual property rights of others, other parties may assert
claims against us that we have misappropriated a trade secret or infringed a
patent, copyright, trademark or other proprietary right belonging to them. Any
infringement or related claims, even if not meritorious, could be costly and
time consuming to litigate, may distract management from other tasks of
operating the business and may result in the loss of significant rights and the
loss of our ability to operate our business.
WE MAY NOT BE ABLE TO SUCCESSFULLY MAKE ACQUISITIONS OF OTHER COMPANIES,
SERVICES OR PRODUCTS.
We have limited experience in acquiring other companies, services or
products. Although we have no present understanding or agreement relating to any
acquisition, we do anticipate making acquisitions in the future. We cannot
assure you, however, that we will be able to complete future acquisitions
successfully or to integrate an acquired entity with our current business. In
addition, the key personnel of the acquired company may decide not to work for
us. If we make other types of acquisitions, we could have difficulty
assimilating the acquired services or products. These difficulties could disrupt
our current business, distract our management and employees, increase our
expenses and adversely affect our results of operations. Furthermore, we may
incur debt or issue equity securities to pay for any future acquisitions. The
issuance of equity securities could be dilutive to our existing shareholders.
OUR DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS WILL EXERCISE SIGNIFICANT
CONTROL OVER US FOLLOWING THIS OFFERING.
Upon completion of this offering, our officers, directors and existing
stockholders who own greater than 5% of the outstanding common stock before this
offering, and entities affiliated with them, will, in the aggregate,
beneficially own approximately % of our common stock. In particular,
Gartner Group will own approximately % of our outstanding common stock.
These stockholders acting together will be able to exert substantial influence
over all matters requiring approval by our stockholders. These matters include
the election and removal of directors and any merger, consolidation or sale of
all or substantially all of our assets. In addition, they may dictate the
management of our business and affairs. This concentration of ownership could
have the effect of delaying, deferring or preventing a change in control, or
impeding a merger, consolidation, takeover or other business combination.
PROBLEMS RESULTING FROM THE YEAR 2000 PROBLEM COULD REQUIRE US TO INCUR
UNANTICIPATED EXPENSES AND COULD DIVERT MANAGEMENT'S TIME AND ATTENTION.
The Year 2000 problem could harm our business and financial results. Many
currently installed computer systems and software products are coded to accept
or recognize only two-digit entries in the date code field. These systems may
interpret the date code "00" as the year 1900 rather than the year 2000. As a
result, computer systems and/or software used by many companies and governmental
agencies may need to be upgraded or replaced to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities. We have established procedures for evaluating and
managing the risks associated with the Year 2000 problem, and we are in the
process of assessing our Year 2000 readiness. We are also in the process of
communicating with third-party vendors who provide us with both services and
equipment in order to assess their plans and progress in addressing the Year
2000 problem. Our failure to correct a Year 2000 problem could result in an
interruption in, or a failure of, aspects of our normal business activities or
operations. Any significant Year 2000 problem could require us to incur
significant unanticipated expenses to remedy these problems and could divert
management's time and attention. Please see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Year 2000
Compliance" for detailed information on our state of readiness, potential risks
and contingency plans regarding the Year 2000 issue.
14
<PAGE> 16
FUTURE SALES OF OUR COMMON STOCK MAY NEGATIVELY AFFECT OUR STOCK PRICE.
Following this offering, we will have a large number of shares of common
stock outstanding and available for resale beginning at various points of time
in the future. The market price of our common stock could decline as a result of
sales of a large number of shares of our common stock in the market following
this offering, or the perception that such sales could occur. These sales also
might make it more difficult for us to sell equity securities in the future at a
price that we think is appropriate, or at all. Please see "Shares Eligible for
Future Sale."
THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK, AND OUR STOCK MAY
EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS.
The stock market has experienced extreme price and volume fluctuations. The
market prices of the securities of Internet-related companies have been
especially volatile. Prior to this offering, there has been no public market for
our common stock. We cannot predict the extent to which investor interest in
Jupiter will lead to the development of an active trading market or how liquid
that market might become. The market price of the common stock may decline below
the initial public offering price. The initial public offering price for the
shares will be determined by negotiations between us and the representatives of
the underwriters and may not be indicative of prices that will prevail in the
trading market. Please see "Underwriting."
In the past, companies that have experienced volatility in the market price
of their stock have been the object of securities class action litigation. If we
were the object of securities class action litigation, it could result in
substantial costs and a diversion of our management's attention and resources.
WE WILL HAVE BROAD DISCRETION AS TO THE USE OF THE PROCEEDS OF THIS OFFERING,
WHICH WE MAY NOT USE EFFECTIVELY.
We intend to spend a significant portion of the net proceeds of this
offering for product development, international expansion, research, sales and
marketing expansion, leasehold and technology improvements, potential
acquisitions and general corporate purposes. Our management will have broad
discretion, however, over the allocation of a substantial portion of the net
proceeds from this offering as well as over the timing of our expenditures.
Investors may not agree with the way our management decides to spend these
proceeds. Please see "Use of Proceeds."
WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS, AND WE MAY NOT BE ABLE TO SECURE
ADDITIONAL FINANCING.
We currently anticipate that the net proceeds of this offering, together
with available funds, will be sufficient to meet our anticipated needs for the
next 12 months. We may need to raise additional funds in the future to fund our
operations, to expand or enhance the range of products and services we offer or
to respond to competitive pressures and/or perceived opportunities. We cannot be
sure that additional financing will be available on terms favorable to us, or at
all. If adequate funds are not available when required or on acceptable terms,
we may be forced to cease our operations, and even if we are able to continue
our operations, our business and financial results may suffer.
WE HAVE ANTI-TAKEOVER PROVISIONS WHICH MAY MAKE IT DIFFICULT FOR A THIRD PARTY
TO ACQUIRE US.
Provisions of our certificate of incorporation, our bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
might be beneficial to our stockholders. Please see "Description of Capital
Stock."
INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
Investors purchasing shares in this offering will suffer immediate and
substantial dilution in net tangible book value per share. To the extent
outstanding options to purchase common stock are exercised, there will be
further dilution. Please see "Dilution."
15
<PAGE> 17
WE DO NOT PLAN TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE, AND, AS A RESULT,
STOCKHOLDERS WILL NEED TO SELL SHARES TO REALIZE A RETURN ON THEIR INVESTMENT.
We have not declared or paid any cash dividends on our capital stock since
inception. We intend to retain any future earnings to finance the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. Consequently, stockholders will need to sell shares of
common stock in order to realize a return on their investment, if any.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements which involve risks and
uncertainties. These forward-looking statements are usually accompanied by words
such as "believes," "anticipates," "plans," "expects" and similar expressions.
Our actual results could differ materially from those expressed or implied by
these forward-looking statements as a result of various factors, including the
risk factors described above and elsewhere in this prospectus.
16
<PAGE> 18
USE OF PROCEEDS
We estimate that we will receive net proceeds from the sale of the shares
of common stock in this offering of $ million, assuming an initial
public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses. If the
underwriters exercise their over-allotment option in full, we estimate that our
net proceeds will be $ million.
We intend to use the proceeds from this offering for product development,
international expansion, research, sales and marketing expansion, leasehold and
technology improvements, potential acquisitions and general corporate purposes.
We have no present commitments and are not currently engaged in any negotiations
with respect to such acquisitions. Our management will have significant
flexibility in applying the net proceeds of the offering. Pending any use, we
intend to invest the net proceeds of this offering in short-term,
interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently anticipate that we will retain any future earnings for the development
and operation of our business. Accordingly, we do not anticipate declaring or
paying any cash dividends in the foreseeable future.
17
<PAGE> 19
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999 on
an actual basis, on a pro forma basis to reflect our reorganization from an LLC
to a corporation and on a pro forma as adjusted basis to reflect the sale of
shares of common stock by us in this offering at an initial public
offering price of $ per share, after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us. Please
see "Use of Proceeds."
The following table should be read in conjunction with our financial
statements and the notes to those statements included in this prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Members' equity (deficiency):
Additional paid-in capital............................. $ 3,506
Accumulated deficit.................................... (5,956)
-------
Total members' equity (deficiency)..................... $(2,450)
Stockholders' equity (deficiency):
Common stock, $0.001 par value: shares
authorized on a pro forma basis, shares
outstanding on a pro forma basis, and
shares outstanding on a pro forma as adjusted
basis...............................................
Additional paid-in capital............................. --
Accumulated deficit.................................... --
-------
Total stockholders' equity (deficiency)................ --
-------
Total capitalization........................... $(2,450) $ $
======= ======= ========
</TABLE>
The table above excludes shares of common stock issuable upon the
exercise of stock options outstanding as of , 1999, with a
weighted average exercise price of $ per share. See "Management -- 1997
Option Plan."
18
<PAGE> 20
DILUTION
Our pro forma net tangible book value as of March 31, 1999 was
approximately $ million, or $ per share of common stock. Pro forma
net tangible book value per share is determined by dividing the amount of our
total tangible assets less total liabilities by the pro forma number of shares
of common stock outstanding at that date. Dilution in net tangible book value
per share represents the difference between the amount per share paid by
purchasers of shares of common stock in this offering and the net tangible book
value per share of common stock immediately after the completion of this
offering.
After giving effect to the issuance and sale of the shares of common stock
offered by us at an initial public offering price of $ per share and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us, and the application of the estimated net
proceeds from this offering, our pro forma net tangible book value as of
, 1999 would have been $ million or $ per share. This
represents an immediate increase in pro forma net tangible book value to our
existing stockholders of $ per share and an immediate dilution to purchasers
in this offering of $ per share. If the initial public offering price is
higher or lower, the dilution to purchasers in this offering will be greater or
less, respectively.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at March 31,
1999................................................... $
Increase in pro forma net tangible book value per share
attributable to this offering..........................
------
Pro forma net tangible book value per share after this
offering..................................................
------
Dilution per share to new investors......................... $
======
</TABLE>
Assuming the exercise in full of the underwriters' over-allotment option,
our adjusted pro forma net tangible book value at , 1999 would
have been approximately $ per share, representing an immediate increase in
pro forma net tangible book value of $ per share to our existing
stockholders and an immediate dilution in pro forma net tangible book value of
$ per share to purchasers in this offering.
The following table summarizes, on a pro forma basis, as of March 31, 1999,
the differences between the number of shares of common stock purchased from us,
the aggregate cash consideration paid to us and the average price per share paid
by existing stockholders and new investors purchasing shares of common stock in
this offering. The calculation below is based on an assumed initial public
offering price of $ per share, before deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. % $ % $
New investors......................
-------- ----- -------- ------ --------
Total.............................. 100.0% $100.0%
======== ===== ======== ====== ========
</TABLE>
This discussion and table assume no exercise of any stock options
outstanding as of March 31, 1999. As of March 31, 1999, there were options
outstanding to purchase a total of shares of common stock with a
weighted average exercise price of $ per share. To the extent that any of
these options are exercised, there will be further dilution to new investors.
Please see "Capitalization."
19
<PAGE> 21
SELECTED FINANCIAL AND OPERATING DATA
The selected balance sheet data as of December 31, 1997 and 1998 and the
selected statement of operations data for the years ended December 31, 1996,
1997 and 1998 have been derived from our audited financial statements included
in this prospectus. The selected balance sheet data as of December 31, 1995 and
1996, and the statement of operations data for 1995, have been derived from our
audited financial statements not included in this prospectus. The selected
balance sheet data as of March 31, 1999 and the selected statement of operations
data for the three months ended March 31, 1998 and 1999 are derived from
unaudited financial statements included in this prospectus. In the opinion of
management, the interim data have been prepared on the same basis as the audited
financial statements appearing in this prospectus and include all necessary
adjustments, consisting only of normal recurring adjustments, we believe to be
necessary for a fair presentation of the data. You should read these selected
financial data in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," our financial statements and the
notes to those statements included in the prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------- ------------------
1995 1996 1997 1998 1998 1999
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Strategic Planning Services........ $ 237 $ 566 $ 1,850 $ 6,183 $ 762 $ 3,447
Conferences........................ 2,024 2,686 3,426 4,890 888 1,724
Other.............................. 1,439 3,000 3,246 3,729 959 848
------ ------ ------- ------- ------- -------
Total revenues.................. 3,700 6,252 8,522 14,802 2,609 6,019
Cost of services and fulfillment..... 2,893 4,687 6,259 9,676 2,091 2,955
------ ------ ------- ------- ------- -------
Gross profit.................... 807 1,565 2,263 5,126 518 3,064
Other operating expenses:
Sales and marketing................ 254 514 1,558 3,173 611 1,750
General and administrative......... 1,025 1,664 2,955 4,090 911 1,635
------ ------ ------- ------- ------- -------
Total other operating
expenses...................... 1,279 2,178 4,513 7,263 1,522 3,385
------ ------ ------- ------- ------- -------
Net loss............................. $ (472) $ (613) $(2,250) $(2,137) $(1,004) $ (321)
====== ====== ======= ======= ======= =======
Pro forma basic and diluted net loss
per common share (1)...............
Pro forma weighted average common
shares outstanding (1).............
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
-------------------------------------- ------------------
1995 1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Number of SPS contracts.............. 13 66 145 421 145 514
Total contract value (in
thousands)......................... $ 315 $ 923 $ 2,509 $11,666 $ 3,017 $15,188
Number of employees.................. 18 61 88 142 109 167
Capital expenditures (in
thousands)......................... $ 99 $ 199 $ 207 $ 838 $ 104 $ 447
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, MARCH 31,
------------------------------------- ------------
1995 1996 1997 1998 1999
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 4 $ 8 $1,614 $ 216 $ 851
Working capital (2)........................... (572) (1,166) (553) (3,376) (3,943)
Total assets.................................. 907 1,474 3,463 6,867 8,925
Members'/stockholders' equity (deficiency).... (405) (714) 9 (2,129) (2,450)
</TABLE>
- ------------------------------
(1) Pro forma basic and diluted net loss per common share is computed by
dividing net loss by the pro forma weighted average number of shares of
common stock. Pro forma weighted average shares do not include any common
stock equivalents because inclusion of common stock equivalents would have
been anti-dilutive.
(2) Our working capital balances are typically negative because of the timing of
cash collections from clients. SPS contracts are typically annual and paid
in advance. Accordingly, a substantial portion of our billings is initially
recorded as deferred revenue and amortized into revenue during the term of
the contract to which such billings relate.
21
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and
results of operations together with our financial statements, the notes to those
statements and the other information in this prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. Please
see "Risk Factors."
OVERVIEW
We are a leading provider of research on Internet commerce. Senior
executives at our client companies utilize our research to make informed
business decisions in a complex and rapidly changing Internet economy. Our
research, which is solely focused on the Internet economy, provides our clients
with comprehensive views of industry trends, forecasts and best practices. Our
analysis, supported by proprietary data, emphasizes specific, actionable
findings.
Our revenues consist of SPS, conferences and other revenues. For the three
months ended March 31, 1999, SPS represented approximately 57.3% of our total
revenues. SPS is a combination of proprietary written analysis, supporting data
and access to our analysts. We typically bill clients annually in advance and
deliver the products and services over the term of the contract. We also produce
a wide range of conferences which offer senior executives the opportunity to
hear first-hand the insights of our analysts and the leading decision makers in
the Internet and technology industries. For the three months ended March 31,
1999, conferences represented approximately 28.6% of our total revenues. Other
revenues, which consist primarily of book-length studies, newsletters and custom
research, represented approximately 14.1% of our total revenues for the three
months ended March 31, 1999.
SPS contracts are renewable contracts, typically annual, and payable in
advance. Accordingly, a substantial portion of our billings is initially
recorded as deferred revenue and amortized into revenue over the term of the
contract. Commission expense related to SPS is also initially deferred and
amortized into expense over the contract period in which the related revenues
are earned and amortized to income. Our contracts are non-cancelable and
non-refundable. Billings attributable to our conferences and other products and
services are initially recorded as deferred revenue and recognized upon the
completion of the event or project.
We have experienced rapid growth since our organization, and particularly
since our decision in late 1996 to focus our business on SPS. Between 1995 and
1998, our total revenues have grown from $3.7 million to $14.8 million, a
compound annual growth rate of 58.9%. For the three months ended March 31, 1999,
our revenues were $6.0 million, representing an increase of 130.7% over revenues
of $2.6 million for the three months ended March 31, 1998. The number of our SPS
contracts has increased from 145 as of December 31, 1997 to 514 as of March 31,
1999. Our total contract value has increased from $2.5 million on December 31,
1997 to $15.2 million on March 31, 1999. We believe that total contract value is
a meaningful measure of the volume of our business. Total contract value,
however, does not necessarily correlate to deferred revenues. Total contract
value represents the annualized value of all outstanding SPS contracts without
regard to the remaining duration of such contracts, and deferred revenue
represents unamortized revenue remaining on all outstanding and billed
contracts.
To date, a substantial portion of expiring SPS contracts have been renewed
for an equal or higher amount. Approximately 71% of contracts expiring during
the 12 months ended March 31, 1999 were renewed. With this high customer renewal
rate, we believe we have a growing base of recurring revenues from SPS. However,
this renewal rate is not necessarily indicative of the rate of future retention
of our revenue base.
22
<PAGE> 24
We have a highly diversified client base, including companies in the
Internet, media, telecommunications, technology, financial services, retail,
travel, consumer products and professional services industries. No client
accounts for more than 2% of our total annual revenues.
Cost of services and fulfillment represents the costs associated with
production and delivery of our products and services, including the costs of
salaries, bonuses and related benefits for our research and conference
personnel, all associated editorial, travel and support services, and the costs
of producing our conferences. Sales and marketing expenses include salaries,
bonuses, employee benefits, travel expenses, promotional costs, sales
commissions and other costs incurred in marketing and selling our products and
services. General and administrative expenses include the costs of our finance
and technology groups and other administrative functions.
We have incurred net losses since our formation. Our net loss was $613,000
in 1996, $2.3 million in 1997, $2.1 million in 1998 and $321,000 for the three
months ended March 31, 1999. We expect to incur a net loss for the full year
1999. As of March 31, 1999, we had an accumulated deficit of $6.0 million. We
expect to incur significant expenditures in the future associated with our
domestic and international expansion strategies. In particular, we intend to
continue to expand our research and sales personnel, and we intend to continue
to invest in technology, leasehold improvements and the development of
additional research practices and modules.
RESULTS OF OPERATIONS
The following table sets forth our results of operations for the years
ended December 31, 1996, 1997 and 1998 and the three months ended March 31, 1998
and 1999, expressed as a percentage of revenue:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- ---------------
1996 1997 1998 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Strategic Planning Services.................. 9.0% 21.7% 41.8% 29.2% 57.3%
Conferences.................................. 43.0 40.2 33.0 34.0 28.6
Other........................................ 48.0 38.1 25.2 36.8 14.1
----- ----- ----- ----- -----
Total revenues....................... 100.0 100.0 100.0 100.0 100.0
Cost of services and fulfillment............... 75.0 73.4 65.4 80.2 49.1
----- ----- ----- ----- -----
Gross profit................................. 25.0 26.6 34.6 19.8 50.9
Other operating expenses:
Sales and marketing.......................... 8.2 18.3 21.4 23.4 29.0
General and administrative................... 26.6 34.7 27.6 34.9 27.2
----- ----- ----- ----- -----
Total other operating expenses....... 34.8 53.0 49.0 58.3 56.2
----- ----- ----- ----- -----
Net loss....................................... (9.8)% (26.4)% (14.4)% (38.5)% (5.3)%
===== ===== ===== ===== =====
</TABLE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Revenues. Total revenues increased 130.7% to $6.0 million in the three
months ended March 31, 1999 from $2.6 million in the three months ended March
31, 1998. SPS revenues increased 352.5% to $3.4 million in the three months
ended March 31, 1999 from $762,000 in the three months ended March 31, 1998.
This increase is attributable primarily to an increase in the number of SPS
contracts to 514 at March 31, 1999 from 145 at March 31, 1998 and an increase in
average contract value to $29,500 at
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<PAGE> 25
March 31, 1999 from $20,800 at March 31, 1998. These increases reflect an
increase in the number of users at, and research services purchased by, our
client companies. Total contract value increased to $15.2 million at March 31,
1999 from $3.0 million at March 31, 1998.
Conference revenues increased 94.3% to $1.7 million in the three months
ended March 31, 1999 from $888,000 in the three months ended March 31, 1998.
These revenues reflect the results of one conference in each period. The
increase is attributable to an increase in delegate, sponsor and exhibitor
revenues for this event.
Other revenues decreased 11.6% to $848,000 in the three months ended March
31, 1999 from $960,000 in the three months ended March 31, 1998. This decrease
reflects our decision to focus our business on SPS.
Cost of Services and Fulfillment. Cost of services and fulfillment
increased 41.3% to $3.0 million in the three months ended March 31, 1999 from
$2.1 million in the three months ended March 31, 1998. The increase in this
period was attributable to the overall growth of our business, in particular the
increased research staffing for new and existing research practices. Gross
margin increased to 50.9% in the three months ended March 31, 1999 from 19.8% in
the three months ended March 31, 1998.
Sales and Marketing. Sales and marketing expenses increased 186.3% to $1.8
million in the three months ended March 31, 1999 from $611,000 in the three
months ended March 31, 1998. As a percentage of total revenues, these expenses
increased to 29.0% in the three months ended March 31, 1999 from 23.4% in the
three months ended March 31, 1998. The increase in this period was primarily
attributable to an increased number of sales personnel and the corresponding
commission costs associated with increased revenues.
General and Administrative. General and administrative expenses increased
79.5% to $1.6 million in the three months ended March 31, 1999 from $911,000 in
the three months ended March 31, 1998. As a percentage of total revenues, these
expenses increased to 27.2% in the three months ended March 31, 1999 from 34.9%
in the three months ended March 31, 1998. The increase in this period was
primarily attributable to increased personnel for the finance, human resources
and operations areas, as well as costs associated with our new London office and
higher costs for staff travel and professional fees.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Revenues. Total revenues increased 73.7% to $14.8 million in 1998 from
$8.5 million in 1997 and 36.3% to $8.5 million in 1997 from $6.3 million in
1996. SPS revenues increased by 234.2% to $6.2 million in 1998 from $1.9 million
in 1997. This increase is attributable primarily to an increase in the number of
SPS contracts to 421 at December 31, 1998 from 145 at December 31, 1997 and an
increase in average contract value to $27,700 at December 31, 1998 from $17,300
at December 31, 1997. SPS revenues increased by 227.1% to $1.9 million in 1997
from $566,000 in 1996. This increase is attributable primarily to an increase in
the number of SPS contracts to 145 at December 31, 1997 from 66 at December 31,
1996 and an increase in average contract value to $17,300 at December 31, 1997
from $14,000 at December 31, 1996.
The increase in SPS revenues in these periods reflects an increase in the
number of users at, and research services purchased by, our client companies.
Total contract value increased to $11.7 million at December 31, 1998 from $2.5
million at December 31, 1997 and $923,000 at December 31, 1996.
Conference revenues increased 42.7% to $4.9 million in 1998 from $3.4
million in 1997 and 27.6% to $3.4 million in 1997 from $2.7 million in 1996.
These increases are attributable to an increase both in the number of
conferences and in average delegate, sponsor and exhibitor revenues.
Other revenues increased 14.9% to $3.7 million in 1998 from $3.2 million in
1997. This increase reflects an increase in revenues from custom research and
book-length studies, offset in part by a small
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<PAGE> 26
decrease in newsletter revenues. Other revenues increased 8.2% to $3.2 million
in 1997 from $3.0 million in 1996. This increase reflects an increase in
revenues from book-length studies and newsletter subscriptions, offset in part
by a decrease in custom research.
Cost of Services and Fulfillment. Cost of services and fulfillment
increased 54.6% to $9.7 million in 1998 from $6.3 million in 1997. The increase
in this period was attributable to the overall growth of our business, in
particular the increased research staffing for new and existing research
practices. These expenses increased 33.5% to $6.3 million in 1997 from $4.7
million in 1996. The increase in this period was attributable to increased costs
for producing conferences and other direct products, and for increases in
research staffing. Gross margin increased to 34.6% in 1998 from 26.6% in 1997
and increased to 26.6% in 1997 from 25.0% in 1996.
Sales and Marketing. Sales and marketing expenses increased 103.7% to $3.2
million in 1998 from $1.6 million in 1997. The increase in this period was
primarily attributable to an increased number of sales personnel and the
corresponding commission costs associated with increased revenues. Sales and
marketing expenses increased 202.7% to $1.6 million in 1997 from $514,000 in
1996. The expense increase in this period was primarily attributable to
increased personnel in the marketing area to support an increased direct mail
effort. As a percentage of total revenues, these expenses increased to 21.4% in
1998 from 18.3% in 1997 and increased to 18.3% in 1997 from 8.2% in 1996.
General and Administrative. General and administrative expenses increased
38.4% to $4.1 million in 1998 from $3.0 million in 1997 and 77.7% to $3.0
million in 1997 from $1.7 million in 1996. The increase in these periods was
primarily attributable to increased staffing for the finance, human resources
and operations areas, as well as increased expenses associated with basic office
operations, including rent, utilities, travel and printing. As a percentage of
total revenues, these expenses decreased to 27.6% in 1998 from 34.7% in 1997 and
increased to 34.7% in 1997 from 26.6% in 1996.
INCOME TAXES
No provision or benefit for federal or state income taxes, actual or pro
forma, has been recorded for the net operating losses we incurred in the years
ended December 31, 1996, 1997 and 1998. In addition, no net operating losses
incurred in 1999 prior to the closing of this offering will be recorded on our
federal or state tax returns. Because our company was a limited liability
company for tax purposes during these periods, and will continue to be until the
closing of this offering, all taxable losses were, and will be, allocated to the
members for reporting on their income tax returns. As a result, we will not be
able to offset future taxable income, if any, against losses incurred prior to
the closing of this offering.
QUARTERLY RESULTS OF OPERATIONS DATA
The following tables sets forth certain unaudited quarterly statement of
operations data for each of the five quarters ended March 31, 1999 and such data
expressed as a percentage of total revenues. We believe that we have prepared
these data on the same basis as our audited financial statements in this
prospectus, and have included all necessary adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of our results
of operations for these interim periods. You should read these interim financial
data together with our audited financial statements and the notes to those
statements in this prospectus. Our historical results of operations do not
necessarily indicate the results of operations we will achieve in the future,
and our results of operations for interim periods do not necessarily indicate
the results of operations for any future period. Our results of operations may
fluctuate significantly in the future as a result of a variety of factors, many
of which are beyond our control. See "Risk Factors--Our
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<PAGE> 27
operating results may fluctuate in future periods which may cause volatility or
a decline in the price of our stock."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1998 1998 1998 1998 1999
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Strategic Planning Services...... $ 762 $1,233 $1,757 $2,431 $3,447
Conferences...................... 888 1,091 2,354 557 1,724
Other............................ 959 980 1,014 776 848
------- ------ ------ ------ ------
Total revenues........... 2,609 3,304 5,125 3,764 6,019
Cost of services and fulfillment... 2,091 2,191 3,127 2,267 2,955
------- ------ ------ ------ ------
Gross profit..................... 518 1,113 1,998 1,497 3,064
Other operating expenses:
Sales and marketing.............. 611 702 842 1,018 1,750
General and administrative....... 911 1,007 1,132 1,040 1,635
------- ------ ------ ------ ------
Total other operating
expenses............... 1,522 1,709 1,974 2,058 3,385
------- ------ ------ ------ ------
Net income (loss).................. $(1,004) $ (596) $ 24 $ (561) $ (321)
======= ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1998 1998 1998 1998 1999
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Strategic Planning Services..... 29.2% 37.3% 34.3% 64.6% 57.3%
Conferences..................... 34.0 33.0 45.9 14.8 28.6
Other........................... 36.8 29.7 19.8 20.6 14.1
------- ------- ------- ------- -------
Total revenues.......... 100.0 100.0 100.0 100.0 100.0
Cost of services and
fulfillment..................... 80.2 66.3 61.0 60.2 49.1
------- ------- ------- ------- -------
Gross profit.................... 19.8 33.7 39.0 39.8 50.9
Other operating expenses:
Sales and marketing............. 23.4 21.2 16.4 27.1 29.0
General and administrative...... 34.9 30.5 22.1 27.6 27.2
------- ------- ------- ------- -------
Total other operating
expenses.............. 58.3 51.7 38.5 54.7 56.2
------- ------- ------- ------- -------
Net income (loss)................. (38.5)% (18.0)% 0.5% (14.9)% (5.3)%
======= ======= ======= ======= =======
</TABLE>
SEASONALITY
We experience some seasonality in our revenues and contract value, driven
primarily by trends in our SPS selling cycle and conference business. Our
conference revenues historically have been strongest during the third quarter of
the year, in which the largest number of our events are held. We also have
experienced a significant increase in SPS sales during the fourth quarter of the
year due primarily to the budget cycles of our SPS clients, the renewal dates of
existing SPS contracts and the effect of our annual sales quotas.
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<PAGE> 28
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations since our organization on December 1, 1994
with a total of $3.8 million in member contributions. This includes $3.0 million
in private equity from Gartner Group in October 1997.
Net cash provided by (used in) operating activities was $14,000 for the
year ended December 31, 1996, $(1.1) million for the year ended December 31,
1997, $(557,000) for the year ended December 31, 1998 and $1.1 million for the
three months ended March 31, 1999.
Net cash used in investing activities was $257,000 in 1996, $232,000 in
1997, $838,000 in 1998 and $447,000 for the three months ended March 31, 1999.
Investments were primarily in computer equipment, furniture and leasehold
improvements.
Net cash provided by (used in) financing activities was $246,000 for the
year ended December 31, 1996, $2.9 million for the year ended December 31, 1997,
$(3,000) for the year ended December 31, 1998 and $0 for the three months ended
March 31, 1999. Cash provided by financing activities for the year ended
December 31, 1997 primarily resulted from the placement of private equity with
Gartner Group.
As of March 31, 1999, we had $851,000 in cash and cash equivalents. We have
a $750,000 committed line of credit, secured by substantially all of our assets,
under which there were no outstanding balances as of March 31, 1999. We have a
commitment from our lender to increase this line to $3.0 million.
We expect to spend approximately $4 million in 1999 on technology,
including Web site enhancements, leasehold improvements and telecommunications
upgrades. We anticipate that we will continue to increase our capital
expenditures and lease commitments consistent with our anticipated growth in
operations, infrastructure and personnel. We also anticipate that we will
continue to experience growth in our operating expenses to support our revenue
growth, including the continued introduction of new practices and modules. We
believe that the net proceeds of this offering, together with the unused line of
credit, will be sufficient to fund our operations for the next 12 months.
YEAR 2000 COMPLIANCE
The Year 2000 problem is the result of computer programs being written
using two digits rather than four to identify a given year. Computer programs
that have time-sensitive software may interpret the date code "00" as the year
1900 rather than the year 2000. This could result in a disruption of operations
including a temporary inability to process transactions, send invoices or engage
in other normal business activities. We maintain a significant number of
computer software systems and operating systems across our entire organization
which are potentially subject to Year 2000 problems.
Our Year 2000 concerns cover internal and external application and database
production software, internal and external production hardware, internal
infrastructure and external agents.
Internal and external application and database production software includes
all software used either directly by our clients or indirectly in support of our
clients. We are in the process of either upgrading or replacing most of these
systems in 1999. All of the systems will be designed to pass Year 2000
compliance tests. System testing for Year 2000 compliance is anticipated to be
completed by the end of the third quarter of 1999.
Internal and external production hardware includes the hardware that we use
to directly host our Web site, our internal servers and network hardware and our
desktop systems. All hardware in direct support of our Web site will be upgraded
or replaced by the end of the third quarter of 1999. All internal servers and
network hardware will be upgraded or replaced by the end of the third quarter of
1999. Similarly, all desktop systems will be upgraded or replaced by December 1,
1999.
Internal infrastructure consists of all hardware and software not described
above which is used in support of our internal staff. This includes all printers
and modems, the phone and voicemail systems and
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<PAGE> 29
any common office automation devices, including faxes and copiers. The phone
system was upgraded in the second quarter of 1999 and the voicemail system will
be replaced in the third quarter of 1999. All printers and modems will be
upgraded or replaced by December 1, 1999. Common office automation devices will
likewise be upgraded or replaced by December 1, 1999.
External agents includes all critical hardware, software and related
systems provided by third parties. Beginning in the second quarter of 1999, we
identified critical suppliers and equipment that we depend on for our day to day
business. We are in the process of determining which critical third party
systems are Year 2000 compliant and which systems need to be upgraded or
replaced. We keep a copy of all third party Year 2000 compliance statements that
we obtain.
We expect that our employees will perform all significant work for the Year
2000 projects described above. We do not anticipate hiring any additional
employees nor do we anticipate incurring any significant consulting expenses for
the Year 2000 project. The cost of software tools and consulting expenses used
for detection of Year 2000 problems is not currently expected to exceed
$100,000.
Contingency planning has not yet begun for all sections, but we expect
preliminary contingency plans to be completed by the end of the third quarter of
1999. Ongoing contingency planning will be conducted as feedback received from
third parties necessitates.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect our results of
operations, liquidity and financial condition, and subject us to the risk of
litigation. Due to the general uncertainty inherent in the Year 2000 problem,
resulting in part from the uncertainty of the Year 2000 readiness of third-party
suppliers and customers, we are unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on our results of
operations, liquidity or financial condition.
In addition, we can not assure you that governmental agencies, utility
companies, internet access companies, third party service providers and others
outside our control will be Year 2000 compliant. The failure by those entities
to be Year 2000 compliant could result in a systematic failure beyond our
control, such as prolonged internet, telecommunications or electrical failure,
which could prevent us from providing our services or prevent users from
accessing our services.
RECENT ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"), which provides
guidance for determining whether computer software is internal-use software and
on accounting for the proceeds of computer software originally developed or
obtained for internal use and then subsequently sold to the public. It also
provides guidance on capitalization of the costs incurred for computer software
developed or obtained for internal use. SOP 98-1 will be effective for our
fiscal year ending December 31, 1999. The adoption of SOP 98-1 is not expected
to have a material impact on our financial statements.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5"), which provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up activities
and organization costs to be expensed as incurred. SOP 98-5 will be effective
for our fiscal year ending December 31, 1999. The adoption of SOP 98-5 is not
expected to have a material impact on our financial statements.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 131, "Disclosures About Segments
of an Enterprise and Related Information" ("SFAS No. 131"), which establishes
standards for the way that a public enterprise reports information about
operating segments in annual financial statements, and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes
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<PAGE> 30
standards for related disclosures about products and services, geographic areas
and major customers. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997, and requires restatement of earlier periods presented. In the
initial year of application, comparative information for earlier years must be
restated. We have determined that we do not have any separately reportable
business segments.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), which establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging activities.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. This statement is not expected to affect us as we currently
do not engage or plan to engage in derivative instruments or hedging activities.
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<PAGE> 31
BUSINESS
OVERVIEW
We are a leading provider of research on Internet commerce. Senior
executives at client companies utilize our research to make informed business
decisions in a complex and rapidly changing Internet economy. Our research,
which is solely focused on the Internet economy, provides our clients with
comprehensive views of industry trends, forecasts and best practices. Our
analysis, supported by proprietary data, emphasizes specific, actionable
findings.
Our research services are provided primarily through our continuous
subscription product, Strategic Planning Services, which we call SPS. SPS is a
combination of proprietary written analysis, supporting data and access to our
analysts. We typically bill clients annually in advance and deliver the products
and services over the term of the contract. We generate our research through
seven focused teams of research analysts and associates. Our proprietary
research is informed and supported by a dedicated data research group. We
increasingly deliver our products via the Internet.
We have a highly diversified client base, including companies in the
Internet, media, telecommunications, technology, financial services, retail,
travel, consumer products and professional services industries. We have
successfully increased the number of SPS clients and our total contract value,
which is the annualized value of all SPS contracts at a given point in time. As
of March 31, 1999, we had 514 SPS contracts, an increase from 421 on December
31, 1998 and 145 on December 31, 1997. Our total contract value has increased
from $2.5 million on December 31, 1997, to $11.7 million on December 31, 1998
and to $15.2 million on March 31, 1999. In addition, approximately 71% of the
SPS contracts that expired during the 12 months prior to March 31, 1999 were
renewed.
We also produce a wide range of conferences which offer senior executives
the opportunity to hear first-hand the insights of our analysts and the leading
decision makers in the Internet and technology industries. Because over 75% of
the attendees are not SPS clients, these conferences provide a unique
opportunity to promote our SPS research to potential clients. These conferences
also allow us to increase the public profile of our analysts, generate favorable
press and otherwise promote the Jupiter brand.
MARKET OPPORTUNITY
The Growth of Internet Commerce
The Internet has emerged as a global medium that allows hundreds of
millions of people worldwide to obtain information, communicate and conduct
business electronically. The continued growth in Internet usage will be driven
by:
- the large and growing number of personal computers installed in homes and
offices;
- easier, faster, more reliable and less expensive access to the Internet;
- the availability of more and better content on the Internet;
- improvements in network infrastructure; and
- the increasing ability to access the Internet with devices like
television and telephones.
As the use of the Internet grows, businesses are increasing the breadth and
depth of their Internet products and services geared to consumers and other
businesses. Companies are also increasingly utilizing the Internet for functions
critical to their core business strategies and operations, such as sales and
marketing, customer service, supply chain management and overall project
coordination. As a result, numerous companies, including software development
firms, telecommunications and technology vendors and marketing and advertising
agencies, have developed products, services and technologies which support
consumers and businesses seeking to expand their use of the Internet or increase
their business efficiency.
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<PAGE> 32
The unique interactive nature of the Internet has also led to its rapid
emergence as a convenient vehicle to buy and sell products and services.
Internet commerce can be fast, inexpensive and convenient, and a growing number
of users have used the Internet to trade securities, purchase goods and services
and pay bills. Retailers, advertisers and marketers have embraced the Internet
because it offers them the ability to:
- reach broad, global audiences, thereby overcoming the limitations of
brick-and-mortar businesses;
- access new revenue streams;
- target and cost-effectively market to consumers with specific sets of
interests and desirable demographic characteristics; and
- improve efficiencies in global corporate communications, supply chain
management, technology implementation and overall operating expenses.
We believe that the growth of the Internet, and the growth of Internet
commerce in particular, will continue to expand rapidly for the foreseeable
future both in the United States and abroad. A recent report by the University
of Texas' Center for Research in Electronic Commerce estimated that the Internet
economy generated approximately $300 billion in U.S. revenue and was responsible
for 1.2 million jobs in 1998. A recent study by the Organization for Economic
Cooperation and Development predicted that worldwide Internet commerce will grow
to $1 trillion by 2005. In addition, billion dollar markets are emerging on the
Internet for many different industry sectors. The following graphs illustrate
our growth projections for various domestic Internet markets:
EXPECTED GROWTH OF DOMESTIC INTERNET MARKETS
<TABLE>
<S> <C>
SELECTED INTERNET INDIVIDUAL ONLINE
COMMERCE MARKETS INVESTING MARKET
</TABLE>
[Select Internet Commerce Markets Graph]
Source: Jupiter Communications
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<PAGE> 33
The Need for Timely, Unbiased and Affordable Advice
The rapid growth of Internet commerce and the related increase of
innovative products, services and technologies have made it very difficult for
companies to keep pace with technological changes, to compete against new types
of companies and to generate research internally. Over the past few years,
numerous companies have been formed which focus solely on the delivery of
Internet access and online services, Internet commerce solutions and selling
products and services directly over the Internet. The emergence of these
Internet companies and the competitive challenges they pose have forced many
traditional companies, including financial services, telecommunications, media,
retail and consumer products companies, to make significant investments in
developing Internet-related businesses, services and strategies. In a recent
Jupiter survey of 27 executives responsible for their companies' Web
initiatives, 55% indicated that their Web development budgets increased by more
than 75% for 1999 and 36% indicated that their budgets increased by more than
200% for 1999. Companies today are spending between $500,000 for entry level
marketing and branding Web sites to $50 million or more for the most
sophisticated Internet commerce sites. In addition, many companies with no prior
experience with Internet commerce and Internet technology are increasingly
attempting to understand the rapid technological changes and to evaluate what
steps they should take to promote their businesses and compete effectively.
There is tremendous uncertainty and anxiety among all of these types of
companies as to the future growth of Internet commerce and how it will affect
day-to-day decision-making and business development efforts. This uncertainty
and anxiety is not limited to technology personnel but is increasingly shared by
marketing and sales personnel, business development staff, senior executives and
boards of directors. Many companies do not have the technological knowledge or
the financial resources or personnel to research these issues and developments
internally. In addition, the abundance of conflicting information and
predictions regarding the growth of the Internet and the future marketplace are
very difficult for even experienced executives to decipher. Consequently, demand
is growing for timely and credible advice to assist companies in identifying
revenue models and success criteria, analyzing consumer adoption trends and
activity, developing effective sales and marketing operations, assessing market
trends and analyzing the competitive landscape and industry outlook. We expect
that demand for timely and credible advice will increase as use of the Internet
impacts new industries and expands into other geographic areas.
THE JUPITER SOLUTION
We address the growing demand around the world for advisory research and
analysis on Internet commerce. All of our research is designed to help senior
executives at large and small companies in a wide range of industries make
difficult, complex and informed business decisions in the rapidly changing
Internet economy. Our research identifies revenue models and success criteria;
defines competitive landscapes; analyzes consumer demand for specific products
or Web sites; provides industry forecasts, markets projections and trend
analyses; and assesses the value of strategic partnerships and/or acquisitions.
Our Strategic Planning Services are provided on a subscription basis and
structured as a continuing information service for senior executives focused on
marketing, advertising, media and retail related to Internet commerce.
Our solution provides the following key advantages:
- OUR RESEARCH ENABLES SENIOR EXECUTIVES TO MAKE DIFFICULT AND COMPLEX
BUSINESS DECISIONS. Our research products and services enable companies
to understand the rapid changes related to the growth of Internet
commerce and to evaluate the steps they should take to promote their
businesses and compete effectively. Our primary goal is to provide
clients with prescriptive advice and practical business solutions. We
support our research and analysis with extensive proprietary data,
including market forecasts, executive surveys and surveys of Internet
users and households. Our clients also have access to our research
analysts to address specific business concerns, which enables them to
make more informed business decisions and allows us to better understand
and respond to their changing needs. We believe this interaction also
allows us to sustain a high client retention rate and identify new
research needs among our clients.
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- WE FOCUS SOLELY ON THE RAPIDLY EVOLVING INTERNET ECONOMY. We have
positioned our company as the definitive proprietary resource for all
Internet development efforts. Unlike many of our competitors which focus
on information technology research, our research addresses the business
and marketing strategies of companies grappling with Internet commerce.
We typically cover the impact of new technology on traditional business
models, the rate of return-on-investment and projections of consumer
spending, not vendor selection or cost of implementation alone. As a
result, our prospects and clients are more likely to include chief
executive officers and other senior executives, including sales,
marketing, business development, operations and strategic planning
executives.
- OUR RESEARCH ANALYSTS ARE EXPERTS ON INTERNET COMMERCE. Our analysts
have years of relevant experience and are recruited from a variety of
different industries, including management consulting and research firms,
financial services, publishing, entertainment and advertising. Our
analysts are frequently quoted in articles on the Internet and Internet
commerce that appear in major newspapers, magazines and industry
periodicals. In addition, our analysts are asked to speak at hundreds of
non-Jupiter industry and corporate events. Because of their expertise,
our analysts also have unique personal access to the leading decision
makers in the Internet economy. We believe that the experience and
prominence of our analysts allow us to provide original and prescriptive
research which is unavailable elsewhere.
- WE SUPPLEMENT OUR CORE PRACTICES WITH SPECIALIZED MARKET MODULES. We
supplement our seven core practices, which offer broad prescriptive
advice relevant to all online ventures, with eleven market modules that
target specific industries or geographic areas. By addressing market
forecasts, competitive landscapes and business practices relating to
specific industries and geographic areas, we are able to offer
specialized insights to guide senior executives in their daily decision
making. We believe that we are the only company that provides this type
of comprehensive research coverage.
- WE PROVIDE DESKTOP ACCESS TO JUPITER RESEARCH THROUGH OUR WEB SITE. Our
Web site is an interactive platform that enables clients to access our
products and services in a customized, easy-to-use manner. Our Web site
allows users to search through our research and data libraries, send
e-mails to client service representatives, access special content
packages and register for conferences. In addition, our Web site offers
analyst presentations and audio archives of analyst conference calls
addressing the research reports that we publish.
OUR STRATEGY
Our objective is to be the premier global research company focusing on
Internet commerce. Key elements of our business strategy include the following:
- STAYING AT THE FOREFRONT OF RESEARCH INNOVATION. We intend to
continuously update, expand and refine our practices, market modules and
data research capabilities to anticipate and meet the changing needs of
business executives. We expect to add one practice and four market
modules by the end of 1999, significantly expanding our research
coverage. We also expect to continue to increase the number of our
analysts and other research professionals.
- INCREASING OUR CLIENT BASE IN THE UNITED STATES AND ABROAD. We are
committed to expanding our client base in the United States and abroad
even further by expanding our research products and services, increasing
our sales and marketing initiatives and personnel and focusing on client
service. We intend to hire additional sales representatives who will be
located in the targeted sales regions, as well as additional strategic
account managers who specifically focus on sales to multinational
companies. We also expect that the rapid changes in the Internet markets
and our increased international focus will enable us to attract
additional clients from new industries and geographic areas.
- INCREASING THE LEVEL OF SALES TO EXISTING CLIENTS. We are committed to
increasing the total sales to our existing clients, as well as increasing
the renewal rates for our SPS contracts. As Internet commerce continues
to expand around the world, we expect that our existing clients will
continue
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to need our research and advice and that they will purchase more of our
research products. In addition, we intend to actively market all of our
new practices and market modules to the executives already purchasing our
products and services and to other executives at our current clients.
- PURSUING INTERNATIONAL OPPORTUNITIES. The growth of Internet commerce in
foreign countries will present numerous opportunities for us to expand
our international operations. We intend to add market modules and
conferences that focus on specific geographic markets. We also expect to
expand our London office which focuses on the European market, and we may
open additional offices in foreign cities. We expect to enter into
additional international distribution deals and strategic partnerships,
and we will consider acquisitions of research firms to extend our
international presence and research coverage.
- CONTINUING TO STRENGTHEN THE JUPITER BRAND. While we believe we have
developed a strong brand name, we intend to engage in extensive public
relations and marketing efforts to promote our business in the United
States and abroad. These efforts will include an advertising campaign,
continued enhancements to our Web site and an increase in the number of
marketing events we sponsor for potential clients. We will also focus on
expanding our press coverage and the exposure of our research analysts on
television and at industry events.
- INCREASING THE NUMBER OF CONFERENCES THAT WE PRODUCE. We expect to
expand the number of conferences that we produce, as well as update and
refine our topics as the marketplace changes. We are currently exploring
adding four additional conferences in the United States and abroad in
2000, including new events and regional versions of existing conferences.
Our conferences offer excellent opportunities to showcase our research to
potential clients, increase the public profile of our analysts, generate
favorable press and otherwise promote the Jupiter brand.
- ENHANCING OUR WEB DELIVERY PLATFORM. We plan to continually upgrade our
Web site to enable users to more easily access data, increase
interactivity and enhance customization of delivery. In the fourth
quarter of 1999, we plan to upgrade our Web site on a new platform which
will enable clients to create more personalized views of their content
and to search across all services more effectively. Our enhanced Web site
will allow us to more effectively target specific research to clients,
measure demand for our research and improve our customer service
capabilities.
STRATEGIC PLANNING SERVICES
Strategic Planning Services provides our clients with a wide range of
proprietary research, data and advisory analysis and is structured as a
continuous information service. We have designed our SPS research to enable
companies to make intelligent business decisions about Internet commerce and
consumer use of the Internet and related technologies. The core components of
our Strategic Planning Services are seven practices, which focus on issues vital
to all online ventures, and eleven market modules, which focus on discrete
industries and geographic areas. SPS contracts are renewable on an annual basis.
We also recently introduced our MindShare Senior Executive Program which is
targeted at chief executive officers and other senior executives. MindShare is
structured to combine forward-looking, broad strategic advice with focused
strategy sessions with our analysts. These research products and services
identify revenue models and success criteria, analyze consumer adoption trends
and provide advice, forecasts and industry trends for senior executives focused
on technology, content, advertising, entertainment and merchandising related to
Internet commerce.
A key component of our Strategic Planning Services is access to our
research analysts for discussions and questions related to their published
reports. Our clients typically seek advice or have questions regarding new
business or marketing initiatives, best practices, new opportunities or
competitive threats, market forecasts and/or the value of mergers and strategic
partnerships. Clients submit inquiries to our dedicated client inquiry staff via
telephone, e-mail or our Web site. The client inquiry staff, which consists of
trained research professionals who are familiar with all of our products and
services, coordinates the responses and actively manages access to the analysts.
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The size of our SPS contracts varies depending on the number of practices
and market modules that are purchased and the number and type of users at the
client company. Certain users have interactive access to our research and
analysts and receive hard copies of our research reports while other users only
have the ability to read research reports by accessing our Web site. Each
Strategic Planning Services contract includes at least one practice and passes
to our conferences. Additional practices, market modules and conference passes
can be added at a graduated cost. Participation in our MindShare program is
purchased separately for an annual fee.
We have successfully expanded the number of clients for our Strategic
Planning Services, retained these clients when their contracts expire and
increased the level of sales to our clients. The number of SPS contracts has
increased from 145 on December 31, 1997, to 421 on December 31, 1998 and to 514
on March 31, 1999. In addition, 71% of the contracts that expired during the 12
months prior to March 31,1999 were renewed. Approximately % of the
contracts that were renewed in the first six months of 1999 were for a larger
dollar amount. Furthermore, the average size of our contracts with clients has
increased as well. Our average contract value was approximately $17,300 on
December 31, 1997, approximately $27,700 on December 31, 1998 and approximately
$29,500 on March 31, 1999. For our fifty largest clients, the average contract
value as of June 30, 1999 was $ .
Practices
Our practices focus on broad issues, strategies and challenges facing all
companies engaged in Internet commerce. The following is a description of the
seven practices in our SPS program and a sampling of recent reports published by
each practice:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
PRACTICE RECENT REPORTS
- --------------------------------------------------------------------------------------------
<S> <C>
DIGITAL COMMERCE STRATEGIES: Generating - Determining the Value of Portal Tenancies
Consumer Transactions. Analyzes the - Auctions: From Bidding to Billing
business models of transaction-based sites - Minipayments: Implementing Transactions
and services, as well as their supporting for Small Purchases
technologies. Focusing on the impact that
interactivity will have on consumer
transactions, this practice provides
actionable advice concerning consumer
marketing, cost/revenue expectations and
competitive positioning.
- --------------------------------------------------------------------------------------------
CONSUMER CONTENT STRATEGIES: Programming - Online Distribution: Partnering with the
and Distributing Online Media. Analyzes AOL Behemoth
the integration of content, navigation, - Online Events: Exploiting Marquee Value
communications, community and utility for Audience Acquisition
features for maximum audience acquisition - Navigation: Creating an Intuitive
and retention. Analysts delve into Interface
programming and distribution strategies,
with a special focus on the transition of
traditional assets, e.g., text, audio,
video and commodity data, into the
interactive space.
- --------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
PRACTICE RECENT REPORTS
- --------------------------------------------------------------------------------------------
<S> <C>
ONLINE ADVERTISING STRATEGIES: Buying and - Emerging Ad Platforms: Anticipating the
Selling Interactive Media. Provides Next Generation of Advertising
analysis of both the business and practice - Mining the Clickstream for Competitive
of interactive advertising. Analysts Advantage
deliver insight and advice that help - Agency Relationships: Developing Cost-
advertisers maximize return on investment Effective Compensation
from their online efforts, publishers
generate ad revenues and technology
vendors and service providers best
position themselves to prospective
clients.
- --------------------------------------------------------------------------------------------
SITE OPERATION STRATEGIES: Managing the - Customer Support: Metrics for Cost and
New Media Enterprise. Analyzes the Performance
planning, development and management - Testing Tools and Methodologies for a
problems that plague all organizations Failure-Proof Site
running online businesses. The practice - Site Hosting: Evaluating Outsourcing
provides cost metrics, vendor evaluation Options
models, management strategies, best
practices and case studies. This research
is designed to help business managers
understand how technology and operations
affect the bottom line and solve the
problems that they face today.
- --------------------------------------------------------------------------------------------
WEB TECHNOLOGY STRATEGIES: Positioning for - The Net-Enabled PC: Evolving Features,
Advanced Digital Platforms. Examines Emerging Business Opportunities
consumer adoption of new technologies and - Browser Evolution: Developing Sites for
the advent of new development the Post-Browser-War World
architectures that directly impact the - Web Media: Serving Sizzle in the Bandwidth
consumer experience. Offering practical Drizzle
advice about where executives should focus
their investment dollars, this practice
features examples of how sites are
developing applications to leverage the
emergence of advanced technologies and
predicts which vendors stand to win the
standards and licensing wars.
- --------------------------------------------------------------------------------------------
BANDWIDTH & ACCESS STRATEGIES: Leveraging - Bandwidth: Consumer Access Implications of
Internet Communications Evolution. the Fight for Fiber
Analyzes the dynamics of the consumer - ISP Partnerships: Driving Value Through
market for enhanced, broadband Web-Based Services
communications, specifically as it is - Unified Messaging: Reducing Complexity to
impacted by the emergence of the Internet. Generate Mass-Market Demand
This practice also provides essential
advice for a range of online initiatives
affected by the evolving communications
landscape, as well as for traditional
telecommunications providers, vendors and
application developers.
- --------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
PRACTICE RECENT REPORTS
- --------------------------------------------------------------------------------------------
<S> <C>
EUROPEAN INTERNET STRATEGIES: Competing - Personalization: Confronting European
for Emerging Online Markets. Advises new Privacy Challenges
media players on responding to consumer - Digital Television: Preparing for the
interest in the Internet in Europe. Based Internet's Sister Medium
in London, our analysts provide - The Euro: Meeting the Challenges of a
perspectives on in-country and European Unified Currency
developments, from the implications of
set-top devices and emerging broadband
solutions to the potential for advertising
revenue and commerce transactions.
- --------------------------------------------------------------------------------------------
</TABLE>
We continually evaluate the market demand for additional practices and
expect to add one more practice by the end of 1999. We seek out and receive
input from our research analysts, the sales representatives that are in constant
contact with existing and potential clients and our marketing staff as to the
demand for certain research and our ability to provide coverage. We also examine
a variety of empirical data, including breadth of applicability, uniqueness of
the offering, competitive value and ease of communication.
The SPS program is designed to provide business executives with the most
up-to-date research and analysis. We provide written reports on a regular basis
as well as ongoing access to our research analysts in order to answer specific
questions or clarify information relating to the practice topic. Specifically,
clients in any of the seven practices receive the following:
- Monthly Analyst Reports. Each monthly report examines a different
industry, trend, product segment or business model relating to the
specific practice.
- Analyst Access. Clients have access to Jupiter's research analysts for
discussion, debate and additional advice. This service is available by
phone or e-mail.
- Weekly Analyst Notes. Each week, clients receive a one-page briefing
that analyzes topical issues related to the practice.
- Digital Access. Clients have password-only access to current research
and a fully-searchable archive, which includes research, company profiles
and slides from analyst presentations. Digital access to our Web site
also includes a weekly "JupMail" e-mail that updates clients on recent
research and upcoming events.
- Monthly Teleconferences. Each month, the research analysts from each of
the practices conduct a "JupTel" telephone conference call that outlines
the key findings from a recent monthly analyst report.
- Conference Passes. Clients are entitled to a specified number of passes
to our conferences.
MARKET MODULES
In mid-1998, we began selling market modules which are designed to help
executives understand how the Internet is transforming the competitive landscape
and business practices in specific industries or geographic areas. As with our
practices, we provide subscribers with both written reports and access to our
research analysts for inquiries and insights. Specifically, subscribers to any
of the eleven market modules receive two semi-annual research reports, a
two-page monthly analyst note, access to our research analysts and digital
access to our Web site. The semi-annual research reports provide both an
overview of the key trends and business developments as well as comprehensive
reference materials, market forecasts, identification of key competitors and
information relating to strategic partnerships and acquisitions. The monthly
note highlights recent key trends or developments in the industry or country.
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Our market modules provide us with an excellent opportunity to market our
research to new clients and industries, as well as the ability to market new
products to our existing clients. The following is a list of the eleven market
modules in our SPS program, eight of which relate to specific industries and
three of which relate to specific geographic areas:
<TABLE>
<CAPTION>
INDUSTRIES GEOGRAPHIC AREAS
---------- ----------------
<S> <C>
Consumer Goods France
Financial Services Germany
Health United Kingdom
Music
Shopping
Television
Travel
Classifieds
</TABLE>
As other industries and countries are affected by the growth of the
Internet, we anticipate expanding the number of our market modules which focus
on industries and geographic areas. Specifically, we expect to add four
additional geographic market modules by the end of 1999. As with our practices,
we examine on an ongoing basis the demand for new market modules.
MINDSHARE SENIOR EXECUTIVE PROGRAM
In February 1999, we launched our MindShare Senior Executive Program, which
is specifically targeted at chief executive officers and other senior executives
across all industries. This program combines forward-looking, broad strategic
advice with focused strategy sessions with our analysts. MindShare is designed
to enable these executives to better position and focus their companies,
prioritize business development opportunities, assess long-term competitive
threats and successfully integrate new technologies with Internet commerce.
The cornerstone of our MindShare program is two half-day strategy sessions
with two research analysts per session at a location selected by the client. Our
MindShare clients also receive written reports that contain extensive
forward-looking research related to trends, changes and developments in the
Internet commerce marketplace. These quarterly reports are supplemented by
monthly briefings that focus on topical issues and major industry developments.
Furthermore, MindShare clients are invited to participate in our annual
executive forum, which is an invitation-only event targeted at a select group of
senior executive officers and technology leaders.
In addition to providing significant value for our clients, MindShare helps
us to establish strong relationships with top executives at client companies. We
expect MindShare to enable us to bolster retention rates for SPS and to
strengthen our relationships with clients. We expect that the number of
MindShare clients will increase as we continue to expand the marketing of this
program and as the value of the products and services becomes more widely known.
JUPITER CONFERENCES
We produce a wide range of conferences which provide comprehensive coverage
of issues relating to Internet commerce. These conferences offer senior
executives the opportunity to hear first-hand the insights of our analysts and
the leading decision makers in the Internet and technology industries. Our
events, which typically run for two to three days, provide an excellent
opportunity to showcase our research to current and potential clients, increase
the public profile of our research analysts, generate favorable press and
otherwise promote the Jupiter brand. Since over 75% of the attendees at our
conferences are not SPS clients, these events provide a unique opportunity to
promote our research products and services to potential customers. As a result,
our marketing staff and sales representatives attend each of our events
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and conduct continuous promotional and direct sales efforts targeted at
potential clients. We believe that our events and the sales and marketing
efforts at these events have resulted in numerous SPS contracts.
Our conferences, located in the United States and in Europe, are notable
for the senior level of attendees from all sectors of the online and media
industries. We have scheduled ten conferences for calendar year 1999, six of
which are large events and four of which are small events. Paid attendance at
our large events typically ranges from 800-1,200 participants, while paid
attendance at our small events typically ranges from 400-600 participants. We
also solicit sponsors and exhibitors for each of our events. We typically have
approximately 50-75 sponsors and exhibitors at our large events and 25 sponsors
and exhibitors at our small events.
We have successfully increased attendance at our various conferences over
the past few years. For example, paid attendance at our six conferences held
through July 1999 is 3,930, 45% above total paid attendance for all nine of our
conferences held in 1998. In addition, paid attendance at the five conferences
held so far in 1999 that were also held in 1998 has increased by 104%.
The following is a list of the ten events scheduled for 1999, nine of which
are located in the United States and one of which will take place in London, and
the year the conference was first held:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
CONFERENCE YEAR FIRST HELD
- ---------------------------------------------------------------------------------
<S> <C>
JUPITER CONSUMER ONLINE FORUM: Internet Strategies for
Mainstream Media 1994
- ---------------------------------------------------------------------------------
DIGITAL KIDS: Marketing to the Post-Modern Kid 1995
- ---------------------------------------------------------------------------------
JUPITER CONSUMER ONLINE FORUM--EUROPE: The European
Internet Economy 1995
- ---------------------------------------------------------------------------------
PLUG.IN: The Jupiter Music Forum 1996
- ---------------------------------------------------------------------------------
JUPITER ONLINE ADVERTISING FORUM: Online in the Media Mix 1996
- ---------------------------------------------------------------------------------
@TRAVEL: Strategies for Destination-Based Commerce 1997
- ---------------------------------------------------------------------------------
JUPITER SHOPPING FORUM: Reinventing Retail 1998
- ---------------------------------------------------------------------------------
JUPITER FINANCIAL SERVICES FORUM: Portals for Consumer
Finance 1998
- ---------------------------------------------------------------------------------
MINDSHARE: The Jupiter Executive Forum 1999
- ---------------------------------------------------------------------------------
JUPITER ENTERTAINMENT FORUM: Hollywood and the Internet 1999
- ---------------------------------------------------------------------------------
</TABLE>
As Internet commerce continues to grow, we anticipate that we will expand
the number of events that we produce as well as attract higher attendance at our
conferences. We also expect to devote more resources to promoting events outside
the United States or events with more of an international focus. Specifically,
in addition to the ten conferences described above, we plan to produce four
additional events during calendar year 2000, including conferences on health
care, European shopping and Latin America.
PUBLISHING AND CUSTOM RESEARCH
We also provide other research products and services to clients, including
book-length research reports and customized research.
We annually publish approximately fifteen book-length research studies that
are available for purchase through direct mail or on our Web site. Sales of
these studies are an important way to expose new companies and executives to our
research.
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<PAGE> 41
We also perform customized, client-focused research projects relating to
Internet commerce on a limited basis. These projects allow our clients to take
advantage of the knowledge and experience of our research analysts and to
develop structured, detailed responses to specific issues relevant to their
business. Custom studies often form the basis to explore a new practice or
market module and, like our book-length studies, are an effective way to expose
new companies and executives to our research products and services.
CLIENTS
Our client base has rapidly expanded since we launched SPS. In addition,
our client base has diversified from primarily technology and media companies to
include large and small companies in the Internet, media, telecommunications,
technology, financial services, consumer products, retail, travel and
professional services industries. Many of our clients have limited experience
with Internet commerce or operating an online business. The users of our
research products and services at our client companies hold diverse positions,
demonstrating the importance of Internet commerce to a company's overall
strategy and development. In addition to chief executive officers and
presidents, our users include marketing, business development, operations,
strategic planning and information technology executives.
As of June 30, 1999, our clients included 78 of the Fortune 1000 companies,
22 of the AdWeek Top 100 Megabrands, 10 of the Fortune 50 commercial banks and
29 of Media Metrix's top 50 Web properties. Approximately 88% of these customers
are headquartered in the United States and the remainder are located primarily
in Europe. We expect that our client base will continue to expand as we
introduce new practices and market modules and increase our sales and marketing
initiatives. We also believe there is significant opportunity to increase our
penetration of large corporate clients. In addition, we expect the number of our
international clients to increase significantly as the use of the Internet grows
in other parts of the world and as we introduce additional products and services
targeted to international markets.
To date, none of our clients have accounted for more than 2% of the total
annual revenues generated from SPS.
As of March 31, 1999, we had 514 contracts for our Strategic Planning
Services. The following is a representative listing of our clients:
<TABLE>
<CAPTION>
PROFESSIONAL
CONSUMER BRANDS FINANCIAL SERVICES INTERNET MEDIA SERVICES
--------------- ------------------ -------- ----- ------------
<S> <C> <C> <C> <C>
Heineken American Express America Online BBC Agency.com
Hickory Farms Bank of America CNET CBS Broadvision
Johnson & Johnson Charles Schwab Inktomi Grolier DoubleClick
Levi Strauss Intuit Netcentives News Corp. iXL Enterprises
Unilever The Hartford Sportsline USA NFL Enterprises Sapient
Visa Yahoo! Oxygen Media Vantive
Time Warner
</TABLE>
<TABLE>
<CAPTION>
RETAIL TECHNOLOGY TELECOM TRAVEL
------ ---------- ------- ------
<S> <C> <C> <C> <C>
Amazon.com Apple Computer AT&T American Airlines
Cybershop Dell BellSouth Flightbookers
eToys Hewlett-Packard British Telecom Hyatt Hotels
SkyMall IBM France Telecom Starwood Hotels
Staples Intel TCI Swiss Air
Toys "R" Us Sun Microsystems Telefonica
Value America
</TABLE>
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RESEARCH METHODOLOGY
Our research methodology enables us to deliver compelling, data-driven and
timely analysis across all seven practices and eleven market modules. Our
research products and services are generated by a growing team of research
professionals, including research analysts, an independent data research group
and a dedicated staff to handle client inquiries. These research professionals
are supported by in-house primary research tools and proprietary databases. In
addition, we have implemented a rigorous editorial and review process to ensure
that every report is accurate, well-written and useful to our clients.
As of June 30, 1999, we employed a total of 74 research professionals,
including 38 analysts. The knowledge and experience of our research
professionals, particularly our analysts, are the crucial elements in our
ability to provide high-quality, timely and original research. Our analysts have
extensive industry experience and varied backgrounds. We recruit them from a
number of different industries, including management consulting and research
firms, financial services, publishing, entertainment and advertising. We believe
that the diverse backgrounds and experiences of our analysts allow us to provide
original and prescriptive research and analysis which frequently challenges the
conventional wisdom and viewpoints promoted by others. We expect to
significantly expand the number of our research analysts as we grow the business
and increase the number of practices and market modules.
The reports published by our analysts are supplemented with primary
research, data gathering, interviews and surveys of high-level industry
executives. To assist our analysts and their research activities, we have a
dedicated data research group that conducts discrete research and survey
projects, develops and maintains a series of econometric forecast models and
works with the analysts to provide a statistical foundation for their findings.
Our analysts and our data research group have access to significant
proprietary data, including the following:
- HOUSEHOLD SURVEYS. Twice a year, we field a broad benchmarking survey of
a large representative sample of United States households, including
those that are not yet online. Data from these consumer surveys are
incorporated into the body of our proprietary research products.
- ONLINE USER SURVEYS. Each month, we conduct focused, in-depth surveys of
thousands of online consumers. As with the household surveys described
above, the data from these surveys are incorporated into the body of our
proprietary research products.
- MARKET FORECASTS. Our analysts forecast the future of various online
markets to help guide clients' strategies and investments. Complementing
our qualitative predictions, these forecasts measure the expected growth
of many industry indicators and market sectors.
- EXECUTIVE SURVEYS. We conduct phone and written surveys with top
industry executives to understand their strategies, attitudes and
intentions. These data provide our research analysts with systematic and
comprehensive insight into those leaders whose actions shape the online
marketplace.
We design the large-scale household and online user surveys described above
which are conducted through our arrangement with NFO Worldwide, one of the
largest worldwide research organizations.
While NFO maintains the panels, all of the questions and surveys that we
prepare and provide NFO, as well as all of the findings and results from these
survey panels, remain our proprietary data.
All of our research products are subject to a stringent editorial and
review process to ensure the highest quality. We maintain consistency among the
formats of our research reports across the practices and market modules so as to
ensure clarity and readability by all of our clients. Each research topic is
first subject to a series of discussions and meetings to define the scope of the
topic, assess the relevance and importance of the research and highlight key
themes and questions. Prior to publication, each research report is subject to
ongoing review and comment from other analysts and research management.
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SALES AND MARKETING
We sell and market our research products and services primarily through our
direct sales force, which was comprised of 40 sales representatives as of June
30, 1999. This represents an increase from four sales representatives at the end
of 1997 and 21 sales representatives at the end of 1998. As with our research
analysts, our sales representatives have diverse backgrounds and experience in a
number of different industries. In addition, we have been very successful at
retaining our sales representatives. Of the 36 sales representatives hired
between January 1, 1998 and June 30, 1999, 35 are still employed with us.
Our sales representatives currently consist of strategic account managers,
who are each responsible for 20 to 30 multinational companies, and geographic
account managers, who are each responsible for specific territories. Our
strategic account managers are focused on selling a broad array of products and
services across a global enterprise. Unlike many of our direct and indirect
competitors, we try, to the extent possible, to locate our sales representatives
in the geographic territories that they cover. Specifically, as of June 30,
1999, 34 of our 40 sales representatives were located in the territories that
they cover. We believe that this allows us to develop stronger relationships
with our current and potential clients and to better understand the changing
needs of our clients. We have implemented a training program for all of our new
sales representatives and believe that this program has been effective in
enabling our sales representatives to quickly and effectively solicit new
clients. Sales representatives receive a base salary and are eligible for
commissions based on new business and renewals.
We expect to significantly increase the number of our sales representatives
as we grow the business and increase our international operations. In addition
to our sales representatives, we use independent sales distributors to sell our
products and services in Australia and Israel. We are currently exploring
similar distribution arrangements in other countries and may enter into
additional agreements of this nature in the future.
We have developed a number of strategies and programs to build awareness of
the Jupiter name and to position the company as the definitive research resource
for Internet commerce. We employ an active press relations team, which responds
to hundreds of press inquiries on a weekly basis, and an in-house
promotions/advertising staff, which is responsible for developing sales
literature and direct mail campaigns and managing our advertising efforts. Our
analysts are frequently quoted in articles on the Internet and e-commerce that
appear in major newspapers, magazines and industry periodicals. In addition, we
actively encourage our research analysts to speak at non-Jupiter industry and
corporate events in order to enhance our reputation and promote our diverse
products. For example, in the first six months of 1999, our research analysts
appeared at approximately 80 non-Jupiter events, conferences and forums around
the world, and we intend to increase this activity in the future. We estimate
that our analysts addressed approximately 36,000 people at these functions. We
also host numerous breakfast forums around the world which are targeted at
potential customers and designed to enhance our visibility and reputation.
During the first six months of 1999, we hosted a total of 38 forums which
collectively had over 2,300 guests. We also devote significant resources to
promoting our numerous research products and services to the thousands of
individuals attending our conferences. Lastly, we use our Web site as a tool to
market the Jupiter name and expose potential customers to our products.
COMPETITION
We believe that the primary competitive factors determining success in our
markets include the quality and timeliness of our research and analysis, our
ability to offer products and services that meet the changing needs of our
customers, the prices we charge for our various research products and general
economic conditions. We believe that we compete favorably with respect to each
of these factors. In addition, we believe that we distinguish ourselves from our
competitors as a result of the depth and breadth of our Strategic Planning
Services, the extent to which we provide access to our research analysts, the
quality of our research analysts and sales representatives and the primary
research tools and proprietary databases that we have developed internally.
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<PAGE> 44
Our principal current competitor is Forrester Research. Recently Gartner
Group announced its intention to compete directly in providing research products
related to Internet commerce. A number of other companies compete with us in
providing research and analysis related to a specific industry or geographic
area. In addition, our indirect competitors include information technology
research firms, business consulting and accounting firms, electronic and print
publishing companies and equity analysts employed by financial services
companies. Some of these indirect competitors could choose to compete directly
against us in the future.
We expect competition to increase because of the business opportunities
presented by the growth of Internet commerce around the world. Competition may
also intensify as a result of industry consolidation, because the markets in
which we operate face few substantial barriers to entry or because some of our
competitors may provide additional or complementary services, such as consulting
services. Our current and potential competitors include many companies that have
substantially greater financial, information gathering and marketing resources
than we have. This may allow them to devote greater resources than we can to the
promotion of their brand and to the development and sale of their products and
services. We cannot assure you that we will be able to compete successfully
against current and future competitors.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
To protect our rights to our intellectual property, we rely on a
combination of trademark and copyright law, trade secret protections and
confidentiality agreements and other contractual arrangements with our employees
and third parties. We have registered the Jupiter, Jupiter Communications and
Internet Business Report marks in the United States, and we have pending
trademark applications for certain other trademarks in the United States,
including SPS. We also have pending trademark applications for the Jupiter and
Jupiter Communications marks in certain foreign jurisdictions. We provide our
proprietary research products to hundreds of different companies throughout the
world, including some companies that compete with us in some manner. As a
result, the protective steps we have taken may be inadequate to protect our
intellectual property and to deter misappropriation of the original research and
analysis that we develop. We also may be unable to detect the unauthorized use
of, or take appropriate steps to enforce, our intellectual property rights.
Moreover, effective trademark, copyright and trade secret protection may not be
available in every country in which we offer our research products and services
to the extent available in the United States.
Our failure to adequately protect our intellectual property, either in the
United States or abroad, could harm the Jupiter brand or our trademarks, devalue
our proprietary research and analysis and affect our ability to compete
effectively. Defending our intellectual property rights could result in the
expenditure of significant financial and managerial resources, which could harm
our financial results.
Furthermore, although we believe that our proprietary rights do not
infringe on the intellectual property rights of others, other parties may assert
claims against us that we have misappropriated a trade secret or infringed a
patent, copyright, trademark or other proprietary right belonging to them. Any
infringement or related claims, even if not meritorious, could be costly and
time consuming to litigate, may distract management from other tasks of
operating the business and may result in the loss of significant rights and the
loss of our ability to operate our business.
EMPLOYEES
As of June 30, 1999, we had 196 full-time employees, including 40 sales
representatives and 74 research staff, of which 38 were analysts. Our
compensation policy promotes employee ownership, and we believe that this policy
contributes to the high retention rates of our research analysts and sales
representatives. Specifically, as of June 30, 1999, approximately 93% of our
employees, including all of our research analysts and sales representatives,
owned options to purchase our securities.
All of our research analysts and sales representatives, as well as all of
our executive officers, have entered into agreements that prohibit them from
being employed by a competitive company for a period of
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<PAGE> 45
one year following their termination of employment with us. None of our
employees are represented under collective bargaining agreements. We believe
that our relations with our employees are good.
FACILITIES
Our headquarters are located in a leased facility in New York, New York,
consisting of approximately 27,700 square feet of office space. We also lease
office space in London, England. We are in negotiations to lease additional
office space in New York, New York and in San Francisco, California.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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<PAGE> 46
MANAGEMENT
OUR EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of Jupiter, and their
ages and positions, are:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Gene DeRose............................... 36 Chairman of the Board of Directors and
Chief Executive Officer
Kurt Abrahamson........................... 38 President, Chief Operating Officer and
Director
Jean Robinson............................. 43 Chief Financial Officer
Peter Storck.............................. 39 Senior Vice President, Research
Ken Male.................................. 34 Vice President, Global Sales
Phil Whitney.............................. 35 Vice President, Marketing
Joy Cerequas.............................. 34 Vice President, Conferences
Robert Kavner............................. 56 Director
KEY EMPLOYEES:
Ross Rubin................................ 31 Vice President and Senior Analyst
Adam Schoenfeld........................... 35 Vice President and Senior Analyst
Nicole Vanderbilt......................... 25 Vice President and Senior Analyst
Tim DeBaun................................ 43 Chief Information Officer
Phil Dwyer................................ 43 Managing Director, Europe
Jack Foreman.............................. 34 Vice President, Strategic Development
</TABLE>
GENE DEROSE has served as Chief Executive Officer of Jupiter since November
1996 and served as President of Jupiter from its inception to November 1996. He
has served as Chairman of the Board of Directors of Jupiter Communications, Inc.
since its formation in July 1999. Mr. DeRose is a board member of MOUSE, a
nonprofit organization that provides volunteer technical manpower to New York
City's public schools, and also serves on the Advisory Board of the Markle
Foundation's E-mail For All campaign, an initiative that encourages the use of
new communications technologies for socially beneficial purposes. Mr. DeRose
received his B.A. from the University of Virginia. Mr. DeRose is the son-in-law
of Robert Kavner.
KURT ABRAHAMSON has served as President and Chief Operating Officer of
Jupiter since its inception. He has served as a Director of Jupiter
Communications, Inc. since its formation in July 1999. Prior to joining Jupiter,
Mr. Abrahamson served as Principal Analyst for the Harvey M. Rose Corporation, a
management consulting firm. Mr. Abrahamson received a B.A. from Cornell
University and an M.A. from the John F. Kennedy School of Government at Harvard
University.
JEAN ROBINSON has served as Chief Financial Officer of Jupiter since March
1999. From January 1983 to January 1999, Ms. Robinson held various corporate
finance positions at J.P. Morgan & Co. Incorporated, including Vice President,
Equity Capital Markets from June 1993 to January 1999. Ms. Robinson received her
B.A. from Smith College and an M.B.A. from Columbia University.
PETER STORCK has served as Senior Vice President, Research of Jupiter since
November 1998. From June 1998 to November 1998, Mr. Storck served as Vice
President, Research of Jupiter. From July 1996 to June 1998, he served as
Jupiter's Director, Online Advertising Strategies. From July 1995 to July 1996,
Mr. Storck served as a consultant to Jupiter. From January 1989 to July 1995,
Mr. Storck was a novelist, a writing instructor at Columbia University and a
compensation specialist at Guy Carpenter & Co., Inc., a
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<PAGE> 47
reinsurance intermediary. Prior to that, he served as a political advisor to
various campaigns and officials. Mr. Storck received his B.S. from Cornell
University and an M.F.A. from Columbia University.
KEN MALE has served as Vice President, Global Sales of Jupiter since
January 1998. From December 1995 to January 1998, he served as an Account
Manager for Giga Information Group, Inc., an information technology research
firm, and developed that company's equities research product. From June 1995 to
December 1995, Mr. Male was involved in the formation and launch of Giga
Information Group, Inc. Prior to June 1995, Mr. Male was a private consultant
and held various account manager positions at Gartner Group, Inc., Digital
Equipment Corporation and EMC Corporation. Mr. Male received his B.S. from
Boston College.
PHIL WHITNEY has served as Vice President, Marketing of Jupiter since
December 1998. From April 1997 to December 1998 he served as Vice President,
Consumer Marketing at Money Magazine, a division of Time, Inc. From May 1992 to
April 1997, Mr. Whitney held various marketing positions at Money Magazine.
Prior to 1992, he held a number of circulation and consulting positions at
Audubon Magazine and Robert Cohen Associates, a publishing management and
consulting firm. Mr. Whitney received his B.A. from Tufts University.
JOY CEREQUAS has served as Vice President, Conferences of Jupiter since
August 1998. From May 1994 to August 1998, she served as Group Show Director for
SIGS Publications, Inc., a producer of magazines, books and conferences. Prior
to working at SIGS Publications, Inc., Ms. Cerequas managed conferences and
events for the International Trademark Association and Citicorp Investment Bank.
Ms. Cerequas received B.S. degrees from both the S.I. Newhouse School of Public
Communications and the School of Management of Syracuse University.
ROBERT KAVNER has served as a director of Jupiter Communications, Inc.
since its formation in July 1999. Since December 1998, Mr. Kavner has served as
a General Partner of idealab!, an incubator for starting and growing Internet
businesses. From September 1996 to December 1998, he was President and Chief
Executive Officer of On Command Corporation, a supplier of entertainment and
information services to the lodging industry. From June 1994 to September 1996,
he was an independent venture capitalist. From May 1984 to June 1994, he held a
number of senior level positions at AT&T Corporation, including CEO of the
Multimedia Products and Services Group and President of the Data Systems
Division. Prior to his work at AT&T, Mr. Kavner was a Partner at Coopers &
Lybrand, L.L.P. and was Co-Chairman of the firm's information industry practice.
Mr. Kavner serves on the Board of Directors of Fleet Financial Group, Inc.,
Earthlink Network, Inc., Ticketmaster Online Citysearch, Inc. and GoTo.Com, Inc.
He received his B.S. from Adelphi University and attended the Advanced
Management Program at Dartmouth University. Mr. Kavner is the father-in-law of
Mr. DeRose.
ROSS RUBIN has served as Vice President and Senior Analyst of Jupiter since
April 1999. From November 1998 to April 1999, Mr. Rubin served as Senior
Research Officer of Jupiter. From January 1998 to November 1998, he served as
Jupiter's Group Director, Telecom and Technology, and from August 1996 to
January 1998, he served as Jupiter's Group Director, Consumer Internet
Technologies. From May 1996 to August 1996, Mr. Rubin was a Senior Analyst for
Jupiter. From March 1994 to May 1996, Mr. Rubin served as a Technology Analyst
for Salomon Brothers. From September 1991 to March 1994, he served as an Analyst
for McKinsey & Company. Mr. Rubin received his B.S. from Cornell University.
ADAM SCHOENFELD has served as Vice President and Senior Analyst of Jupiter
since February 1995. From Jupiter's inception to February 1995, Mr. Schoenfeld
served as a news director for Jupiter. Prior to joining Jupiter, he worked as a
journalist for the Associated Press. Mr. Schoenfeld attended Cornell University.
NICOLE VANDERBILT has served as Vice President and Senior Analyst of
Jupiter since January 1999. From October 1996 to January 1999, she served as an
analyst for Jupiter and later the Practice Director of Jupiter's Digital
Commerce Strategies practice. From July 1995 to October 1996, she was an
information
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<PAGE> 48
technology consultant at Deloitte & Touche, L.L.P. Ms. Vanderbilt received her
B.S. from Princeton University.
TIM DEBAUN has served as Chief Information Officer of Jupiter since January
1999. From October 1993 to January 1999, Mr. DeBaun served as Vice President,
Head of Global Telecommunications for D. E. Shaw & Co., L.P., a securities and
investment firm. Mr. DeBaun received his B.A. from Marist College and did
graduate work at both the School of Computer Science of Rutgers University and
the School of Engineering of Columbia University.
PHIL DWYER has served as Jupiter's Managing Director, European Internet
Strategies since February 1998. From January 1994 to February 1998, he was a
Publisher at Centaur Publications where he helped launch several publications,
including New Media Age. Mr. Dwyer received his B.A. from London University and
an M.A. from Brunel University.
JACK FOREMAN has served as Vice President, Strategic Development of Jupiter
since February 1998. From June 1992 to February 1998, Mr. Foreman held a number
of positions at Gartner Group, Inc., including Financial Director, Vice
President of Business Operations, Interactive Systems and Vice President of
Business Products. Previously, he was a Senior Accountant at Price Waterhouse.
Mr. Foreman received his B.S. from The Wharton School at the University of
Pennsylvania and an M.B.A. from the University of Michigan.
COMPOSITION OF THE BOARD
Upon the completion of this offering, we intend to file an amended and
restated certificate of incorporation pursuant to which our board of directors
will be 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. Our
board of directors has resolved that will be a Class I Director
whose term expires at the 2000 annual meeting of stockholders,
will be a Class II Director whose term expires at the 2001 annual meeting of
stockholders and and will be Class III Directors
whose terms expire at the 2002 annual meeting of stockholders. With respect to
each class, a director's term will be subject to the election and
disqualification of their successors, or their earlier death, resignation or
removal.
BOARD COMMITTEES
The Audit Committee of the board of directors will be established prior to
the closing of this offering and will review, act on and report to the board of
directors with respect to various auditing and accounting matters, including the
recommendation of Jupiter's auditors, the scope of the annual audits, fees to be
paid to the auditors, the performance of Jupiter's independent auditors and the
accounting practices of Jupiter.
The Compensation Committee of the board of directors will be established
prior to the closing of this offering and will recommend, review and oversee the
salaries, benefits and stock option plans for Jupiter's employees, consultants,
directors and other individuals compensated by Jupiter. The Compensation
Committee will also administer Jupiter's compensation plans.
DIRECTOR COMPENSATION
Other than reimbursing directors for customary and reasonable expenses of
attending board of directors or committee meetings, Jupiter does not currently
compensate its directors. Under our 1999 Stock Incentive Plan, each individual
who first joins the Jupiter board after the effective date of this offering as a
non-employee board member will automatically receive a grant of an option on
that date to purchase shares of common stock at the time of his or her
commencement of board service. In addition, on the date of each annual
stockholders' meeting beginning in 2000, each non-employee member of the board
of directors who is to continue to serve as a non-employee board member will
automatically be granted an option to purchase shares of common stock.
Please see "--1999 Stock Incentive Plan."
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<PAGE> 49
EMPLOYMENT AGREEMENTS
We have entered into an employment agreement with Gene DeRose, dated
October 22, 1997. The initial term of this agreement expires on December 31,
1999, although Mr. DeRose has the option to renew the agreement for two
successive one-year terms. The agreement provides for Mr. DeRose to receive an
initial base salary of $165,000 and a bonus of $30,000 for the year ended
December 31, 1997. For each year thereafter, Mr. DeRose's salary is to be
increased within a specific range based on negotiations between Jupiter and Mr.
DeRose. For each calendar year after 1997, Mr. DeRose's annual bonus is based on
Jupiter's attainment of specified revenue targets. If Mr. DeRose's employment
agreement is terminated by us for any reason other than for cause or if he
voluntarily resigns under certain circumstances, he is entitled to receive 50%
of the salary and bonus payments that would have been paid to him under his
employment agreement had he continued working for us for a period of eighteen
months following the date of termination.
We have entered into an employment agreement with Kurt Abrahamson, dated
October 22, 1997. The initial term of this agreement expires on December 31,
1999, although Mr. Abrahamson has the option to renew the agreement for two
successive one-year terms. The agreement provides for Mr. Abrahamson to receive
an initial base salary of $155,000 and a bonus of $30,000 for the year ended
December 31, 1997. For each year thereafter, Mr. Abrahamson's salary is to be
increased within a specific range based on negotiations between Jupiter and Mr.
Abrahamson. For each calendar year after 1997, Mr. Abrahamson's annual bonus is
based on Jupiter's attainment of specific revenue targets. If Mr. Abrahamson's
employment agreement is terminated by us for any reason other than for cause or
if he voluntarily resigns under certain circumstances, he is entitled to 50% of
the salary and bonus payments that would have been paid to him under his
employment agreement had he continued working for us for a period of eighteen
months following the date of termination.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned for all services
rendered to us in all capacities during 1998 by our Chief Executive Officer and
the other three most highly compensated executive officers, other than our Chief
Executive Officer, who earned more than $100,000 in 1998 and who were serving as
executive officers at the end of 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION AWARDS
------------------ SHARES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS (#)
<S> <C> <C> <C>
Gene DeRose............................................. $165,000 $50,000 --
Chief Executive Officer
Kurt Abrahamson......................................... $155,000 $50,000 --
President and Chief Operating Officer
Peter Storck............................................ $116,750 $37,000 13,500
Senior Vice President, Research
Ken Male................................................ $105,000 $96,000 100,000
Vice President, Global Sales
</TABLE>
- ------------------------------
(1) The column for "Other Annual Compensation" has been omitted because there is
no compensation required to be reported in that column. The aggregate amount
of perquisites and other personal benefits provided to each executive
officer listed above is less than the lesser of $50,000 and 10% of his total
annual salary and bonus.
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<PAGE> 50
OPTION GRANTS IN LAST YEAR
The following table sets forth information concerning individual grants of
options made during 1998 to each of our executive officers named in the Summary
Compensation Table. In the year ended December 31, 1998, Jupiter Communications,
LLC granted options to purchase 563,000 units, which will convert into options
to purchase 563,000 shares of common stock following the merger with Jupiter
Communications, Inc. We have never granted any stock appreciation rights.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE VALUE AT
------------------------------------------------ ASSUMED ANNUAL RATES OF STOCK
% OF TOTAL PRICE APPRECIATION
NUMBER OF OPTIONS FOR OPTION TERM(2)
SHARES GRANTED TO -----------------------------
UNDERLYING EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE PER EXPIRATION
NAME GRANTED YEAR SHARE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Gene DeRose.................. -- -- -- -- -- --
Kurt Abrahamson.............. -- -- -- -- -- --
Peter Storck................. 13,500 2.4% $1.75 06/01/05 $ 9,618 $ 22,413
Ken Male..................... 100,000 17.8 1.75 04/14/05 71,243 166,025
</TABLE>
- ------------------------------
(1) Each option represents the right to purchase one share of common stock. The
options shown in these columns, which were originally granted pursuant to
Jupiter Communications, LLC's 1997 Option Plan, vest at a rate of 25% after
one year from the date of grant and 6.25% each quarter thereafter.
(2) 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 our
estimate or projection of our future common stock prices. These amounts
represent certain assumed rates of appreciation in the value of our common
stock from the fair market value on the date of grant. Actual gains, if any,
on stock option exercise depend on the future performance of the common
stock. The amounts reflected in the table may not necessarily be achieved.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1998 AND YEAR-END
OPTION VALUES
The following table sets forth information concerning the number and value
of unexercised options held by each of our executive officers named in the
Summary Compensation Table at December 31, 1998. None of these executive
officers exercised options during the year ended December 31, 1998. This table
assumes the conversion of Jupiter Communications, LLC to a corporate form of
organization as of December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS
1998 AT DECEMBER 31, 1998(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Gene DeRose...................................... -- -- -- --
Kurt Abrahamson.................................. 166,992 -- $375,976 --
Peter Storck..................................... 22,742 32,258 56,855 $ 63,770
Ken Male......................................... -- 100,000 -- 125,000
</TABLE>
- ------------------------------
(1) There was no public trading market for our common stock as of December 31,
1998. Accordingly, the values of the unexercised in-the-money options have
been calculated on the basis of the fair market value at December 31, 1998
of $3.00 per share, less the applicable exercise price, multiplied by the
number of shares acquired on exercise.
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<PAGE> 51
1997 OPTION PLAN
Jupiter Communications, LLC adopted the 1997 Option Plan in June 1997. A
total of 2,750,000 units have been reserved for issuance under this plan. As of
July 30, 1999, options to purchase a total of 2,483,981 units were outstanding.
Upon the merger of Jupiter Communications, LLC with and into Jupiter
Communications, Inc., the plan and each outstanding option will be assumed by
Jupiter Communications, Inc. and no further options will be granted under this
plan.
Each option has a maximum term of seven years. The exercise price of each
option must be paid in cash. In the event of an acquisition of Jupiter, each
option may, at our discretion, be accelerated or assumed by the successor
corporation.
1999 STOCK INCENTIVE PLAN
The 1999 Stock Incentive Plan will be adopted by the board of directors and
approved by our stockholders prior to the date of this offering. The 1999 Stock
Incentive Plan will be administered by our compensation committee.
shares of common stock have been authorized for issuance under the
1999 Stock Incentive Plan. However, in no event may one participant in the 1999
Stock Incentive Plan receive option grants or direct stock issuances for more
than shares in the aggregate per calendar year.
The 1999 Stock Incentive Plan will be divided into five separate programs:
- the discretionary option grant program under which eligible individuals
in the employ of Jupiter may be granted options to purchase shares of
common stock at an exercise price determined by the plan administrator;
- the stock issuance program under which eligible individuals may be issued
shares of common stock directly, through the purchase of these shares at
a price determined by the plan administrator or as a bonus tied to the
performance of services;
- the salary investment option grant program which may, at the plan
administrator's discretion, be activated for one or more calendar years
and, if so activated, will allow executive officers and other highly
compensated employees the opportunity to use a portion of their base
salary to acquire special below market stock option grants;
- the automatic option grant program under which option grants will
automatically be made at periodic intervals to eligible non-employee
board members to purchase shares of common stock at an exercise price
equal to 100% of the fair market value of those shares on the grant date;
and
- the director fee option grant program under which non-employee board
members may be given the opportunity to use a portion of any retainer fee
otherwise payable to them in cash for the year to acquire special below
market stock option grants.
The 1999 Stock Incentive Plan will include the following features:
- The exercise price for any options granted under the plan may be paid in
cash or in shares of our common stock valued at fair market value on the
exercise date. The option may also be exercised through a same-day sale
program without any cash outlay by the optionee.
- The compensation committee will have the authority to cancel outstanding
options under the discretionary option grant program in return for the
grant of new options for the same or different number of option shares
with an exercise price per share based upon the fair market value of
common stock on the new grant date.
- Stock appreciation rights may be issued under the discretionary option
grant program. Such rights will provide the holders with the election to
surrender their outstanding options for an appreciation distribution from
Jupiter equal to the fair market value of the vested shares of common
stock
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<PAGE> 52
subject to the surrendered option less the exercise price payable for
those shares. Jupiter may make the payment in cash or in shares of common
stock.
The 1999 Stock Incentive Plan will include change in control provisions
that may result in the accelerated vesting of outstanding option grants and
stock issuances:
- In the event that Jupiter is acquired by merger or asset sale or a
board-approved sale of more than 50% of Jupiter stock by its
stockholders, each outstanding option under the discretionary option
grant program that is not assumed or continued by the successor
corporation will immediately become exercisable for all the option
shares, and all unvested shares will immediately vest, except to the
extent our repurchase rights with respect to those shares are to be
assigned to the successor corporation.
- The plan administrator may grant options which vest immediately upon an
acquisition of Jupiter or upon a hostile change of control or upon the
individual's termination of service following an acquisition that results
in a change in control.
The board will be able to amend or modify the 1999 Stock Incentive Plan at
any time, subject to any required stockholder approval. The 1999 Stock Incentive
Plan will terminate no later than , 2009.
1999 EMPLOYEE STOCK PURCHASE PLAN
The 1999 Employee Stock Purchase Plan will be adopted by the board of
directors and approved by the stockholders prior to the date of this offering.
The plan will become effective immediately upon the execution of the
underwriting agreement for this offering. The plan is designed to allow eligible
employees of Jupiter and its participating subsidiaries to purchase shares of
our common stock, at semi-annual intervals, through their periodic payroll
deductions. A total of shares of common stock may be issued under
the plan.
The plan will have a series of successive offering periods, each with a
maximum duration of 24 months. However, the initial offering period will begin
on the day the underwriting agreement is executed in connection with this
offering and will end on the last business day in October 2001. The next
offering period will begin on the first business day in November 2001, and
subsequent offering periods will be set by our compensation committee.
A participant may contribute up to % of his or her cash earnings
through payroll deductions and the accumulated payroll deductions will be
applied to the purchase of shares on the participant's behalf on each
semi-annual purchase date (the last business day in April and October of each
year). The purchase price per share will be 85% of the lower of the fair market
value of our common stock on the participant's entry date into the offering
period or the fair market value on the semi-annual purchase date. The first
purchase date will occur on the last business day in April 2000. In no event,
however, may any participant purchase more than shares, nor may
all participants in the aggregate purchase more than shares on
any one semi-annual purchase date. Should the fair market value of the common
stock on any semi-annual purchase date be less than the fair market value on the
first day of the offering period, then the current offering period will
automatically end and a new offering period will begin, based on the lower fair
market value.
The board will be able to amend or modify the plan at any time. The plan
will terminate no later than the last business day in October 2009.
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<PAGE> 53
CERTAIN TRANSACTIONS
INVESTMENT BY GARTNER GROUP
In October 1997, Gartner Group purchased 1,318,359 units from Jupiter
Communications, LLC for a total of $3.0 million. In connection with this
investment, Gartner Group was granted various rights, including, among others,
piggyback registration rights and the ability to appoint two of the five
representatives on the board of members. In addition, Gartner Group was granted
the right to approve a number of corporate actions taken by Jupiter
Communications, LLC. Gartner Group has also purchased 2,710,144 units from other
members of Jupiter Communications, LLC in a series of transactions.
Upon the closing of this offering, all of the units owned by Gartner Group
will be exchanged for shares of common stock of Jupiter Communications, Inc. In
addition, except for piggyback registration rights and limited indemnification
rights, all of the specific rights granted to Gartner Group in connection with
its investment in the company will terminate upon the closing of this offering.
Furthermore, for a period of one year following the closing of this offering,
Gartner Group and its affiliates may not acquire, directly or indirectly, any
additional common stock, if the acquisition would cause Gartner Group and its
affiliates to own more than 32% of our common stock.
RELATIONSHIP WITH FLEET FINANCIAL GROUP, INC.
Robert Kavner, one of our directors, is also a director of Fleet Financial
Group, Inc. Two affiliates of Fleet Financial Group, Inc. have SPS contracts
with us.
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<PAGE> 54
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the common stock as of July 30, 1999, and as adjusted to reflect
the sale of the shares of common stock offered hereby, by each person or group
of affiliated persons who is known by us to beneficially own 5% or more of our
common stock, each director, each executive officer named in the Summary
Compensation Table and all our directors and executive officers as a group.
Unless otherwise indicated, the address of each beneficial owner listed below is
c/o Jupiter Communications, Inc., 627 Broadway, New York, New York 10012.
The following table gives effect to the shares of common stock issuable
within 60 days of July 30, 1999 upon the exercise of all options and other
rights beneficially owned by the indicated stockholders on that date. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and includes voting and investment power with respect to
shares. Unless otherwise indicated, the persons named in the table have sole
voting and sole investment control with respect to all shares beneficially
owned.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
NUMBER OF SHARES --------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING
<S> <C> <C> <C>
Gartner Group, Inc.(1).................................... 4,028,503 36.7% %
Gene DeRose............................................... 2,393,478 21.8
Kurt Abrahamson(2)........................................ 1,171,713 10.5
Joshua Harris............................................. 1,070,595 9.7
Joshua A. Weinreich....................................... 971,221 8.8
Ernest Abrahamson......................................... 845,335 7.7
Robert Kavner............................................. 200,000 1.8
Peter Storck(3)........................................... 38,180 *
Ken Male(4)............................................... 37,500 *
All directors and executive officers as a group (8
persons)................................................ 3,845,871 34.2
</TABLE>
- ------------------------------
* Less than 1%.
(1) The address of Gartner Group, Inc. is 56 Top Gallant Road, P.O. Box 10212,
Stamford, CT 06904.
(2) Includes 166,992 shares that are issuable upon the exercise of options.
(3) All of these shares are issuable upon the exercise of options. This number
does not include 61,820 shares issuable upon the exercise of stock options
that do not vest within 60 days of July 30, 1999.
(4) All of these shares are issuable upon the exercise of options. This number
does not include 92,500 shares issuable upon the exercise of stock options
that do not vest within 60 days of July 30, 1999.
53
<PAGE> 55
DESCRIPTION OF CAPITAL STOCK
GENERAL
The following description of our common stock and preferred stock and the
relevant provisions of our amended and restated certificate of incorporation and
amended and restated bylaws as will be in effect upon the closing of this
offering are summaries thereof and are qualified by reference to our amended and
restated certificate of incorporation and the amended and restated bylaws,
copies of which have been filed with the Securities and Exchange Commission as
exhibits to our registration statement, of which this prospectus forms a part.
Upon the closing of this offering, our authorized capital stock will
consist of shares of common stock, par value $0.001 per share, and
5,000,000 shares of preferred stock, par value $0.001 per share.
COMMON STOCK
Upon the closing of this offering, and giving effect to the issuance of
shares of common stock in this offering and the merger of Jupiter
Communications, LLC with and into Jupiter Communications, Inc., there will be
shares of common stock outstanding. Holders of common stock are
entitled to one vote for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights. Accordingly, holders of a
majority of the shares of common stock entitled to vote in any election of
directors may elect all of the directors standing for election. Holders of
common stock are entitled to receive ratably those dividends, if any, as may be
declared by the board of directors out of funds legally available therefor,
subject to any preferential dividend rights of any outstanding preferred stock.
Upon the liquidation, dissolution or winding up of Jupiter, the holders of
common stock are entitled to receive ratably the net assets of Jupiter available
after the payment of all debts and other liabilities and subject to the prior
rights of any outstanding preferred stock. Holders of the common stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of common stock are, and the shares offered by us in this offering will
be, when issued in consideration for payment thereof, fully paid and
nonassessable. The rights, preferences and privileges of holders of common stock
are subject to, and may be adversely affected by, the rights of the holders of
shares of any series of preferred stock which we may designate and issue in the
future. Upon the closing of this offering, there will be no shares of preferred
stock outstanding.
PREFERRED STOCK
Upon the closing of this offering, there will be no shares of preferred
stock outstanding. Upon the closing of this offering, the board of directors
will be authorized, without further stockholder approval, to issue from time to
time up to an aggregate of 5,000,000 shares of preferred stock in one or more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption, including sinking fund provisions,
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designation of series. We have no present plans to
issue any shares of preferred stock. See "--Anti-Takeover Effects of Various
Provisions of Delaware Law and Jupiter's Certificate of Incorporation and
Bylaws."
OPTIONS
Options to purchase a total of shares of common stock may be
granted under the 1997 Option Plan and the 1999 Stock Incentive Plan. As of June
30, 1999, there were outstanding options to purchase a total of shares
of common stock, of which options to purchase approximately will be
exercisable upon the closing of this offering. Since we intend to file a
registration statement on Form S-8 as soon as practicable following the closing
of this offering, any shares issued upon exercise of these options will be
immediately available for sale in the public market, subject to the terms
54
<PAGE> 56
lock-up agreements entered into with the underwriters. See "Management--1997
Option Plan," "Management--1999 Stock Incentive Plan" and "Shares Eligible for
Future Sale."
REGISTRATION RIGHTS
Pursuant to the terms of a registration rights agreement, after the closing
of this offering the holders of shares of common stock will be
entitled to piggyback registration rights with respect to the registration of
their shares under the Securities Act, subject to various limitations. These
registration rights are subject to certain conditions and limitations, among
them the right of the underwriters of an offering to limit the number of shares
of common stock held by security holders with registration rights to be included
in a registration. Registration of any shares of the shares of common stock held
by security holders with registration rights would result in shares becoming
freely tradable without restriction under the Securities Act immediately upon
effectiveness of such registration.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND JUPITER'S CERTIFICATE OF
INCORPORATION AND BYLAWS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to some exceptions, Section 203 prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
interested stockholder attained that status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
various exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to Jupiter and, accordingly, may discourage attempts to acquire Jupiter.
In addition, various provisions of our amended and restated certificate of
incorporation and our amended and restated bylaws, which provisions will be in
effect upon the closing of the offering and are summarized in the following
paragraphs, may be deemed to have an anti-takeover effect and may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might consider
in its best interest, including those attempts that might result in a premium
over the market price for the shares held by stockholders.
BOARD OF DIRECTORS VACANCIES. Our amended and restated certificate of
incorporation authorizes the board of directors to fill vacant directorships or
increase the size of the board of directors. This may deter a stockholder from
removing incumbent directors and simultaneously gaining control of the board of
directors by filling the vacancies created by this removal with its own
nominees.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. Our amended and
restated certificate of incorporation provides that stockholders may not take
action by written consent, but only at duly called annual or special meetings of
stockholders. The amended and restated certificate of incorporation further
provides that special meetings of stockholders of Jupiter may be called only by
the chairman of the board of directors, the chief executive officer or a
majority of the board of directors.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to various limitations imposed by the Nasdaq
National Market. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued shares of common stock and preferred stock could make
more difficult or discourage an attempt to obtain control of us by means of a
proxy contest, tender offer, merger or otherwise.
55
<PAGE> 57
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless
a corporation's certificate of incorporation or bylaws, as the case may be,
requires a greater percentage.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company, New York, New York.
56
<PAGE> 58
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices of our common stock. Furthermore,
since no shares will be available for sale shortly after this offering because
of certain contractual and legal restrictions on resale described below, sales
of substantial amounts of common stock in the public market after these
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon the closing of this offering, we will have outstanding an aggregate of
shares of our common stock, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options. Of
these shares, all shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act unless such shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act. This leaves shares eligible for sale in the
public market as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES DATE
<S> <C>
After the date of this
prospectus.
After 180 days from the date of
this prospectus (subject, in some
cases, to volume limitations).
At various times after 180 days
from the date of this prospectus.
</TABLE>
The remaining shares of common stock held by existing
stockholders are "restricted securities" as defined in Rule 144. Restricted
securities may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rule 144 or 701 under the
Securities Act, which rules are summarized below.
LOCK-UP AGREEMENTS
Stockholders holding an aggregate of shares of common stock
and substantially all of our option holders have signed lock-up agreements under
which they agreed not to transfer or dispose of, directly or indirectly, any
shares of our common stock or any securities convertible into or exercisable or
exchangeable for shares of our common stock for 180 days after the date of this
prospectus. Transfers can be made sooner with the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, in the case of certain
transfers to affiliates, or if made as a bona fide gift.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the number of shares of common stock then outstanding, which will equal
approximately shares immediately after the offering, or the
average weekly trading volume of the common stock on the Nasdaq National Market
during the four calendar weeks preceding the filing of a notice on Form 144 with
respect to such sale. Sales under Rule 144 are also subject to certain
manner-of-sale provisions, notice requirements and the availability of current
public information about us.
RULE 144(k)
Under Rule 144(k), a person who is not one of our affiliates 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, including the holding period of any
prior owner other than an affiliate, is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144. Therefore, unless otherwise restricted, "144(k)"
shares may be sold immediately upon completion of this offering.
57
<PAGE> 59
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell such shares 90 days 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.
REGISTRATION RIGHTS
After this offering, the holders of at least shares of our
common stock will be entitled to certain rights with respect to the registration
of those shares under the Securities Act. See "Description of Capital
Stock -- Registration Rights." After such registration, these shares of our
common stock become freely tradeable without restriction under the Securities
Act. These sales could have a material adverse effect on the trading price of
our common stock.
STOCK PLANS
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering shares of common stock reserved
for issuance under our 1997 Option Plan, our 1999 Stock Incentive Plan, our
Employee Stock Purchase Plan and the shares reserved for issuance upon exercise
of outstanding non-plan options. We expect this registration statement to be
filed and to become effective as soon as practicable after the effective date of
this offering.
As of , 1999, options to purchase shares of
common stock were issued and outstanding. All of these shares will be eligible
for sale in the public market from time to time, subject to vesting provisions,
Rule 144 volume limitations applicable to our affiliates and, in the case of
some options, the expiration of lock-up agreements.
58
<PAGE> 60
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement,
dated , 1999, the underwriters named below, who are represented
by Donaldson, Lufkin & Jenrette Securities Corporation, Deutsche Bank Securities
Inc. and Thomas Weisel Partners LLC, have severally agreed to purchase from us
the number of shares set forth opposite their names below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS: OF SHARES
------------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Deutsche Bank Securities Inc................................
Thomas Weisel Partners LLC..................................
-----
Total.............................................
=====
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares included in this
offering are subject to approval of certain legal matters by their counsel and
to certain other conditions. The underwriters are obligated to purchase and
accept delivery of all the shares, other than those covered by the
over-allotment option described below, if they purchase any of the shares.
The underwriters propose to initially offer some of the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus and some of the shares to certain dealers at the public offering
price less a concession not in excess of $ per share. The underwriters may
allow, and such dealers may re-allow, a concession not in excess of $ per
share on sales to other dealers. After the initial offering of the shares to the
public, the representatives may change the public offering price and such
concessions. The underwriters do not intend to confirm sales to any accounts
over which they exercise discretionary authority.
The following table shows the underwriting fees to be paid to the
underwriters by us in connection with this offering. These amounts are shown
assuming both no exercise and full exercise of the underwriters' over-allotment
option described below.
<TABLE>
<CAPTION>
PAID BY JUPITER
------------------------
NO FULL
EXERCISE EXERCISE
<S> <C> <C>
Per Share.................................................. $ $
Total......................................................
</TABLE>
We will pay the offering expenses, estimated to be $ .
An electronic prospectus is available on the Web site maintained by
DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation and a member of the selling group. The underwriters have agreed to
allocate a limited number of shares to DLJdirect Inc. for sale to their
brokerage account holders. Other than the prospectus in electronic format, the
information on such Web site relating to our offering is not part of this
prospectus and has not been approved and/or endorsed by us or any underwriter,
and should not be relied on by prospective investors.
We have granted to the underwriters an option, exercisable for 30 days
after the date of this prospectus, to purchase up to additional shares
at the public offering price less the underwriting fees. The underwriters may
exercise such option solely to cover over-allotments, if any, made in connection
with this offering. To the extent that the underwriters exercise such option,
each underwriter will become obligated, subject to certain conditions, to
purchase a number of additional shares approximately proportionate to that
underwriter's initial purchase commitment.
59
<PAGE> 61
We have agreed to indemnify the underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments that the underwriters may be required to make in respect
of any of those liabilities.
We, all of our executive officers and directors, stockholders holding an
aggregate of shares of common stock and substantially all of our
option holders have agreed, for a period of 180 days from the date of this
prospectus, not to, without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation: offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for our common stock; or enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any common stock,
regardless of whether any of these transactions is to be settled by the delivery
of common stock, or such other securities, in cash or otherwise. In addition,
during this 180-day period, we have agreed not to file any registration
statement with respect to, and each of our executive officers, directors,
stockholders and option holders has agreed not to make any demand for, or
exercise any right with respect to, the registration of any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation.
Outside the United States, neither we nor the underwriters have taken any
action that would permit a public offering of the shares of common stock
included in this offering in any jurisdiction that requires action for that
purpose. The shares included in this offering may not be offered or sold,
directly or indirectly, nor may this prospectus or any other offering material
or advertisement in connection with the offer and sale of any of these shares be
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of that
jurisdiction. We advise persons who receive this prospectus to inform themselves
about and to observe any restrictions relating to the offering of the common
stock and the distribution of this prospectus. This prospectus is not an offer
to sell or a solicitation of an offer to buy any shares of our common stock
included in this offering in any jurisdiction where that would not be permitted
or legal.
In connection with this offering, certain underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may overallot this offering,
creating a syndicate short position. The underwriters may bid for and purchase
shares of our common stock in the open market to cover syndicate short positions
or to stabilize the price of the common stock. The underwriting syndicate may
reclaim selling concessions if the syndicate repurchases previously distributed
common stock in syndicate covering transactions, in stabilizing transactions or
in some other way or if Donaldson, Lufkin & Jenrette Securities Corporation
receives a report that indicates clients of such syndicate members have
"flipped" the common stock. These activities may stabilize or maintain the
market price of the common stock above independent market levels. The
underwriters are not required to engage in these activities and may end any of
these activities at any time.
We sell our research products and services to numerous financial services
companies, including each of the underwriters of this offering.
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 been named as a lead or co-manager on 43 filed
public offerings of equity securities, of which 25 have been completed, and has
acted as a syndicate member in an additional 19 public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
us or any of our officers, directors or other controlling persons, except with
respect to its contractual relationship with us pursuant to the underwriting
agreement entered into in connection with this offering.
Prior to this offering, there has been no established trading market for
our common stock. We will negotiate with the underwriters regarding the initial
public offering price for the shares of common stock
60
<PAGE> 62
offered by this prospectus. In determining the initial public offering price,
the factors we and the underwriters will consider include:
- the history of and the prospects for the industry in which we compete;
- our past and present operations;
- our historical results of operations;
- our prospects for future earnings;
- the recent market prices of securities of generally comparable companies;
and
- the general condition of the securities markets at the time of the
offering.
At our request, the underwriters have reserved for sale at the initial
public offering price up to % of the shares of common stock to be sold in
this offering for sale to our employees and others we designate. To the extent
these person purchase the reserved shares, the number of shares available for
sale to the general public will be reduced. The underwriters will offer any
reserved shares not so purchased on the same basis as the other shares offered
by this prospectus.
61
<PAGE> 63
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Brobeck, Phleger & Harrison LLP, New York, New York. Certain legal matters in
connection with the offering will be passed upon for the underwriters by Hale
and Dorr LLP, Boston, Massachusetts.
EXPERTS
The balance sheets of Jupiter Communications, LLC as of December 31, 1998
and 1997 and the related statements of operations, members' equity (deficiency)
and cash flows for the three years in the period ended December 31, 1998 have
been included in reliance on the reports of KPMG LLP, independent accountants,
given on the authority of that firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits, schedules and amendment filed with
the registration statement, under the Securities Act with respect to the common
stock to be sold in this offering. This prospectus does not contain all of the
information set forth in this registration statement. For further information
about us and the shares of common stock to be sold in the offering, please refer
to this registration statement. For additional information, please refer to the
exhibits that have been filed with our registration statement on Form S-1.
You may read and copy all or any portion of the registration statement or
any other information we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C., 20549. You can
request copies of these documents upon payment of a duplicating fee, by writing
to the Securities and Exchange Commission. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information about the public
reference rooms. Our Securities and Exchange Commission filings, including the
registration statement, will also be available to you on the Securities and
Exchange Commission's Web site (http://www.sec.gov).
We intend to furnish our stockholders with annual reports containing
audited financial statements and to make available quarterly reports containing
unaudited financial information.
62
<PAGE> 64
JUPITER COMMUNICATIONS, LLC
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets as of December 31, 1997 and 1998, and March
31, 1999 (unaudited)...................................... F-3
Statement of Operations for the years ended December 31,
1996, 1997 and 1998, and for the three months ended March
31, 1998 (unaudited) and 1999 (unaudited)................. F-4
Statements of Members' Equity (Deficiency) for the years
ended December 31, 1996, 1997 and 1998, and for the three
months ended March 31, 1999 (unaudited)................... F-5
Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998, and for the three months ended March
31, 1998 (unaudited) and 1999 (unaudited)................. F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 65
INDEPENDENT AUDITORS' REPORT
The Board of Members and Members
Jupiter Communications, LLC:
We have audited the accompanying balance sheets of Jupiter Communications,
LLC as of December 31, 1997 and 1998, and the related statements of operations
and members' equity (deficiency), and cash flows for each of the years in the
three-year 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 Jupiter Communications, LLC
as of December 31, 1997 and 1998, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
March 18, 1999
F-2
<PAGE> 66
JUPITER COMMUNICATIONS, LLC
BALANCE SHEETS
DECEMBER 31, 1997, 1998 AND MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- -----------
1997 1998 1999
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $1,614,050 $ 216,144 $ 850,943
Accounts receivable, less allowance for doubtful
accounts of $51,483, $37,915 and $34,534 in
1997, 1998, and 1999, respectively.............. 1,136,230 4,579,856 4,912,619
Prepaid expenses and other assets.................. 141,062 797,168 1,512,280
---------- ----------- -----------
Total current assets............................ 2,891,342 5,593,168 7,275,842
Property and equipment, net.......................... 396,805 1,071,432 1,401,547
Intangible assets, net............................... 84,791 54,791 47,291
Investment in Methodfive L.L.C. ..................... 48,740 26,510 --
Security deposits.................................... 41,531 121,120 199,993
---------- ----------- -----------
Total assets.................................... $3,463,209 $ 6,867,021 $ 8,924,673
========== =========== ===========
LIABILITIES AND MEMBERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable................................... $1,203,578 $ 1,241,618 $ 1,456,867
Accrued expenses................................... 329,411 208,843 109,827
Accrued compensation............................... 135,915 841,624 584,355
Deferred revenue................................... 1,775,003 6,677,233 9,067,930
---------- ----------- -----------
Total current liabilities....................... 3,443,907 8,969,318 11,218,979
Deferred rent........................................ 10,695 26,477 155,733
Members' equity (deficiency)......................... 8,607 (2,128,774) (2,450,039)
Commitments and contingencies........................
---------- ----------- -----------
Total liabilities and members' equity
(deficiency).................................. $3,463,209 $ 6,867,021 $ 8,924,673
========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 67
JUPITER COMMUNICATIONS, LLC
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
AND FOR THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
AND MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------- ------------------------
1996 1997 1998 1998 1999
---------- ----------- ----------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Strategic Planning Services..... $ 565,555 $ 1,850,154 $ 6,183,188 $ 761,695 $3,446,767
Conferences..................... 2,685,834 3,426,079 4,889,703 887,747 1,724,486
Other........................... 3,000,593 3,245,919 3,729,440 959,562 848,308
---------- ----------- ----------- ----------- ----------
Total revenues............... 6,251,982 8,522,152 14,802,331 2,609,004 6,019,561
Cost of services and
fulfillment..................... 4,686,993 6,259,433 9,675,838 2,091,233 2,955,210
---------- ----------- ----------- ----------- ----------
Gross profit................. 1,564,989 2,262,719 5,126,493 517,771 3,064,351
Other operating expenses:
Sales and marketing expenses.... 514,548 1,557,676 3,173,368 611,347 1,750,135
General and administrative
expenses..................... 1,663,565 2,955,340 4,090,506 910,889 1,635,481
---------- ----------- ----------- ----------- ----------
Total other operating
expenses................... 2,178,113 4,513,016 7,263,874 1,522,236 3,385,616
---------- ----------- ----------- ----------- ----------
Net loss..................... $ (613,124) $(2,250,297) $(2,137,381) $(1,004,465) $ (321,265)
========== =========== =========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 68
JUPITER COMMUNICATIONS, LLC
STATEMENTS OF MEMBERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
AND FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN ACCUMULATED MEMBERS'
CAPITAL DEFICIT EQUITY (DEFICIENCY)
---------- ----------- -------------------
<S> <C> <C> <C>
Balance as of December 31, 1995............... $ 228,794 $ (634,237) $ (405,443)
Contributions made by members................. 325,000 -- 325,000
Distributions paid to members................. (20,743) -- (20,743)
Net loss for the year ended December 31,
1996........................................ -- (613,124) (613,124)
---------- ----------- -----------
Balance as of December 31, 1996............... 533,051 (1,247,361) (714,310)
Contributions made by members, net of offering
costs of $254,098........................... 2,996,175 -- 2,996,175
Distributions paid to members................. (22,961) -- (22,961)
Net loss for the year ended December 31,
1997........................................ -- (2,250,297) (2,250,297)
---------- ----------- -----------
Balance as of December 31, 1997............... 3,506,265 (3,497,658) 8,607
Net loss for the year ended December 31,
1998........................................ -- (2,137,381) (2,137,381)
---------- ----------- -----------
Balance as of December 31, 1998............... 3,506,265 (5,635,039) (2,128,774)
Net loss for the three months ended March 31,
1999 (unaudited)............................ -- (321,265) (321,265)
---------- ----------- -----------
Balance as of March 31, 1999 (unaudited)...... $3,506,265 $(5,956,304) $(2,450,039)
========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 69
JUPITER COMMUNICATIONS, LLC
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
AND FOR THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
AND MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- -------------------------
1996 1997 1998 1998 1999
--------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $(613,124) $(2,250,297) $(2,137,381) $(1,004,465) $ (321,265)
Adjustments to reconcile net loss to net cash used in
operating activities:
Equity loss from investment in Methodfive L.L.C. ... -- 35,000 22,230 5,558 26,510
Depreciation and amortization....................... 74,816 99,751 193,410 48,353 124,458
Provision for allowance for doubtful accounts....... 26,000 25,483 (13,568) 1,491 (3,381)
Changes in operating assets and liabilities:
Increase in accounts receivable................... (290,022) (328,142) (3,430,058) (455,551) (329,382)
(Increase) decrease in inventory.................. (14,615) 24,035 -- -- --
Increase in prepaid expenses and other assets..... (77,035) (10,962) (656,106) (240,179) (715,112)
(Increase) decrease in security deposits.......... (24,938) 3,815 (79,589) 7,113 (78,873)
Increase in accounts payable...................... 417,505 397,337 38,040 469,961 215,249
Increase (decrease) in accrued expenses........... 87,357 298,300 606,858 (15,665) (356,285)
Increase in deferred revenue...................... 432,776 657,280 4,902,230 958,594 2,390,697
(Decrease) increase in deferred rent.............. (4,262) (13,138) (3,016) 23,126 129,256
--------- ----------- ----------- ----------- ----------
Net cash provided by (used in) operating
activities................................... 14,458 (1,061,538) (556,950) (201,664) 1,081,872
--------- ----------- ----------- ----------- ----------
Cash flows from investing activities:
Capital expenditures.................................. (198,651) (206,842) (838,037) (104,129) (447,073)
Investment in Methodfive L.L.C. ...................... (58,594) -- -- -- --
Investment in Internet Content Report................. -- (25,000) -- -- --
--------- ----------- ----------- ----------- ----------
Net cash used in investing activities.......... (257,245) (231,842) (838,037) (104,129) (447,073)
--------- ----------- ----------- ----------- ----------
Cash flows from financing activities:
Member contributions.................................. 325,000 3,250,273 -- -- --
Offering costs........................................ -- (254,098) -- -- --
Distributions paid to members......................... (20,743) (22,961) -- -- --
Repayment of notes payable............................ (55,000) (70,000) -- -- --
Principal payments under capital lease obligation..... (2,841) (3,447) (2,919) -- --
--------- ----------- ----------- ----------- ----------
Net cash provided by (used in) financing
activities................................... 246,416 2,899,767 (2,919) -- --
--------- ----------- ----------- ----------- ----------
Increase (decrease) in cash and cash
equivalents.................................. 3,629 1,606,387 (1,397,906) (305,793) 634,799
Cash and cash equivalents at beginning of period........ 4,034 7,663 1,614,050 1,614,050 216,144
--------- ----------- ----------- ----------- ----------
Cash and cash equivalents at end of period.............. $ 7,663 $ 1,614,050 $ 216,144 $ 1,308,257 $ 850,943
========= =========== =========== =========== ==========
Supplemental cash flow information:
Cash paid during the period for:
Interest............................................ $ -- $ 8,694 $ 11,855 $ -- $ --
========= =========== =========== =========== ==========
Supplemental noncash operating and financing activities:
Fair value of barter transactions..................... $ 105,974 $ 18,120 $ -- $ -- $ 25,000
========= =========== =========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 70
JUPITER COMMUNICATIONS, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998 AND MARCH 31, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(1) ORGANIZATION
Jupiter Communications, LLC ("Jupiter" or the "Company") was organized in
New York on December 1, 1994. Jupiter is a new media research firm that helps
companies make intelligent business decisions about consumer interactivity. The
Company's information services encompass Strategic Planning Services,
conferences, newsletters, book-length studies, and custom research reports and
provide clients and customers with focused research and strategic planning
support as they develop interactive products and services.
(2) SIGNIFICANT ACCOUNTING POLICIES
(a) UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial statements of the Company for the three months ended
March 31, 1998 and 1999 included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the SEC. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations relating to interim
financial statements.
In the opinion of management, the accompanying unaudited interim financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position of the Company
at March 31, 1999 and the results of its operations and its cash flows for the
three months ended March 31, 1998 and 1999.
(b) CASH AND CASH EQUIVALENTS
Cash equivalents of $1,613,015, $211,681 and $464,598 at December 31, 1997,
December 31, 1998 and March 31, 1999, respectively, consist of a money market
account with an initial term of less than three months. For purposes of the
statements of cash flows, the Company considers all highly liquid debt
instruments with original maturities of three months or less to be cash
equivalents.
(c) PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets primarily consist of prepaid Strategic
Planning Services commissions and prepaid conference costs.
(d) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided by the
straight-line method over the estimated useful lives of the respective assets,
which range from three to five years. Leasehold improvements are amortized on a
straight-line basis over the shorter of the lease term or their estimated useful
life. Additions and major improvements are capitalized, whereas the cost of
maintenance and repairs is charged to operations as incurred.
(e) INTANGIBLE ASSETS
Intangible assets are stated at cost and are amortized over their useful
lives. The net book value of intangible assets is periodically evaluated by
management as to the realizability by the Company with any permanent impairment
in such value charged to operations in the year so determined.
F-7
<PAGE> 71
JUPITER COMMUNICATIONS, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND MARCH 31, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(f) INCOME TAXES
Until completion of the proposed initial public offering ("IPO")(see Note
14 regarding the proposed IPO), the Company will remain a New York limited
liability company. Accordingly, income or loss attributed to the Company's
operations prior to the closing of the IPO will be allocated to its members to
be reported on their personal tax returns. As a result, Jupiter will not be able
to offset future taxable income, if any, against losses incurred prior to the
closing of the IPO.
Upon completion of the proposed IPO, the Company's LLC status will be
terminated as a result of the Company reorganizing to a "C" corporation for tax
purposes. Effective on this date, income taxes will be accounted for under the
asset and liability method. Under this method, deferred tax assets and
liabilities are recognized for future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
results of operations in the period that the tax change occurs. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the
amount expected to be realized.
(g) REVENUE AND COMMISSION EXPENSE RECOGNITION
Strategic Planning Services revenues are deferred and then reflected
proportionally in operations over the term of the service period, which is
generally up to one year. Conference revenues are reflected in operations when
the conference occurs. Newsletter subscriptions are deferred and then reflected
proportionally in operations over the term of the subscription, which is
generally up to one year. Book-length studies and custom research are reflected
in operations when the product is shipped.
Deferred revenue is composed of prepaid Strategic Planning Services fees to
be earned in the future over the term of the service period, prepaid conference
sponsorship/exhibition fees to be earned from conferences held after the balance
sheet date, and prepaid newsletter subscriptions to be earned in the future over
the term of the subscriptions.
The Company records prepaid commissions related to Strategic Planning
Services upon the signing of the contract and amortizes this corresponding
prepaid commission expense over the contract period in which the related
revenues are earned and amortized to income.
(h) USE OF ESTIMATES
The accompanying financial statements are prepared in accordance with U.S.
generally accepted accounting principles (GAAP). In preparing financial
statements in conformity with GAAP, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenue and expenses during the reporting period. Actual results
could differ from those estimates.
(i) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts payable and
accrued expenses approximated fair value because of the relatively short
maturity of these instruments.
F-8
<PAGE> 72
JUPITER COMMUNICATIONS, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND MARCH 31, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(j) STOCK-BASED COMPENSATION
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation," which permits entities to
recognize the fair value of all stock-based awards on the date of grant as
expense over the vesting period. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and provide pro forma net loss disclosures for
employee unit option grants made as if the fair value-based method defined in
SFAS No. 123 had been applied.
Under APB Opinion No. 25, compensation expenses would be recorded on the
date of grant only if the current market price of the underlying units exceeded
the exercise price. The Company has elected to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
(k) IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED OF
The Company applies the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell. Adoption of this Statement
did not have a material impact on the Company's financial position, results of
operations or liquidity.
(l) RECENT ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1") which provides
guidance for determining whether computer software is internal-use software and
on accounting for the proceeds of computer software originally developed or
obtained for internal use and then subsequently sold to the public. It also
provides guidance on capitalization of the costs incurred for computer software
developed or obtained for internal use. SOP 98-1 will be effective for the
Company's fiscal year ending December 31, 1999. The adoption of SOP 98-1 is not
expected to have a material impact on the Company's financial statements.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") which provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up activities
and organization costs to be expensed as incurred. SOP 98-5 will be effective
for the Company's fiscal year ending December 31, 1999. The adoption of SOP 98-5
is not expected to have a material impact on the Company's financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information" which establishes standards for the way
that a public enterprise reports information about operating segments in annual
financial statements, and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes
F-9
<PAGE> 73
JUPITER COMMUNICATIONS, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND MARCH 31, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
standards for related disclosures about products and services, geographic areas
and major customers. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997, and requires restatement of earlier periods presented. In the
initial year of application, comparative information for earlier years must be
restated. The Company has determined that it does not have any separately
reportable business segments.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and reporting
standards for derivative instruments, including derivative instruments embedded
in other contracts, and for hedging activities. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. This
statement is not expected to affect the Company as it currently does not engage
or plan to engage in derivative instruments or hedging activities.
(3) PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------- ------------
1997 1998 1999
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred SPS commissions................................... $ -- $632,406 $ 978,579
Prepaid conference expenses................................ 125,159 101,974 384,501
Other...................................................... 15,903 62,788 149,200
-------- -------- ----------
$141,062 $797,168 $1,512,280
======== ======== ==========
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- -----------
1997 1998 1999
--------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment....................................... $ 367,759 $ 758,428 $ 961,777
Furniture and fixtures................................... 90,689 178,892 337,597
Office equipment......................................... 52,812 96,623 100,687
Leasehold improvements................................... 70,249 385,603 466,557
--------- ---------- ----------
581,509 1,419,546 1,866,618
Less accumulated depreciation and amortization........... (184,704) (348,114) (465,071)
--------- ---------- ----------
$ 396,805 $1,071,432 $1,401,547
========= ========== ==========
</TABLE>
F-10
<PAGE> 74
JUPITER COMMUNICATIONS, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND MARCH 31, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(5) INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- ----------- AMORTIZATION
1997 1998 1999 PERIOD IN YEARS
-------- -------- ----------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Internet Content Report:
Subscriber list......................... $ 12,500 $ 12,500 $ 12,500 5
Trademark............................... 12,500 12,500 12,500 5
-------- -------- ---------
25,000 25,000 25,000
Internet Business Report:
Subscriber list......................... 62,500 62,500 62,500 5
Trademark............................... 62,500 62,500 62,500 5
-------- -------- ---------
125,000 125,000 125,000
Less accumulated amortization............. (65,209) (95,209) (102,709)
-------- -------- ---------
$ 84,791 $ 54,791 $ 47,291
======== ======== =========
</TABLE>
(6) INVESTMENT IN METHODFIVE L.L.C.
Jupiter has an investment in Methodfive L.L.C. ("Methodfive"), formerly the
Myriad Agency, LLC, a Web site design and consulting company. For the years
ended December 31, 1997 and 1998, Methodfive experienced a net loss from
operations and the Company recorded its share of the loss in the accompanying
statements of operations and members' equity (deficiency). Jupiter's cumulative
interest in Methodfive as of December 31, 1997 and 1998 was approximately 17.4%
and has been accounted for under the equity method.
As of March 31, 1999 the Company has written down its investment as a
result of the current financial position and recurring losses of Methodfive. The
Company has no future funding responsibilities with respect to Methodfive and
has a 17.4% passive interest.
(7) MEMBERS' EQUITY
The Company has three classes of members' equity: Class A, Class B and
Class C. Class A, Class B and Class C equity members own respectively 33.5%,
29.2% and 37.3% of the Company, as of December 31, 1998. All equity members have
substantially the same rights and privileges, except that Class B equity members
do not participate in the day-to-day management of the business. Class C equity
members, as well, do not participate in the day-to-day management of the
business; however, certain actions, as defined in the operating agreement,
require the consent of Class C equity members.
During October 1997, Gartner Group, Inc. ("acquiror") purchased 3,515,624
Class C units of the Company for $8.0 million from both the Company and existing
members. The Company amended its operating agreement to allow current members to
sell all or part of their units to the acquiror. During 1997, existing members
sold 2,197,265 units for $5.0 million, and 1,318,359 units were purchased from
the Company for $3.0 million and recorded as capital contributions by the
Company, less $254,098 in offering costs. Class A and Class B units sold by
existing members to the acquiror automatically converted to Class C units upon
transfer on a one-for-one basis to the acquiror. Three members sold 100% of
their
F-11
<PAGE> 75
JUPITER COMMUNICATIONS, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND MARCH 31, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
units to the acquiror. In addition, during 1997 capital contributions of
$250,273 were made by existing Class A and B equity members. During 1998, an
existing member sold 333,333 units for $1.25 million to the acquiror. After
completion of the transactions, the acquiror owned 37.3% of all outstanding
units as of December 31, 1998, and had two seats on the board of members.
Profits and losses are shared by all members based on their respective
percentage ownership interests. No member shall be liable for any debts of the
Company or be required to contribute any additional capital related to deficits
incurred.
(8) OPTIONS
During 1997, the Company established the 1997 Employee Unit Option Plan
(the "Plan"). Under the Plan, 1,590,000 Class B units shall be available for
grant. On March 1, 1999, the equity members authorized an increase in the number
of units reserved for issuance under the Plan from 1,590,000 to 2,500,000 (see
Note 14). Unit options may be granted to key employees of the Company upon
selection by the managing members. The exercise price of a unit option shall be
equal to the established fair market value of the unit at the time of grant, in
accordance with the provisions of the Plan. These options vest ratably over a
four-year period.
All unit options have a fixed term determinable by the managing members,
but no option shall be exercisable more than seven years after the date of
grant. Option exercisability is subject to the terms and conditions as
determined by the managing members.
F-12
<PAGE> 76
JUPITER COMMUNICATIONS, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND MARCH 31, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
Unit option activity under the Plan is as follows:
<TABLE>
<CAPTION>
WEIGHTED
UNIT AVERAGE
OPTIONS EXERCISE
GRANTED PRICE
--------- --------
<S> <C> <C>
Outstanding at December 31, 1996............................ --
Granted..................................................... 704,738 $ .50
Exercised................................................... --
Canceled.................................................... --
---------
Outstanding at December 31, 1997............................ 704,738 $ .50
---------
Granted..................................................... 563,000 $2.08
Exercised................................................... --
Canceled.................................................... --
---------
Outstanding at December 31, 1998............................ 1,267,738 $1.20
---------
Granted (unaudited)......................................... 547,900 $3.00
Exercised (unaudited)....................................... --
Canceled (unaudited)........................................ (2,782) $ .50
---------
Outstanding at March 31, 1999 (unaudited)................... 1,812,856 $1.75
=========
Vested at December 31, 1997................................. 217,912
=========
Vested at December 31, 1998................................. 499,155
=========
Vested at March 31, 1999 (unaudited)........................ 542,858
=========
</TABLE>
The fair value of each unit option granted to employees during 1998 is
estimated using the Black-Scholes Option Pricing Model with the following
assumptions: dividend yield 0%, 1998 risk-free interest rate 6% and an expected
life of four years. As permitted under the provision of SFAS No. 123, and based
on the historical lack of a public market for the Company's units, no factor for
volatility has been reflected in the unit option pricing calculation.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its unit options in
the accompanying financial statements.
The pro forma effect on the Company's net loss, had such options been
accounted for at fair value at the date of grant, is as follows:
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Net Loss:
As Reported............................................... $(2,250,297) $(2,137,381)
=========== ===========
Pro Forma................................................. $(2,269,149) $(2,216,536)
=========== ===========
</TABLE>
In addition to the units granted under the Plan, during November 1996, the
Company granted unit investment options to three equity members in conjunction
with contributions made by those equity members. A total of 667,968 unit
investment options were granted at a weighted average exercise price of $0.75.
The unit investment options were immediately vested and are exercisable at any
time during the period ending on the earlier of (a) October 31, 2001 or (b) the
closing of an initial public offering.
F-13
<PAGE> 77
JUPITER COMMUNICATIONS, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND MARCH 31, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
During 1999, two of the equity members exercised 500,976 unit investment
options at a weighted average exercise price of $0.75. As a result, 166,992 unit
investment options remain outstanding related to one equity member at a weighted
average exercise price of $0.75.
(9) DEFERRED REVENUE
Deferred revenue consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ ------------
1997 1998 1999
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Strategic Planning Services........................... $ 614,472 $5,638,847 $6,586,853
Conferences........................................... 359,337 783,912 2,271,485
Newsletter subscriptions.............................. 801,194 254,474 209,592
---------- ---------- ----------
$1,775,003 $6,677,233 $9,067,930
========== ========== ==========
</TABLE>
(10) OTHER REVENUES
Other revenues consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------ -------------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Book length studies.................. $1,488,705 $1,518,545 $1,681,114 $477,945 $374,411
Newsletter subscriptions............. 1,130,377 1,492,000 1,470,380 448,270 185,012
Other................................ 381,511 235,374 577,946 33,347 288,885
---------- ---------- ---------- -------- --------
$3,000,593 $3,245,919 $3,729,440 $959,562 $848,308
========== ========== ========== ======== ========
</TABLE>
(11) BARTER TRANSACTIONS
During 1997, the Company entered into barter transactions by exchanging its
products for advertising. Barter revenue and expenses are recorded at the fair
market value of services provided or received, whichever is more determinable in
the circumstances. The value of these transactions was $105,974 and $18,120 for
the years ended December 31, 1996 and 1997, respectively. No such transactions
were entered into by the Company during 1998.
(12) 401(k) PROFIT SHARING PLAN
The Company has a 401(k) profit sharing plan for its employees. Employees
who have completed one year of service and attained age 21 are eligible to
participate. The Company makes a matching contribution equal to 50% for every
one dollar of each participant's contribution and applies such matching
percentage to the participant's salary reduction, up to 6% of the participant's
compensation. During 1996, 1997 and 1998, the Company's matching contribution
was $10,639, $12,435 and $38,882, respectively.
F-14
<PAGE> 78
JUPITER COMMUNICATIONS, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND MARCH 31, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(13) COMMITMENTS AND CONTINGENCIES
(a) OFFICE LEASES
The Company leases office space in New York City and London. The future
minimum annual rental commitments under the leases are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
1999...................................................... $ 515,113
2000...................................................... 625,536
2001...................................................... 734,024
2002...................................................... 655,491
2003...................................................... 677,844
2004 and thereafter....................................... 218,318
----------
$3,426,326
==========
</TABLE>
Rent expense for the years ended December 31, 1996, 1997 and 1998 was
$111,433, $335,063 and $303,061, respectively.
During April 1998, the Company entered into a seven-year operating lease
agreement for office space in London. The lease agreement calls for monthly
payments with no scheduled increase in succeeding periods.
During January 1999, the Company terminated its existing New York operating
lease agreements that were due to expire in May 2000 and December 2001 and
signed a new five-year operating lease agreement with the same landlord. The new
lease agreement covers the same office space as the terminated lease agreement
as well as additional office space. In connection with this lease agreement, the
Company received two months of free rent. The agreement also calls for scheduled
increases in succeeding periods. As such, the Company records rent expense on a
straight-line basis. The future payments related to this new lease agreement are
reflected in the above schedule, and the deferred rent balance as of March 31,
1999 reflects the impact of the new lease.
(b) EQUIPMENT LEASE
Future minimum lease payments under noncancellable operating leases as of
December 31, 1998 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
1999...................................................... $ 42,370
2000...................................................... 47,956
2001...................................................... 47,956
2002...................................................... 38,671
2003...................................................... 18,840
Thereafter................................................ 4,710
--------
Total.................................................. $200,503
========
</TABLE>
F-15
<PAGE> 79
JUPITER COMMUNICATIONS, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1998 AND MARCH 31, 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
\(14) SUBSEQUENT EVENTS (UNAUDITED)
a) INITIAL PUBLIC OFFERING
In July 1999, the Class A equity members authorized the filing of a
registration statement with the Securities and Exchange Commission ("SEC") that
would permit the Company to sell shares of its common stock in connection with
the proposed IPO.
Upon the completion of the proposed IPO, the Company will be reorganized
from a limited liability company (LLC) to a corporation, which will be treated
as a "C" corporation for tax purposes. All of the members of the LLC will
exchange their respective member interests in the LLC for shares of common stock
in the corporation.
After the IPO, the members no longer retain the rights granted to them as
part of the Company's Operating Agreement, other than piggyback registration
rights and, with respect to the Class C equity member, limited indemnification
rights.
b) LINE OF CREDIT
During March 1999, the Company entered into an agreement for a line of
credit of $750,000 with the Silicon Valley Bank. Any unpaid balance is payable
on demand and bears an interest rate of prime plus 1%. All of the Company's
assets were listed as collateral in the event of default. No amounts were
outstanding as of March 31, 1999.
During June 1999, the Company received a commitment to increase this line
of credit to $3.0 million. Any unpaid balance is payable on demand and bears an
interest rate of prime plus 1 1/2%. In the event that the Company raises an
additional $3 million of equity financing, the interest rate on the $3 million
line of credit will be reduced to prime plus 3/4%.
c) ADVERTISING COMMITMENTS
In 1999, the Company entered into certain advertising contracts and has
future advertising commitments with a publishing company in the amount of
approximately $500,000.
d) UNIT OPTION PLAN
In March 1999, the equity members authorized an increase in the number of
units reserved for issuance under the Plan from 1,590,000 to 2,500,000.
In July 1999, the equity members authorized an additional increase in the
number of units reserved for issuance under the Plan from 2,500,000 to
2,750,000.
e) CLASS B (NON-VOTING) UNITS
In July 1999, the equity members authorized the Company to issue Class B
(Non-Voting) units which shall provide Jupiter with, among other things,
flexibility in the issuance of units in connection with mergers, acquisitions
and/or similar transactions and in the exercise of options. Holders of Class B
(Non-Voting) units shall have the same rights and privileges as holders of Class
B units, except for certain specified rights.
f) ACQUISITION OF INTELLIGENCE SE AB
In July 1999, the Company acquired all of the stock of Intelligence SE AB,
a Swedish research company, in exchange for 137,000 Class B (Non-Voting) units
at an aggregate value of $808,000.
g) SALE OF UNITS BY MEMBERS
On May 25, 1999, two equity members sold a total of 254,238 units to other
existing equity members.
F-16
<PAGE> 80
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
JUPITER LOGO
SHARES OF COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
DONALDSON, LUFKIN & JENRETTE
DEUTSCHE BANC ALEX. BROWN
THOMAS WEISEL PARTNERS LLC
-------------------------
DLJdirect INC.
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of Jupiter
Communications, Inc. have not changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until 1999 (25 days after the date of this prospectus) all
dealers that effect transactions in these shares of common stock may be required
to deliver a prospectus. This is in addition to the dealer's obligation to
deliver a prospectus when acting as an underwriter and with respect to their
unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE> 81
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an estimate of the costs and expenses, other
than the underwriting discounts and commissions, payable by the registrant in
connection with the issuance and distribution of the common stock being
registered.
<TABLE>
<S> <C>
SEC registration fee........................................ $15,985
NASD fee.................................................... 6,250
NASDAQ listing fee..........................................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Printing expenses...........................................
Blue sky fees and expenses.................................. 10,000
Transfer Agent and Registrar fees and expenses..............
Miscellaneous...............................................
-------
Total............................................. $
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant's certificate of incorporation in effect as of the date
hereof, and the registrant's amended and restated certificate of incorporation
to be in effect upon the closing of this offering (collectively, the
"Certificate") provide that, except to the extent prohibited by the Delaware
General Corporation Law, as amended (the "DGCL"), the registrant's directors
shall not be personally liable to the registrant or its stockholders for
monetary damages for any breach of fiduciary duty as directors of the
registrant. Under the DGCL, the directors have a fiduciary duty to the
registrant which is not eliminated by this provision of the Certificate and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available. In addition, each director will
continue to be subject to liability under the DGCL for breach of the director's
duty of loyalty to the registrant, for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are prohibited by DGCL. This provision
also does not affect the directors' responsibilities under any other laws, such
as the Federal securities laws or state or Federal environmental laws. The
registrant intends to obtain liability insurance for its officers and directors
prior to the closing of this offering.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) arising under Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the corporation's bylaws, any agreement, a vote
of stockholders or otherwise. The Certificate eliminates the personal liability
of directors to the fullest extent permitted by Section 102(b)(7) of the DGCL
and provides that the registrant shall fully indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that such person is or was a director or
officer of the registrant, or is or was serving at the request of the registrant
as a director or officer of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorney's fees), judgments, fines
II-1
<PAGE> 82
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Certificate. The registrant is not aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Within the last three years, the registrant has sold and issued the
following securities:
Units. Between November 1996 and February 1997, the registrant sold
approximately 11% of the company to Kurt Abrahamson, Joshua A. Weinreich and
Narain Gehani, for an aggregate purchase price of $500,000. In addition, the
registrant granted these individuals options to purchase an additional 667,968
units at a weighted average exercise price of $0.75. In October 1997, Gartner
Group purchased 1,318,359 Class C units from Jupiter Communications, LLC for a
total of $3.0 million.
Upon the closing of this offering, Jupiter Communications, LLC will merge
with and into Jupiter Communications, Inc. In connection with this merger, all
membership units in Jupiter Communications, LLC will be exchanged for shares of
common stock of Jupiter Communications, Inc. The sales of the above securities
were deemed to be exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
Options. The registrant has from time to time granted options to purchase
units in Jupiter Communications, LLC in reliance upon exemptions from
registration pursuant to either Section 4(2) of the Securities Act of 1933, as
amended, or Rule 701 promulgated under the Securities Act of 1933, as amended.
The following table sets forth certain information regarding such grants:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
UNITS EXERCISE PRICE
--------- --------------
<S> <C> <C>
August 1, 1996 to December 31, 1996......................... 667,968 $ 0.75
January 1, 1997 to December 31, 1997........................ 704,738 $ 0.50
January 1, 1998 to December 31, 1998........................ 563,000 $ 2.08
January 1, 1999 to July 30, 1999............................ 1,311,775 $ 3.95
</TABLE>
The sales of the above securities were deemed to be exempt from
registration pursuant to either Section 4(2) of the Securities Act of 1933, as
amended, or Rule 701 promulgated under the Securities Act of 1933, as amended.
The recipients of securities in each of these transactions represented their
intention to acquire the securities for investment only and not with view to or
for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and instruments issued in such
transactions. All recipients had adequate access, through their relationship
with the Registrant, to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
1.1* Form of underwriting agreement.
3.1 Certificate of incorporation.
3.2* Form of amended and restated certificate of incorporation to
be in effect upon the closing of this offering.
3.3 Bylaws.
3.4* Form of amended and restated bylaws to be in effect upon the
closing of this offering.
</TABLE>
II-2
<PAGE> 83
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
4.1* Specimen common stock certificate.
4.2 Please see Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of
the certificate of incorporation and bylaws of the
registrant defining the rights of holders of common stock of
the registrant.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Employment Agreement, dated as of October 22, 1997, between
the registrant and Gene DeRose.
10.2 Employment Agreement, dated as of October 22, 1997, between
the registrant and Kurt Abrahamson.
10.3 1997 Option Plan.
10.4* 1999 Stock Incentive Plan.
10.5* 1999 Employee Stock Purchase Plan.
23.1 Consent of KPMG LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
24.1 Powers of Attorney (please see Signature Page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------------
* To be filed by amendment.
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497 (h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 84
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on this 30th day of July, 1999.
JUPITER COMMUNICATIONS, INC.
By: /s/ GENE DEROSE
------------------------------------
Gene DeRose
Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and/or officers of Jupiter Communications,
Inc. (the "Company"), hereby severally constitute and appoint Gene DeRose, Chief
Executive Officer, and Jean Robinson, Chief Financial Officer, and each of them
individually, with full powers of substitution and resubstitution, our true and
lawful attorneys, with full powers to them and each of them to sign for us, in
our names and in the capacities indicated below, the registration statement on
Form S-1 filed with the Securities and Exchange Commission, and any and all
amendments to said registration statement (including post-effective amendments),
and any registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, in connection with the registration under
the Securities Act of 1933, as amended, of equity securities of the Company, and
to file or cause to be filed the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as each of them might
or could do in person, and hereby ratifying and confirming all that said
attorneys, and each of them, or their substitute or substitutes, shall do or
cause to be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated below:
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
/s/ GENE DEROSE Chief Executive Officer and Chairman July 30, 1999
- --------------------------------------------------- of the Board of Directors
Gene DeRose (Principal Executive Officer)
/s/ JEAN ROBINSON Chief Financial Officer July 30, 1999
- --------------------------------------------------- (Principal Financial and
Jean Robinson Accounting Officer)
/s/ KURT ABRAHAMSON President, Chief Operating Officer July 30, 1999
- --------------------------------------------------- and Director
Kurt Abrahamson
/s/ ROBERT KAVNER Director July 30, 1999
- ---------------------------------------------------
Robert Kavner
</TABLE>
II-4
<PAGE> 85
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
1.1* Form of underwriting agreement.
3.1 Certificate of incorporation.
3.2* Form of amended and restated certificate of incorporation to
be in effect upon the closing of this offering.
3.3 Bylaws.
3.4* Form of amended and restated bylaws to be in effect upon the
closing of this offering.
4.1* Specimen common stock certificate.
4.2 Please see Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of
the certificate of incorporation and bylaws of the
registrant defining the rights of holders of common stock of
the registrant.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Employment Agreement, dated as of October 22, 1997, between
the registrant and Gene DeRose.
10.2 Employment Agreement, dated as of October 22, 1997, between
the registrant and Kurt Abrahamson.
10.3 1997 Option Plan.
10.4* 1999 Stock Incentive Plan.
10.5* 1999 Employee Stock Purchase Plan.
23.1 Consent of KPMG LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
24.1 Powers of Attorney (please see Signature Page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------------
* To be filed by amendment.
<PAGE> 86
SCHEDULE II
JUPITER COMMUNICATIONS, LLC
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT PROVISION BALANCE AT
BEGINNING FOR DOUBTFUL END OF
OF PERIOD ACCOUNTS DEDUCTIONS PERIOD
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
For the year ended December 31, 1996
Allowance for doubtful accounts.............. $ -- $26,000 $ -- $26,000
======= ======= ======== =======
For the year ended December 31, 1997
Allowance for doubtful accounts.............. $$26,000 $25,483 $ -- $51,483
======= ======= ======== =======
For the year ended December 31, 1998
Allowance for doubtful accounts.............. $51,483 $ -- $(13,568) $37,915
======= ======= ======== =======
</TABLE>
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
JUPITER COMMUNICATIONS, INC.
ARTICLE I.
The name of this Corporation is Jupiter Communications, Inc.
ARTICLE II.
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, Delaware 19801 and the name of the registered agent at
that address is The Corporation Trust Company.
ARTICLE III.
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV.
The name of the Corporation's incorporator is David Goldman and the
incorporator's mailing address is c/o Brobeck, Phleger & Harrison LLP, 1633
Broadway, 47th Floor, New York, New York 10019.
ARTICLE V.
This Corporation is authorized to issue "Common Stock." The total
number of shares which the Corporation is authorized to issue is one hundred
(100) shares. All one hundred shares shall be Common Stock, $0.001 par value.
ARTICLE VI.
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware
<PAGE> 2
General Corporation Law is amended after approval by the stockholders of this
Article to authorize corporation action further eliminating or limiting the
personal liability of directors then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law as so amended.
Any repeal or modification of the foregoing provisions of this Article
VI by the stockholders of the Corporation shall not adversely affect any right
or protection of a director of the Corporation existing at the time of such
repeal or modification.
ARTICLE VII.
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation.
ARTICLE VIII.
Election of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
ARTICLE IX.
The number of directors which shall constitute the whole Board of
Directors shall be fixed from time to time by, or in the manner provided in, the
Bylaws or in an amendment thereof duly adopted by the Board of Directors or by
the stockholders.
ARTICLE X.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE XI.
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of the Corporation.
ARTICLE XII.
The Corporation expressly elects not to be governed by Section 203 of
the Delaware General Corporation Law.
2.
<PAGE> 3
ARTICLE XIII.
Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Incorporation this Twenty First day of June, 1999.
/s/ David Goldman
David Goldman,
Incorporator
3.
<PAGE> 1
Exhibit 3.3
BY-LAWS
OF
JUPITER COMMUNICATIONS, INC.
ARTICLE 1 - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held at such
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors or the President or, if not so designated, at the
registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election of
directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Board of
Directors or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the Board
of Directors or the President and stated in the notice of the meeting. If no
annual meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and any action taken
at that special meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case all references in these By-Laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be called at
any time by the President or by the Board of Directors. Business transacted at
any special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
1.5 Voting List. The officer who has charge of the stock ledger of the
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, at a place within the city where the meeting is to
be held. The list shall also be produced and kept at
<PAGE> 2
the time and place of the meeting during the whole time of the meeting, and may
be inspected by any stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to vote
at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize another person or persons to vote or act for him by
written proxy executed by the stockholder or his authorized agent and delivered
to the Secretary of the corporation. No such proxy shall be voted or acted upon
after three years from the date of its execution, unless the proxy expressly
provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
holders of shares of stock representing a majority of the votes cast on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of shares of stock of
that class representing a majority of the votes cast on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these By-Laws. When a quorum is present at any meeting, any
election by stockholders shall be determined by a plurality of the votes cast on
the election.
1.10 Action without Meeting. Any action required or permitted to be taken
at any annual or special meeting of stockholders of the corporation may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote on such action were present and voted. Prompt notice of the
taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
<PAGE> 3
ARTICLE 2 - Directors
2.1 General Powers. The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law or the
Certificate of Incorporation. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.
2.2 Number; Election and Qualification. The number of directors which
shall constitute the whole Board of Directors shall be determined by resolution
of the stockholders or the Board of Directors, but in no event shall be less
than one. The number of directors may be decreased at any time and from time to
time either by the stockholders or by a majority of the directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the corporation.
2.3 Enlargement of the Board. The number of directors may be increased at
any time and from time to time by the stockholders or by a majority of the
directors then in office.
2.4 Tenure. Each director shall hold office until the next annual meeting
and until his successor is elected and qualified, or until his earlier death,
resignation or removal.
2.5 Vacancies. Unless and until filled by the stockholders, any vacancy in
the Board of Directors, however occurring, including a vacancy resulting from an
enlargement of the Board, may be filled by vote of a majority of the directors
then in office, although less than a quorum, or by a sole remaining director. A
director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office, and a director chosen to fill a position resulting
from an increase in the number of directors shall hold office until the next
annual meeting of stockholders and until his successor is elected and qualified,
or until his earlier death, resignation or removal.
2.6 Resignation. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.7 Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
2.8 Special Meetings. Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, two or more directors, or by
one director in the event that there is only a single director in office.
<PAGE> 4
2.9 Notice of Special Meetings. Notice of any special meeting of directors
shall be given to each director by the Secretary or by the officer or one of the
directors calling the meeting. Notice shall be duly given to each director (i)
by giving notice to such director in person or by telephone at least 48 hours in
advance of the meeting, (ii) by sending a telegram or telex, or delivering
written notice by hand, to his last known business or home address at least 48
hours in advance of the meeting, or (iii) by mailing written notice to his last
known business or home address at least 72 hours in advance of the meeting. A
notice or waiver of notice of a meeting of the Board of Directors need not
specify the purposes of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any members of
any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.11 Quorum. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.12 Action at Meeting. At any meeting of the Board of Directors at which
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these By-Laws.
2.13 Action by Consent. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
2.14 Removal. Except as otherwise provided by the General Corporation Law
of Delaware, any one or more or all of the directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, except that the directors elected by the holders of
a particular class or series of stock may be removed without cause only by vote
of the holders of a majority of the outstanding shares of such class or series.
2.15 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such
<PAGE> 5
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Each such committee shall keep minutes and make such reports as
the Board of Directors may from time to time request. Except as the Board of
Directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the directors or in such
rules, its business shall be conducted as nearly as possible in the same manner
as is provided in these By-Laws for the Board of Directors.
2.16 Compensation of Directors. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE 3 - Officers
3.1 Enumeration. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or more
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by
vote of a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer
who resigns or is removed shall have any right to any compensation as an officer
for any period following his resignation or removal, or any right to damages on
account of such removal, whether his
<PAGE> 6
compensation be by the month or by the year or otherwise, unless such
compensation is expressly provided in a duly authorized written agreement with
the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of
Directors may appoint a Chairman of the Board and may designate the Chairman of
the Board as Chief Executive Officer. If the Board of Directors appoints a
Chairman of the Board, he shall perform such duties and possess such powers as
are assigned to him by the Board of Directors. If the Board of Directors
appoints a Vice-Chairman of the Board, he shall, in the absence or disability of
the Chairman of the Board, perform the duties and exercise the powers of the
Chairman of the Board and shall perform such other duties and possess such other
powers as may from time to time be vested in him by the Board of Directors.
3.8 President. The President shall, subject to the direction of the Board
of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders and, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has designated
the Chairman of the Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the corporation. The President
shall perform such other duties and shall have such other powers as the Board of
Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall perform such
duties and shall have such powers as the Board of Directors or the President may
from time to time prescribe. In addition, the Secretary shall perform such
duties and have such powers as are incident to the office of the secretary,
including without limitation the duty and power to give notices of all meetings
of stockholders and special meetings of the Board of Directors, to attend all
meetings of stockholders and the Board of Directors and keep a record of the
proceedings, to maintain a stock ledger and prepare lists of stockholders and
their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
<PAGE> 7
Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Secretary, the Assistant Secretary, (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer, (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE 4 - Capital Stock
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the corporation shall
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
him in the corporation. Each such certificate shall be signed by, or in the name
of the corporation by, the Chairman or Vice-Chairman, if any, of the Board of
Directors, or the President or a Vice President, and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
<PAGE> 8
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
By-Laws, applicable securities laws or any agreement among any number of
shareholders or among such holders and the corporation shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-Laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to such stock, regardless of any transfer, pledge or other disposition of such
stock until the shares have been transferred on the books of the corporation in
accordance with the requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
<PAGE> 9
ARTICLE 5 - Indemnification
The corporation may, to the fullest extent authorized under the laws
of the State of Delaware, as those laws may be amended and supplemented from
time to time, indemnify any director, officer, employee and/or agent made, or
threatened to be made, a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of being a director, officer
and/or employee of the corporation or a predecessor corporation or, at the
corporation's request, a director or officer of another corporation, provided,
however, that the corporation shall indemnify any such agent in connection with
a proceeding initiated by such agent only if such proceeding was authorized by
the Board of Directors of the corporation. The indemnification provided for in
this Article 5 shall: (i) not be deemed exclusive of any other rights to which
those indemnified may be entitled under any bylaw, agreement or vote of
stockholders or disinterested directors or otherwise, both as to action in their
official capacities and as to action in another capacity while holding such
office, (ii) continue as to a person who has ceased to be a director, officer,
employee and/or agent, as the case may be, and (iii) inure to the benefit of the
heirs, executors and administrators of such a person. The corporation's
obligation to provide indemnification under this Article 5 shall be offset to
the extent of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the corporation or any other
person.
Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that he is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized by relevant sections of the
General Corporation Law of Delaware. Notwithstanding the foregoing, the
corporation shall not be required to advance such expenses to an agent who is a
party to an action, suit or proceeding brought by the corporation and approved
by a majority of the Board of Directors of the corporation which alleges willful
misappropriation of corporate assets by such agent, disclosure of confidential
information in violation of such agent's fiduciary or contractual obligations to
the corporation or any other willful and deliberate breach in bad faith of such
agent's duty to the corporation or its stockholders.
The foregoing provisions of this Article 5 shall be deemed to be a
contract between the corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
The Board of Directors in its discretion shall have power on behalf
of the corporation to indemnify any person, other than a director, made a party
to any action, suit or proceeding by reason of the fact that he, his testator or
intestate, is or was an officer or employee of the corporation.
<PAGE> 10
To assure indemnification under this Article 5 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Article 5, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also imposes duties on, or otherwise involves
services by, such person to the plan or participants or beneficiaries of the
plan; excise taxes assessed on a person with respect to an employee benefit plan
pursuant to such Act of Congress shall be deemed "fines."
ARTICLE 6 - General Provisions
6.1 Fiscal Year. Except as from time to time otherwise designated by the
Board of Directors, the fiscal year of the corporation shall end on the last day
of December in each year.
6.2 Corporate Seal. The corporate seal shall be in such form as shall be
approved by the Board of Directors.
6.3 Waiver of Notice. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
6.4 Voting of Securities. Except as the directors may otherwise designate,
the President or Treasurer may waive notice of, and act as, or appoint any
person or persons to act as, proxy or attorney-in-fact for this corporation
(with or without power of substitution) at, any meeting of stockholders or
shareholders of any other corporation or organization, the securities of which
may be held by this corporation.
6.5 Evidence of Authority. A certificate by the Secretary, or an Assistant
Secretary, or a temporary Secretary, as to any action taken by the stockholders,
directors, a committee or any officer or representative of the corporation shall
as to all persons who rely on the certificate in good faith be conclusive
evidence of such action.
6.6 Certificate of Incorporation. All references in these By-Laws to the
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
6.7 Transactions with Interested Parties. No contract or transaction
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the
<PAGE> 11
meeting of the Board of Directors or a committee of the Board of Directors which
authorizes the contract or transaction or solely because his or their votes are
counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
6.8 Severability. Any determination that any provision of these By-Laws is
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
6.9 Pronouns. All pronouns used in these By-Laws shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE 7 - Amendments
7.1 By the Board of Directors. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
7.2 By the Stockholders. These By-Laws may be altered, amended or repealed
or new by-laws may be adopted by the affirmative vote of the holders of a
majority of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting.
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<PAGE> 1
Exhibit 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of October 22,
1997, between EUGENE DEPOSE, an individual residing at 90 Hudson Street, Apt.
7A, New York, New York 10013 (the "Executive"), and Jupiter Communications, LLC,
a New York limited liability company having its principal office located at 627
Broadway, New York, New York 10012 (the "Company").
W I T N E S S E T H:
WHEREAS, the Executive is currently serving as Chairman and Chief
Executive Officer of the Company; and
WHEREAS, the Company desires to secure for itself the continued
availability of the Executive's services; and
WHEREAS, for purposes of securing for the Company the Executive's
services, the managing members of the Company (the "Managing Members") have
approved and authorized the execution of this Agreement with the Executive on
the terms and conditions set forth herein; and
WHEREAS, the Company and the Executive desire to provide for the
employment of the Executive by the Company on the terms set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises contained in this Agreement,
IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Employment and Duties.
(a) Subject to the provisions of this Agreement, the Company hereby
employs the Executive as its Chairman and Chief Executive Officer and the
Executive hereby accepts such employment. Subject to the provisions of this
Agreement and the authority of the Managing Members, the Executive shall have
full duties and responsibilities, with the concomitant powers and authority,
consistent with the Executive's position as Chairman and Chief Executive
Officer, including, without limitation, the oversight (in collaboration with the
President and Chief Operating Officer) of the Company's editorial and new
business development operations, strategic planning, and consulting practices,
and industry conferences, along with such additional duties as are consistent
with the Executive's experience and background as the Managing Members shall
determine from time to time. The Company shall use its best efforts to ensure
that the Executive continues to be a Managing Member during the term of this
Agreement.
-1-
<PAGE> 2
(b) The Executive shall devote substantially all of his business time,
energies, and attention to the performance of the duties specified in this
Agreement. Subject to the foregoing and to the limitations set forth in Section
9(a) of this Agreement, the Company acknowledges that the Executive may engage
in personal business and investment activities for his own account, provided
that such activities do not interfere with the performance of the Executive's
duties under this Agreement. It is expressly understood and agreed that the
Executive's continuing to serve on any boards and committees on which he is
serving or with which he is otherwise associated immediately preceding the date
hereof, or his service on any other boards and committees of which the Company
has knowledge and does not object, in writing, within thirty (30) days after
first becoming aware of such service, shall not be deemed to interfere with the
performance of the Executive's services to the Company, provided that such
service on boards or committees shall be in compliance with the provisions of
Section 9(a) hereof, as qualified by Section 9(a) (ii)(C).
(c) The Executive's principal place of employment shall be at the
Company's executive offices located at the address first set forth above, or at
such other location as the Company and the Executive may mutually agree upon.
(d) The Executive shall at all times, and to the best of his ability,
use his best efforts to promote and advance the best interests of the Company
and to perform all of his obligations under this Agreement.
Section 2. Term.
The initial term of this Agreement and the Executive's employment by
the Company hereunder shall commence as of the date of this Agreement and shall
continue, subject to earlier termination in accordance with the provisions of
this Agreement, until December 31, 1999 (the "Initial Term"). Upon ninety (90)
days written notice to the Company prior to the expiration of the Initial Term
or the first Renewal Term (as hereinafter defined), the Executive shall have the
right to extend the term of this Agreement for an additional one-year period
(the "Renewal Term"). The Executive is entitled to up to two (2) Renewal Terms.
The Term of this Agreement shall include the Initial Term and all Renewal Terms.
Section 3. Compensation.
(a) Salary.
(i) For all of the services to be rendered by the Executive
hereunder, the Company shall pay to the Executive a salary at an annual rate
equal to One Hundred Sixty-Five Thousand Dollars ($165,000), subject to
adjustment as provided herein. The annual salary payable under this Section 3(a)
shall be paid in approximately equal installments in accordance with the
Company's customary payroll procedures and withholding obligations. Pursuant to
Section 707(c)
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of the Internal Revenue Code of 1986, as amended, salary payable to the
Executive shall be treated as a guaranteed payment for federal income tax
purposes.
(ii) During the 60-day period preceding the end of each fiscal
year during the Term, commencing with the fiscal year ending December 31, 1998,
the parties will negotiate in good faith to increase Executive's salary for the
succeeding fiscal year so that Executive's total cash compensation is
substantially the same as the total cash compensation paid by companies
comparable to the Company to executives with experience and responsibilities
comparable to the Executive's; provided, however, that such salary levels shall
not be lower than those set forth on Schedule 3 attached hereto and made a part
hereof; provided, further, (a) that if a "Minimum Revenue Target" (as set forth
on Schedule 3 hereof) is not achieved for a fiscal year during the term hereof,
then the Executive's salary for the succeeding fiscal year shall not be
increased without the consent of Gartner Group, Inc. ("Gartner"), and (b) in no
event shall the salary for any fiscal year be increased above the respective
amount set forth in Schedule 3 without Gartner's approval. The salary levels
agreed to pursuant to the preceding sentence will become effective as of the
commencement of the upcoming fiscal year. In no event shall the Executive's
initial salary or any increased salary be reduced absent mutual agreement of the
parties.
(b) Bonus.
In addition to the salary provided under Section 3(a) of this
Agreement, the Executive shall receive a bonus for each fiscal year of the
Company as follows: (i) the amount of Thirty Thousand Dollars ($30,000) for the
fiscal year ending December 31, 1997, and (ii) for each fiscal year thereafter,
the amount indicated on Schedule 3 attached hereto and made a part hereof, based
on the attainment of the "Revenue Targets" set forth on such Schedule 3. The
"Revenue Targets" may be increased or reduced from time to time if agreed in
writing by the Company and the Executive, provided that any such adjustments
shall be approved by Gartner. A "Revenue Target" shall be attained if the
"Adjusted Gross Revenues" (as hereinafter defined) of the Company meets or
exceeds the indicated amount. As used herein, "Adjusted Gross Revenues" shall
mean gross revenues of the Company less the sum of all write-offs taken, or
reserves created, for bad debts during such fiscal year. All computations of
Adjusted Gross Revenues hereunder shall be made by the Company in accordance
with generally accepted accounting principles, consistently applied. In the
event that the Executive is in the Company's employ for less than a full fiscal
year, and is entitled to a bonus for that year as provided in this Agreement,
then the bonus payable for such year shall be pro-rated. The bonus shall be paid
in cash within ninety (90) days following the end of the fiscal year for which
such bonus is payable.
(c) Options.
(i) The Managing Members of the Company shall have the right
to cause the Company to grant to the Executive at any time or from time to time
options to purchase additional units of membership interests in the Company (the
"Options") in such amounts and on such terms as the Managing Members shall
determine, with the approval of Gartner; provided, however, that
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Gartner's approval shall not be required for the issuance of Options to
the Executive (A) in an amount not to exceed the number of Options
granted to the most senior executive or employee of the Company who has
received Options of the Company ("Other Options") (exclusive of
"one-time" grants of Options issued in connection with the initial
hiring of an executive) and (B) on terms no more favorable than the
Other Options.
(d) All references in this Agreement to required consents or approvals
by Gartner shall only apply so long as Gartner continues to have a membership
interest in the Company with a sharing ratio (as defined in the Company's Third
Amended and Restated Operating Agreement) of no less than 16%.
Section 4. Benefits.
(a) Employee Benefits. Except as otherwise provided in this Agreement,
the Executive shall be treated as an executive and an employee and shall have
the right to participate in and receive benefits under life, health (including
hospitalization, medical, and major medical), dental, accident, and long term
disability insurance plans, pension, profit sharing, incentive compensation
plans or programs (whether or not employee benefit plans or programs), and any
stock option and appreciation rights plan, employee stock ownership plan, and
restricted stock plan, as may from time to time be maintained by, or cover
employees or executives of, the Company, in accordance with the terms and
conditions of such employee benefit plans and programs and compensation plans
and programs and with the Company's customary practices. The benefits and
entitlements which the Company currently provides to its executives are
described on Schedule 4(a) hereto.
(b) Expenses. The Executive is authorized to incur reasonable expenses
for promoting the business of the Company and as may be reasonably necessary to
enable the Executive to perform his duties hereunder including, without
limitation, expenses for entertainment, travel, and similar items. The Company
shall pay or reimburse the Executive for such expenses after the presentation by
the Executive, from time to time, of itemized accounts of such expenditures in
the form then required by the Company for such accounting. Payments or
reimbursements will be made within the time period in which the Company
routinely makes such payments or reimbursements to its employees, but in no
event later than thirty (30) days after the submission of itemized accounts. The
Company shall provide the Executive with a credit card and the Executive shall
be entitled to the use of such card for the Company's business.
(c) Electronic Equipment. The Company shall purchase or lease for the
Executive's exclusive use and pay or reimburse the Executive for the payment of
all charges relating to (i) a personal computer for Executive's use outside of
the Company's offices, (ii) a cellular telephone, and (iii) a beeper. Such
personal computer, cellular telephone, and beeper shall be selected by the
Executive.
(d) Working Facilities. The Company shall provide the Executive at the
Executive's principal place of employment with a private office, secretarial
services, and other support services,
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equipment, and facilities suitable to the Executive's position with the Company
and necessary or appropriate in connection with the performance of the
Executive's assigned duties under this Agreement.
(e) Vacation. The Executive shall be entitled to four (4) weeks of paid
vacation each year, to be scheduled on reasonable notice to the Company.
Section 5. Representations and Warranties of the Executive.
The Executive represents and warrants that he (a) is subject to no
currently existing agreement which would interfere with his entering into this
Agreement; (b) has made no commitment of any kind inconsistent with the
provisions of this Agreement and his duties hereunder; and (c) is under no
disability of any kind which would prevent him from entering into this Agreement
and performing all of his obligations hereunder.
Section 6. Termination of Employment with Company Liability.
(a) Permitted Termination. In the event that Executive's employment
with the Company shall terminate during the Term on account of:
(i) The discharge of the Executive by the Company for any
reason other than for "cause" (as defined in Section 7(a) hereof); or
(ii) The Executive's voluntary resignation from employment
with the Company within ninety (90) days of the occurrence of any of
the following:
(A) If the Company, without the Executive's consent
thereto or as otherwise permitted herein, (x) materially
changes the Executive's duties, responsibilities, authority,
or positions as provided in this Agreement such that the
change represents a demotion to a position below "Senior
Management" (as herein defined), or (y) reduces Executive's
base salary or reduces the bonus payable to Executive below
the amounts set forth in Section 3(a) or 3(b) (as applicable)
or Schedule 3 hereof, other than across the board reductions
effectuated with respect to senior level executives and
employees as a result of fiscal constraints; or
(B) If the Executive ceases to be a Managing Member
without the Executive's consent; or
(C) If the Company experiences a Change in Control;
(each of the foregoing, a "Permitted Termination"), then the Company shall
provide the benefits and pay to the Executive (or his estate, as applicable) the
amounts set forth under Section 6(b) of this Agreement; provided' however. that
if the Company in good faith disputes that Section 6(a)(ii) applied to a
resignation by the Executive, the Company shall not be obliged to provide to the
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Executive the amounts set forth under Section 6(b) of this Agreement until
resolution has been reached on whether such resignation falls within Section
6(a)(ii). For purposes hereof, a "Change in Control" shall mean (i) the
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act of 1934, as amended (the "Exchange
Act") (a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of membership interests (or equivalent
equity securities should the Company not be a limited liability company) of the
Company where such acquisition causes such Person to own membership interests
(or such equivalent equity securities) having a sharing ratio (or equivalent
equity interest) equal to or greater than 50%; provided that such Person does
not include the Executive, Kurt Abrahamson or Gartner; or (ii) the approval by
the members of the Company of a reorganization, merger or consolidation, or sale
or other disposition of all or substantially all of the assets of the Company;
provided, however, that if the Executive consents to, or abstains from, any vote
with regard to any such change, then such change shall not be deemed to be a
"Change in Control". For purposes hereof, "Senior Management" shall mean the
positions of Chairman and Chief Executive Officer or President and Chief
Operating Officer or senior executive positions of equivalent responsibility and
authority.
(b) Payments on Permitted Termination. Upon termination of the
Executive's employment with the Company under circumstances described in Section
6(a) of this Agreement, and subject to the provisions of such Section 6(a), the
Company shall pay and provide to the Executive (or, in the event of the
Executive's death, to the Executive's estate):
(i) the Executive's earned but unpaid salary as of the date of
termination of the Executive's employment with the Company, along with
all outstanding amounts due to the Executive under this Agreement
(including reimbursement of all business expenses); and except as
provided in Section 6(b)(ii), the provision of such other insurance
(including COBRA) and disability benefits, if any, to which the
Executive is entitled as a former employee under this Agreement and the
employee benefit plans and programs and compensation plans and programs
maintained by, or covering employees of, the Company.
(ii) in lieu of any monetary payments to which the Executive
may be entitled under any severance pay plan, program, or policy, the
following amounts:
(A) within thirty (30) days following the Executive's
termination of employment with the Company, a lump sum cash payment, in
an amount equal to the present value of fifty percent (50%) of the
salary that the Executive would have earned at the rate in effect as of
the date of termination (in accordance with Section 3(a)) if the
Executive had continued working for the Company for a period of
eighteen months following the date of termination at the same annual
rate, where such present value is to be determined using a discount
rate of six percent (6%) per annum, compounded monthly (or the
compounding period corresponding to the Company's regular payroll
periods with respect to its officers, if not monthly); and
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(B) the Company shall continue to pay Executive fifty percent (50%) of
the salary that Executive would have earned at the rate in effect as of the date
of termination (in accordance with Section 3(a)), if the Executive had continued
working for the Company during such eighteen month period at the same annual
rate, such salary to be paid in accordance with the Company's normal payroll
procedures and withholding obligations;
such payments pursuant to clauses (A) and (B) above to be paid in lieu of all
other payments of salary provided for under this Agreement in respect of the
period following any such termination hereof; provided, however, that if the
termination is pursuant to Section 6(a)(i) where the termination occurs within
twelve (12) months following a "Change in Control" or pursuant to Section
6(a)(ii)(C), the amount and duration of the payments under this Section
6(b)(ii)(A) and (B) shall be adjusted (and, if the remaining unexpired Term
(including the Renewal Terms) is greater than eighteen months, shall be
increased) as follows, subject to the provisions of Section 6(b)(iv): the
payments shall be calculated to compensate the Executive as if the Executive had
continued working for the Company during the remaining unexpired Term (including
the Renewal Terms) at the annual salary rate set forth above and all references
in clauses (A) and (B) to "eighteen months" shall be changed to "the remaining
unexpired Term (including the Renewal Terms)";
(iii) the following amounts:
(A) within thirty (30) days following Executive's termination of
employment with the Company, a lump sum cash payment in an amount equal to the
present value (determined at the discount rate set forth in subparagraph (ii)
hereof), of fifty percent (50%) of the payments that would have been made to the
Executive under Section 3(b) hereof if the Executive had continued working for
the Company for a period of eighteen months following the termination of his
employment and had earned an annual bonus payment for each fiscal year
calculated, (x) in case of a termination occurring during fiscal year ending
December 31, 1997 in the amount of $30,000 per annum, and (y) in the case of a
termination occurring during any fiscal year ending December 31, 1998 through
2001, determined by the annual bonus payment based on the intermediate "Revenue
Target" for the fiscal year in which the termination occurs as set forth in
Schedule 3; and
(B) the Company shall pay to the Executive in cash fifty percent (50%)
of the bonus payments that would have been paid to Executive under Section 3(b)
hereof if the Executive had continued working for the Company during such
eighteen month period and had earned an annual bonus payment for each fiscal
year calculated, as set forth in clause (A) hereof, such bonus payments to be
payable at the times specified in the last sentence of Section 3(b) hereof;
provided, however, that if the termination is pursuant to Section 6(a)(i) where
the termination occurs within twelve (12) months following a "Change in Control"
or pursuant to Section 6(a)(ii)(C), the amount and duration of the payments
under this Section 6(b)(iii)(A) and (B) shall be adjusted (and, if the remaining
unexpired Term (including the Renewal Terms) is greater than eighteen months,
shall be increased) as follows, subject to the provisions of Section 6(b)(iv):
the payments shall be calculated to compensate the Executive as if the Executive
had continued working for the Company
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during the remaining unexpired Term (including the Renewal Terms) and was
entitled to the annual bonus calculated as set forth above based on the year in
which termination occurs, for each fiscal year during such period, and all
references in clauses (A) and (B) to "eighteen months" shall be changed to "the
remaining unexpired Term (including the Renewal Terms)";
(iv) In the event that a termination of employment occurs pursuant to
Section 6(a)(i) where the termination occurs within twelve (12) months following
a "Change in Control," or pursuant to 6(a)(ii)(C) of this Agreement, in either
case with less than one year remaining in the unexpired Term (including, for
these purposes, the Renewal Periods), then in lieu of the payments and benefits
which the Company shall pay or provide pursuant to Section 6(b) (or as otherwise
specified herein), the Company shall pay to the Executive (or his estate, as
applicable), within thirty (30) days following his termination of employment,
the following severance payments:
(A) the amounts set forth in Section 6(b)(i); plus
(B) a lump sum cash payment in an amount equal to one year of
the Executive's salary at the base salary in effect as of his
termination as set forth in Section 3(a); plus
(C) a lump sum cash payment in an amount equal to one hundred
percent (100%) of the annual bonus payment that would have been paid to
the Executive had he continued working for the Company for a one year
period following the date of termination of his employment, calculated
as provided in clauses (x) and (y) of Section 6(b)(iii)(A) hereof.
(c) Option Treatment on Permitted Termination. On a Permitted
Termination, the Executive shall have a period of 30 days thereafter to exercise
all vested Options. All non-vested Options shall become null and void upon any
such termination of employment.
(d) Stipulation. The Company and the Executive hereby stipulate that
the damages which may be incurred by the Executive following any termination of
employment pursuant to Section 6(a) are not capable of accurate measurement as
of the date of this Agreement and that the payments and benefits contemplated by
Section 6(b) constitute reasonable damages under the circumstances and shall be
payable without any requirement of proof of actual damage and without regard to
the Executive's efforts, if any, to mitigate damages.
Section 7. Termination without Additional Company Liability.
In the event that the Executive's employment with the Company shall
terminate during the Term on account of:
(a) Cause. The discharge of the Executive for "cause" which, for
purposes of this Agreement, shall mean: (i) fraudulent or dishonest action by
the Executive in the performance of his duties under this Agreement; (ii) the
willful continued failure by the Executive to substantially perform his duties
hereunder or his willful misconduct that causes material harm to the Company
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or the Executive's failure to comply with the rules and policies of the Company
disseminated from time to time, which is not cured within 15 business days of
the Company's written notice specifying the alleged breach with reasonable
particularity; (iii) the conviction of, or plea of nolo contendere by, the
Executive of any felony involving an act of moral turpitude or otherwise
relating directly or indirectly to the business or reputation of the Company; or
(iv) drug or other substance abuse that interferes in any material respects with
the performance of the Executive's duties under this Agreement;
(b) Voluntary Resignation. The Executive's voluntary resignation from
employment with the Company for reasons other than those specified in Section
6(a)(ii);
(c) Death. The Executive's death; or
(d) Disability. A determination by the Company that the Executive is
incapacitated or disabled and as a result thereof is unable to perform the
Executive's material duties hereunder for six consecutive months, or an
aggregate of six months during any nine consecutive month period;
then the Company shall have no further obligations under this
Agreement, other than (i) the payment to the Executive (or, in the event of the
Executive's death, to his estate) of (A) the Executive's earned but unpaid
salary as of the date of termination of the Executive's employment; and (B) in
the event of a termination on account of the Executive's death or disability,
the Executive's earned but unpaid bonus as of the date of the Executive's
termination, pro-rated for the fiscal year during which the Executive's
termination occurs (based on the number of days the Executive was in the
Company's employ during such fiscal year) if the date of termination is other
than the last day of a fiscal year; and (ii) the provision of such other
insurance (including COBRA) and disability benefits, if any, to which the
Executive is entitled as a former employee under this Agreement and the employee
benefit plans and programs and compensation plans and programs maintained by, or
covering employees of, the Company. All vested Options issued under Section 3(c)
hereof shall survive and may be exercised for a period of 30 days after such
termination, or 90 days in the event of the Executive's death or disability
unless earlier expiring pursuant to their terms. All non-vested Options shall
become null and void upon any such termination of this Agreement.
Section 8. Severance at Expiration of Term.
In the event that the Executive has extended the Term for two Renewal
Terms and, at the expiration of the second Renewal Term, the Executive's
employment is not continued by the Company for any reason, then the Company
shall pay to the Executive (or the Executive's estate, as applicable) the
Executive's earned but unpaid salary as of the date of the termination of the
Executive's employment and the Executive's earned but unpaid bonus as of the
date of the Executive's termination, pro-rated for the fiscal year during which
the Executive's termination occurs (based on the number of days the Executive
was in the Company's employ during such fiscal year) if the date of termination
is other than the last day of a fiscal year; shall provide to the Executive all
of the insurance (including COBRA) and disability benefits, if any, to which the
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Executive is entitled as a former employee under this Agreement, and the
employee benefit plans and programs and compensation plans and programs
maintained by, or covering employees of, the Company; and, in addition, shall
pay the Executive the severance payments set forth in Section 6(b)(iv) of this
Agreement. All vested Options issued under Section 3(c) hereof shall survive and
may be exercised for a period of 30 days after such termination, unless earlier
expiring pursuant to their terms. All non-vested Options shall become null and
void upon such severance.
Section 9. Covenants.
(a) Non-competition.
(i) In General. (A) The Executive hereby covenants and agrees
that, during the Term and for a period of two (2) years following the
termination of his employment, he will not, without the written consent
of the Company, engage or be otherwise directly or indirectly
interested in any way, whether as an officer, director, stockholder
(other than a stockholder of less than 2% of the stock of a publicly
traded company), partner, member, principal, agent, employee,
consultant, owner, or otherwise, in any business in the United States
which is in direct competition with the business conducted by the
Company.
(B) The Executive further covenants and agrees that,
during the Term and for a period of two (2) years following
the termination of his employment, whether upon expiration of
the Term or otherwise, he will not, directly or indirectly,
for his benefit or for the benefit of any other person, firm
or entity, (x) contact or solicit the business of any
customers or prospective customers (namely, prospects whose
business was actively solicited by the Company) for purposes
in direct competition with the business conducted by the
Company; or (y) cause or induce any customer, potential
customer, employee or consultant to terminate or fail to
continue a relationship with the Company. For purposes hereof,
all references to customers and prospective customers shall
mean those who were customers or prospective customers at any
time during the twelve (12) months prior to the occurrence of
any of the activities described in clause (x) or (y) of this
Section 9(a)(i)(B).
(ii) Exceptions.
(A) In the event that the Executive's employment is
terminated on account of disability as provided in Section
7(d) of this Agreement, this Section 9(a) shall not prevent
the Executive from accepting any position or performing any
services if (1) he first offers, by written notice, to accept
a similar position with, or perform similar services for, the
Company on substantially the same terms and conditions and (2)
the Company declines to accept such offer within ten (10) days
after such notice is given.
(B) The Company understands that the Executive owns
an equity interest in Pseudo Programs, Inc. ("PPI") and serves
on the Board of Directors of PPI and agrees that such business
interest and activities may continue during and after the Term
and shall not be deemed to violate the provisions of Section
9(a) hereof, so long as the business of PPI does not
materially
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change in such a way so as to compete directly with the
business conducted by the Company (in which event the
Executive will resign from the Board of Directors of PPI as
promptly as practicable).
(b) Restrictions on Offers of Employment. The Executive covenants and
agrees that during the Term and for a period of one (1) year after the
termination of his employment, whether upon expiration of the Term or otherwise,
the Executive will not directly or indirectly, for his benefit or for the
benefit of any other person, firm or entity, solicit or offer employment to or
employ persons who at termination were, or at any time during the preceding six
(6) months prior thereto had been, known to be in the employ of the Company,
without the Company's written consent which can be withheld within the Company's
sole discretion.
Section 10. Confidentiality; Proprietary Information.
(a) Unless he obtains the prior written consent of the Company (which
consent shall not be unreasonably withheld), the Executive shall keep
confidential and shall refrain from using for the benefit of any person or
entity other than the Company or any entity which is a subsidiary of the
Company, any material document or information obtained from the Company in the
course of his employment concerning its properties, operations or business
(unless such document or information is readily ascertainable from public or
published information or trade sources or has otherwise been made available to
the public through no fault of his own) until the same ceases to be material (or
becomes so ascertainable or available); provided, however, that nothing in this
Section 10 shall prevent the Executive, with or without the Company's consent,
from participating in or disclosing documents or information in connection with
any judicial or administrative investigation, inquiry or proceeding to the
extent that such participation or disclosure is required under applicable law.
(b) The Executive acknowledges that during the course of his employment
with the Company he may develop or otherwise acquire papers, files or other
records, whether in human or machine readable form, involving or relating to
confidential or secret processes, formulas, discoveries, inventions, machinery,
plans, design information of any kind, devices, material, research, new product
development, customers or customer lists. All such papers, files, disks, and
other records shall be the exclusive property of the Company and shall, together
with any and all copies thereof, be returned to the Company upon Executive's
termination of employment.
Section 11. Injunctive Relief.
The Executive agrees that his violation or threatened violation of any
of the provisions of Sections 9 and 10 of this Agreement shall cause immediate
and irreparable harm to the Company. In the event of any breach or threatened
breach of said provisions, the Executive consents to the entry of preliminary
and permanent injunctions by a court of competent jurisdiction prohibiting such
party from any violation or threatened violation of these provisions and
compelling the Executive to comply with these provisions. This Section 11 shall
not affect or limit, and the injunctive relief provided in this Section 11 shall
be in addition to, any other remedies available to the Company at law or in
equity. In the event an injunction is issued against any such conduct by the
Executive, the
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period referred to in Section 9 of this Agreement shall continue until the later
of the expiration of the period set forth therein or one (1) month from the date
a final judgment enforcing such provisions is entered and the time for appeal
has lapsed.
Section 12. Indemnification and Attorneys' Fees.
The Company shall provide the Executive with payment of legal fees and
indemnification for claims and liabilities arising out of or related to his
employment with the Company to the maximum extent permitted by the New York
Limited Liability Company Law. If the Executive is the prevailing party in an
action, suit, or proceeding to enforce the terms of this Agreement, the Company
shall indemnify and hold the Executive harmless against reasonable costs,
including legal fees and expenses, incurred by him in connection with or arising
out of any such action, suit, or proceeding.
Section 13. Survival of Covenants.
The covenants and agreements of the Executive and the Company as set
forth in Sections 9, 10, 11, and 12 of this Agreement survive any termination of
this Agreement, except as otherwise expressly provided.
Section 14. Applicable Law.
This Agreement shall in all respects be construed and interpreted in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York applicable to contracts executed and to be performed
wholly within such State. Each party hereby (a) consents to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York and Supreme Court of the State of New York in the County of New York in
any action relating to or arising out of this Agreement, (b) agrees that any
process in any action commenced in such court under this Agreement may be served
upon the Executive personally, by certified or registered mail, return receipt
requested, or by an overnight courier service which obtains evidence of
delivery, with the same full force and effect as if personally served upon the
Executive in New York City in addition to any other method of service permitted
by law, and (c) waives any claim that the jurisdiction of any such tribunal is
not a convenient forum for any such action and any defense of lack of in
personam jurisdiction with respect thereto.
Section 15. Notices.
All notices provided for in this Agreement shall be in writing signed
by the party giving such notice, and delivered personally or sent by overnight
courier, mail or messenger against receipt thereof or sent by registered or
certified mail, return receipt requested, or by facsimile transmission or
similar means of communication if receipt is confirmed or if transmission of
such notice is confirmed by mail as provided in this Section 15. Notices shall
be effective when received and shall in any event be deemed to have been
received and to be effective (i) on the date of personal delivery
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or telecopy or, (ii) if sent by certified or registered mail, return receipt
requested, on the fifth (5th) business day after the date of mailing, or (iii)
if sent by overnight courier, on the first business day following the date of
deposit with the courier. Notices shall be sent to the parties at their
respective addresses set forth at the beginning of this Agreement or by
telecopier, to the Company at (212) 780-6075 or to the Executive at (212)
539-1784. Notices to the Company shall be address to the attention of the person
executing this Agreement on behalf of the Company. Either party may, by like
notice, change the address, person, or telecopier number to which notice shall
be sent.
Section 16. Miscellaneous.
(a) Severance Payments. The severance and other payments and benefits
to which the Executive is entitled under Sections 6, 7 and 8 hereof constitute
the only compensation to which the Executive is entitled in the event of the
termination of his employment with the Company.
(b) Entire Agreement. This Agreement together with the confidentiality
provisions of the Company's Third Amended and Restated Operating Agreement
constitutes the entire agreement of the Company and the Executive as to the
subject matter hereof, superseding all prior written and prior or
contemporaneous oral understanding or agreements, including any previous
employment agreements, or understandings with respect to the subject matter
covered in this Agreement. This Agreement may not be modified or amended, nor
may any right be waived, except by a writing which expressly refers to this
Agreement, states that it is intended to be a modification, amendment, or waiver
and is signed by both parties in the case of a modification or amendment or by
the party granting the waiver. No course of conduct or dealing between the
parties and no custom or trade usage shall be relied upon to vary the terms of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
(c) Assignment: Parties in Interest. This Agreement and the rights and
obligations of the parties hereto shall bind and inure to the benefit of the
Executive and his legal representatives and heirs and the Company and any
successor or successors of the Company by reorganization, merger, or
consolidation and any assignee of all or substantially all of its business and
properties, but, except as to any such legal representatives or heirs of the
Executive or successor or assignee of the Company, neither this Agreement nor
any rights or benefits hereunder may be assigned by the Company or the
Executive. Nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
(d) Partial Invalidity.
(i) If any term, covenant or condition of this Agreement or
the application thereof to any party or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement,
or the application of such term, covenant or condition to parties or
circumstances other
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<PAGE> 14
than those as to which it is held invalid or unenforceable, shall not
be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent
permitted by law, and any court having jurisdiction may reduce the
scope of any provision of this Agreement so that it complies with
applicable law.
(ii) In addition to, and not in limitation of, the
provisions of Section 1 6(d)(i) of this Agreement, the parties
agree that the restrictive covenant contained in Section 9(a)
of this Agreement is reasonable, both in time and geographical
scope, and in Section 9(b) is reasonable as to time, in order
to protect the Company and its business. The parties further
agree that such restrictive covenant is a material inducement
for the Company's entering into this Agreement and that the
Company would not execute this Agreement without the inclusion
of such covenant. The parties hereby agree that if any court
or other tribunal of competent jurisdiction determines that
the restrictive covenant contained herein is unenforceable,
then such restrictive covenant shall be deemed to be modified
to the maximum legally permissible time, geographical area,
and scope in accordance with the determination by the court or
other tribunal and shall remain in full force and effect.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not affect in any way the
construction or interpretation of this Agreement.
(f) Counterparts. This Agreement may be executed by either of
the parties hereto in counterparts, each of which shall be deemed to be
an original, but all such counterparts shall together constitute one
and the same instrument.
(g) Acknowledgment. The Executive acknowledges that he has had
the opportunity to be represented by separate counsel in connection
with the negotiation, execution and delivery of this Agreement and has
consulted with such advisers as he has deemed appropriate in connection
with this Agreement.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
JUPITER COMMUNICATIONS, LLC
By: /s/ Kurt Abrahamson /s/ Eugene DeRose
------------------- -----------------
Name: Kurt Abrahamson Eugene DeRose
Title: President and CEO
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SCHEDULE 3
Minimum Salary Payable
<TABLE>
<CAPTION>
----------------------- -------------------- ------------------- ---------------------
Fiscal Years ending
December 31, 1997 and Fiscal Year ending Fiscal Year ending Fiscal Year ending
December 31, 1998 December 31, 1999 December 31, 2000 December 31, 2001
----------------------- -------------------- ------------------- ---------------------
<S> <C> <C> <C>
$165,000 $182,500 $202,500 $225,000
----------------------- -------------------- ------------------- ---------------------
</TABLE>
Bonus Payable*
<TABLE>
<CAPTION>
Fiscal Year ending Fiscal Year ending Fiscal Year ending Fiscal Year ending
December 31, 1998 December 31, 1999 December 31, 2000 December 31, 2001
------------------ ------------------ ------------------ ------------------
Revenue Revenue Revenue
Revenue Target Bonus Target Bonus Target Bonus Target Bonus
- -------------- ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
$13MM** $50,000 $20MM** $67,500 $28MM** $85,000 $37MM** $102,500
$16MM*** $100,000 $23MM*** $135,000 $31MM*** $170,000 $40MM*** $205,000
$18MM $150,000 $26MM $202,500 $34MM $255,000 $43MM $307,500
</TABLE>
* Fiscal Year ending December 31, 1997 Bonus: $30,000
** Minimum Revenue Targets for purposes of Section 3(b)(ii).
*** Intermediate Revenue Targets for purposes of Section 6(b)(iii).
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<PAGE> 17
SCHEDULE 4(a)
Jupiter Communications, LLC
Schedule of Benefits
Standard Company Benefits:
Medical Insurance: Oxford (Freedom Plan)
Dental Insurance: Oxford (Premium Plan)
Long Term Disability: First Fortis, providing benefits equal to 60% of salary
Short Term Disability: First Fortis
Life Insurance: First Fortis, in an amount equal to $15,000
AD&D: First Fortis
401(k) plan, with Company matching 25% of contributions.
Additional Executive Benefits:
Supplemental Long Term Disability coverage, from The Equitable.
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<PAGE> 1
Exhibit 10.2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of October 22,
1997, between KURT ABRAHAMSON, an individual residing at 139 Baltic Street,
Brooklyn, New York 11201 (the "Executive"), and Jupiter Communications, LLC, a
New York limited liability company having its principal office located at 627
Broadway, New York, New York 10012 (the "Company").
W I T N E S S E T H:
WHEREAS, the Executive is currently serving as President and Chief
Operating Officer of the Company; and
WHEREAS, the Company desires to secure for itself the continued
availability of the Executive's services; and
WHEREAS, for purposes of securing for the Company the Executive's
services, the managing members of the Company (the "Managing Members") have
approved and authorized the execution of this Agreement with the Executive on
the terms and conditions set forth herein; and
WHEREAS, the Company and the Executive desire to provide for the
employment of the Executive by the Company on the terms set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises contained in this Agreement,
IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Employment and Duties.
(a) Subject to the provisions of this Agreement, the Company hereby
employs the Executive as its President and Chief Operating Officer and the
Executive hereby accepts such employment. Subject to the provisions of this
Agreement and the authority of the Managing Members, the Executive shall have
full duties and responsibilities, with the concomitant powers and authority,
consistent with the Executive's position as President and Chief Operating
Officer, including, without limitation, the direction of finance, marketing, and
administrative operations of the Company; the oversight (in collaboration with
the Chairman and Chief Executive Officer of the Company) of the Company's
consulting and research business, reviewing all consulting assignments,
preparing all proposals, and supervising project management staff; and such
additional duties as are consistent with the Executive's experience and
background as the Managing Members shall determine from time to time. The
Company shall use its best efforts to ensure that the Executive continues to be
a Managing Member during the term of this Agreement.
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<PAGE> 2
(b) The Executive shall devote substantially all of his business time,
energies, and attention to the performance of the duties specified in this
Agreement. Subject to the foregoing and to the limitations set forth in Section
9(a) of this Agreement, the Company acknowledges that the Executive may engage
in personal business and investment activities for his own account, provided
that such activities do not interfere with the performance of the Executive's
duties under this Agreement. It is expressly understood and agreed that the
Executive's continuing to serve on any boards and committees on which he is
serving or with which he is otherwise associated immediately preceding the date
hereof, or his service on any other boards and committees of which the Company
has knowledge and does not object, in writing, within thirty (30) days after
first becoming aware of such service, shall not be deemed to interfere with the
performance of the Executive's services to the Company, provided that such
service on boards or committees shall be in compliance with the provisions of
Section 9(a) hereof, as qualified by Section 9(a)(ii)(C).
(c) The Executive's principal place of employment shall be at the
Company's executive offices located at the address first set forth above, or at
such other location as the Company and the Executive may mutually agree upon. It
is hereby mutually agreed that if the Company opens an office in the San
Francisco, California metropolitan area, Executive will be assigned to such
office.
(d) The Executive shall at all times, and to the best of his ability,
use his best efforts to promote and advance the best interests of the Company
and to perform all of his obligations under this Agreement.
Section 2. Term.
The initial term of this Agreement and the Executive's employment by
the Company hereunder shall commence as of the date of this Agreement and shall
continue, subject to earlier termination in accordance with the provisions of
this Agreement, until December 31, 1999 (the "Initial Term"). Upon ninety (90)
days written notice to the Company prior to the expiration of the Initial Term
or the first Renewal-Term (as hereinafter defined), the Executive shall have the
right to extend the term of this Agreement for an additional one-year period
(the "Renewal Term"). The Executive is entitled to up to two (2) Renewal Terms.
The Term of this Agreement shall include the Initial Term and all Renewal Terms.
Section 3. Compensation.
(a) Salary.
(i) For all of the services to be rendered by the Executive
hereunder, the Company shall pay to the Executive a salary at an annual
rate equal to One Hundred Fifty-Five Thousand Dollars ($155,000) per
annum, subject to adjustment as provided herein. The annual salary
payable under this Section 3(a) shall be paid in approximately equal
installments in accordance with the Company's customary payroll
procedures and withholding obligations.
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<PAGE> 3
(ii) During the 60-day period preceding the end of each fiscal
year during the Term, commencing with the fiscal year ending December
31, 1998, the parties will negotiate in good faith to increase
Executive's salary for the succeeding fiscal year so that Executive's
total cash compensation is substantially the same as the total cash
compensation paid by companies comparable to the Company to executives
with experience and responsibilities comparable to the Executive's;
provided, however, that such salary levels shall not be lower than
those set forth on Schedule 3 attached hereto and made a part hereof;
provided, further, (a) that if a "Minimum Revenue Target" (as set forth
on Schedule 3 hereof) is not achieved for a fiscal year during the term
hereof, then the Executive's salary for the succeeding fiscal year
shall not be increased without the consent of Gartner Group, Inc.
("Gartner"), and (b) in no event shall the salary for any fiscal year
be increased above the respective amount set forth in Schedule 3
without Gartner's approval. The salary levels agreed to pursuant to the
preceding sentence will become effective as of the commencement of the
upcoming fiscal year. In no event shall the Executive's initial salary
or any increased salary be reduced absent mutual agreement of the
parties.
(b) Bonus.
In addition to the salary provided under Section 3(a) of this
Agreement, the Executive shall receive a bonus for each fiscal year of the
Company as follows: (i) the amount of Thirty Thousand Dollars ($30,000) for the
fiscal year ending December 31, 1997, and (ii) for each fiscal year thereafter,
the amount indicated on Schedule 3 attached hereto and made a part hereof, based
on the attainment of the "Revenue Targets" set forth on such Schedule 3. The
"Revenue Targets" may be increased or reduced from time to time if agreed in
writing by the Company and the Executive, provided that any such adjustments
shall be approved by Gartner. A "Revenue Target" shall be attained if the
"Adjusted Gross Revenues" (as hereinafter defined) of the Company meets or
exceeds the indicated amount. As used herein, "Adjusted Gross Revenues" shall
mean gross revenues of the Company less the sum of all write-offs taken, or
reserves created, for bad debts during such fiscal year. All computations of
Adjusted Gross Revenues hereunder shall be made by the Company in accordance
with generally accepted accounting principles, consistently applied. In the
event that the Executive is in the Company's employ for less than a full fiscal
year, and is entitled to a bonus for that year as provided in this Agreement,
then the bonus payable for such year shall be pro-rated. The bonus shall be paid
in cash within ninety (90) days following the end of the fiscal year for which
such bonus is payable.
(c) Options.
(i) The Managing Members of the Company shall have the right
to cause the Company to grant to the Executive at any time or from time
to time options to purchase additional units of membership interests in
the Company (the "Options") in such amounts and on such terms as the
Managing Members shall determine, with the approval of Gartner;
provided, however, that Gartner's approval shall not be required for
the issuance of Options to the Executive (A) in an amount not to exceed
the number of Options granted to the most senior executive or employee
of the Company who has received Options of the Company ("Other
Options") (exclusive of "one-time"
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<PAGE> 4
grants of Options issued in connection with the initial hiring of an executive)
and (B) on terms no more favorable than the Other Options.
(d) All references in this Agreement to required consents or approvals
by Gartner shall only apply so long as Gartner continues to have a membership
interest in the Company with a sharing ratio (as defined in the Company's Third
Amended and Restated Operating Agreement) of no less than 16%.
Section 4. Benefits.
(a) Employee Benefits. Except as otherwise provided in this Agreement,
the Executive shall be treated as an executive and an employee and shall have
the right to participate in and receive benefits under life, health (including
hospitalization, medical, and major medical), dental, accident, and long term
disability insurance plans, pension, profit sharing, incentive compensation
plans or programs (whether or not employee benefit plans or programs), and any
stock option and appreciation rights plan, employee stock ownership plan, and
restricted stock plan, as may from time to time be maintained by, or cover
employees or executives of, the Company, in accordance with the terms and
conditions of such employee benefit plans and programs and compensation plans
and programs and with the Company's customary practices. The benefits and
entitlements which the Company currently provides to its executives are
described on Schedule 4(a) hereto.
(b) Expenses. The Executive is authorized to incur reasonable expenses
for promoting the business of the Company and as may be reasonably necessary to
enable the Executive to perform his duties hereunder including, without
limitation, expenses for entertainment, travel, and similar items. The Company
shall pay or reimburse the Executive for such expenses after the presentation by
the Executive, from time to time, of itemized accounts of such expenditures in
the form then required by the Company for such accounting. Payments or
reimbursements will be made within the time period in which the Company
routinely makes such payments or reimbursements to its employees, but in no
event later than thirty (30) days after the submission of itemized accounts. The
Company shall provide the Executive with a credit card and the Executive shall
be entitled to the use of such card for the Company's business.
(c) Electronic Equipment. The Company shall purchase or lease for the
Executive's exclusive use and pay or reimburse the Executive for the payment of
all charges relating to (i) a personal computer for Executive's use outside of
the Company's offices, (ii) a cellular telephone, and (iii) a beeper. Such
personal computer, cellular telephone, and beeper shall be selected by the
Executive.
(d) Working Facilities. The Company shall provide the Executive at the
Executive's principal place of employment with a private office, secretarial
services, and other support services, equipment, and facilities suitable to the
Executive's position with the Company and necessary or appropriate in connection
with the performance of the Executive's assigned duties under this Agreement.
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<PAGE> 5
(e) Vacation. The Executive shall be entitled to four (4) weeks of paid
vacation each year, to be scheduled on reasonable notice to the Company.
Section 5. Representations and Warranties of the Executive.
The Executive represents and warrants that he (a) is subject to no
currently existing agreement which would interfere with his entering into this
Agreement; (b) has made no commitment of any kind inconsistent with the
provisions of this Agreement and his duties hereunder; and (c) is under no
disability of any kind which would prevent him from entering into this Agreement
and performing all of his obligations hereunder.
Section 6. Termination of Employment with Company Liability.
(a) Permitted Termination. In the event that Executive's employment
with the Company shall terminate during the Term on account of:
(i) The discharge of the Executive by the Company for any
reason other than for "cause" (as defined in Section 7(a) hereof); or
(ii) The Executive's voluntary resignation from employment
with the Company within ninety (90) days of the occurrence of any of
the following:
(A) If the Company, without the Executive's consent thereto or as
otherwise permitted herein, (x) materially changes the Executive's duties,
responsibilities, authority, or positions as provided in this Agreement such
that the change represents a demotion to a position below "Senior Management"
(as herein defined), or (y) reduces Executive's base salary or reduces the bonus
payable to Executive below the amounts set forth in Section 3(a) or 3(b) (as
applicable) or Schedule 3 hereof, other than across the board reductions
effectuated with respect to senior level executives and employees as a result of
fiscal constraints; or
(B) If the Executive ceases to be a Managing Member without the
Executive's consent; or
(C) If the Company experiences a Change in Control;
(each of the foregoing, a "Permitted Termination"), then the Company shall
provide the benefits and pay to the Executive (or his estate, as applicable) the
amounts set forth under Section 6(b) of this Agreement; provided. however. that
if the Company in good faith disputes that Section 6(a)(ii) applied to a
resignation by the Executive, the Company shall not be obliged to provide to the
Executive the amounts set forth under Section 6(b) of this Agreement until
resolution has been reached on whether such resignation falls within Section
6(a)(ii). For purposes hereof, a "Change in Control" shall mean (i) the
acquisition by any individual, entity or group (within the meaning of
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<PAGE> 6
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of membership interests (or
equivalent equity securities should the Company not be a limited liability
company) of the Company where such acquisition causes such Person to own
membership interests (or such equivalent equity securities) having a sharing
ratio (or equivalent equity interest) equal to or greater than 50%; provided
that such Person does not include the Executive, Eugene DeRose or Gartner; or
(ii) the approval by the members of the Company of a reorganization, merger or
consolidation, or sale or other disposition of all or substantially all of the
assets of the Company; provided, however, that if the Executive consents to, or
abstains from, any vote with regard to any such change, then such change shall
not be deemed to be a "Change in Control". For purposes hereof, "Senior
Management" shall mean the positions of Chairman and Chief Executive Officer or
President and Chief Operating Officer or senior executive positions of
equivalent responsibility and authority.
(b) Payments on Permitted Termination. Upon termination of the
Executive's employment with the Company under circumstances described in Section
6(a) of this Agreement, and subject to the provisions of such Section 6(a), the
Company shall pay and provide to the Executive (or, in the event of the
Executive's death, to the Executive's estate):
(i) the Executive's earned but unpaid salary as of the date of
termination of the Executive's employment with the Company, along with
all outstanding amounts due to the Executive under this Agreement
(including reimbursement of all business expenses); and except as
provided in Section 6(b)(ii), the provision of such other insurance
(including COBRA) and disability benefits, if any, to which the
Executive is entitled as a former employee under this Agreement and the
employee benefit plans and programs and compensation plans and programs
maintained by, or covering employees of, the Company.
(ii) in lieu of any monetary payments to which the Executive
may be entitled under any severance pay plan, program, or policy, the
following amounts:
(A) within thirty (30) days following the Executive's
termination of employment with the Company, a lump sum cash payment, in
an amount equal to the present value of fifty percent (50%) of the
salary that the Executive would have earned at the rate in effect as of
the date of termination (in accordance with Section 3(a)) if the
Executive had continued working for the Company for a period of
eighteen months following the date of termination at the same annual
rate, where such present value is to be determined using a discount
rate of six percent (6%) per annum, compounded monthly (or the
compounding period corresponding to the Company's regular payroll
periods with respect to its officers, if not monthly); and
(B) the Company shall continue to pay Executive fifty percent
(50%) of the salary that Executive would have earned at the rate in
effect as of the date of termination (in accordance with Section 3(a)),
if the Executive had continued working for the Company during such
eighteen
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<PAGE> 7
month period at the same annual rate, such salary to be paid in accordance with
the Company's normal payroll procedures and withholding obligations;
such payments pursuant to clauses (A) and (B) above to be paid in lieu of all
other payments of salary provided for under this Agreement in respect of the
period following any such termination hereof; provided, however, that if the
termination is pursuant to Section 6(a)(i) where the termination occurs within
twelve (12) months following a "Change in Control" or pursuant to Section
6(a)(ii)(C), the amount and duration of the payments under this Section
6(b)(ii)(A) and (B) shall be adjusted (and, if the remaining unexpired Term
(including the Renewal Terms) is greater than eighteen months, shall be
increased) as follows, subject to the provisions of Section 6(b)(iv): the
payments shall be calculated to compensate the Executive as if the Executive had
continued working for the Company during the remaining unexpired Term (including
the Renewal Terms) at the annual salary rate set forth above and all references
in clauses (A) and (B) to "eighteen months" shall be changed to "the remaining
unexpired Term (including the Renewal Terms)";
(iii) the following amounts:
(A) within thirty (30) days following Executive's termination of
employment with the Company, a lump sum cash payment in an amount equal to the
present value (determined at the discount rate set forth in subparagraph (ii)
hereof), of fifty percent (50%) of the payments that would have been made to the
Executive under Section 3(b) hereof if the Executive had continued working for
the Company for a period of eighteen months following the termination of his
employment and had earned an annual bonus payment for each fiscal year
calculated, (x) in case of a termination occurring during fiscal year ending
December 31, 1997 in the amount of $30,000 per annum, and (y) in the case of a
termination occurring during any fiscal year ending December 31, 1 998 through
2001, determined by the annual bonus payment based on the intermediate "Revenue
Target" for the fiscal year in which the termination occurs as set forth in
Schedule 3; and
(B) the Company shall pay to the Executive in cash fifty percent (50%)
of the bonus payments that would have been paid to Executive under Section 3(b)
hereof if the Executive had continued working for the Company during such
eighteen month period and had earned an annual bonus payment for each fiscal
year calculated, as set forth in clause (A) hereof, such bonus payments to be
payable at the times specified in the last sentence of Section 3(b) hereof;
provided, however, that if the termination is pursuant to Section 6(a)(i) where
the termination occurs within twelve (12) months following a "Change in Control"
or pursuant to Section 6(a)(ii)(C), the amount and duration of the payments
under this Section 6(b)(iii)(A) and (B) shall be adjusted (and, if the remaining
unexpired Term (including the Renewal Terms) is greater than eighteen months,
shall be increased) as follows, subject to the provisions of Section 6(b)(iv):
the payments shall be calculated to compensate the Executive as if the Executive
had continued working for the Company during the remaining unexpired Term
(including the Renewal Terms) and was entitled to the annual bonus calculated as
set forth above based on the year in which termination occurs, for each fiscal
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year during such period, and all references in clauses (A) and (B) to "eighteen
months" shall be changed to "the remaining unexpired Term (including the Renewal
Terms)";
(iv) In the event that a termination of employment occurs pursuant to
Section 6(a)(i) where the termination occurs within twelve (12) months following
a "Change in Control," or pursuant to 6(a)(ii)(C) of this Agreement, in either
case with less than one year remaining in the unexpired Term (including, for
these purposes, the Renewal Periods), then in lieu of the payments and benefits
which the Company shall pay or provide pursuant to Section 6(b) (or as otherwise
specified herein), the Company shall pay to the Executive (or his estate, as
applicable), within thirty (30) days following his termination of employment,
the following severance payments:
(A) the amounts set forth in Section 6(b)(i); plus
(B) a lump sum cash payment in an amount equal to one year of
the Executive's salary at the base salary in effect as of his
termination as set forth in Section 3(a); plus
(C) a lump sum cash payment in an amount equal to one hundred
percent (100%) of the annual bonus payment that would have been paid to
the Executive had he continued working for the Company for a one year
period following the date of termination of his employment, calculated
as provided in clauses (x) and (y) of Section 6(b)(iii)(A) hereof.
(c) Option Treatment on Permitted Termination. On a Permitted
Termination, the Executive shall have a period of 30 days thereafter to exercise
all vested Options. All non-vested Options shall become null and void upon any
such termination of employment.
(d) Stipulation. The Company and the Executive hereby stipulate that
the damages which may be incurred by the Executive following any termination of
employment pursuant to Section 6(a) are not capable of accurate measurement as
of the date of this Agreement and that the payments and benefits contemplated by
Section 6(b) constitute reasonable damages under the circumstances and shall be
payable without any requirement of proof of actual damage and without regard to
the Executive's efforts, if any, to mitigate damages.
Section 7. Termination without Additional Company Liability.
In the event that the Executive's employment with the Company shall
terminate during the Term on account of:
(a) Cause. The discharge of the Executive for "cause" which, for
purposes of this Agreement, shall mean: (i) fraudulent or dishonest action by
the Executive in the performance of his duties under this Agreement; (ii) the
willful continued failure by the Executive to substantially perform his duties
hereunder or his willful misconduct that causes material harm to the Company or
the Executive's failure to comply with the rules and policies of the Company
disseminated from time to time, which is not cured within 15 business days of
the Company's written notice specifying
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<PAGE> 9
the alleged breach with reasonable particularity; (iii) the conviction of, or
plea of nolo contendere by, the Executive of any felony involving an act of
moral turpitude or otherwise relating directly or indirectly to the business or
reputation of the Company; or (iv) drug or other substance abuse that interferes
in any material respects with the performance of the Executive's duties under
this Agreement;
(b) Voluntary Resignation. The Executive's voluntary resignation from
employment with the Company for reasons other than those specified in Section
6(a)(ii);
(c) Death. The Executive's death; or
(d) Disability. A determination by the Company that the Executive is
incapacitated or disabled and as a result thereof is unable to perform the
Executive's material duties hereunder for six consecutive months, or an
aggregate of six months during any nine consecutive month period;
then the Company shall have no further obligations under this
Agreement, other than (i) the payment to the Executive (or, in the event of the
Executive's death, to his estate) of (A) the Executive's earned but unpaid
salary as of the date of termination of the Executive's employment; and (B) in
the event of a termination on account of the Executive's death or disability,
the Executive's earned but unpaid bonus as of the date of the Executive's
termination, pro-rated for the fiscal year during which the Executive's
termination occurs (based on the number of days the Executive was in the
Company's employ during such fiscal year) if the date of termination is other
than the last day of a fiscal year; and (ii) the provision of such other
insurance (including COBRA) and disability benefits, if any, to which the
Executive is entitled as a former employee under this Agreement and the employee
benefit plans and programs and compensation plans and programs maintained by, or
covering employees of, the Company. All vested Options issued under Section 3(c)
hereof shall survive and may be exercised for a period of 30 days after such
termination, or 90 days in the event of the Executive's death or disability
unless earlier expiring pursuant to their terms. All non-vested Options shall
become null and void upon any such termination of this Agreement.
Section 8. Severance at Expiration of Term.
In the event that the Executive has extended the Term for two Renewal
Terms and, at the expiration of the second Renewal Term, the Executive's
employment is not continued by the Company for any reason, then the Company
shall pay to the Executive (or the Executive's estate, as applicable) the
Executive's earned but unpaid salary as of the date of the termination of the
Executive's employment and the Executive's earned but unpaid bonus as of the
date of the Executive's termination, pro-rated for the fiscal year during which
the Executive's termination occurs (based on the number of days the Executive
was in the Company's employ during such fiscal year) if the date of termination
is other than the last day of a fiscal year; shall provide to the Executive all
of the insurance (including COBRA) and disability benefits, if any, to which the
Executive is entitled as a former employee under this Agreement, and the
employee benefit plans and programs and compensation plans and programs
maintained by, or covering employees of, the
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<PAGE> 10
Company; and, in addition, shall pay the Executive the severance payments set
forth in Section 6(b)(iv) of this Agreement. All vested Options issued under
Section 3(c) hereof shall survive and may be exercised for a period of 30 days
after such termination, unless earlier expiring pursuant to their terms. All
non-vested Options shall become null and void upon such severance.
Section 9. Covenants.
(a) Non-competition.
(i) In General. (A) The Executive hereby covenants and agrees that,
during the Term and for a period of two (2) years following the termination of
his employment, he will not, without the written consent of the Company, engage
or be otherwise directly or indirectly interested in any way, whether as an
officer, director, stockholder (other than a stockholder of less than 2% of the
stock of a publicly traded company), partner, member, principal, agent,
employee, consultant, owner, or otherwise, in any business in the United States
which is in direct competition with the business conducted by the Company.
(B) The Executive further covenants and agrees that, during the Term
and for a period of two (2) years following the termination of his employment,
whether upon expiration of the Term or otherwise, he will not, directly or
indirectly, for his benefit or for the benefit of any other person, firm or
entity, (x) contact or solicit the business of any customers or prospective
customers (namely, prospects whose business was actively solicited by the
Company) for purposes in direct competition with the business conducted by the
Company; or (y) cause or induce any customer, potential customer, employee or
consultant to terminate or fail to continue a relationship with the Company. For
purposes hereof, all references to customers and prospective customers shall
mean those who were customers or prospective customers at any time during the
twelve (12) months prior to the occurrence of any of the activities described in
clause (x) or (y) of this Section 9(a)(i)(B).
(ii) Exceptions.
(A) In the event that the Executive's employment is terminated
on account of disability as provided in Section 7(d) of this Agreement,
this Section 9(a) shall not prevent the Executive from accepting any
position or performing any services if (1) he first offers, by written
notice, to accept a similar position with, or perform similar services
for, the Company on substantially the same terms and conditions and (2)
the Company declines to accept such offer within ten (10) days after
such notice is given.
(B) The Company understands that the Executive owns an equity
interest in Pseudo Programs, Inc. ("PPI") and agrees that such business
interest and activities may continue during and after the Term and
shall not be deemed to violate the provisions of Section 9(a) hereof,
so long as the business of PPI does not materially change in such a way
so as to compete directly with the business conducted by the Company.
-10-
<PAGE> 11
(b) Restrictions on Offers of Employment. The Executive covenants and
agrees that during the Term and for a period of one (1) year after the
termination of his employment, whether upon expiration of the Term or otherwise,
the Executive will not directly or indirectly, for his benefit or for the
benefit of any other person, firm or entity, solicit or offer employment to or
employ persons who at termination were, or at any time during the preceding six
(6) months prior thereto had been, known to be in the employ of the Company,
without the Company's written consent which can be withheld within the Company's
sole discretion.
Section 10. Confidentiality; Proprietary Information.
(a) Unless he obtains the prior written consent of the Company (which
consent shall not be unreasonably withheld), the Executive shall keep
confidential and shall refrain from using for the benefit of any person or
entity other than the Company or any entity which is a subsidiary of the
Company, any material document or information obtained from the Company in the
course of his employment concerning its properties, operations or business
(unless such document or information is readily ascertainable from public or
published information or trade sources or has otherwise been made available to
the public through no fault of his own) until the same ceases to be material (or
becomes so ascertainable or available); provided, however, that nothing in this
Section 10 shall prevent the Executive, with or without the Company's consent,
from participating in or disclosing documents or information in connection with
any judicial or administrative investigation, inquiry or proceeding to the
extent that such participation or disclosure is required under applicable law.
(b) The Executive acknowledges that during the course of his employment
with the Company he may develop or otherwise acquire papers, files or other
records, whether in human or machine readable form, involving or relating to
confidential or secret processes, formulas, discoveries, inventions, machinery,
plans, design information of any kind, devices, material, research, new product
development, customers or customer lists. All such papers, files, disks, and
other records shall be the exclusive property of the Company and shall, together
with any and all copies thereof, be returned to the Company upon Executive's
termination of employment.
Section 11. Injunctive Relief.
The Executive agrees that his violation or threatened violation of any
of the provisions of Sections 9 and 10 of this Agreement shall cause immediate
and irreparable harm to the Company. In the event of any breach or threatened
breach of said provisions, the Executive consents to the entry of preliminary
and permanent injunctions by a court of competent jurisdiction prohibiting such
party from any violation or threatened violation of these provisions and
compelling the Executive to comply with these provisions. This Section 11 shall
not affect or limit, and the injunctive relief provided in this Section 11 shall
be in addition to, any other remedies available to the Company at law or in
equity. In the event an injunction is issued against any such conduct by the
Executive, the period referred to in Section 9 of this Agreement shall continue
until the later of the expiration of the period set forth therein or one (1)
month from the date a final judgment enforcing such provisions is entered and
the time for appeal has lapsed.
-11-
<PAGE> 12
Section 12. Indemnification and Attorneys' Fees.
The Company shall provide the Executive with payment of legal fees and
indemnification for claims and liabilities arising out of or related to his
employment with the Company to the maximum extent permitted by the New York
Limited Liability Company Law. If the Executive is the prevailing party in an
action, suit, or proceeding to enforce the terms of this Agreement, the Company
shall indemnify and hold the Executive harmless against reasonable costs,
including legal fees and expenses, incurred by him in connection with or arising
out of any such action, suit, or proceeding.
Section 13. Survival of Covenants.
The covenants and agreements of the Executive and the Company as set
forth in Sections 9, 10, 11, and 12 of this Agreement survive any termination of
this Agreement, except as otherwise expressly provided.
Section 14. Applicable Law.
This Agreement shall in all respects be construed and interpreted in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York applicable to contracts executed and to be performed
wholly within such State. Each party hereby (a) consents to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York and Supreme Court of the State of New York in the County of New York in
any action relating to or arising out of this Agreement, (b) agrees that any
process in any action commenced in such court under this Agreement may be served
upon the Executive personally, by certified or registered mail, return receipt
requested, or by an overnight courier service which obtains evidence of
delivery, with the same full force and effect as if personally served upon the
Executive in New York City in addition to any other method of service permitted
by law, and (c) waives any claim that the jurisdiction of any such tribunal is
not a convenient forum for any such action and any defense of lack of in
personam jurisdiction with respect thereto.
Section 15. Notices.
All notices provided for in this Agreement shall be in writing signed
by the party giving such notice, and delivered personally or sent by overnight
courier, mail or messenger against receipt thereof or sent by registered or
certified mail, return receipt requested, or by facsimile transmission or
similar means of communication if receipt is confirmed or if transmission of
such notice is confirmed by mail as provided in this Section 15. Notices shall
be effective when received and shall in any event be deemed to have been
received and to be effective (i) on the date of personal delivery or telecopy
or, (ii) if sent by certified or registered mail, return receipt requested, on
the fifth (5th) business day after the date of mailing, or (iii) if sent by
overnight courier, on the first business day following the date of deposit with
the courier. Notices shall be sent to the parties at their respective addresses
set forth at the beginning of this Agreement or by telecopier, to the Company at
(212) 780-
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<PAGE> 13
6075 or to the Executive at (212) 539-1784. Notices to the Company
shall be address to the attention of the person executing this Agreement on
behalf of the Company. Either party may, by like notice, change the address,
person, or telecopier number to which notice shall be sent.
Section 16. Miscellaneous.
(a) Severance Payments. The severance and other payments and benefits
to which the Executive is entitled under Sections 6, 7 and 8 hereof constitute
the only compensation to which the Executive is entitled in the event of the
termination of his employment with the Company.
(b) Entire Agreement. This Agreement together with the confidentiality
provisions of the Company's Third Amended and Restated Operating Agreement
constitutes the entire agreement of the Company and the Executive as to the
subject matter hereof, superseding all prior written and prior or
contemporaneous oral understanding or agreements, including any previous
employment agreements, or understandings with respect to the subject matter
covered in this Agreement. This Agreement may not be modified or amended, nor
may any right be waived, except by a writing which expressly refers to this
Agreement, states that it is intended to be a modification, amendment, or waiver
and is signed by both parties in the case of a modification or amendment or by
the party granting the waiver. No course of conduct or dealing between the
parties and no custom or trade usage shall be relied upon to vary the terms of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
(c) Assignment; Parties in Interest. This Agreement and the rights and
obligations of the parties hereto shall bind and inure to the benefit of the
Executive and his legal representatives and heirs and the Company and any
successor or successors of the Company by reorganization, merger, or
consolidation and any assignee of all or substantially all of its business and
properties, but, except as to any such legal representatives or heirs of the
Executive or successor or assignee of the Company, neither this Agreement nor
any rights or benefits hereunder may be assigned by the Company or the
Executive. Nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
(d) Partial Invalidity.
(i) If any term, covenant or condition of this Agreement or the
application thereof to any party or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term, covenant or condition to parties or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby and
each term, covenant or condition of this Agreement shall be valid and be
enforced to the fullest extent permitted by law, and any court having
jurisdiction may reduce the scope of any provision of this Agreement so that it
complies with applicable law.
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<PAGE> 14
(ii) In addition to, and not in limitation of, the provisions
of Section l6(d)(i) of this Agreement, the parties agree that the
restrictive covenant contained in Section 9(a) of this Agreement is
reasonable, both in time and geographical scope, and in Section 9(b) is
reasonable as to time, in order to protect the Company and its
business. The parties further agree that such restrictive covenant is a
material inducement for the Company's entering into this Agreement and
that the Company would not execute this Agreement without the inclusion
of such covenant. The parties hereby agree that if any court or other
tribunal of competent jurisdiction determines that the restrictive
covenant contained herein is unenforceable, then such restrictive
covenant shall be deemed to be modified to the maximum legally
permissible time, geographical area, and scope in accordance with the
determination by the court or other tribunal and shall remain in full
force and effect.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not affect in any way the construction or
interpretation of this Agreement.
(f) Counterparts. This Agreement may be executed by either of the
parties hereto in counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
(g) Acknowledgment. The Executive acknowledges that he has had the
opportunity to be represented by separate counsel in connection with the
negotiation, execution and delivery of this Agreement and has consulted with
such advisers as he has deemed appropriate in connection with this Agreement.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
JUPITER COMMUNICATIONS, LLC
By: /s/ Eugene DeRose /s/ Kurt Abrahamson
----------------- -------------------
Name: Eugene DeRose Kurt Abrahamson
Title: CEO
-15-
<PAGE> 16
SCHEDULE 3
Minimum Salary Payable
<TABLE>
<CAPTION>
------------------------- -------------------- ------------------- ----------------------
Fiscal Years ending
December 31, 1997 and Fiscal Year ending Fiscal Year ending Fiscal Year ending
December 31, 1998 December 31, 1999 December 31, 2000 December 31, 2001
------------------------- -------------------- ------------------- ----------------------
<S> <C> <C> <C>
$155,000 $172,500 $192,500 $215,000
------------------------- -------------------- ------------------- ----------------------
</TABLE>
Bonus Payable*
<TABLE>
<CAPTION>
Fiscal Year ending December Fiscal Year ending Fiscal Year ending Fiscal Year ending
31, 1998 December 31, 1999 December 31, 2000 December 31, 2001
- --------------------------- -------------------- -------------------- --------------------
Revenue Revenue Revenue
Revenue Target Bonus Target Bonus Target Bonus Target Bonus
- --------------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$13MM** $50,000 $20MM** $67,500 $28MM** $85,000 $37MM** $102,500
$16MM*** $100,000 $23MM*** $135,000 $31MM*** $170,000 $40MM*** $205,000
$18MM $150,000 $26MM $202,500 $34MM $255,000 $43MM $307,500
</TABLE>
* Fiscal Year ending December 31, 1997 Bonus: $30,000
** Minimum Revenue Targets for purposes of Section 3(b)(ii).
*** Intermediate Revenue Targets for purposes of Section 6(b)(iii).
-16-
<PAGE> 17
SCHEDULE 4(a)
Jupiter Communications, LLC
Schedule of Benefits
Standard Company Benefits:
Medical Insurance: Oxford (Freedom Plan)
Dental Insurance: Oxford (Premium Plan)
Long Term Disability: First Fortis, providing benefits equal to 60% of
salary
Short Term Disability: First Fortis
Life Insurance: First Fortis, in an amount equal to $15,000
AD&D: First Fortis
401(k) plan, with Company matching 25% of contributions.
Additional Executive Benefits:
Supplemental Long Term Disability coverage, from The Equitable.
-17-
<PAGE> 1
Exhibit 10.3
JUPITER COMMUNICATIONS, LLC
1997 OPTION PLAN
SECTION 1. PURPOSE OF THE PLAN.
The purpose of this plan (the "Plan") is to promote the interests of
Jupiter Communications, LLC, a New York limited liability company (the
"Company"), and its Members by permitting the Company to grant options to
purchase Units (as hereinafter defined) in the Company to Key Employees (as
hereinafter defined) of the Company, in order to attract, retain and reward such
persons and strengthen the mutuality of interests between them and the Company.
SECTION 2. ADMINISTRATION.
(a) The Plan shall be administered by a Compensation Committee of the
Managing Members (the "Committee"), consisting of all the Managing Members. A
majority-in-interest of the members of the Committee shall constitute a quorum,
and a majority-in-interest of the Members present at any meeting at which a
quorum is present shall constitute the acts of the Committee. For purposes of
determining a majority-in-interest of the members of the Committee and a
majority-in-interest of the members present at any meeting, the interest of each
member of the Committee who is a Class A Member shall be equal to his Sharing
Ratio on the date of meeting or consent. The interest of each member of the
Committee who is a Class B Designee shall be determined pursuant to Section
7.5(c) of the Second Amended and Restated Operating Agreement of Jupiter
Communications, LLC as amended (such agreement, as the same may be amended,
supplemented, restated or modified from time to time, is referred to herein as
the "Operating Agreement").
(b) Subject to the express provisions of the Plan, the Committee shall
have full authority in its discretion, to determine the individuals to whom, and
the time or times at which, options shall be granted; the number of Units
subject to each option; the option price per Unit; the exercise period of each
option; and the other terms and provisions of the option. Grants of options need
not be identical.
(c) The Committee shall have the authority to adopt, alter and repeal
such rules, guidelines and practices governing the Plan as it shall, from time
to time, deem advisable; to interpret the terms and provisions of the Plan and
any options granted pursuant to the Plan and any agreements relating thereto,
and otherwise to supervise the administration of the Plan.
(d) All decisions made by the Committee pursuant to the provisions of the
Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and Plan participants.
(e) Notwithstanding the foregoing, any grant of an option to a Managing
Member shall be subject to the provisions, if any, of the Operating Agreement.
SECTION 3. UNITS SUBJECT TO PLAN
<PAGE> 2
The Members intend to amend the Second Amended and Restated Operating
Agreement, as amended, to issue Units of the Company to the Members, pro rata,
in proportion to their respective Sharing Ratios as of the date of such
amendment such that the number of Units issued to each Member as of such date
divided by the total number of Units issued to all Members as of such date shall
be equal to his respective Sharing Ratio as of such date. The total number of
Units issued to all Members as of such date pursuant to such amendment shall not
be less than 9,000,000 Units. For purposes of thereafter determining a
majority-in-interest of the members of the Committee and a majority-in-interest
of the members present at any meeting, the interest of each member of the
Committee shall be equal to (a) one hundred percent (100%) multiplied by (b) a
fraction, the numerator of which is the number of Units held by such member on
the date of the meeting or consent and the denominator of which is the total
number of Units outstanding as of such date.
The Committee is authorized to cause the Company to issue options to
acquire 1,590,000 Units to Key Employees, and in the case of Key Employees who
are not Members of the Company, to admit them to the Company as Class B Members
upon exercise of such options, all without the further consent or approval of
the Members. The 1,590,000 Units reserved and available for issuance upon the
exercise of options granted pursuant to the Plan shall be subject to adjustment
as hereinafter provided. Any Units subject to options which for any reason
expire or are terminated unexercised shall again become available for options
under the Plan.
SECTION 4. ELIGIBILITY.
(a) The Committee may, consistent with the purpose of the Plan, grant
options, from time to time, within ten (10) years from the date of adoption of
the Plan by the Company, to Key Employees of the Company and covering such
number of Units as the Committee may determine. Eligible persons may receive
more than one grant of an option under the Plan.
(b) For purposes of the Plan, a Key Employee of the Company shall mean
(i) any employee of the Company or its Affiliates and (ii) any Member of the
Company who receives compensation for services from the Company (A) determined
without regard to the income of the Company or (B) for services deemed to be
performed for the Company in a capacity other than as a Member. An Affiliate of
the Company shall mean any partnership, limited liability company or other
entity, other than the Company, that is designated by the Committee as a
participating employer under the Plan, provided that the Company directly or
indirectly owns at least 50 percent of the capital or profits of such entity or
50 percent of the combined voting power of all classes of stock of such entity.
SECTION 5. OPTIONS.
(a) Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee, in its sole
discretion, shall deem desirable, which shall be evidenced by a Unit option
agreement or instrument of grant (collectively, "option agreement"):
(i) Option Price. The option price per Unit shall be determined by
the Committee at the time of grant but shall be not less than $5.50 per Unit.
2
<PAGE> 3
(ii) Option Term. The term of each option shall be fixed by the
Committee, but no option shall be exercisable more than seven (7) years after
the date the Option is granted.
(iii) Exercisability. Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee. If the Committee provides, in its sole discretion, that any option is
exercisable only in installments, the Committee may waive such installment
exercise provisions at any time at or after grant in whole or in part, based on
such factors as the Committee shall, in its sole discretion, determine.
(iv) Method of Exercise.
(A) Subject to whatever installment exercise provisions apply
pursuant to Paragraph 5(a)(iii) of the Plan, options may be exercised in whole
at any time or in part from time to time by giving written notice of exercise to
the Company specifying the number of Units to be purchased. Such notice shall be
accompanied by payment in full of the purchase price, either by check, note or
such other instrument, securities or property as the Committee may in its sole
discretion accept.
(B) No Units shall be issued until full payment therefor has
been received by the Company. If a personal check is given in payment of the
exercise price, no Units shall be issued to the optionee until the Company's
bank shall have advised the Company that such check has cleared. In the event of
any payment by note or other instrument, the Units shall not be issued until
such note or other instrument shall have been paid in full, and the exercising
optionee shall have no rights as a Member (with respect to such Units) until
such payment is made.
(C) An optionee shall have no rights to distributions or other
rights of a Member with respect to Units subject to an option until (I) the
Company has received full payment, pursuant to the terms of this Paragraph
5(a)(iv), for the Units as to which the option is being exercised (II) in the
case of an optionee who has not previously been admitted as a Member of the
Company, the optionee has adopted and approved in writing all the terms and
provisions of the operating agreement of the Company then in effect and executed
any and all documents that the Managing Members may deem necessary in connection
with the admission of such optionee to the Company as a Class B Member and (III)
if requested, the optionee has given the representation described in Paragraph
9(a) of the Plan.
(v) Non-Transferability of Options. No option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution, and all options shall be exercisable, during the optionee's
lifetime, only by the optionee, or, in the event that the optionee shall be
determined to be incompetent, by his legal representative.
(vi) Termination. Except as expressly provided in Paragraph 5(b) and
Section 6(b) of the Plan, an option shall terminate immediately upon the
optionee's death or termination of Employment for any reason or upon the merger
or consolidation of the Company into any limited liability company, partnership
or corporation or the sale or exchange by the Company of all or substantially
all of the Company's business and assets. Termination of Employment shall mean
(I) termination of employment as an employee of the Company and (II) termination
of the
3
<PAGE> 4
performance of services by a Member for the Company in a case in which the
Member has received compensation for such services from the Company (A)
determined without regard to the income of the Company or (B) deemed to have
been performed for the Company in a capacity other than as a Member.
Notwithstanding anything contained in this Plan, or a related option agreement
to the contrary, in no event shall a Key Employee of the Company who is
terminated for cause have the right to exercise any option or options granted to
such employee under this Plan. For these purposes, the term "terminated for
cause" shall include, without limitation, the termination of an optionee as the
result of a breach of any agreement between the Company or any Affiliate of the
Company and such optionee by such optionee, acts of dishonesty or deliberate
misconduct, dereliction of duty, or any other reason which, in the sole judgment
of the Company or any Affiliate of the Company, as the case may be, makes it
advisable to terminate the Employment of such optionee with the Company or such
Affiliate, as the case may be.
(vii) Restrictions on Transfer of Units. Units issuable upon the
exercise of an option shall be subject to such restrictions as the Committee
may, in its sole discretion, deem necessary or desirable. Any certificate of
beneficial interest for such Units shall bear an appropriate legend setting
forth such transfer restrictions and stating that no transfer in violation of
such transfer restrictions shall be registered on the books of the Company.
(b) The Committee may, in its sole discretion, include any of the
following provisions in the option agreement:
(i) If, at the date of the optionee's death or a termination of the
optionee's Employment as a result of a disability or on retirement or for any
other reason other than cause, a Public Offering Event, as hereinafter defined,
shall have occurred, then the option may be exercised, to the extent exercisable
on the date of death or termination of Employment, during the one (1) year
period following the date of death or the three (3) month period following the
date of termination of Employment, but in no event subsequent to the last day of
the stated term of the option. The term "Public Offering Event" shall mean such
date as the Company or its successor shall have received the proceeds from its
initial public offering of securities pursuant to the Securities Act of 1933, as
amended, or Regulation A thereunder or the Units shall be otherwise registered
pursuant to the Securities Exchange Act of 1934, as amended.
(ii) (A) If at the date of the optionee's death or a termination of
an optionee's Employment as a result of a disability or on retirement or for any
other reason other than cause (such date hereinafter referred to as the
"Termination Date"), a Public Offering Event shall not yet have occurred, then
the Company shall have the right in its sole discretion to purchase such
optionee's option for an amount (the "Purchase Price") equal to the excess, if
any, of (I) the aggregate value, as of the Termination Date, of the Units
subject to the option of such optionee over (II) the aggregate exercise price of
the options for the purchase of such Units. For these purposes, (I) Units
subject to the option of such optionee shall be deemed to be limited to those
Units (x) with respect to which the option was exercisable immediately prior to
the Termination Date and (y) with respect to which the exercise price was less
than the value of such Unit as of the Termination Date and (II) the value of
each Unit as of the Termination Date shall be determined by the Committee in its
sole discretion. Such right of the Company to purchase the optionee's option
shall be exercisable by written notice given to the optionee (or his legal
representative) within ninety (90) days after the Termination Date ("Purchase
Notice"). If the
4
<PAGE> 5
Purchase Notice is not given by the Company as aforesaid, then the option may be
exercised, to the extent exercisable on the Termination Date, within one hundred
eighty (180) days after the Termination Date.
(B) If the Purchase Notice is given pursuant to paragraph
5(b)(ii)(A), then twenty percent (20%) of the Purchase Price payable by the
Company shall be payable by the Company no later than one hundred eighty (180)
days after the Termination Date. The balance of the Purchase Price shall be paid
in five annual installments of sixteen percent (16%) of the Purchase Price
commencing on the first anniversary of the first payment date, together with
interest at a rate determined by the Committee in its sole discretion.
(iii) A Sale Event shall mean the merger of the Company into another
limited liability company, a partnership or a corporation in which the then
existing Managing Members of the Company have an equity interest of less than
thirty percent (30%) or a sale or exchange by the Company of all or
substantially all of its businesses and assets to an entity in which the then
existing Managing Members of the Company have an equity interest of less than
thirty percent (30%). For purposes of this paragraph, a Managing Member shall be
considered as owning the equity interests owned by his spouse, children,
grandchildren, parents and the parents of his spouse. Notwithstanding the
provisions of Paragraph 5(a)(vi) of the Plan, in the event of a Sale Event:
(A) The Committee, at its sole discretion, with respect to an
option which is or would be exercisable as of the effective date of such Sale
Event, shall determine whether such option shall either (I) terminate as of the
effective date of such Sale Event unless exercised prior thereto or (II)
continue in effect in accordance with its terms, in which case such option shall
be amended or deemed to be amended so that the optionee, upon exercise of the
option, shall be entitled to receive in respect of each Unit subject to the
option the same amount and kind of membership interest, stock, securities, cash,
property or other consideration that each holder of a Unit is entitled to
receive in respect of a Unit in the transaction constituting such Sale Event.
(B) The Committee, at its sole discretion, with respect to an
option which is not and would not be exercisable as of the effective date of
such Sale Event, shall determine whether such option shall either (I) become
immediately exercisable, in which case the provisions of Paragraph 5(b)(iii)(A)
shall apply to such option and the Committee shall also determine whether
subparagraph (I) or (II) of such Paragraph shall be applicable to such option or
(II) continue in effect in accordance with its terms, in which case such option
shall be amended or deemed to be amended so that the optionee shall, upon
exercise of the option, be entitled to receive in respect of each Unit subject
to the option the same amount and kind of stock, securities, cash, property or
other consideration that each holder of a Unit is entitled to receive in respect
of a Unit in the transaction constituting such Sale Event, provided, however,
that nothing in this Paragraph 5(b)(iii)(B) shall be interpreted to accelerate
the date on which an option may be exercised if the Committee shall determine
that such option shall continue in accordance with its terms pursuant to option
(II) of this Paragraph 5(b)(iii)(B).
5
<PAGE> 6
(C) Any determination made by the Committee pursuant to this
Paragraph 5(b)(iii) shall be conclusive notwithstanding any other provision of
this Plan or any option agreement entered into in accordance with this Plan.
(iv) (A) (I) If at the date of the optionee's death or a
termination of the optionee's Employment with the Company for any reason, a
Public Offering Event shall not yet have occurred, the Company shall have the
right in its discretion to purchase all, and not less than all, of the Units
previously issued upon the exercise, if any, of any options by the terminating
optionee from the optionee or his legal representative for an amount (the "Unit
Repurchase Price"), which shall be determined pursuant to the provisions of (B)
and (C) of this Paragraph 5(b)(iv). Such right shall be exercisable by written
notice given to the optionee (or his legal representative) by the Company ("Unit
Purchase Notice") within ninety (90) days after the date of death or termination
of Employment (such date of death or termination of Employment hereinafter
referred to as the "Date of Termination"). If the Unit Purchase Notice is given,
then twenty percent (20%) of the Unit Repurchase Price shall be paid no later
than one hundred eighty (180) days after the Date of Termination. The balance of
the Unit Repurchase Price shall be paid in five annual installments of sixteen
percent (16%) of the Unit Repurchase Price commencing on the first anniversary
of the first payment date, together with interest at a rate determined by the
Committee in its sole discretion.
II) If, following the date of the optionee's death or a
termination of the optionee's Employment as a result of a disability or on
retirement or for any other reason other than cause, a Unit Purchase Notice is
given pursuant to paragraph 5(b)(iv)(A), then the Company shall also be deemed
to have given a Purchase Notice pursuant to paragraph 5(b)(ii)(A) with respect
to any Units subject to the option of such optionee (as defined in paragraph
5(b)(ii)(A)) and the provisions of paragraph 5(b)(ii)(B) shall apply.
(B) In the event of the death or termination of the optionee's
Employment as a result of a disability or on retirement or for any other reason
other than cause, the Unit Repurchase Price shall be equal to the amount
determined by multiplying (I) the number of Units being repurchased the Company
by (II) the value of each Unit as determined by the Committee at the Date of
Termination. For these purposes, the value of each Unit on the Date of
Termination shall be determined by the Committee in its sole discretion.
(C) In the event of the termination of the optionee's
Employment for cause, the Unit Repurchase Price shall be equal to the sum of the
Purchase Prices for the Units being repurchased by the Company. The Purchase
Price for a Unit shall be equal to the sum of (I) the exercise price paid by the
Optionee for the such Unit plus (minus) (II) any increase (decrease) in the
Company's book value per Unit (computed in accordance with generally accepted
accounting principles) from the last day of the month ending immediately
preceding the date of grant of the Option with respect to such Unit to the last
day of the fiscal quarter ending immediately prior to the Date of Termination.
(D) Subject to the limitations set forth in Section 736 of the
Internal Revenue Code of 1986, as amended ("Code"), the Committee shall
determine the portion of the Unit Repurchase Price payable under the provisions
of (B) or (C) of this Paragraph 5(b)(iv) which shall be considered as a
liquidating distribution made in exchange for the Member's
6
<PAGE> 7
interest in Company property (except for unrealized receivables and goodwill)
under Section 736(b)(1) of the Code and the portion which shall be considered a
"guaranteed payment" pursuant to Section 736(a) of the Code.
SECTION 6. ADJUSTMENTS
(a) In the event of any merger, reorganization, consolidation,
recapitalization, split or subdivision of Units, distribution of Units,
combination or reclassification of Units, or other change in the capital
structure affecting the Units (other than a Sale Event or Conversion Event (as
hereinafter defined)), such substitution or adjustment as shall be deemed
appropriate by the Committee, shall be made in the aggregate number of Units
reserved for issuance under the Plan and in the number and option price of Units
subject to outstanding options granted under the Plan.
(b) In the event of a Conversion Event, each option shall be amended or
deemed to be amended in a manner consistent with conversion or exchange of other
Units (as reasonably determined by the Committee) so that an optionee shall,
upon exercise of an option, be entitled to receive in respect of each Unit
subject to the option the same amount and kind of stock or other securities that
a Class B Member who is the holder of a Unit is entitled to receive in respect
of a Unit in the transaction constituting such Conversion Event. A Conversion
Event shall mean the transfer of all or substantially all of the business and
assets of the Company in exchange for stock of a corporation and the
distribution of such stock to the Members of the Company, the merger of the
Company into a corporation or a similar transaction whereby the business and
assets of the Company are acquired by a successor corporation. Notwithstanding
the foregoing, a Conversion Event shall not include a transfer of all or
substantially all of the assets and business of the Company if the then existing
Managing Members of the Company do not have an equity interest of thirty (30%)
percent or more in the corporation immediately after the transfer and
distribution unless the Managing Members specifically determine that such
transfer is a Conversion Event. For purposes of this paragraph, a Managing
Member shall be considered as owning the equity interests owned by his spouse,
children, grandchildren, parents and the parents of his spouse.
SECTION 7. AMENDMENT AND TERMINATION.
(a) The Committee may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would impair the
rights of an optionee or participant under any option theretofore granted
without the optionee's consent, and no amendment will be made without approval
of the Members if such amendment requires Member approval under the operating
agreement of the Company then in effect.
(b) The Committee may amend the terms of any option or other award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any optionee without the optionee's consent. The Committee
may also substitute new options for previously granted options (on a one for one
or other basis), including previously granted options having higher option
exercise prices.
7
<PAGE> 8
(c) Notwithstanding any other provision of this Section 7, in the event
the Members amend the Operating Agreement to provide for the admission of
non-voting Members, the Committee may amend the terms of any option theretofore
granted, prospectively or retroactively, to provide that (i) upon exercise of
such option, by or on behalf of an optionee not previously admitted to the
Company as a Class B Member, the optionee (or his legal representative) shall be
admitted to the Company as a non-voting Member rather than as a Class B Member
and (ii) upon exercise of such option by or on behalf of an optionee previously
admitted to the Company as a Class B Member, such optionee (or his legal
representative) shall have no voting rights with respect to the Units received
on exercise of such option.
SECTION 8. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan. With respect
to any payments to be made to an optionee by the Company, nothing contained in
the Plan shall give arty such participant or optionee any rights that are
greater than those of a general creditor of the Company.
SECTION 9. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing Units pursuant to an
option under the Plan to represent to and agree with the Company in writing that
the optionee or participant is acquiring the Units for investment and not with a
view to the sale or distribution thereof. Any certificates for such Units may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer. All certificates of beneficial interest for Units
delivered under the Plan shall be subject to such restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Units are
then listed and any applicable Federal or state securities law, ant the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions. If the Company shall have an
option to repurchase the Units in the event of the optionee's death or
termination of Employment, the Committee may instruct the Company to place an
appropriate legend on any certificates representing such Units.
(b) Nothing contained in this Plan shall prevent the Committee from
adopting other or additional compensation arrangements, subject to Member
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
(c) Neither the adoption of the Plan nor the grant of any award pursuant
to the Plan shall confer upon any employee or Member of the Company or any
Affiliate any right to continued Employment with the Company or an Affiliate, as
the case may be, nor shall it interfere in any way with the right of the Company
or an Affiliate to terminate the Employment of any of its employees or Members
at any time.
(d) No later than the date as of which an amount first becomes includible
in the gross income of the optionee for Federal income tax purposes with respect
to any option granted or exercised under the Plan, the optionee shall pay to the
Company, or make arrangements
8
<PAGE> 9
satisfactory to the Committee regarding the payment of any Federal, state, or
local taxes of any kind required by law to be withheld with respect to such
amount. The obligations of the Company under the Plan shall be conditional on
such payment or arrangements and the Company and its Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the optionee. Upon the request of the
optionee, the Committee may, in its sole discretion, authorize the Company to
satisfy the withholding tax obligation of the optionee by having the Company
withhold certain of the Units issuable pursuant to the exercise of the option.
The Units withheld shall have, as of the date on which the amount of tax
required to be withheld is determined, a fair market value equal to the minimum
amount of taxes required to be withheld in connection with the exercise of the
option.
(e) Capitalized terms and terms not otherwise defined herein shall have
the meanings ascribed to such terms in the Operating Agreement.
SECTION 10. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of the date the Plan is approved by
80%-in-interest of the Members.
SECTION 11. TERM OF PLAN
Options may be granted pursuant to the Plan during the ten (10) year
period commencing on the date the Plan is approved by 80%-in-interest of the
Members, until the Plan shall be terminated, but options granted prior to such
termination may extend beyond that date.
9
<PAGE> 1
Exhibit 23.1
The Board of Directors
Jupiter Communications, LLC
The audits referred to in our report dated March 18, 1999, included the
related financial statement schedule for each of the years in the three year
period ended December 31, 1998, included in the registration statement. The
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the prospectus.
KPMG LLP
New York, New York
July 30, 1999
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 216,144
<SECURITIES> 0
<RECEIVABLES> 4,617,771
<ALLOWANCES> (37,915)
<INVENTORY> 0
<CURRENT-ASSETS> 5,593,168
<PP&E> 1,419,546
<DEPRECIATION> (348,114)
<TOTAL-ASSETS> 6,867,021
<CURRENT-LIABILITIES> 8,969,318
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (2,128,774)
<TOTAL-LIABILITY-AND-EQUITY> 6,867,021
<SALES> 0
<TOTAL-REVENUES> 14,802,331
<CGS> 0
<TOTAL-COSTS> (9,675,838)
<OTHER-EXPENSES> 3,173,368
<LOSS-PROVISION> (13,568)
<INTEREST-EXPENSE> 11,855
<INCOME-PRETAX> (2,137,381)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,137,381)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,137,381)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
