SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box: / /
Preliminary Proxy Statement / /
Definitive Proxy Statement /X/
Definitive Additional Materials / /
Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12 / /
JUNO ONLINE SERVICES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
1540 BROADWAY, 27TH FLOOR
NEW YORK, NEW YORK 10036
April 10, 2000
Dear Fellow Stockholders:
On behalf of the Board of Directors of Juno Online Services, Inc. ("Juno"),
I cordially invite you to attend the Annual Meeting of Stockholders which will
be held on Wednesday, May 24, 2000, at 10:00 A.M. at The Empire Hotel, 44 West
63rd Street, New York, New York 10023.
At the Annual Meeting, we will vote on the election of a director, the
approval of a series of amendments to the Juno 1999 Stock Incentive Plan and the
ratification of the selection of PricewaterhouseCoopers LLP as our independent
accountants for the year 2000. In the pages that follow, you will find the
Notice of Meeting and the Proxy Statement which describes these matters in
detail.
You will also find enclosed a proxy form appointing proxies to vote your
shares at the Annual Meeting. Please sign, date and return your proxy form as
soon as possible so that your shares can be represented and voted in accordance
with your instructions even if you cannot attend the Annual Meeting in person.
Sincerely,
[SIGNATURE]
Charles E. Ardai
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
JUNO ONLINE SERVICES, INC.
1540 BROADWAY, 27(TH) FLOOR
NEW YORK, NEW YORK 10036
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 2000
TO THE STOCKHOLDERS OF JUNO ONLINE SERVICES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Juno
Online Services, Inc., a Delaware corporation (the "Company"), will be held at
The Empire Hotel, 44 West 63(rd) Street, New York, New York 10023 on Wednesday,
May 24, 2000 at 10:00 a.m. Eastern Time for the following purposes, as more
fully described in the Proxy Statement accompanying this Notice:
1. To elect a director to serve for a three-year term ending at the 2003
Annual Meeting of Stockholders or until his successor is duly elected
and qualified;
2. To approve a series of amendments to the Company's 1999 Stock Incentive
Plan (the "1999 Plan"), to (i) increase the number of shares of Common
Stock reserved for issuance over the term of the 1999 Plan by an
additional 3,500,000 shares and (ii) amend the 1999 Plan so that at the
beginning of each calendar year the share reserve under the 1999 Plan is
automatically increased by an amount equal to 4% of the total number of
shares of Common Stock outstanding;
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the fiscal year ending December 31, 2000;
and
4. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The foregoing items of business are more thoroughly described in the Proxy
Statement accompanying this notice. Only stockholders of record at the close of
business on April 10, 2000 are entitled to notice of and to vote at the Annual
Meeting. The stock transfer books of the Company will remain open between the
record date and the date of the meeting. A list of stockholders entitled to vote
at the Annual Meeting will be available for inspection at the executive offices
of the Company.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed proxy as
promptly as possible in the envelope enclosed for your convenience. Should you
receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to assure that all
your shares will be voted. You may revoke your proxy at any time prior to the
Annual Meeting. If you attend the Annual Meeting and vote by ballot, your proxy
will be revoked automatically and only your vote at the Annual Meeting will be
counted.
Sincerely,
[SIGNATURE]
Richard D. Buchband
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL; SECRETARY
New York, New York
April 10, 2000
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
JUNO ONLINE SERVICES, INC.
1540 BROADWAY, 27(TH) FLOOR
NEW YORK, NEW YORK 10036
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2000
GENERAL
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of Juno Online Services, Inc., a Delaware corporation (the "Company"),
for use at the Annual Meeting of Stockholders to be held on May 24, 2000 (the
"Annual Meeting"). The Annual Meeting will be held at 10:00 a.m. at The Empire
Hotel, 44 West 63(rd) Street, New York, New York 10023. These proxy solicitation
materials were mailed on or about April 17, 2000, to all stockholders entitled
to vote at the Annual Meeting.
VOTING
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice and are described in more detail in
this Proxy Statement. On April 10, 2000, the record date for determination of
stockholders entitled to notice of and to vote at the Annual Meeting, 38,645,583
shares of the Company's common stock, par value $0.01 ("Common Stock"), were
issued and outstanding. No shares of the Company's preferred stock, par value
$0.01, were outstanding. Each stockholder is entitled to one vote for each share
of Common Stock held by such stockholder on April 10, 2000. Stockholders may not
cumulate votes in the election of directors.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes are counted
as present for purposes of determining the presence or absence of a quorum for
the transaction of business. Abstentions will be counted towards the tabulations
of votes cast on proposals presented to the stockholders and will have the same
effect as negative votes, whereas broker non-votes will not be counted for
purposes of determining whether a proposal has been approved.
PROXIES
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election of
the director proposed by the Board unless the authority to vote for the election
of such director is withheld and, if no contrary instructions are given, the
proxy will be voted FOR the approval of Proposals 2, 3 and 4 described in the
accompanying Notice and Proxy Statement. You may revoke or change your Proxy at
any time before the Annual Meeting by filing with the Secretary of the Company
at the Company's principal executive offices, 1540 Broadway, 27(th) Floor, New
York, New York 10036, a notice of revocation or another signed Proxy with a
later date. You may also revoke your Proxy by attending the Annual Meeting and
voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional solicitation materials furnished to the stockholders. Copies
of solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by a solicitation by
telephone, telegram or other means by directors, officers or employees of the
Company. No additional compensation will be paid to these individuals for
any such services. Except as described above, the Company does not presently
intend to solicit proxies other than by mail.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting must be received no
later than December 31, 2000, in order that they may be included in the proxy
statement and form of proxy relating to that meeting. In addition, the proxy
solicited by the Board of Directors for the 2001 Annual Meeting will confer
discretionary authority to vote on any stockholder proposal presented at that
meeting, unless the Company receives notice of such proposal on or before
March 4, 2001.
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MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE
ELECTION OF DIRECTOR
GENERAL
The Company's Certificate of Incorporation provides for a classified Board
of Directors consisting of three classes of directors with staggered three-year
terms, with each class consisting, as nearly as possible, of one-third of the
total number of directors. The Board currently consists of four persons. The
class whose term of office expires at the Annual Meeting currently consists of
one director. The director elected to this class will serve for a term of three
years, expiring at the 2003 annual meeting of stockholders or until his
successor has been duly elected and qualified. The nominee listed below is
currently a director of the Company. If this proposal is approved, the Board
will consist of four persons, with two classes consisting of one director each
and the third class consisting of two directors.
The nominee for election has agreed to serve if elected, and management has
no reason to believe that such nominee will be unavailable to serve. In the
event the nominee is unable or declines to serve as a director at the time of
the Annual Meeting, the proxies will be voted for any nominee who may be
designated by the present Board of Directors to fill the vacancy. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
FOR the nominee named below.
NOMINEE FOR TERM ENDING UPON THE 2003 ANNUAL MEETING OF STOCKHOLDERS
CHARLES E. ARDAI, 30, has served as President of Juno since its inception in
June 1995 and was named Chief Executive Officer of Juno in May 1999. Mr. Ardai
has served as a director of Juno since October 1997. From January 1992 until
June 1995, Mr. Ardai was employed by D. E. Shaw & Co., L.P., where he served in
a number of positions--first as Director of Strategic Growth from January 1992
until January 1993, where he was responsible for the development and execution
of DESCO, L.P.'s recruitment strategies, then as Vice President from
January 1993 until January 1995. From January 1995 until June 1995, Mr. Ardai
served as Senior Vice President at DESCO, L.P., with responsibility for
development of Internet-related business ventures. Mr. Ardai also served as a
Managing Director of DESCO, L.P. from January 1998 until February 1999. Prior to
joining DESCO, L.P. in January 1992, Mr. Ardai worked at Davis Publications,
where he was responsible for the development and marketing of products derived
from the firm's media properties. During this period, he also maintained an
independent career as a freelance writer and editor. Mr. Ardai serves on the
Advisory Board of the Association for Interactive Media, and on the Markle
Foundation's E-mail For All Advisory Board. Mr. Ardai graduated SUMMA CUM LAUDE
from Columbia University.
CONTINUING DIRECTOR FOR TERM ENDING UPON THE 2001 ANNUAL MEETING OF STOCKHOLDERS
LOUIS K. SALKIND, 42, has served as a director of Juno since March 1999.
Since January 1991, Dr. Salkind has been a Managing Director of DESCO, L.P.,
where he manages the firm's proprietary trading business. Since May 1993, he has
also been a Director of D. E. Shaw Securities International, a London-based
affiliate of DESCO, L.P., and since November 1997, he has been a Director of D.
E. Shaw Securities Hong Kong, Ltd. Dr. Salkind graduated CUM LAUDE with an A.B.
from Princeton University and received his M.S. and Ph.D degrees from New York
University.
CONTINUING DIRECTORS FOR TERM ENDING UPON THE 2002 ANNUAL MEETING OF
STOCKHOLDERS
DAVID E. SHAW, 49, served as Chairman of Juno from its inception in
June 1995. He has served as a director of Juno since July 1996, and was named
Chairman of the Board of Juno in February 1999. Since November 1992, Dr. Shaw
has been the Chairman and President of D. E. Shaw & Co., Inc., the parent of
DESCO, L.P. Prior to founding a predecessor to DESCO, L.P. in 1988, Dr. Shaw was
a Vice President at
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Morgan Stanley & Co., where he managed the firm's automated trading technology
group. Earlier, he served on the faculty of the Department of Computer Science
at Columbia University, and as President and founder of Stanford Systems
Corporation. In 1994, Dr. Shaw was appointed by President Clinton to the
President's Committee of Advisors on Science and Technology, in which capacity
he served as Chairman of the Panel on Educational Technology. Dr. Shaw is also
the Treasurer of the American Association for the Advancement of Science and a
member of the executive committee of the Council on Competitiveness. He also
serves as the (non-executive) Chairman of the board of directors of
Schrodinger, Inc., a developer of computational chemistry software. Dr. Shaw
graduated with highest honors from the University of California at San Diego,
and received his Ph.D. from Stanford University following several years of
research at the Stanford Artificial Intelligence Laboratory.
EDWARD J. RYEOM, 30, has served as a director of Juno since March 1999.
Since December 1999, Mr. Ryeom has been the Chief Executive Officer and
President of Axalon Internet Group, Inc., an information technology holding
company engaged in building digital media, applications and service platforms
through a network of partner companies. From January 1999 through
December 1999, Mr. Ryeom was a Partner of Prospect Street Ventures, a venture
capital firm focused on information technology investments. From May 1998 to
December 1998, he was a Vice President of Prospect Street Ventures. From
August 1995 to May 1998, he was a Vice President in investment banking for
Brenner Securities. From May 1994 to June 1995, he worked at Cowen & Company, in
the information technology group. From May 1993 to May 1994, he was a consultant
with Andersen Consulting. Mr. Ryeom also serves as a director for private
information technology companies. Mr. Ryeom graduated with a bachelor's degree
in Electrical Engineering from Columbia University, and an M.E. in Systems
Engineering from the University of Virginia.
BOARD COMMITTEES AND MEETINGS
The Board of Directors held four meetings and acted by unanimous written
consent on seven occasions during the fiscal year ended December 31, 1999 (the
"1999 Fiscal Year"). The Board of Directors has an Audit Committee and a
Compensation Committee. Each director attended or participated in all of the
Board of Directors and committees of the Board on which such director served
during the 1999 Fiscal Year.
The Audit Committee currently consists of three directors, Mr. Ryeom and
Drs. Salkind and Shaw. The Audit Committee reviews, acts on and reports to the
board of directors with respect to various auditing and accounting matters,
including the recommendation of the Company's auditors, the scope of the annual
audits, fees to be paid to the auditors, the performance of the Company's
independent auditors and the accounting practices of the Company. The Audit
Committee held two meetings during the 1999 Fiscal Year.
The Compensation Committee currently consists of three directors,
Messrs. Ardai and Ryeom, and Dr. Shaw. The Compensation Committee recommends,
reviews and oversees the salaries, benefits and stock option plans for the
Company's employees, consultants, directors, and other individuals compensated
by the Company. The Compensation Committee also administers the Company's
compensation plans. The Compensation Committee acted by unanimous written
consent thirteen times during the 1999 Fiscal Year.
DIRECTOR COMPENSATION
Other than reimbursing directors for customary and reasonable expenses of
attending board of directors or committee meetings, Juno does not currently pay
cash compensation to its directors. On April 9, 1999, Drs. Salkind and Shaw, and
Mr. Ryeom, as non-employee board members, were each granted an option to
purchase 22,222 shares of common stock with an exercise price of $9.00 per
share, which became exercisable on August 9, 1999. Additionally, under Juno's
1999 Stock Incentive Plan each individual who first joins the Juno board after
May 25, 1999 as a non-employee board member will
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automatically receive a grant of an option to purchase 22,222 shares of common
stock at the time of his or her commencement of board service. In addition, on
the date of each annual stockholders meeting beginning in 2000, each
non-employee member of the board of directors who is to continue to serve as a
non-employee board member will automatically be granted an option to purchase
7,777 shares of common stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEE LISTED ABOVE.
PROPOSAL TWO
APPROVAL OF AMENDMENT TO THE
1999 STOCK INCENTIVE PLAN
The Company's stockholders are being asked to approve an amendment to the
Company's 1999 Stock Incentive Plan (the "Plan") which will effect the following
changes:
(i) increase the number of shares of the Company's Common Stock reserved for
issuance under the Plan by an additional 3,500,000 shares; and
(ii) increase the number of shares by which the share reserve under the Plan
will automatically increase on the first trading day in each calendar
year from one percent (1%) of the shares of Common Stock outstanding on
the last trading day of the immediately preceding calendar year
(subject to a maximum annual increase of 444,444 shares) to four
percent (4%) of such outstanding shares, subject to a maximum annual
increase of 2,400,000 shares.
The Board of Directors adopted the amendment on March 2, 2000, subject to
stockholder approval at this Meeting.
The Board believes the amendment is necessary to assure that a sufficient
reserve of Common Stock remains available for issuance under the Plan in order
to allow the Company to continue to utilize equity incentives to attract and
retain the services of key individuals essential to the Company's long-term
growth and financial success. The Company relies significantly on equity
incentives in the form of stock option grants in order to attract and retain key
employees and believes that such equity incentives are necessary for the Company
to remain competitive in the marketplace for executive talent and other key
employees. Option grants made to newly-hired or continuing employees will be
based on both competitive market conditions and individual performance.
The following is a summary of the principal features of the Plan, as most
recently amended. Any stockholder of the Company who wishes to obtain a copy of
the actual plan document may do so upon written request to the Company's
Secretary at 1540 Broadway, 27(th) Floor, New York, New York 10036.
EQUITY INCENTIVE PROGRAMS
The Plan consists of four (4) separate equity incentive programs: (i) the
Discretionary Option Grant Program, (ii) the Salary Investment Option Grant
Program, (iii) the Stock Issuance Program and (iv) the Automatic Option Grant
Program for non-employee Board members. The principal features of each program
are described below. The Compensation Committee of the Board has the exclusive
authority to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to option grants and stock issuances made to the Company's
executive officers and non-employee Board members and also has the authority to
make option grants and stock issuances under those programs to all other
eligible individuals. However, the Board may at any time appoint a secondary
committee of one or more Board members to have separate but concurrent authority
with the Compensation Committee to make option grants and stock issuances under
those two programs to individuals other than the Company's executive
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officers and non-employee Board members. The Compensation Committee has complete
discretion to select the individuals who are to participate in the Salary
Investment Option Grant Program, but all grants made to the selected individuals
are governed by the express terms of that program.
The term Plan Administrator, as used in this summary, will mean the
Compensation Committee and any secondary committee, to the extent each such
entity is acting within the scope of its administrative jurisdiction under the
Plan. However, neither the Compensation Committee nor any secondary committee
exercises any administrative discretion under the Automatic Option Grant
Program. All grants under that program are made in strict compliance with the
express provisions of such program.
SHARE RESERVE
An aggregate of 9,616,946 shares of Common Stock has been reserved for
issuance over the term of the Plan. Such share reserve consists of (i) the
5,768,611 shares initially reserved for issuance under the Plan, (ii) the
additional 348,335 shares added to the reserve on January 3, 2000 pursuant to
the automatic share increase provisions of the Plan plus (iii) the additional
increase of 3,500,000 shares of Common Stock which forms part of this Proposal.
In addition, subject to approval of this Proposal by the Company's stockholders,
on the first trading day of each calendar year during the term of the Plan,
beginning January 2001, the number of shares of Common Stock available for
issuance under the Plan will automatically increase by an amount equal to four
percent (4%) of the shares of the Company's Common Stock outstanding on the last
trading day of the immediately preceding calendar year, subject to a maximum
annual increase of 2,400,000 shares.
No participant in the Plan may receive option grants, separately exercisable
stock appreciation rights or direct stock issuances for more than 1,111,111
shares of Common Stock in the aggregate per calendar year. Stockholder approval
of this Proposal will also constitute a reapproval of the 1,111,111-share
limitation for purposes of Internal Revenue Code Section 162(m).
The shares of Common Stock issuable under the Plan may be drawn from shares
of the Company's authorized but unissued shares of such common stock or from
shares of such common stock reacquired by the Company, including shares
repurchased on the open market.
In the event any change is made to the outstanding shares of Common Stock by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to the securities issuable (in the aggregate, annually and per participant)
under the Plan and the securities and the exercise price per share in effect
under each outstanding option.
ELIGIBILITY
Officers and employees, non-employee Board members and independent
consultants in the service of the Company or its parent and subsidiaries
(whether now existing or subsequently established) are eligible to participate
in the Discretionary Option Grant and Stock Issuance Programs. Executive
officers and other highly paid employees are also eligible to participate in the
Salary Investment Option Grant Program. Participation in the Automatic Option
Grant Program will be limited to non-employee members of the Board.
As of March 24, 2000, four executive officers, three non-employee Board
members and approximately 290 other employees and consultants were eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs. The
four executive officers were also eligible to participate in the Salary
Investment Option Grant Program, and the three non-employee Board members were
also eligible to participate in the Automatic Option Grant Program.
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VALUATION
The fair market value per share of Common Stock on any relevant date under
the Plan will be deemed to be equal to the closing selling price per share on
that date on the Nasdaq National Market. On March 24, 2000 the fair market value
per share determined on such basis was $18.19.
DISCRETIONARY OPTION GRANT PROGRAM
The Plan Administrator has complete discretion under the Discretionary
Option Grant Program to determine which eligible individuals are to receive
option grants, the time or times when those grants are to be made, the number of
shares subject to each such grant, the status of any granted option as either an
incentive stock option or a non-statutory option under the federal tax laws, the
vesting schedule (if any) to be in effect for the option grant and the maximum
term for which any granted option is to remain outstanding.
Each granted option will have an exercise price per share equal to the fair
market value of the shares unless otherwise determined by the Plan Administrator
on the date of grant. No granted option will have a term in excess of ten
(10) years, and the option will generally become exercisable in one or more
installments over a specified period of service measured from the grant date.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent exercisable for vested
shares. The Plan Administrator will have complete discretion to extend the
period following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability or
vesting of such options in whole or in part. Such discretion may be exercised at
any time while the options remain outstanding, whether before or after the
optionee's actual cessation of service.
The Plan Administrator is authorized to issue tandem stock appreciation
rights under the Discretionary Option Grant Program, which provide the holders
with the right to surrender their options for an appreciation distribution from
the Company equal to the excess of (i) the fair market value of the vested
shares of Common Stock subject to the surrendered option over (ii) the aggregate
exercise price payable for such shares. Such appreciation distribution may, at
the discretion of the Plan Administrator, be made in cash or in shares of Common
Stock.
The Plan Administrator also has the authority to effect the cancellation of
any or all options outstanding under the Discretionary Option Grant Program and
to grant, in substitution therefor, new options covering the same or a different
number of shares of Common Stock but with an exercise price per share based upon
the fair market value of the option shares on the new grant date.
SALARY INVESTMENT OPTION GRANT PROGRAM
The Compensation Committee has complete discretion in implementing the
Salary Investment Option Grant Program for one or more calendar years and in
selecting the executive officers and other eligible individuals who are to
participate in the program for those years. As a condition to such
participation, each selected individual must, prior to the start of the calendar
year of participation, file with the Compensation Committee an irrevocable
authorization directing the Company to reduce his or her base salary for the
upcoming calendar year by a specified dollar amount not less than $5,000 nor
more than $50,000 and to apply that amount to the acquisition of a special
option grant under the program.
Each selected individual who files such a timely election will automatically
be granted a non-statutory option on the first trading day in January of the
calendar year for which that salary reduction is to be in effect.
The number of shares subject to each such option will be determined by
dividing the salary reduction amount by two-thirds of the fair market value per
share of Company Common Stock on the grant date, and
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the exercise price will be equal to one-third of the fair market value of the
option shares on the grant date. As a result, the total spread on the option
shares at the time of grant (the fair market value of the option shares on the
grant date less the aggregate exercise price payable for those shares) will be
equal to the amount by which the optionee's salary is to be reduced for the
calendar year. In effect, the salary reduction serves as an immediate
prepayment, as of the time of the option grant, of two thirds of the then
current market price of the shares of common stock subject to the option.
The option will become exercisable in a series of twelve equal monthly
installments upon the optionee's completion of each month of service in the
calendar year for which such salary reduction is in effect and will become
immediately exercisable for all the option shares on an accelerated basis should
the Company experience certain changes in ownership or control. Each option will
remain exercisable for any vested shares until the earlier of (i) the expiration
of the ten-year option term or (ii) the end of the three (3)-year period
measured from the date of the optionee's cessation of service.
The Company has not yet implemented the Salary Investment Option Grant
Program.
STOCK ISSUANCE PROGRAM
Shares of Common Stock may be issued under the Stock Issuance Program at a
price per share equal to the fair market value of the shares unless otherwise
determined by the Plan Administrator and for such valid consideration under the
Delaware General Corporation Law as the Plan Administrator deems appropriate,
including cash and promissory notes. The shares may also be issued as a bonus
for past services without any cash outlay required of the recipient. The shares
issued may be fully vested upon issuance or may vest upon the completion of a
designated service period or the attainment of pre-established performance
goals. The Plan Administrator will, however, have the discretionary authority at
any time to accelerate the vesting of any and all unvested shares outstanding
under the Stock Issuance Program.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, eligible non-employee Board
members receive a series of option grants over their period of Board service.
Each non-employee Board member will, at the time of his or her initial election
or appointment to the Board, receive an option grant for 22,222 shares of Common
Stock. In addition, on the date of each Annual Stockholders Meeting, each
individual who is to continue to serve as a non-employee Board member will
automatically be granted an option to purchase 7,777 shares of Common Stock,
provided he or she has served as a non-employee Board member for at least six
(6) months. There will be no limit on the number of such 7,777-share option
grants any one eligible non-employee Board member may receive over his or her
period of continued Board service.
Stockholder approval of this Proposal will also constitute pre-approval of
each option granted under the Automatic Option Grant Program after the date of
the Annual Stockholders Meeting and the subsequent exercise of that option in
accordance with the terms of the program summarized below.
Each automatic grant will have an exercise price per share equal to the fair
market value per share of Common Stock on the grant date and will have a maximum
term of 10 years, subject to earlier termination following the optionee's
cessation of Board service. Each initial 22,222-share automatic option will
become exercisable upon optionee's completion of four (4) months of Board
service measured from the grant date. Each annual 7,777-share automatic option
will become exercisable upon optionee's completion of six (6) months of Board
service measured from the grant date. However, each outstanding automatic option
grant will automatically accelerate and become immediately exercisable in full
upon certain changes in control or ownership of the Company or upon the
optionee's death or disability while a Board member. Following the optionee's
cessation of Board service for any reason, each option will remain exercisable
for a 12-month period and may be exercised during that time for any or all
shares in which the optionee is vested at the time of such cessation of Board
service.
8
Stockholder approval of this Proposal will also constitute pre-approval of
each limited stock appreciation right granted under the Salary Investment Option
Grant Program and the Automatic Option Grant Program and the subsequent exercise
of those rights in accordance with the foregoing terms.
GENERAL PROVISIONS
In the event that the Company is acquired by merger, asset sale or sale by
the stockholders of more than 50% of the Company's outstanding voting stock
recommended by the Board, each outstanding option under the Discretionary Option
Grant Program that is not to be assumed or replaced by the successor corporation
or otherwise continued in effect will automatically accelerate in full, and all
unvested shares outstanding under the Discretionary Option Grant and Stock
Issuance Programs will immediately vest, except to the extent the Company's
repurchase rights with respect to those shares are to be assigned to the
successor corporation or otherwise continued in effect.
The Plan Administrator will have the authority under the Discretionary
Option Grant Program to provide that those options will automatically vest in
full (i) upon an acquisition of the Company, whether or not those options are
assumed or replaced, (ii) upon a hostile change in control of the Company
effected through a tender offer for more than 50% of the Company's outstanding
voting stock or by proxy contest for the election of Board members, or (iii) in
the event of certain terminations of service (including forced terminations)
following an acquisition or a hostile change in control. The vesting of
outstanding shares under the Stock Issuance Program may be accelerated upon
similar terms and conditions. The options granted under the Salary Investment
Option Grant Program and the Automatic Option Grant Program will automatically
accelerate and become exercisable in full upon any acquisition or change in
control transaction.
The acceleration of vesting in the event of a change in the ownership or
control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
Each option granted under the Salary Investment Option Grant Program and the
Automatic Option Grant Program will include a limited stock appreciation right
so that upon the successful completion of a hostile tender offer for more than
fifty percent (50%) of the Company's outstanding voting securities or a change
in a majority of the Board as a result of one or more contested elections for
Board membership, the option may be surrendered to the Company in return for a
cash distribution from the Company. The amount of the distribution per
surrendered option share will be equal to the excess of (i) the fair market
value per share at the time the option is surrendered or, if greater, the tender
offer price paid per share in the hostile take-over over (ii) the exercise price
payable per share under such option. In addition, the Plan Administrator may
grant such rights to officers of the Company who are subject to Section 16 of
the Securities Exchange Act of 1934, as amended, as part of their option grants
under the Discretionary Option Grant Program.
The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options under the
Discretionary Option Grant Program or the purchase of shares under the Stock
Issuance Program through full-recourse interest-bearing promissory notes.
However, the maximum amount of financing provided any participant may not exceed
the cash consideration payable for the issued shares plus all applicable taxes
incurred in connection with the acquisition of those shares. The Plan
Administrator may provide one or more holders of non-statutory options or
unvested share issuances under the Plan with the right to have the Company
withhold a portion of the shares otherwise issuable to such individuals in
satisfaction of the withholding taxes to which such individuals become subject
in connection with the exercise of those options or the vesting of those shares.
Alternatively, the Plan Administrator may allow such individuals to deliver
previously acquired shares of common stock in payment of such withholding tax
liability.
9
AMENDMENT AND TERMINATION
The Board may amend or modify the Plan at any time, subject to any required
stockholder approval pursuant to applicable laws and regulations. Unless sooner
terminated by the Board, the Plan will terminate on the earliest of
(i) March 25, 2009, (ii) the date on which all shares available for issuance
under the Plan have been issued as fully-vested shares or (iii) the termination
of all outstanding options in connection with certain changes in control or
ownership of the Company.
STOCK AWARDS
The table below shows, for each of the Company's executive officers named in
the Summary Compensation Table of the Executive Compensation and Other
Information section of this Proxy Statement and the other individuals and groups
indicated, the number of shares of Common Stock subject to option grants made
under the Plan through March 24, 2000, together with the weighted average
exercise price payable per share. The Company has not made any direct stock
issuances to date under the Plan.
OPTION TRANSACTIONS
WEIGHTED
NUMBER OF SHARES AVERAGE
UNDERLYING EXERCISE
NAME AND POSITION OPTIONS GRANTED (1) PRICE PER SHARE
- ----------------- ------------------- ---------------
Charles E. Ardai............................................ 1,134,044 $ 9.36
President, Chief Executive Officer and Director Nominee
Robert H. Cherins........................................... 450,069 $ 9.16
Executive Vice President, Sales and Marketing
Mark A. Moraes.............................................. 450,069 $ 9.28
Executive Vice President, Technology
Richard M. Eaton, Jr........................................ 406,679 $12.52
Chief Financial Officer and Treasurer
All current executive officers as a group (4 persons)....... 2,440,861 $ 9.83
All current non-employee directors as a group (3 persons)... 66,666 $ 9.00
All employees, including current officers who are not
executive officers, as a group (290 persons).............. 3,566,981 $14.76
- ------------------------------
(1) The option grants set forth above include those certain option grants made
in March 2000 that are described below in the section of this Proxy
Statement entitled "New Plan Benefits."
As of March 24, 2000, 6,074,508 shares of Common Stock were subject to
outstanding options under the Plan, 657,942 shares of Common Stock had been
issued under the Plan, and 2,884,496 shares of Common Stock remained available
for future issuance, assuming stockholder approval of this Proposal.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the Plan may be either incentive stock options which
satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
INCENTIVE OPTIONS. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will,
10
however, recognize taxable income in the year in which the purchased shares are
sold or otherwise disposed of. For Federal tax purposes, dispositions are
divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying
disposition occurs if the sale or other disposition is made after the optionee
has held the shares for more than two (2) years after the option grant date and
more than one (1) year after the exercise date. If either of these two holding
periods is not satisfied, then a disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased shares,
the Company will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the excess of (i) the fair market value
of such shares on the option exercise date over (ii) the exercise price paid for
the shares. If the optionee makes a qualifying disposition, the Company will not
be entitled to any income tax deduction.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the
Section 83(b) election is made, the optionee will not recognize any additional
income as and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
STOCK APPRECIATION RIGHTS
No taxable income is recognized upon receipt of a stock appreciation right.
The holder will recognize ordinary income, in the year in which the stock
appreciation right is exercised, in an amount equal to the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution in the taxable year in which such ordinary income
is recognized by the optionee.
DIRECT STOCK ISSUANCES
The tax principles applicable to direct stock issuances under the Plan will
be substantially the same as those summarized above for the exercise of
non-statutory option grants.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company anticipates that any compensation deemed paid by it in
connection with the disqualifying dispositions of incentive stock option shares
or the exercise of non-statutory options with exercise prices equal to the fair
market value of the option shares on the grant date will qualify as performance-
based compensation for purposes of Code Section 162(m) and will not have to be
taken into account for purposes of the $1 million limitation per covered
individual on the deductibility of the compensation paid
11
to certain executive officers of the Company. Accordingly, all compensation
deemed paid with respect to those options will remain deductible by the Company
without limitation under Code Section 162(m).
ACCOUNTING TREATMENT
Option grants under the Discretionary Option Grant and Automatic Option
Grant Programs with exercise prices equal to the fair market value of the option
shares on the grant date will not result in any direct charge to the Company's
reported earnings. However, the fair value of those options is required to be
disclosed in the notes to the Company's financial statements, and the Company
must also disclose, in footnotes to the Company's financial statements, the
pro-forma impact those options would have upon the Company's reported earnings
were the fair value of those options at the time of grant treated as a
compensation expense. In addition, the number of outstanding options may be a
factor in determining the Company's earnings per share on a fully-diluted basis.
Option grants or stock issuances made under the Plan with exercise or issue
prices less than the fair market value of the shares on the grant or issue date
will result in a direct compensation expense to the Company in an amount equal
to the excess of such fair market value over the exercise or issue price. The
expense must be amortized against the Company's earnings over the period that
the option shares or issued shares are to vest.
On March 31, 1999, the Financial Accounting Standards Board issued an
exposure draft of a proposed interpretation of APB Opinion No. 25 governing the
accounting principles applicable to equity incentive plans. Under the proposed
interpretation, as subsequently modified on August 11, 1999, option grants made
to non-employee consultants (but not non-employee Board members) after
December 15, 1998 will result in a direct charge to the Company's reported
earnings based upon the fair value of the option measured initially as of the
grant date and then subsequently on the vesting date of each installment of the
underlying option shares. Such charge will accordingly include the appreciation
in the value of the option shares over the period between the grant date of the
option (or, if later, the effective date of the final interpretation) and the
vesting date of each installment of the option shares. In addition, if the
proposed interpretation is adopted, any options which are repriced after
December 15, 1998 will also trigger a direct charge to Company's reported
earnings measured by the appreciation in the value of the underlying shares over
the period between the grant date of the option (or, if later, the effective
date of the final amendment) and the date the option is exercised for those
shares.
Should one or more individuals be granted tandem stock appreciation rights
under the Plan, then such rights would result in a compensation expense to be
charged against the Company's reported earnings. Accordingly, at the end of each
fiscal quarter, the amount (if any) by which the fair market value of the shares
of common stock subject to such outstanding stock appreciation rights has
increased from the prior quarter-end would be accrued as compensation expense,
to the extent such fair market value is in excess of the aggregate exercise
price in effect for those rights.
NEW PLAN BENEFITS
As of March 24, 2000, 1,087,600 stock options had been granted, and no
direct stock issuances had been made, on the basis of the share increases which
are the subject of this Proposal.
The table below shows, for each of the Company's executive officers named in
the Summary Compensation Table of the Executive Compensation and Other
Information section of this Proxy Statement and the other individuals and groups
indicated, the number of shares of Common Stock subject to option grants under
the Plan that have been made on the basis of the 3,500,000 share increase that
is the subject of this Proposal, together with the weighted average exercise
price payable per share.
12
OPTION TRANSACTIONS
WEIGHTED
NUMBER OF SHARES AVERAGE
UNDERLYING EXERCISE PRICE
NAME AND POSITION OPTIONS GRANTED PER SHARE
- ----------------- ---------------- --------------
Charles E. Ardai President,................................. 250,000 $19.81
President, Chief Executive Officer and Director Nominee
Robert H. Cherins........................................... 100,000 $19.81
Executive Vice President, Sales and Marketing
Mark A. Moraes.............................................. 100,000 $19.81
Executive Vice President, Technology
Richard M. Eaton, Jr........................................ 100,000 $19.81
Chief Financial Officer and Treasurer
All current executive officers as a group (4 persons)....... 550,000 $19.81
All current non-employee directors as a group -- $ --
(3 persons)...............................................
All employees, including current officers who are not 537,600 $19.81
executive officers, as a group (18 persons)...............
Additionally, on the date of the Annual Meeting, Drs. Shaw and Salkind and
Mr. Ryeon will receive an option grant for 7,777 shares at an exercise price
equal to the fair market value per share of Common Stock on that date
STOCKHOLDER APPROVAL
The affirmative vote of at least a majority of the outstanding shares of
Common Stock present in person or by proxy at the Annual Meeting and entitled to
vote is required for approval of the amendment to the Plan. Should such
stockholder approval not be obtained, then the 3,500,000-share increase to the
share reserve under the Plan will not be implemented, the 4% percentage increase
to the automatic share increase provision will not be implemented, any stock
options granted under the Plan on the basis of the increases will immediately
terminate without ever becoming exercisable for the shares of Common Stock
subject to those options, and no additional options or stock issuances will be
made on the basis of such increases. The Plan will, however, continue in effect,
and option grants and direct stock issuances may continue to be made under the
Plan until all the shares available for issuance under the Plan have been issued
pursuant to such option grants and direct stock issuances.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT AND RECOMMENDS
THAT THE STOCKHOLDERS VOTE FOR THE AMENDMENT TO THE PLAN.
PROPOSAL THREE
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of PricewaterhouseCoopers LLP,
independent accountants for the Company during the 1999 Fiscal Year, to serve in
the same capacity for the year ending December 31, 2000, and is asking the
stockholders to ratify this appointment. The affirmative vote of a majority of
the shares represented and voting at the Annual Meeting is required to ratify
the selection of PricewaterhouseCoopers LLP.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors in its discretion may direct the
13
appointment of a different independent auditing firm at any time during the year
if the Board of Directors believes that such a change would be in the best
interests of the Company and its stockholders.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP TO SERVE AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other matters is granted
by the execution of the enclosed Proxy.
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Company's Common Stock as of
March 24, 2000, by (i) all persons who are beneficial owners of five percent
(5%) or more of the Company's Common Stock, (ii) each director and nominee for
director, (iii) the executive officers named in the Summary Compensation Table
of the Executive Compensation and Other Information section of this Proxy
Statement and (iv) all current directors and executive officers as a group.
Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares beneficially owned, subject to
community property laws, where applicable. Unless otherwise indicated, the
address of each beneficial owner listed below is c/o Juno Online Services, Inc.,
1540 Broadway, New York, New York 10036.
NUMBER
OF SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED
- ---------------- ------------ ------------
DIRECTORS AND EXECUTIVE OFFICERS
David E. Shaw (1)........................................... 17,509,123 45.3%
Charles E. Ardai (2)........................................ 388,452 *
Louis K. Salkind (3)........................................ 188,704 *
Mark A. Moraes (4).......................................... 151,700 *
Richard M. Eaton, Jr. (5)................................... 86,817 *
Robert H. Cherins (6)....................................... 76,908 *
Edward J. Ryeom (7)......................................... 22,222 *
All directors and executive officers as a group (7 persons)
(8)....................................................... 18,423,926 46.8
5% STOCKHOLDERS
Shaw Family Trust IV (9).................................... 7,419,152 19.2
D. E. Shaw & Co., L.P. (10)................................. 6,336,735 16.4
News America Incorporated (11).............................. 3,135,208 8.1
- ------------------------------
* Less than 1%.
(1) Includes (i) 3,217,812 shares held directly by David E. Shaw, (ii) 107,627
shares held by D. E. Shaw & Co., Inc., (iii) 5,559,697 shares held by D. E.
Shaw & Co., L.P., (iv) 777,038 shares held by D. E. Shaw Investment Group,
L.P., (v) 7,419,152 shares held
14
by Shaw Family Trust IV and (vi) 22,222 shares that are issuable upon the
exercise of stock options. Dr. Shaw disclaims beneficial ownership of the
shares held by D. E. Shaw & Co., L.P., D. E. Shaw Investment Group, L.P.,
and Shaw Family Trust IV, except to the extent of his pecuniary interest
therein. The address of the foregoing entities is 120 West 45th Street, New
York, New York 10036. In addition to the shares included above, 233,334
shares are held by the Shaw Juno Trust. For a description of the
relationship between David E. Shaw and Juno, please see "Certain
Transactions."
(2) Includes 388,289 shares that are issuable upon the exercise of stock
options. This number does not include 745,755 shares issuable upon the
exercise of stock options that do not vest within 60 days of March 24, 2000.
Of the stock options granted to Mr. Ardai, an option to acquire 250,000
shares has been granted subject to stockholder approval of the increase in
the share reserve which forms a part of Proposal Two described in this Proxy
Statement.
(3) Includes shares held by the Louis K. Salkind 1999 Grantor Retained Annuity
Trust and 22,222 shares that are issuable upon the exercise of stock
options. Although Dr. Salkind is neither the trustee nor a beneficiary of
the Louis K. Salkind 1999 Grantor Retained Annuity Trust, some of the
beneficiaries of this trust reside in Dr. Salkind's household. The address
of the Louis K. Salkind 1999 Grantor Retained Annuity Trust is 120 West 45th
Street, New York, New York 10036.
(4) Includes 115,264 shares that are issuable upon the exercise of stock
options. This number does not include 299,805 shares issuable upon the
exercise of stock options that do not vest within 60 days of March 24, 2000.
Of the stock options granted to Mr. Moraes, an option to acquire 100,000
shares has been granted subject to stockholder approval of the increase in
the share reserve which forms a part of Proposal Two described in this Proxy
Statement.
(5) Includes 80,797 shares that are issuable upon the exercise of stock options.
This number does not include 305,688 shares issuable upon the exercise of
stock options that do not vest within 60 days of March 24, 2000. Of the
stock options granted to Mr. Eaton, an option to acquire 100,000 shares has
been granted subject to stockholder approval of the increase in the share
reserve which forms a part of Proposal Two described in this Proxy
Statement.
(6) Includes 76,787 shares that are issuable upon the exercise of stock options.
This number does not include 300,580 shares issuable upon the exercise of
stock options that do not vest within 60 days of March 24, 2000. Of the
stock options granted to Mr. Cherins, an option to acquire 100,000 shares
has been granted subject to stockholder approval of the increase in the
share reserve which forms a part of Proposal Two described in this Proxy
Statement.
(7) Includes 22,222 shares that are issuable upon the exercise of stock options.
The address of Mr. Ryeom is 70 West 36th Street, Suite 906, New York, New
York 10018.
(8) Includes 727,803 shares that are issuable upon the exercise of stock
options.
(9) David E. Shaw is the trustee of the Shaw Family Trust IV. The address of
Shaw Family Trust IV is 120 West 45th Street, New York, New York 10036.
(10) Includes (i) 5,559,697 shares held directly by D. E. Shaw & Co., L.P. and
(ii) 777,038 shares held by D. E. Shaw Investment Group, L.P. D. E. Shaw &
Co., Inc., which is wholly owned by David E. Shaw, is the general partner of
D. E. Shaw & Co., L.P. D. E. Shaw & Co., L.P. disclaims beneficial ownership
of the shares held by D. E. Shaw Investment Group, L.P., except to the
extent of its pecuniary interest therein. Dr. Shaw, as President of D. E.
Shaw & Co., Inc., has voting and dispositive powers with respect to these
shares. The address of D. E. Shaw & Co., L.P. is 120 West 45th Street,
New York, New York 10036. For a description of the relationship between
D. E. Shaw & Co., L.P. and Juno, please see "Certain Transactions."
(11) News America Incorporated is an affiliate of News Corporation, a publicly
traded company. The address of News America Incorporated is 1211 Avenue of
the Americas, New York, New York 10036. For a description of the
relationship between News America Incorporated and Juno, please see "Certain
Transactions."
15
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The executive officers and key employees of the Company, and their ages and
positions as of March 31, 2000, are as follows:
NAME AGE POSITION WITH THE COMPANY
- ---- -------- ------------------------------------------
Charles E. Ardai.......................... President, Chief Executive Officer and
30 Director
Robert H. Cherins......................... Executive Vice President, Sales and
59 Marketing
Mark A. Moraes............................ 34 Executive Vice President, Technology
Richard M. Eaton, Jr...................... 39 Chief Financial Officer and Treasurer
Jordan S. Birnbaum........................ Senior Vice President, Business
29 Development
Richard D. Buchband....................... 36 Senior Vice President and General Counsel
V. S. Mani................................ 35 Senior Vice President, Database Systems
Peter D. Skopp............................ 29 Senior Vice President, Network Development
INFORMATION CONCERNING EXECUTIVE OFFICERS AND KEY EMPLOYEES WHO ARE NOT
DIRECTORS
ROBERT H. CHERINS has served as Juno's Executive Vice President, Sales and
Marketing since December 1996. From March 1993 until December 1996, Mr. Cherins
served as President of Jordan, McGrath, Case & Taylor/Direct and Executive Vice
President of its corporate parent, Jordan, McGrath, Case & Taylor. Previously,
Mr. Cherins spent 12 years with McCaffrey and McCall Advertising. He served as
Chairman and CEO of McCaffrey and McCall from 1987 to 1992 and as President from
1986 to 1987. Mr. Cherins served as President of McCaffrey and McCall's Direct
Marketing Division from 1981 to 1986. Mr. Cherins graduated from Hunter College
of the City University of New York.
MARK A. MORAES has served as Juno's Executive Vice President, Technology
since February 1998. From February 1997 until February 1998, he served as a
Senior Vice President of Juno, with responsibility for the development and
operation of Juno's system and networks. From June 1995 until February 1997,
Mr. Moraes served in several positions in Juno's systems development group,
including Vice President. From April 1992 until June 1995, Mr. Moraes served as
a global systems architect at DESCO, L.P., where he designed data distribution
networks. Earlier, he made contributions to the development and roll-out of
UUNET Canada, to the X Windows environment, and to Usenet's news software, which
is used by tens of thousands of sites around the world. Mr. Moraes is also the
moderator of Usenet's news.announce.newusers newsgroup, which is read by tens of
thousands of new Usenet users each year. Mr. Moraes received a Bachelor of
Technology degree from the Indian Institute of Technology and a Master of
Applied Science degree from the University of Toronto.
RICHARD M. EATON, JR. has served as Juno's Chief Financial Officer and
Treasurer since February 1999. From February 1998 until February 1999,
Mr. Eaton served as Juno's Senior Vice President, Finance and Administration.
From November 1996 until February 1998, he served as Juno's Vice President &
Corporate Controller. From May 1996 until November 1996, Mr. Eaton served as a
senior financial professional on a consulting basis for Think Systems
Corporation. From April 1995 to April 1996, Mr. Eaton served as Vice
President & Corporate Controller at Datalogix International, Inc. Mr. Eaton
served as an Area Controller of Finance and Administration for J. D. Edwards &
Company from August 1993 to December 1994. Mr. Eaton spent the first seven years
of his career with Coopers & Lybrand, last serving as an audit manager.
Mr. Eaton graduated SUMMA CUM LAUDE from the accelerated combined BBA/MBA
degrees program in public accountancy at Pace University, and is a member of
both the Connecticut Society of Certified Public Accountants and the American
Institute of Certified Public Accountants.
16
JORDAN S. BIRNBAUM has served as Juno's Senior Vice President, Business
Development since February 1998. He served as Juno's Vice President, Strategic
Marketing from February 1997 to February 1998 and as director of Juno's member
acquisition activities from October 1995 until February 1997. Prior to joining
Juno, Mr. Birnbaum held a number of positions with DESCO, L.P., most recently as
a London-based trader of equity securities from January 1994 until April 1995.
Mr. Birnbaum graduated from Cornell University.
RICHARD D. BUCHBAND has served as Juno's Senior Vice President and General
Counsel since February 1998, and is responsible for oversight of Juno's legal,
human resources and security policies. From January 1997 to February 1998, he
served as Vice President of Juno, and from September 1995 until January 1997 as
associate counsel of DESCO, L.P. Prior to September 1995, Mr. Buchband was a
corporate and transactional lawyer in New York. Mr. Buchband graduated MAGNA CUM
LAUDE with an A.B. from the Woodrow Wilson School of Public and International
Affairs at Princeton University and received his J.D. from Columbia Law School.
V. S. MANI has served as Juno's Senior Vice President, Database Systems
since February 1998. From February 1997 until February 1998, Mr. Mani served as
a Vice President, and from April 1996 until February 1997 as a software engineer
at Juno, with responsibility for the design of many of Juno's advertising and
electronic commerce systems. From February 1993 until March 1996, Mr. Mani held
a number of positions at the Matsushita Information Technology Laboratory in
Princeton, New Jersey, where he conducted research in information retrieval and
mobile computing, and, prior to that, with Digital Equipment Corporation.
Mr. Mani received his bachelor's degree with honors in Mechanical Engineering
from the Indian Institute of Technology and his M.S. in Computer Science from
the University of Wisconsin.
PETER D. SKOPP has served as Juno's Senior Vice President, Network
Development since February 1998. He served as a Vice President of Juno from
February 1997 to February 1998, with responsibility for designing Juno's server
software, and as a member of Juno's technical staff from December 1995 until
February 1997. From December 1992 until December 1995, Mr. Skopp was a manager
at the Programming Systems Laboratory of the Computer Science Department at
Columbia University. Mr. Skopp received his B.S. and M.S. degrees from Columbia
University.
17
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation that in 1999 was awarded to, earned or paid to the Company's Chief
Executive Officer and each of the three other most highly compensated executive
officers of the Company whose salary and bonus for the 1999 fiscal year was in
excess of $100,000. No other executive officers who would have otherwise been
includable in such table on the basis of salary and bonus earned for the 1999
fiscal year has been excluded by reason of his or her termination of employment
or change in executive status during that year. The listed individuals shall be
hereinafter referred to as the "Named Officers".
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION (1) AWARDS
------------------- SHARES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
- --------------------------- -------- -------- -----------------
Charles E. Ardai(2)..................................... $223,353 $165,000 462,933
President and Chief Executive Officer
Robert H. Cherins(3).................................... $150,000 $200,000 150,067
Executive Vice President, Sales and Marketing
Mark A. Moraes(4)....................................... $150,000 $175,000 150,067
Executive Vice President, Technology
Richard M. Eaton, Jr.(5)................................ $125,000 $125,000 217,789
Chief Financial Officer and Treasurer
- ------------------------------
(1) The column for "Other Annual Compensation" has been omitted because there is
no compensation required to be reported in that column. The aggregate amount
of perquisites and other personal benefits provided to each executive
officer above is less than the lesser of $50,000 and 10% of the total annual
salary and bonus of that officer.
(2) Amounts presented represent amounts paid for services rendered in 1999.
(3) Amounts presented represent amounts paid for services rendered in 1999. The
amounts shown above exclude a bonus of $100,000 paid in 1999 for services
rendered in 1998.
(4) Amounts presented represent amounts paid for services rendered in 1999. The
amounts shown above exclude a bonus of $75,000 paid in 1999 for services
rendered in 1998.
(5) Amounts presented represent amounts paid for services rendered in 1999. The
amounts shown above exclude a bonus of $60,000 paid in 1999 for services
rendered in 1998.
18
OPTION GRANTS IN LAST YEAR
The following table contains information concerning the stock options
granted to the Named Officers during the 1999 fiscal year. No stock appreciation
rights were granted to the Named Officers during such fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------------------
NAME GRANTED 1999 PER SHARE DATE 0% 5% 10%
- ---- ---------- ------------ -------------- ---------- -------- ---------- ----------
Charles E. Ardai....... 105,277 3.8% $ 9.00 4/8/2009 $315,831 $ 595,873 $1,510,060
315,556 11.3 13.00 4/21/2009 -- 2,579,869 6,537,895
42,100 1.5 8.94 6/3/2009 -- 236,700 599,843
Robert H. Cherins...... 66,667 2.4 13.00 4/26/2009 -- 545,045 1,381,250
13,400 0.5 8.94 6/3/2009 -- 75,339 190,924
70,000 2.5 15.00 8/15/2009 -- 660,339 1,673,430
Mark A. Moraes......... 66,667 2.4 13.00 4/21/2009 -- 545,045 1,381,250
13,400 0.5 8.94 6/3/2009 -- 75,339 190,924
70,000 2.5 15.00 8/15/2009 -- 660,339 1,673,430
Richard M. Eaton, 88,889 3.2 13.00 4/21/2009 -- 726,724 1,841,660
Jr................... 8,900 0.3 8.94 6/3/2009 -- 50,039 126,808
120,000 4.3 15.00 8/15/2009 -- 1,132,010 2,868,736
- ------------------------------
(1) Each option represents the right to purchase one share of common stock and
generally vests at a rate of 25% per annum over four years.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 0%, 5%
and 10% assumed annual rates of compounded stock price appreciation are
mandated by rules of the Securities and Exchange Commission and do not
represent Juno's estimate or projection of Juno's future common stock
prices. These amounts represent assumed rates of appreciation in the value
of Juno's common stock from the deemed fair market value for accounting
purposes on the date of grant. Actual gains, if any, on stock option
exercises are dependent on the future performance of the common stock and
overall stock market conditions. The amounts reflected in the table may not
necessarily be achieved.
19
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1999 AND YEAR-END
OPTION VALUES
The following table provides information, with respect to the Named
Officers, concerning the exercise of options during the 1999 fiscal year and
unexercised options held by them at of the end of that fiscal year. None of the
Named Officers exercised any stock appreciation rights during the 1999 fiscal
year.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1999
AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED DECEMBER 31, 1999 AT DECEMBER 31, 1999(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ---------- ----------- ------------- ----------- -------------
Charles E. Ardai........ -- -- 159,653 724,391 $5,584,707 $20,138,845
Robert H. Cherins....... 73,000 $1,305,934 58,909 218,158 2,061,570 4,232,965
Mark A. Moraes.......... 35,000 194,250 58,280 256,789 1,661,140 7,341,830
Richard M. Eaton, Jr.... 20,194 341,528 51,681 234,804 1,220,707 5,848,651
- ------------------------------
(1) The last reported sale price of the common stock of Juno as of December 31,
1999 was $35.50 per share.
EMPLOYMENT, SEVERANCE AND OTHER ARRANGEMENTS
Juno has entered into an employment agreement with Charles E. Ardai, dated
April 26, 1999, which may be terminated by either party upon 30 days notice. The
agreement was amended on February 29, 2000 for calendar year 2000 and provides
for Mr. Ardai to receive a base salary of $225,000 and to receive semi-annual
bonus payments on June 30 and December 31 of each year, of $50,000 each.
Subsequent to calendar year 2000, Mr. Ardai's base salary and bonus amount may
be increased, decreased or eliminated in the sole discretion of Juno.
Juno has entered into an employment agreement with Robert H. Cherins, dated
April 26, 1999, which may be terminated by either party upon 30 days notice. The
agreement, which incorporates the terms of a letter agreement dated
November 20, 1996, was amended on February 29, 2000 for calendar year 2000 and
provides for Mr. Cherins to receive a base salary of $185,000. The agreement
also provides for Mr. Cherins to receive a non-refundable advance of $143,500,
to be paid semi-monthly and deducted against any year-end bonus. Mr. Cherins is
eligible under the agreement to receive a year-end bonus. Subsequent to calendar
year 2000, Mr. Cherins's base salary, bonus amount and the amount of the
non-refundable advance may be increased or decreased in the sole discretion of
Juno, provided that, for each calendar year he is employed by Juno, his base
salary and the amount of the non-refundable advance shall not be less than
$328,500. In the event that Mr. Cherins is discharged by Juno, unless he is
terminated for cause or becomes unable to work due to disability, Juno shall pay
Mr. Cherins three months of severance at a rate of $328,500 per annum.
Juno has entered into an employment agreement with Mark A. Moraes, dated
October 6, 1999, which may be terminated by either party upon 30 days notice.
The agreement was amended on February 29, 2000 for calendar year 2000 and
provides for a base salary of $185,000 and for Mr. Moraes to be eligible to
receive a bonus at the sole discretion of Juno. Subsequent to calendar year
2000, Mr. Moraes's base salary and bonus amount may be increased, decreased or
eliminated in the sole discretion of Juno.
Juno has entered into an employment agreement with Richard M. Eaton, Jr.,
dated September 25, 1998, which may be terminated by either party upon 30 days
notice. The agreement was amended on February 29, 2000 for calendar year 2000
and provides for a base salary of $160,000 and for Mr. Eaton to be eligible to
receive a bonus at the sole discretion of Juno. Subsequent to calendar year
2000, Mr. Eaton's base salary and bonus amount may be increased or decreased in
the sole discretion of Juno.
20
Juno has also granted specified rights to some of our officers in the event
that they are terminated without cause or in the event that they voluntarily
resign following a material reduction in their duties and responsibilities or
their cash compensation or following a relocation of their place of employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Juno did not have a Compensation Committee during the first quarter of 1999.
During that period, Mr. Ardai and Dr. Shaw made decisions relating to
compensation of Juno's executive officers, except that Mr. Ardai did not
participate in discussions regarding his own compensation. No executive officer
of Juno serves on the board of directors or compensation committee of any entity
which has one or more executive officers serving as a member of Juno's board of
directors or Compensation Committee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during fiscal year 1999, all filings with the
Securities and Exchange Commission of its officers, directors and 10%
stockholders complied with requirements for reporting ownership and changes in
ownership of the Company's Common Stock pursuant to Section 16 (a) of the
Securities Exchange Act of 1934, except that Richard M. Eaton, Jr. omitted to
file a Form 4 with respect to the sale by him of 9,000 shares of Common Stock in
December 1999 and instead reflected such transaction on Form 5 filed by him in
February 2000.
21
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors advises the Chief
Executive Officer and the Board of Directors on matters of the Company's
compensation philosophy and the compensation of executive officers and other
individuals compensated by the Company. The Compensation Committee is also
responsible for the administration of the Company's stock option plans under
which option grants may be made to executive officers. The Compensation
Committee has reviewed and is in accord with the compensation paid to executive
officers in 1999.
GENERAL COMPENSATION POLICY
The fundamental policy of the Compensation Committee is to provide the
Company's executive officers with competitive compensation opportunities based
upon their contribution to the development and financial success of the Company
and their personal performance. It is the Compensation Committee's objective to
have a portion of each executive officer's compensation contingent upon the
Company's performance as well as upon such executive officer's own level of
performance.
COMPONENTS OF EXECUTIVE COMPENSATION
The Compensation Committee focuses primarily on the following three
components in forming the total compensation package for its executive officers:
- Base Salary
- Annual Bonus
- Long-Term Stock-Based Incentive Awards
BASE SALARY
The suggested base salary for each executive officer is determined on the
basis of the following factors: experience, personal performance, the salary
levels in effect for comparable positions within and without the industry and
internal base salary comparability considerations. The weight given to each of
these factors differs from individual to individual, as the Compensation
Committee deems appropriate.
ANNUAL BONUS
During the year, the executive officers of the Company were eligible for
discretionary annual bonuses, as determined by the Compensation Committee. Among
factors considered in determining the bonus were personal performance and the
Company's achievements and performance.
LONG-TERM STOCK-BASED INCENTIVE AWARDS
Long-term stock-based incentives are provided through grants of stock
options. The grants are designed to align the interests of each executive
officer with those of the stockholders and provide each individual with a
significant incentive to manage the Company from the perspective of an owner
with an equity stake in the Company. Each option generally becomes exercisable
in installments over a four-year period, contingent upon the executive officer's
continued employment with the Company. Accordingly, the option grant will
provide a return to the executive officer only if the executive officer remains
employed by the Company during the vesting period, and then only if the market
price of the underlying shares appreciates. The number of shares subject to each
option grant is set at a level intended to create a meaningful opportunity for
stock ownership based on the executive officer's current position with the
Company, the base salary associated with that position, the size of comparable
awards made to individuals in similar positions within the industry, the
individual's potential for increased responsibility and promotion over the
option term and the individual's personal performance in recent periods. The
Compensation
22
Committee also considers the number of unvested options held by the executive
officer in order to maintain an appropriate level of equity incentive for that
individual. However, the Compensation Committee does not adhere to any specific
guidelines as to the relative option holdings of the Company's executive
officers. Stock options to purchase an aggregate of 980,856 shares of Common
Stock were granted to executive officers in 1999.
CEO COMPENSATION
The plans and policies discussed above were the basis for the 1999
compensation of the Company's Chief Executive Officer, Mr. Charles E. Ardai. In
advising the Board of Directors with respect to the compensation of the
Company's Chief Executive Officer, the Compensation Committee seeks to achieve
two objectives: (i) establish a level of base salary competitive with that paid
by companies within the industry which are of comparable size to the Company and
by companies outside of the industry with which the Company competes for
executive talent and (ii) make a significant percentage of the total
compensation package contingent upon the Company's performance. In accordance
with these objectives, Mr. Ardai received a base salary of $223,353 for fiscal
year 1999. Stock options to purchase 462,933 shares of Common Stock were granted
to Mr. Ardai in fiscal year 1999; he currently holds a total of 1,134,044
unexercised stock options.
DISCUSSION OF COMPENSATION IN EXCESS OF $1 MILLION PER YEAR
The Compensation Committee has considered the implications of
Section 162(m) of the Internal Revenue Code of 1986, as amended, enacted under
the Revenue Reconciliation Act of 1993. This Section precludes a public
corporation from taking a tax deduction for individual compensation in excess of
$1 million for its Chief Executive Officer or any of its four other highest-paid
officers. This limitation will apply to all compensation paid to the covered
executive officers which is not considered to be performance based. Compensation
which does qualify as performance-based compensation will not have to be taken
into account for purposes of this limitation. The Plan contains certain
provisions which are intended to assure that any compensation deemed paid in
connection with the exercise of stock options granted under that plan with an
exercise price equal to the market price of the option shares on the grant date
will qualify as performance-based compensation. The Compensation Committee does
not expect that the compensation to be paid to the Company's executive officers
for 2000 will exceed the $1 million limit per officer.
SUMMARY
The Compensation Committee believes that its executive compensation policy
serves the interests of the Company and its stockholders.
THE COMPENSATION COMMITTEE
David E. Shaw
Edward J. Ryeom
Charles E. Ardai
23
STOCK PERFORMANCE GRAPH
The graph depicted below shows a comparison of cumulative total stockholder
returns for the Company, the Nasdaq Stock Market (U.S) Index and the
Hambrecht & Quist Internet Index.
CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
DOLLARS
5/26/99 12/31/99
JUNO ONLINE SERVICES, INC. 100 305.38
NASDAQ STOCK MARKET (U.S.) 100 157.09
HAMBRECHT & QUIST INTERNET 100 181.07
- ------------------------------
(1) The graph covers the period from May 26, 1999, the commencement date of the
Company's initial public offering of shares of its Common Stock, to
December 31, 1999.
(2) The graph assumes that $100 was invested in the Company on May 26, 1999, in
the Company's Common Stock and in each index, and that all dividends were
reinvested. No cash dividends have been declared on the Company's Common
Stock.
(3) Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings made under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings made by the Company under those statutes, neither the preceding Stock
Performance Graph nor the Compensation Committee Report is to be incorporated by
reference into any such prior filings, nor shall such graph or report be
incorporated by reference into any future filings made by the Company under
those statutes.
24
CERTAIN TRANSACTIONS
FINANCINGS PRIOR TO THE STATUTORY MERGER
From the formation of Juno Online Services, L.P. on June 30, 1995, until the
statutory merger of Juno Online Services, L.P. with Juno Online Services, Inc.
on March 1, 1999, we were financed through contributions of capital, primarily
from persons or entities affiliated with D. E. Shaw & Co., Inc. In return for
their investments, these investors received Class A limited partnership units.
On March 1, 1999, we converted from a limited partnership into a C corporation.
As part of this conversion, Class A limited partnership units were converted
into shares of Series A redeemable convertible preferred stock at a one-to-one
ratio.
1999 PRIVATE EQUITY INVESTMENT
Following the statutory merger, we raised gross proceeds of $65.0 million by
completing a private placement of 10,138,716 shares of a newly authorized class
of Series B redeemable convertible preferred stock to a group of investors.
Investors in the private round of financing included Intel Corporation, News
Corporation, Prospect Street Ventures and Sycamore Ventures. Upon completion of
our initial public offering on May 25, 1999, the outstanding shares of Series A
redeemable convertible preferred stock and Series B redeemable convertible
preferred stock automatically converted into an aggregate of 27,822,751 shares
of our common stock.
SHARED SERVICES
Historically, DESCO, L.P. has provided Juno various administrative services.
These services have included numerous overhead and infrastructure items, such as
providing office space and occupancy-related services, providing insurance and
professional services, providing and maintaining some of the hardware and
software used by Juno, and administering employee benefit plans for the benefit
of Juno employees. Effective January 1, 1998, Juno and DESCO, L.P. entered into
a services agreement pursuant to which DESCO, L.P. has agreed to provide
administrative and other services for Juno in a specified set of service
categories, in return for a set monthly fee: $152,500 per month for the period
of January 1, 1998 to April 16, 1998, $61,600 per month for the period
April 17, 1998 to December 31, 1999 and $7,200 per month, primarily for
telecommunications services, for the period thereafter. The services agreement
covers the delivery of:
- telecommunications services;
- personnel-related services, including for 401(k) and other benefit plans
and workers' compensation insurance;
- miscellaneous administrative services;
- various professional services;
- various purchasing services; and
- various information technology services.
The term of the services agreement extends on a month-to-month basis until
terminated by either party. The services agreement may be terminated by either
party at any time upon written notice to the other party following a material
default by the other party which remained uncured for 30 days or at any time
upon 90 days written notice to the other party. Juno believes that the amounts
charged to it under the services agreement are generally comparable to the
amounts that would have been charged by an independent third party. We do not
have any current plans to terminate the services agreement.
Prior to May 20, 1999, Juno and DESCO, L.P. were parties to a services
agreement pursuant to which DESCO, L.P., through certain affiliates based in
India, provided various consulting services to Juno. Under
25
this agreement, DESCO, L.P. provided technical and non-technical consulting
services as well as other consulting services agreed to by the parties. Each
staff member who performed consulting services under this agreement was
categorized as either a technical consultant or a non-technical consultant. In
addition to reimbursing DESCO, L.P. for specified expenses, such as travel costs
and satellite link charges, we paid DESCO, L.P. $3,650 per month for each
technical consultant and $2,300 per month for each non-technical consultant. The
parties terminated this agreement effective May 20, 1999, and we are presently
restructuring the manner in which Juno obtains the services that had been
provided under the agreement. We have formed a subsidiary of Juno based in
Hyderabad, India, and that subsidiary has entered into employment agreements
with substantially all of the individuals who had previously served as technical
or non-technical consultants. In the future, we expect to enter into a more
limited agreement to formalize occupancy and related services that we continue
to obtain from DESCO, L.P.'s affiliated entity in India. We believe that the
economic terms of the new agreement will be generally comparable to those that
could be obtained from an independent third party.
We employ a small number of personnel in Cambridge, Massachusetts, primarily
for the purpose of maintaining Juno server equipment that is located in a space
formerly maintained by D. E. Shaw Financial Technology, L.P., an affiliate of
DESCO, L.P. Effective January 1, 1998, Juno and Shaw Financial Technology
entered into a services agreement under which Shaw Financial Technology has
agreed to provide information technology, telecommunications, occupancy, and
related administrative services to us, in return for a monthly fee of $11,500.
Shaw Financial Technology sold some of its assets to a third party and we have
made arrangements with this third party to continue to host our server
equipment.
TRANSACTIONS WITH NEWS CORPORATION
Juno has entered into an agreement with News America Incorporated, a
significant stockholder of Juno and an affiliate of News Corporation, to
purchase various forms of advertising on the media properties of News America
Incorporated and its affiliates. Under the March 1, 1999 agreement, Juno spent
$10.0 million for advertising that may be used at any time prior to March 2001,
to be provided by News America and its affiliates at then-current rates which
shall be no greater than those customarily applied to purchasers of similar
amounts of comparable advertising.
On September 29, 1999, Juno entered into an agreement with News America
Digital Publishing, an affiliate of News Corporation, to use Fox-branded news,
sports, entertainment and business content within co-branded channels on the
Juno portal site.
LEASES
Since November 1997, Juno's principal executive offices have been located on
a single floor at 1540 Broadway leased from Bertelsmann Property, Inc. under an
Agreement of Lease dated September 22, 1997 between DESCO, L.P., as lessee, and
Bertelsmann. The lease permits DESCO, L.P. to sublet all or a portion of the
premises to Juno. Juno has agreed to assume the performance of DESCO, L.P.'s
payment obligations under the lease. The term of the lease continues until March
2003 and DESCO, L.P. has an option to renew for an additional five-year term.
Juno also currently occupies two floors in an adjacent building under a
subleasing arrangement with DESCO, L.P. Although the terms of this arrangement
have not been finalized, Juno expects that the sublease will expire on
April 30, 2001. We believe that the economic terms of this sublease will be
generally comparable to those that could be obtained from an independent third
party.
26
ANNUAL REPORT
A copy of the Annual Report of the Company for the 1999 Fiscal Year has been
mailed concurrently with this Proxy Statement to all stockholders entitled to
notice of and to vote at the Annual Meeting. The Annual Report is not
incorporated into this Proxy Statement and is not considered proxy solicitation
material.
FORM 10-K
The Company filed an Annual Report on Form 10-K with the Securities and
Exchange Commission on February 15, 2000. Stockholders may obtain a copy of this
report, without charge, by writing to Richard D. Buchband, Senior Vice President
and General Counsel, at the Company's principal executive offices located at
1540 Broadway, 27(th) Floor, New York, New York 10036.
****
Management does not know of any business to be transacted at the meeting
other than as indicated herein. However, certain stockholders may present topics
for discussion from the floor. Should any matter other than as indicated herein
proeprly come before the meeting for a vote, the persons designated as proxies
will vote thereon in accordance with their best judgment.
You are urged to sign, date and return the enclosed proxy in the prepaid
envelope provided or, if applicable, to vote by telephone. Promptly voting may
save your Company the expense of a second mailing.
By Order of the Board of Directors
[SIGNATURE]
Richard D. Buchband
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL; SECRETARY
Dated: April 10, 2000
27
JUNO ONLINE SERVICES, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 24, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
JUNO ONLINE SERVICES, INC.
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders to be held May 24, 2000 and the
Proxy Statement and appoints Charles E. Ardai, Richard M. Eaton Jr. and
Richard D. Buchband, and each of them, the Proxy of the undersigned, with full
power of substitution, to vote all shares of Common Stock or Preferred Stock of
Juno Online Services, Inc. (the "Company") which the undersigned is entitled to
vote, either on his or her own behalf or on behalf of any entity or entities, at
the Annual Meeting of Stockholders of the Company to be held at The Empire
Hotel, 44 West 63(rd) Street, New York, New York 10023 on Wednesday,
May 24, 2000 at 10:00 Eastern Time (the "Annual Meeting"), and at any
adjournment or postponement thereof, with the same force and effect as the
undersigned might or could do if personally present thereat. The shares
represented by this Proxy shall be voted in the manner set forth on the reverse
side.
1. To elect a director to serve for a three-year term ending in the year 2003 or until his
successor is duly elected and qualified;
Charles E. Ardai For / / Withhold Authority to Vote / /
To approve a series of amendments to the Company's 1999 Stock
Incentive Plan (the "1999 Plan"), to (i) increase the number of
shares of Common Stock reserved for issuance over the term of the
2. For Against Abstain 1999 Plan by an additional 3,500,000 shares and (ii) to amend the
/ / / / / / 1999 Plan so that at the beginning of each calendar year the
share reserve under the 1999 Plan is automatically increased by a
number of shares equal to 4% of the total number of shares of
Common Stock outstanding (each such increase not to exceed
2,400,000 shares);
3. For Against Abstain To ratify the appointment of PricewaterhouseCoopers LLP as
/ / / / / / independent accountants of the Company for the fiscal year ending
December 31, 2000.
4. In accordance with the discretion of the proxy holders, to act upon all matters incident
to the conduct of the meeting and upon other matters as may properly come before the
meeting.
The Board of Directors recommends a
vote FOR the director listed above
and a vote FOR each of the listed
proposals. This Proxy, when
properly executed, will be voted as
specified above. IF NO
SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF
THE DIRECTOR LISTED ABOVE AND FOR
THE OTHER PROPOSALS.
Please print the name(s) appearing on each share
certificate(s) over which you have voting
authority:
--------------------------------------------------
(Print name(s) on certificate)
Please sign your name:
--------------------------------------------------
(Authorized Signature(s))
Date:
--------------------------------------------------