<PAGE>
As filed with the Securities and Exchange Commission on October 29, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
SWITCHBOARD INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
------------------
<TABLE>
<S> <C>
Delaware 7375 04-3321134
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification Number)
Incorporation or
Organization)
</TABLE>
115 Flanders Road
Westboro, Massachusetts 01581
(508) 898-1122
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
------------------
Dean Polnerow
President
SWITCHBOARD INCORPORATED
115 Flanders Road
Westboro, Massachusetts 01581
(508) 898-1122
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)
------------------
Copies to:
<TABLE>
<S> <C>
Mark G. Borden Brian D. Goldstein
Virginia K. Kapner Testa, Hurwitz & Thibeault, LLP
Hale and Dorr LLP 125 High Street
60 State Street Boston, Massachusetts 02110
Boston, Massachusetts 02109 Telephone: (617) 248-7000
Telephone: (617) 526-6000 Telecopy: (617) 248-7100
Telecopy: (617) 526-5000
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date hereof.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
------------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of each Class of Proposed Maximum Amount of
Securities to be Registered Aggregate Offering Price(1) Registration Fee(2)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.01 par value per
share................................ $60,000,000 $16,680
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.
(2) Calculated pursuant to Rule 457(o) based on an estimate of the proposed
maximum aggregate offering price.
------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 29, 1999
[LOGO]
[ ] Shares
Common Stock
Switchboard Incorporated is offering shares of its common stock. This
is our initial public offering, and no public market currently exists for our
shares. We have applied to have the shares we are offering approved for
quotation on the Nasdaq National Market under the symbol "SWBD". We anticipate
that the initial public offering price will be between $ and $ per share.
--------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 9.
--------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price......................................... $ $
Underwriting Discounts and Commissions........................ $ $
Proceeds to Switchboard....................................... $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
Switchboard has granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments. BancBoston
Robertson Stephens, Inc. expects to deliver the shares of common stock to
purchasers on , 1999.
--------------
Robertson Stephens J.P. Morgan & Co.
--------------
Wit Capital Corporation
The date of this prospectus is , 1999.
<PAGE>
[Inside Front Cover]
<PAGE>
Until , 1999 (25 days after the date of this prospectus), all dealers
that buy, sell or trade our common stock, whether or not participating in this
offering, may be required to deliver a prospectus. This requirement is in
addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 4
Risk Factors............................................................. 9
Forward-Looking Statements............................................... 23
Use of Proceeds.......................................................... 24
Dividend Policy.......................................................... 24
Capitalization........................................................... 25
Dilution................................................................. 27
Selected Financial Data.................................................. 28
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 29
Business................................................................. 38
Management............................................................... 49
Certain Transactions..................................................... 58
Principal Stockholders................................................... 66
Description of Capital Stock............................................. 68
Shares Eligible for Future Sale.......................................... 72
Underwriting............................................................. 74
Legal Matters............................................................ 76
Experts.................................................................. 76
Where You Can Find More Information...................................... 77
Index to Financial Statements............................................ F-1
</TABLE>
3
<PAGE>
SUMMARY
This summary may not contain all of the information that is important to
you. You should read the entire prospectus, including "Risk Factors" and the
financial statements and related notes, before deciding to invest in our common
stock.
Our Company
We are a leading Internet-based local merchant network interconnecting
consumers, merchants and national advertisers. We connect consumers searching
for specific products and services with the merchants that provide them. We
offer our users local information about people and businesses across the United
States, including listings of over 96 million individuals, 12 million
businesses and four million e-mail addresses. Our online network gives
merchants a fast, easy, cost-effective way to get their businesses represented
online and facilitates commerce by connecting them with consumers. We provide
an effective online lead generation engine for these local merchants and for
national advertisers that reaches consumers motivated to buy products and
services in specific geographic locations.
We entered into a strategic relationship with CBS in June 1999 providing
for $95.0 million in advertising and promotion through 2006 across CBS media
properties, including television, radio and outdoor advertising. Our strategic
alliance with CBS positions us to build our brand, attract consumers and
increase the credibility of our service with local merchants. In addition to
our CBS relationship, we reach a large base of consumers and local merchants
through our relationships with financial services, telecommunications and
newspaper companies and Internet destinations. Through these relationships, we
aggregate new merchants into our network and increase the number of consumers
using our Web site.
The number of Internet users worldwide is projected to increase to 500
million by the end of 2003 from approximately 195 million in 1999, according to
International Data Corporation. According to Forrester Research, total online
commerce is projected to increase to $42.0 billion in 2002 from approximately
$7.3 billion in 1998. Forrester Research also estimates that, along with this
growth of online commerce, total online advertising will increase to $10.4
billion in 2003 from approximately $1.3 billion in 1998.
Historically, consumers have used printed materials such as yellow pages
directories and maps to identify and seek out businesses that provide specific
products and services in their area. These sources, however, typically cover
narrowly defined geographic areas and are updated only once per year. Recently,
consumers have turned to online directories as an alternative source of local
information. Consumers, however, continue to encounter difficulties obtaining
the relevant information they seek because of the volume and fragmented nature
of online local information.
Local merchants are increasingly recognizing the need to establish an
online presence to remain competitive. According to Forrester Research, the
number of small businesses with a Web presence is projected to increase to 4.2
million by the end of 2003 from approximately 2.1 million in 1999. Forrester
Research also predicts local online commerce will increase to $6.1 billion in
2003 from approximately $680 million in 1998. Creating an online presence,
however, is often a difficult and costly task for small businesses. Local
merchants may struggle with the financial, technical and administrative
challenges associated with creating, maintaining and promoting an effective Web
site.
We have created a single online destination, Switchboard.com, that
satisfies consumers' need for easily accessible detailed local information and
merchants' need to establish and maintain an online presence. Switchboard.com
attracted approximately three million unique visitors in September 1999
according to Media Metrix and we have over 2.4 million registered users.
Additionally, our users viewed over 55 million pages in August 1999.
4
<PAGE>
We provide the following benefits to consumers:
Extensive information base. We provide our users with links to a growing
base of over 350,000 business Web sites. This provides our users with a
powerful tool to research and compare competitive products and services and to
ultimately conduct business, both online and offline.
Powerful search capability. Our proprietary directory architecture combined
with our intuitive screen display allows search results to be delivered quickly
with fewer page views. Search results can be organized alphabetically or by
geographic proximity.
Integrated maps and driving directions. Our Maps On Us maps and driving
directions technology is fully integrated with our directory services. Once a
consumer identifies a desired address, Maps On Us allows the consumer to plot
the most effective route to that destination, including intermediate stopping
points.
We also provide the following benefits to merchants and national
advertisers:
Fast cost-effective Web presence. We quickly and cost-effectively develop
and deploy multi-page Web sites for local merchants while eliminating the
associated technical, administrative and financial challenges.
Participation in a leading online local merchant network. We provide local
merchants with access to our nationally recognized, highly trafficked merchant
network, Switchboard.com, which provides merchants with exposure to customers
beyond their immediate local area.
Lead generation. Our online network attracts self-qualified consumers and
helps to connect them with our merchant customers.
Customized advertising options for national advertisers. We offer national
advertisers a wide range of customized advertising options designed to generate
leads at the local or national level.
We intend to be the leading Internet-based local merchant network by:
. building our brand;
. expanding our merchant aggregation programs;
. creating specialized vertical directories;
. extending our technology leadership; and
. expanding our operations internationally.
Our Offices
We were incorporated in Delaware on April 18, 1996. We are a majority-owned
subsidiary of Banyan Systems Incorporated, or Banyan Worldwide. Our principal
executive offices are located at 115 Flanders Road, Westboro, Massachusetts
01581, and our telephone number at that location is (508) 898-1122. Our Web
site address is www.Switchboard.com. The information on our Web site is not
incorporated by reference into this prospectus and should not be considered to
be a part of this prospectus.
5
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by Switchboard................. shares
Common stock to be outstanding after this offering.. shares
Use of proceeds..................................... For working capital and
general corporate
purposes. Please see "Use
of Proceeds."
Proposed Nasdaq National Market symbol.............. SWBD
</TABLE>
The number of shares of our common stock that will be outstanding after
this offering is based on 18,128,477 shares outstanding on June 30, 1999. This
number includes one share issuable upon the conversion of our one outstanding
share of series E special voting preferred stock, which will not convert
automatically upon the closing of this offering, and the following shares
issuable upon the conversion of series A, series C and series D convertible
preferred stock, which will convert automatically upon the closing of this
offering:
. 750,000 shares issuable upon the conversion of 750,000 shares of series
A convertible preferred stock;
. 2,655,916 shares issuable upon the conversion of 2,655,916 shares of
series C convertible preferred stock; and
. 87,345 shares issuable upon the conversion of 87,345 shares of series D
convertible preferred stock.
The number of shares outstanding excludes:
. 1,393,825 shares subject to outstanding options as of June 30, 1999 at
a weighted average exercise price of $2.88 per share;
. 1,751,174 shares subject to outstanding warrants at a weighted average
exercise price of $2.71 per share, assuming these warrants are all
exercised in full;
. outstanding principal and interest on a convertible note convertible
into 67,704 shares of common stock at a conversion price of $7.50 per
share; and
. 1,574,176 shares reserved for issuance under our 1996 stock incentive
plan.
In addition, there are an aggregate of 1,500,000 shares reserved for
issuance under our 1999 stock incentive plan and 300,000 shares reserved for
issuance under our 1999 employee stock purchase plan, each of which was adopted
in October 1999.
Recent Development
On October 27, 1999, Banyan Worldwide issued a press release summarizing
Banyan Worldwide's consolidated financial results for the three and nine months
ended September 30, 1999. Some of our financial results were included in Banyan
Worldwide's consolidated financial results. For the three months ended
September 30, 1999, our revenue was approximately $2.5 million and our gross
profit was approximately $1.7 million. For the nine months ended September 30,
1999, our revenue was approximately $6.1 million and our gross profit was
approximately $4.6 million.
6
<PAGE>
Additional Information
Except as set forth in the financial statements and related notes or as
otherwise indicated, all information in this prospectus:
. assumes no exercise of the underwriters' over-allotment option;
. reflects the conversion of all outstanding shares of our convertible
preferred stock into shares of common stock, with the exception of the
one outstanding share of series E special voting preferred stock; and
. reflects the filing, as of the closing of this offering, of our amended
and restated certificate of incorporation and the adoption of our
amended and restated by-laws.
Industry data included in this prospectus has been obtained from third
parties and has not been independently verified by us.
"Switchboard," "Maps On Us" and "SideClick" are our registered service
marks. We have applied for service mark registrations for "Ad Studio," "What's
Nearby," "Think Outside the Book," "My Corner" and "My Studio." "CBS" and the
CBS "eye" device are registered trademarks of CBS Broadcasting Inc. This
prospectus also contains other trademarks, tradenames and service marks of ours
and other companies which are the property of their respective owners.
7
<PAGE>
Summary Financial Data
The following summary historical and pro forma financial data should be
read together with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our financial statements and related notes
included elsewhere in this prospectus. The summary pro forma data do not
purport to represent what our results would have been if the events below had
occurred at the dates indicated.
<TABLE>
<CAPTION>
Period from
Inception Year Ended Six Months Ended
to December 31, June 30,
December 31, ---------------- ------------------
1996 1997 1998 1998 1999
------------ ------- ------- -------- --------
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue.................... $ 170 $ 650 $ 6,536 $ 2,761 $ 3,168
Gross profit............... 141 (143) 5,229 2,139 2,572
Loss from operations....... (1,530) (5,334) (4,961) (3,737) (1,105)
Net loss................... $(1,515) $(5,329) $(5,365) $ (3,899) $ (1,318)
======= ======= ======= ======== ========
Basic and diluted net loss
per share................ $ (0.22) $ (0.81) $ (0.81) $ (0.58) $ (0.21)
======= ======= ======= ======== ========
Shares used in computing
basic and diluted net
loss per share........... 7,000 7,000 7,011 7,005 7,056
Unaudited pro forma basic
and diluted net loss per
share.................... $ (0.69) $ (0.50) $ (0.17)
======= ======== ========
Shares used in computing
unaudited pro forma basic
and diluted net loss per
share.................... 7,761 7,755 7,814
</TABLE>
The following table is a summary of our balance sheet at June 30, 1999. The
pro forma as adjusted data give effect to:
. the conversion of 750,000 shares of our series A convertible preferred
stock into 750,000 shares of common stock;
. the conversion of 2,655,916 shares of our series C convertible
preferred stock into 2,655,916 shares of common stock;
. the conversion of 87,345 shares of our series D convertible preferred
stock into 87,345 shares of common stock; and
. the sale of shares of common stock at an assumed initial public
offering price of $ per share, after deducting underwriting
discounts and commissions and estimated offering expenses payable by
Switchboard.
<TABLE>
<CAPTION>
As of June 30, 1999
--------------------
Pro Forma
Actual As Adjusted
------- -----------
(unaudited)
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................................. $ 6,806 $
Working capital............................................ 5,603
Total assets............................................... 10,935
Total current liabilities.................................. 3,599
Redeemable convertible preferred stock..................... 15,091
Total stockholders' equity (deficit)....................... (7,755)
</TABLE>
8
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should consider carefully
the risks and uncertainties described below and the other information in this
prospectus, including the financial statements and related notes, before
deciding to invest in shares of our common stock. The risks and uncertainties
described below may not be the only risks that we face. If any of these risks
or uncertainties actually occurs, our business, financial condition and results
of operations would likely suffer. In that event, the market price of our
common stock could decline, and you could lose all or part of the money you
paid to buy our common stock.
Risks Related to Our Business
Our business is difficult to evaluate because our operating history is limited
We have only a limited operating history on which you can base an
evaluation of our business and prospects. You must consider our prospects in
light of the risks, uncertainties and difficulties frequently encountered by
companies in their early stages of development, particularly companies in new
and rapidly evolving markets like ours. We may not be successful in addressing
these risks and uncertainties. Our failure to do so could have a material
adverse effect on our business, results of operations or financial condition.
Some of these risks and uncertainties relate to our ability to:
. attract, retain and maintain a large base of consumers and merchants;
. expand our service offerings;
. establish and maintain strategic relationships with merchant
aggregators and service and content providers;
. establish and maintain relationships with sponsors and advertisers;
. respond effectively to competitive and technological developments; and
. maintain and enhance the leadership and quality of our services.
We have a history of incurring net losses and expect our net losses to increase
We have incurred significant net losses in each fiscal quarter since our
inception. From inception to June 30, 1999, we have incurred net losses
totaling $13.5 million. We expect to incur increasing net losses and negative
cash flows for the foreseeable future as we increase operating expenses to
develop the Switchboard brand through marketing, promotion, enhancement and
expansion of our services. As a result of this expected increase in operating
expenses, we will need to generate significant additional revenue to achieve
profitability. It is possible that we may never achieve profitability and, even
if we do achieve profitability we may not sustain or increase profitability on
a quarterly or annual basis in the future. If we do not achieve sustained
profitability in the future, we will be unable to continue our operations.
Our quarterly results of operations are likely to fluctuate, which may
negatively affect our stock price
Our quarterly revenue and results of operations are volatile and
particularly difficult to predict. Our quarterly results of operations have
fluctuated significantly in the past and are likely to fluctuate significantly
from quarter to quarter in the future.
Factors that may cause our results of operations to fluctuate include:
. the addition or loss of strategic relationships;
. our ability to attract and retain advertisers;
. the productivity of our direct sales force and of third-party sales
forces that sell advertising for us;
9
<PAGE>
. the amount and timing of expenditures for expansion of our operations,
including the hiring of new employees, capital expenditures and related
costs;
. technical difficulties, system downtime or failures or Internet brown-
outs;
. the cost of acquiring, and the availability of, content;
. our ability to retain and motivate personnel;
. the introduction of new or enhanced services by us or our strategic
partners;
. the introduction of new services by our competitors;
. price competition in Internet advertising;
. seasonality; and
. general economic conditions and economic conditions specific to the
Internet.
As a result of these factors, results in some future quarter or quarters may be
below the expectations of securities analysts or investors. If so, the market
price of our common stock may decline significantly.
We do not believe that period-to-period comparisons of our results of
operations are necessarily meaningful and you should not rely upon these
comparisons as indicators of our future performance. Our expenses are partially
based on our expectations regarding future revenue and are largely fixed in
nature, particularly in the short term. As a result, if our revenue in a period
does not meet our expectations, our financial results will likely suffer.
We have an unproven business model and may not achieve profitability
Our model for conducting business and generating revenue is unproven. Our
business model depends upon our ability to generate revenue from:
. Internet advertising and sponsorships fees;
. Web site design, construction, hosting and enhancement for local
merchants; and
. syndication and licensing of our products and services.
It is uncertain whether our products and services can generate sufficient
revenue to achieve profitability. For our business to be successful, we must
develop interactive services designed for local merchants, provide content that
attracts users to our Web site frequently and expand our products and services.
We cannot assure you that we will be able to provide users with an acceptable
blend of content and other products and services that will attract them to our
Web site frequently. We provide our products and services to users without
charge, and we may not be able to generate sufficient revenue to pay for the
cost of these products and services. Accordingly, we cannot assure you that our
business model will succeed or that our business will grow.
We need to develop the Switchboard brand to grow and this will be costly
Building recognition of our brand is critical to attracting and expanding
our user base. We are pursuing an aggressive brand-building strategy that
includes mass market and multimedia advertising, promotional programs and
public relations activities. CBS has agreed, with some limitations, to provide
us with a total of $95.0 million of advertising and promotion on CBS properties
before June 2006. We intend to incur significant additional expenditures in
connection with our future advertising and promotional programs and activities.
We may find it necessary to accelerate expenditures on our sales and marketing
efforts or otherwise increase our financial commitment to creating and
maintaining brand awareness among potential users. These additional
expenditures may not result in a sufficient increase in revenue to cover our
advertising and promotional expenses. In addition, even if awareness of our
brand increases, the number of new users of our Web site may not increase. Even
if the number of new users increases, the amount of traffic on our Web site may
not increase sufficiently to justify these additional advertising and
promotional expenditures. If our strategy to build brand is unsuccessful, these
expenditures may never be recovered and we may be unable to increase or
maintain revenue in the future.
10
<PAGE>
Our affiliation with CBS may not successfully develop recognition of the
Switchboard brand
We use the "CBS" trademark and "eye" device under a license agreement with
CBS which we entered into in June 1999. We therefore have limited experience in
integrating CBS's trademarks into our effort to build our brand. While CBS's
trademarks are well-recognized, we cannot be certain that our use of these
trademarks will enhance the Switchboard brand due to our limited experience in
using them and the potential for confusion between CBS's businesses and our
business. In addition, CBS licenses the use of its name and trademarks to other
companies, some of whom have unproven business plans in competitive markets. If
CBS or any of these companies experiences business difficulties or conducts
activities which damage the CBS brand, our brand could be damaged.
If we are unable to expand our merchant aggregation program, the growth of our
revenue may be impeded
For our business to be successful, we must expand our merchant aggregation
program and generate significant revenue from that program. The success of our
merchant aggregation program depends in substantial part upon our ability to
access a broad base of local merchants. The base of local merchants is highly
fragmented, and local merchants are difficult to contact efficiently and cost-
effectively. Consequently, we depend on merchant aggregators, like Discover
Financial Services, Inc., a subsidiary of Morgan Stanley Dean Witter & Co., to
provide us with local merchant contacts and to provide billing and other
administrative services relating to our local merchant services. Discover was
our first and remains our primary merchant aggregator. The dissolution of our
strategic relationship with Discover would significantly impair our ability to
attract potential local merchant customers and deliver our local merchant
services to our current customers. We cannot be certain that we will be able to
develop or maintain relationships with new merchant aggregators on terms
acceptable to us or at all.
We may not be able to retain our local merchant customers
We may be unable to demonstrate to our local merchant customers the value
of our local merchant services. We generally provide our local merchant
services on a month-to-month basis. If local merchants cancel our services, our
business will suffer. We do not presently provide our local merchant customers
with data demonstrating the number of leads generated by our local merchant
services. Other forms of advertising available to local merchants provide local
merchants with tangible evidence, such as a coupon, of a lead resulting from
their advertising efforts. Regardless of whether our local merchant services
effectively produce leads, our local merchant customers may not know the source
of the leads and may cancel our local merchant services.
Our success depends upon strategic alliances
Our business will suffer if we fail to maintain or renew our existing
strategic alliances, establish additional strategic alliances or fully
capitalize on any relationship. In addition to our relationship with CBS and
our relationships with merchant aggregators we have entered into strategic
relationships with syndication customers and third-party content providers. Our
strategic allies may not perform their contractual obligations to us and if
they do not, we may not be able to require them to do so. Some of our strategic
alliances may be terminated by either party on short notice.
Our strategic alliances are in early stages of development. These
relationships may not be profitable or provide us benefits that outweigh the
costs of the relationships. If any strategic ally demands a greater portion of
advertising revenue or requires us to make payments for access to its site, our
business may suffer. In addition, if we lose a significant strategic ally we
may be unable to replace it with other strategic allies with comparable revenue
potential, content or user demographics.
11
<PAGE>
We depend on third parties for database information
Our future success depends in significant part upon our ability to maintain
relationships with third-party content providers and enter into new
relationships with other content providers. We principally rely upon single
third-party sources to provide us with our business and residential listings
data, e-mail data and mapping data. The loss of any one of these sources or the
inability of any of these sources to collect their data could significantly and
adversely affect our ability to provide information to consumers. Although
other sources of our database information exist, we may not be able to
integrate data from these sources into our database systems in a timely, cost-
effective manner or without an inordinate expenditure of internal engineering
resources. Moreover other sources of data may not be offered on terms
acceptable to us.
We typically license information under arrangements that require us to pay
royalties or other fees for the use of the content. In the future, some of our
content providers may demand a greater portion of advertising revenue or
increase the fees that they charge us for their content. If we fail to enter
into and maintain satisfactory arrangements with content providers, our
business will suffer.
The success of our business depends on the quality of our products and
services and the quality is substantially dependent on the accuracy of data we
license from third parties. Any failure to maintain accurate data would
adversely affect our business.
We rely on advertising and promotion revenue
We have derived a substantial portion of our revenue from the sale of
advertisements and sponsorships. If we are unable to remain an attractive
medium for advertising, our results of operations will suffer. Our ability to
remain an attractive medium for advertising will depend upon a number of
factors, including:
. the acceptance of the Internet as an advertising medium;
. the acceptance of our products and services by a large number of users
who have demographic characteristics that are attractive to
advertisers; and
. the expansion and productivity of our advertising sales force.
We typically sell advertisements under agreements with terms of less than
six months. These short-term agreements expose us to competitive pricing
pressures and potentially severe fluctuations in our results of operations. In
addition, these agreements often contain guarantees by us of a minimum number
of impressions or click throughs by Web users. If we fail to meet these
guarantees we are required to provide our advertising customers with
advertising at no additional charge until the guarantees are met.
We rely on a small number of customers whom we may be unable to replace
We derive a substantial portion of our revenue from a small number of
advertising and syndication customers. Consequently, our business may suffer if
we lose any of these customers. We anticipate that our future results of
operations will continue to depend to a significant extent upon revenue from a
small number of customers. In addition we anticipate that the identity of those
customers will change over time. To achieve our long-term goals, we will need
to attract additional significant customers on an ongoing basis. Our failure to
enter into a sufficient number of large contracts during a particular period
may have a material adverse effect on our business, results of operations and
financial condition.
Our sales cycles may cause revenue to be lost or delayed
Sales cycles for our products and services typically range from one to
twelve months. Accordingly, the cancellation or deferral of a small number of
purchases of products and services could materially adversely affect our
results of operations in any particular quarter. Cancellations or deferrals may
be caused by several factors, including delays in introducing new or enhanced
products and services. In addition, to the extent that sales occur earlier than
we predict, our results of operations for subsequent quarters could suffer.
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We depend on a small number of sales personnel, most of whom have only recently
joined us
Our business would be adversely affected if we do not develop and maintain
an effective sales force. Our sales group consists of only five members. We
need to increase the size of our sales force. Our Director of National Ad Sales
joined us in April 1999, and two other members of our sales group joined us in
October 1999. Typically new sales personnel require six to twelve months to
become productive.
If we do not successfully introduce new and enhanced products and services for
our Web site, we may not be able to attract and retain a sufficient number of
consumers and local merchants
We need to introduce new and enhanced products and services to generate
additional revenue, attract and retain more local merchants to our products and
services, attract more consumers to our Web site and respond to competition.
Any new product or service introduction not favorably received could damage our
reputation and our brand. We may also experience difficulties that could delay
or prevent us from introducing new services. Furthermore, these services may
contain errors that are discovered after the services are introduced. We may
need to significantly modify the design of these services on our Web site to
correct these errors. Our business could be adversely affected if we experience
difficulties in introducing new services or if users do not accept these new
services.
A number of members of our management team have little experience working
together, and our business is dependent on a few key employees
Our future success depends to a significant extent on the continued
services and effective working relationships of our senior management and other
key personnel, including Douglas Greenlaw, our Chief Executive Officer, and
Dean Polnerow, our President. Mr. Greenlaw joined us in October 1999 and has
not previously worked with other members of our senior management team. Our
business will suffer if we lose the services of Mr. Greenlaw, Mr. Polnerow or
other key personnel or if we are unable to successfully integrate Mr. Greenlaw
into our current senior management team.
If we are unable to attract and retain qualified personnel, our business will
suffer
We believe that our success depends largely on our ability to attract and
retain highly skilled technical, managerial, sales and marketing personnel. The
industry in which we compete has a high level of employee turnover. We may not
be able to hire or retain the necessary personnel to implement our business
strategy. In addition, we may need to pay higher compensation for employees
than we currently expect. Individuals with the technical, sales and marketing
skills we require, particularly with Internet experience, are in very short
supply. Competition to hire from this limited pool is intense.
We need to manage our growth or our growth may slow or stop
We have significantly expanded our operations and must expand further if we
are to be successful in building our business. Our growth has placed, and will
continue to place, a significant strain on our management, operating and
financial systems, and sales, marketing and administrative resources. If we
cannot manage our expanding operations, we may not be able to continue to grow
or may grow at a slower pace. Furthermore, our operating costs may escalate
faster than we expect. To manage our growth successfully we will need to
improve our management, financial and information systems and controls, and
attract, retain and motivate employees.
Our markets are highly competitive and our failure to compete successfully will
limit our ability to increase or retain our market share
Our failure to maintain and enhance our competitive position will limit our
ability to increase or maintain our market share, which would seriously harm
our business. We compete in the markets for Internet content, products,
services and advertising. The markets are new, rapidly evolving and highly
competitive. We expect this competition to intensify in the future. We compete,
or expect to compete, with many providers of Internet
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content, information services and products, as well as with traditional media,
for audience attention and advertising and sponsorship expenditures. Many of
our competitors are substantially larger than we are and have substantially
greater financial, infrastructure and personnel resources than we have. In
addition, many of our competitors have well established, large and experienced
sales and marketing capabilities and greater name recognition than we have. As
a result, our competitors may be in a stronger position to respond quickly to
new or emerging technologies and changes in customer requirements. They may
also develop and promote their services more effectively than we do. Moreover,
barriers to entry are not significant, and current and new competitors may be
able to launch new Web sites at a relatively low cost. We therefore expect
additional competitors to enter these markets. Some of these new competitors
may be traditional media companies, who are increasingly expanding onto the
Internet.
Many of our current customers have established relationships with our
current and potential competitors. If our competitors develop content that is
superior to ours or that achieves greater market acceptance than ours, our
business will suffer.
We rely on internally developed software and systems which require substantial
resources to monitor and maintain
We use custom software to provide our services. This software may contain
undetected errors, defects or bugs. Although we have not suffered significant
harm from any errors or defects to date, we may discover significant errors or
defects in the future that we may not be able to fix. We will have to expand
and upgrade our technology, transaction-processing systems and network
infrastructure if the volume of traffic on our Web site or our strategic
allies' Web sites increases substantially. We could experience temporary
capacity constraints that may cause unanticipated system disruptions, slower
response times and lower levels of customer service. We may be unable to
accurately project the rate or timing of increases, if any, in the use of our
services or expand and upgrade our systems and infrastructure to accommodate
these increases in a timely manner. Any inability to do so could harm our
business. Because we developed our software and these systems internally, we
must either dedicate substantial internal resources to monitor, maintain and
upgrade these software and systems or contract with an outside supplier for
these services at substantial expense.
If our systems fail to perform, our ability to provide our services will be
compromised
Our success depends, in part, on the performance, reliability and
availability of our services. Our revenue depends in large part on the number
of users that access our Web site. Our computer and communications hardware is
located at our headquarters in Westboro, Massachusetts and at additional
hosting facilities in Waltham, Massachusetts provided by Exodus Communications,
Inc. Our systems and operations could be damaged or interrupted by fire, flood,
power loss, telecommunications failure, Internet breakdown, break-in,
earthquake and similar events. We do not have a formal disaster recovery plan,
and we do not carry business interruption insurance that is adequate to
compensate us for losses that may occur. In addition, systems that use
sophisticated software may contain bugs, which could also slow or interrupt
service. We may experience slower response times or system failures due to
increased traffic on our Web sites or for a variety of other reasons. Any
system interruptions resulting in the complete or partial unavailability or
slow or delayed delivery of our content would reduce the volume of users able
to access our Web site and the attractiveness of our service offerings to our
strategic partners, advertisers and content providers. These volume reductions
could harm our business, particularly with respect to our ability to satisfy
minimum advertising commitments. In addition, CBS has the right to suspend or
terminate our advertising and promotion agreements and our license to use the
"CBS" trademark and "eye" device in the event of specified system
interruptions.
We could face additional regulatory requirements, tax liabilities and other
risks in international markets
We recently entered into an agreement to provide directory services in
Canada. As opportunities arise, we intend to pursue strategic initiatives
internationally. There are additional risks related to doing business in
international markets, such as changes in regulatory requirements, tariffs and
other trade barriers, fluctuations in
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currency exchange rates and adverse tax consequences. In addition, there are
likely to be different consumer preferences and requirements in specific
international markets. Furthermore, we may face difficulties in staffing and
managing any foreign operations. We cannot assure you that one or more of these
factors would not harm any future international operations.
Our results of operations may fluctuate due to seasonal factors
Advertising sales in traditional media, such as television and radio,
generally are lower in the first and third calendar quarters of each year. As
our markets develop, seasonal and cyclical patterns may develop. If the
Internet advertising market follows the same seasonal patterns as those found
in traditional media, we may experience lower advertising revenue in the first
and third calendar quarters of each year. Seasonal and cyclical patterns in
Internet advertising and electronic commerce purchases may also affect our
revenue. Seasonal fluctuations could have a material adverse effect on our
business, results of operations and financial condition.
We may need additional capital, which may not be available to us, and which, if
raised, may dilute your ownership interest in us
We may need to raise additional funds through public or private equity or
debt financings to:
. expand our sales and marketing operations;
. develop new technology and upgrade current technology and data network
infrastructure;
. develop new and expand current content and services;
. pursue acquisitions or expansion opportunities; or
. address additional working capital needs.
If we cannot obtain any needed financing on terms acceptable to us or at all,
our business will suffer. Moreover, we may be forced to curtail some or all of
these activities. As a result we could grow more slowly or stop growing. Any
additional capital raised through the sale of equity may dilute your ownership
interest in us and may be on terms that are unfavorable to holders of our
common stock.
We may undertake acquisitions which could limit our ability to manage and
maintain our business, result in adverse accounting treatment and be difficult
to integrate into our business
We have no experience in acquiring businesses and have very limited
experience in acquiring complementary technologies. In the future we may
undertake acquisitions. Acquisitions, in general, involve numerous risks,
including:
. diversion of management attention;
. amortization of substantial goodwill, adversely affecting our reported
results of operations;
. inability to retain the management, key personnel and other employees
of the acquired business;
. inability to assimilate the operations, products, technologies and
information systems of the acquired business;
. inability to establish uniform standards, controls, procedures and
policies;
. inability to retain the acquired company's customers, affiliates,
content providers and advertisers;
. potentially dilutive issuances of equity securities; and
. exposure to legal claims for activities of the acquired business prior
to acquisition.
We are particularly susceptible to these risks due to our limited experience in
making acquisitions. Client satisfaction or performance problems with an
acquired business also could affect our reputation. In addition, any acquired
business could significantly underperform relative to our expectations.
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<PAGE>
We may be unable to adequately protect or enforce our intellectual property
rights
We depend upon our proprietary technology. If we do not effectively protect
our intellectual property, our business could suffer. To protect our
proprietary rights, we rely on a combination of copyright and trademark laws,
patents, trade secrets, confidentiality agreements with employees and third
parties, and protective contractual provisions. Despite our efforts to protect
our proprietary rights, unauthorized parties may misappropriate our proprietary
technology or obtain and use information that we regard as proprietary. We may
not be able to detect these or any other unauthorized uses of our intellectual
property or take appropriate steps to enforce our proprietary rights. In
addition, others could independently develop substantially equivalent
intellectual property.
We may not successfully address the business challenges presented to us as an
independent company
Since commencing operations, we have been a subsidiary of Banyan Worldwide.
Consequently, we have no operating history as a stand-alone company. As a
result, we have limited experience in addressing various business challenges
without the support of a corporate parent. We may not successfully address
these challenges or other challenges which confront stand-alone companies. In
particular, we may not be able to secure additional funds, when necessary, for
working capital or other purposes or develop an infrastructure, including
additional hardware, software, personnel and facilities to support our
business. If we are unable to successfully address these and other risks as a
stand-alone company, our business, financial condition and results of
operations will suffer.
Our products and services may infringe on intellectual property rights of third
parties
Companies in the computer industry have frequently resorted to litigation
regarding intellectual property rights. We have in the past had to litigate to
enforce our intellectual property rights, to protect our trade secrets or to
determine the validity and scope of other parties' proprietary rights. We may
need to do so again in the future. Although we attempt to avoid infringing
known proprietary rights of third parties, including licensed content, we are
subject to the risk of claims alleging infringement of third-party proprietary
rights. If we are subject to claims of infringement or are infringing on the
rights of third parties, we may not be able to obtain licenses to use those
rights on commercially reasonable terms. In that event, we may need to
undertake substantial reengineering to continue our service offerings. Any
effort to undertake such reengineering might not be successful. In addition,
any claim of infringement could cause us to incur substantial costs defending
against the claim, even if the claim is invalid, and could distract our
management. Furthermore, a party making such a claim could secure a judgement
that requires us to pay substantial damages. A judgment could also include an
injunction or other court order that could prevent us from providing our
services. If any of these events occurred, our business, results of operations
and financial condition would be materially and adversely affected.
We would lose revenue and incur significant costs if our systems or material
third-party systems are not year 2000 compliant
The failure of our internal systems or material third-party systems to be
year 2000 compliant could cause a significant number of business disruptions
and inefficiencies for us, our third-party vendors and users. These disruptions
and inefficiencies may divert our time and attention and financial and human
resources from our ordinary business activities. Many currently installed
computer systems and software products are coded to accept or recognize only
two-digit entries in the date code field. These systems may interpret the date
code "00" as the year 1900 rather than the year 2000. We may be affected by
year 2000 issues related to non-compliant information technology systems or
office and facilities equipment operated by us or by third parties or supplied
to us by Banyan Worldwide. If we fail to resolve any disruptions of our
business resulting from year 2000 failures, we may be in breach of some of our
contractual obligations and some of our agreements may be terminated.
In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside of our control may
not be year 2000 compliant. The failure by these entities to be
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year 2000 compliant could result in systemic failure beyond our control, such
as a prolonged Internet, telecommunications or electrical failure, that could
also prevent us from delivering our services to our customers and decrease the
use of the Internet or the number of users accessing our Web site, both of
which would cause our revenue to decline.
Risks Related to Our Relationships with CBS and Banyan Worldwide
We rely upon our agreements with CBS, and termination of these agreements would
negatively affect our financial results and stock price
If our agreements with CBS terminate, our business would suffer and the
price of our common stock could be adversely affected. If our license agreement
terminates, we would lose the right to use the "CBS" trademark and "eye" device
which are very important to the marketing and brand building activities for our
Web site. Our license agreement with CBS will expire on June 30, 2009 and CBS
is not obligated to renew it. If our advertising and promotion agreement
terminates, we may lose the unused portion of the $95.0 million of advertising
and promotion services. Under specified circumstances, CBS has the right to
suspend or terminate the license agreement and the advertising and promotion
agreement prior to their scheduled expirations.
CBS may require us to remove content from our Web site
Under our license agreement with CBS, CBS can require us to remove any
content on our Web site which it determines conflicts with, interferes with or
is detrimental to its reputation or business. We are also required to conform
to CBS's guidelines for the use of its trademark. CBS has the right to approve
all materials, such as marketing materials, that include the "CBS" trademark
and "eye" device. Because of these restrictions we may not be able to perform
our desired marketing activities or include some content on our Web site.
CBS does not guarantee us the availability of the particular advertising
placements or audiences we view for our ads
CBS has agreed, with some limitations, to provide us with a total of $95.0
million of advertising and promotion through June 2006. CBS, however, does not
guarantee us placement of our ads or the demographic composition or size of the
audience that views our ads. Moreover, CBS provides its advertising and on-air
promotions to us under the same terms as it provides to its other advertising
customers and does not extend us priority in the placement of our ads. CBS has
entered into agreements similar to ours with other companies, some of whom,
like us, are Internet companies that may be targeting similar audiences for
their ads as we target for ours. Our advertising and promotion on CBS
properties is an important element of our strategy to increase our brand
awareness. We cannot be certain that CBS will provide us with the ad placements
we desire, particularly if other advertisers are seeking the same placements.
Even if we do receive our desired ad placements, we cannot be certain of the
demographic composition or size of the audience viewing our ads. In addition,
CBS may terminate its obligation to provide us advertising and promotion under
specified circumstances.
Acting together, Banyan Worldwide and CBS will continue to control matters
submitted for approval of our stockholders after this offering
After this offering, Banyan Worldwide will beneficially own approximately %
of our common stock and CBS will beneficially own approximately % of our common
stock. Acting together, Banyan Worldwide and CBS will be able to control, and
acting alone each of Banyan Worldwide and CBS will be able to substantially
influence, all matters submitted to our stockholders for approval and our
management and affairs, including the election and removal of directors and any
merger, consolidation or sale of all or substantially all of our assets. Other
than with respect to the election of directors, Banyan Worldwide and CBS do not
have an agreement to vote in concert. This control could have the effect of
delaying or preventing a change of control
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of Switchboard that other stockholders may believe would result in a premium or
better management. In addition, this control could depress our stock price
because purchasers will not be able to acquire a controlling interest in us.
These risks would be exacerbated if a competitor of CBS acquires a 30% voting
interest in, or all or substantially all of the assets of, Banyan Worldwide. In
that event, CBS has the right to purchase all of Banyan Worldwide's shares of
our capital stock. If CBS were to exercise its right to purchase Banyan
Worldwide's shares, based upon the ownership interests of Banyan Worldwide in
Switchboard immediately after this offering is completed, CBS would
beneficially own % of our capital stock.
Banyan Worldwide has pledged all of our capital stock that it owns as
security for Banyan Worldwide's obligations under its bank credit facility. If
Banyan Worldwide defaults under its bank credit facility, its lender could take
ownership of Banyan Worldwide's capital stock of Switchboard. Moreover, either
or both of Banyan Worldwide and CBS may elect to sell all or a substantial
portion of its capital stock to one or more third parties. In either case, a
third party with whom we have no prior relationship could exercise the same
degree of control over Switchboard as Banyan Worldwide or CBS presently
possess.
Directors designated for election by Banyan Worldwide will control our board of
directors
We are a party to a voting agreement with Banyan Worldwide and CBS. Under
the voting agreement Banyan Worldwide has the right to designate a majority of
our board of directors for election. CBS has agreed to vote its shares of our
capital stock for the directors designated by Banyan Worldwide. After this
offering Banyan Worldwide and CBS will together continue to control enough
shares of our capital stock to elect all of our directors. As a result,
directors designated for election by Banyan Worldwide will continue to control
our board of directors and therefore all of our business and affairs. You may
not agree with the management decisions made by our board of directors.
Overlapping management and boards of directors could hinder or delay decisions
regarding significant business matters
A majority of our directors hold positions as officers or directors of
Banyan Worldwide, as described in the following table:
<TABLE>
<CAPTION>
Name Switchboard Position Banyan Worldwide Position
---- --------------------- ----------------------------------
<C> <C> <S>
William P. Ferry Chairman of the Board Chairman of the Board, President
and Chief Executive Officer
Richard M. Spaulding Director Vice President and Chief Financial
Officer
David N. Strohm Director Director
Robert M. Wadsworth Director Director
</TABLE>
Serving as a director of Switchboard and either a director or an officer of
Banyan Worldwide could create or appear to create potential conflicts of
interest when those directors and officers are faced with decisions that could
have different implications for us and for Banyan Worldwide. These decisions
may relate, for example, to:
. potential acquisitions of businesses;
. intercompany agreements;
. competition;
. the issuance or disposition of securities;
. the election of new or additional directors; and
. the payment of dividends by us.
These conflicts, or potential conflicts, of interest could hinder or delay our
management's ability to make timely decisions regarding significant matters
relating to our business. We and Banyan Worldwide have not instituted any
formal plan or arrangement to address potential conflicts of interest that may
arise.
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We would experience increased costs and disruption of our operations to replace
the services and facilities which Banyan Worldwide provides us
Banyan Worldwide provides us with some of our financial, administrative and
operational services and related support functions. In addition, we occupy our
headquarters in Westboro, Massachusetts under an agreement with Banyan
Worldwide. If Banyan Worldwide ceases or fails to provide these services
satisfactorily or terminates our occupancy, we would be required to perform
these services ourselves or obtain these services from another provider or
locate new facilities. Replacing these services would cause us to incur
additional costs. We may not be able to replace these services on commercially
reasonable terms or, if we choose to perform these services ourselves, we may
not be able to perform them adequately. Our future financial performance could
be adversely affected if we or Banyan Worldwide do not perform these functions
effectively or if we do not implement these systems, controls and procedures
successfully.
Risks Related to the Internet
The acceptance and effectiveness of Internet advertising is not yet fully
established
Our future success is dependent, in part, on an increase in the use of the
Internet as an advertising medium. We generated 45.8% of our revenue from the
sale of advertisements and sponsorships during the six months ended June 30,
1999 and 60.8% in 1998. The Internet advertising market is new and rapidly
evolving, and cannot yet be compared with traditional advertising media to
gauge its effectiveness. As a result, demand for and market acceptance of
Internet advertising is uncertain. Many of our current and potential merchant
customers have little or no experience with Internet advertising and have
allocated only a limited portion of their advertising and marketing budgets to
Internet activities. The adoption of Internet advertising, particularly by
entities that have historically relied upon traditional methods of advertising
and marketing, requires the acceptance of a new way of advertising and
marketing. These customers may find Internet advertising to be less effective
for meeting their business needs than traditional methods of advertising and
marketing. In addition, there are software programs that limit or prevent
advertising from being delivered to a user's computer. Widespread adoption of
this software would significantly undermine the commercial viability of
Internet advertising. If the market for Internet advertising fails to develop
or develops more slowly than we expect, our business will suffer.
There are currently no generally accepted standards for the measurement of
the effectiveness of Internet advertising. Standard measurements may need to be
developed to support and promote Internet advertising as a significant
advertising medium. Our advertising customers may challenge or refuse to accept
our, or third-party, measurements of advertisement delivery.
We may not be able to adapt as Internet technologies and customer demands
continue to evolve
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our Web site. Our industry has
been characterized by rapid technological change, changes in user and customer
requirements and preferences, frequent new product and service introductions
embodying new technologies and the emergence of new industry standards and
practices. These changes could render our Web site, technology and systems
obsolete. We must obtain licensed technologies useful in our business, enhance
our existing services, develop new services and technologies that address
sophisticated and varied consumer needs, respond to technological advances and
emerging industry standards and practices on a timely and cost-effective basis,
and address evolving customer preferences. If some or all of our strategic
allies adopt new Internet technologies or standards, we may need to incur
substantial expenditures to modify or adapt our services. We may experience
difficulties that delay or prevent our being able to respond to these changes.
We distribute content over the Internet that may subject us to liability
When we aggregate and distribute the content we receive from third parties
over the Internet, we may be held liable for the data that is contained in that
content. This data could subject us to legal claims for such
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things as defamation, negligence, intellectual property infringement and
product or service liability. While we carry general business insurance, this
coverage may be inadequate.
In addition, individuals whose names appear in our yellow pages and white
pages directories have occasionally contacted us because their phone numbers
and addresses were unlisted. While we have not received any formal legal claims
from these individuals, we may receive claims in the future. Any liability that
we incur as a result of content we receive from third parties could harm our
business.
We may be held liable for our links to third-party Web sites
We could be exposed to liability because third party Web sites may be
accessible through our Web site. These claims might include copyright or
trademark infringement or other unauthorized actions by third parties through
their Web sites that are accessible through our Web site. Other claims may be
based on errors or false or misleading information provided on our Web site,
such as information deemed to constitute legal, medical, financial or
investment advice. Other claims may be based on links to sexually explicit Web
sites and sexually explicit advertisements. Our business could be materially
adversely affected due to the cost of investigating and defending these claims,
regardless of whether we successfully defend against them. Implementing
measures to reduce our exposure to this liability may require us to spend
substantial resources and limit the attractiveness of our content to users.
Online security risks could harm our business
Our networks may be vulnerable to unauthorized access, computer viruses and
other disruptive problems. Someone who is able to circumvent security measures
could misappropriate our proprietary information or cause interruptions in our
operations. Internet and online service providers have experienced, and may in
the future experience, interruptions in service as a result of the accidental
or intentional actions of Internet users, current and former employees or
others. We may need to expend significant resources protecting against the
threat of security breaches or alleviating problems caused by breaches.
Eliminating computer viruses and alleviating other security problems may
require interruptions, delays or cessation of service to users accessing Web
sites that deliver our content services, any of which could harm our business.
We may face potential liability for invasion of privacy
Although we have a policy against disclosing to third parties personal
identifying information without consent, current computing and Internet
technology allows us to collect personal information about our users. We may
decide in the future to compile and provide this information to our customers
and strategic partners. In the past, the Federal Trade Commission has
investigated companies that have taken these actions without permission or in
violation of a stated privacy policy. If we begin disclosing this information
without permission or in violation of our privacy policy, we may face potential
liability for invasion of privacy for disclosing information about our users to
our customers and strategic allies.
Our industry is experiencing consolidation which could limit our access to
content and reduce our customer base
The Internet industry has recently experienced substantial consolidation.
We expect this consolidation to continue. Consolidation could reduce the number
of our content providers, advertisers and merchant customers. If the number of
content providers, advertisers or local merchant customers decreases, our
business will suffer.
Rapid technological change affects our business
Rapidly changing technology, evolving industry standards, evolving customer
demands and frequent new product and service introductions characterize our
market. Our market's early stage of development exacerbates these
characteristics. Our future success depends in significant part on our ability
to improve the performance,
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content and reliability of our content services in response to both the
evolving demands of the market and competitive product offerings. Our efforts
in these areas may not be successful. If some or all of our strategic partners
adopt new Internet technologies or standards, we may need to incur substantial
expenditures modifying or adapting our content services.
We may become subject to burdensome government regulation and legal
uncertainties
Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent. Laws and regulations may
be adopted covering issues such as user privacy, pricing, content, taxation and
quality of products and services. Any new legislation could hinder the growth
in use of the Internet and other online services generally and decrease the
acceptance of the Internet and other online services as media of
communications, commerce and advertising. Various U.S. and foreign governments
might attempt to regulate our transmissions or levy sales or other taxes
relating to our activities. The laws governing the Internet remain largely
unsettled, even in areas where legislation has been enacted. It may take years
to determine whether and how existing laws such as those governing intellectual
property, privacy, libel and taxation apply to the Internet and Internet
advertising services. In addition, the growth and development of the market for
electronic commerce may prompt calls for more stringent consumer protection
laws, both in the United States and abroad, that may impose additional burdens
on companies conducting business over the Internet. Our business, results of
operations and financial condition could be materially and adversely affected
by the adoption or modification of laws or regulations relating to the Internet
and other online services.
Protection of our domain names is uncertain and, if we cannot protect our
domain names, it will impair our ability to successfully brand Switchboard
We currently hold various Web domain names, including Switchboard.com and
MapsOnUs.com. The acquisition and maintenance of domain names generally is
regulated by Internet regulatory bodies. The regulation of domain names in the
United States and in foreign countries is subject to change. Governing bodies
may establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names. As a result, we
may be unable to acquire or maintain relevant domain names in all countries in
which we conduct business. Furthermore, it is unclear whether laws protecting
trademarks and similar proprietary rights will be will be extended to protect
domain names. Therefore, we may be unable to prevent third parties from
acquiring domain names that are similar to, infringe upon or otherwise decrease
the value of our trademarks and other proprietary rights. We may not
successfully carry out our business strategy of establishing a strong brand for
Switchboard if we cannot prevent others from using similar domain names or
trademarks. This could impair our ability to increase market share and revenue.
Risks Related to this Offering
Purchasers in this offering will suffer immediate and substantial dilution of
their investment
Purchasers of common stock in this offering will pay a price per share
which substantially exceeds the per share value of our assets after subtracting
our liabilities. In addition, purchasers of common stock in this offering will
have contributed approximately % of the aggregate price paid by all purchasers
of our stock but will own only approximately % of our common stock outstanding
after this offering.
We may become subject to an equity ownership claim from America Online which,
if successful, would result in substantial additional dilution to investors in
this offering
America Online may assert a claim to acquire 3.75% of our capital stock
under a warrant we issued in 1996. While we believe the warrant has expired
pursuant to its terms, America Online has in the past indicated to us that it
does not agree that the warrant has expired. In March 1999, we resolved a
number of outstanding intercompany balances between ourselves and America
Online, but did not resolve the status of the warrant.
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The disputed warrant, if in effect, would entitle America Online to
purchase 3.75% of our capital stock on the date of exercise, determined on a
fully diluted basis. The latest stated expiration date of the warrant is
November 5, 2000. The per share exercise price of the warrant is equal to $60.0
million divided by the number of fully diluted shares of our capital stock on
the date of exercise.
If we are required to issue any shares to America Online, we are obligated
to issue to CBS, for no additional consideration, an additional number of
shares of our common stock equal to 35% of the number of shares issued to
America Online and an additional warrant to purchase 5% of the number of shares
issued to America Online.
Immediately after this offering, the disputed warrant, if in effect, would
entitle America Online to purchase shares of our common stock at $ per
share. In the event of a warrant exercise immediately after this offering, we
would be required to issue to CBS additional shares of our common stock and
warrants to purchase additional shares of common stock at an exercise price of
$1.00 per share. If we are required to issue securities to America Online and
CBS, the dilution per share to new investors in this offering would be
increased from $ to $ . The amount of dilution could increase in the future
depending on the value of the common stock when the America Online warrant is
exercised.
While we intend to vigorously defend against any legal actions America
Online may commence relating to the warrant, there can be no assurance that we
will be successful.
Projections included in this prospectus relating to the growth of the Internet
are based on assumptions that could turn out to be incorrect, and actual
results could be materially different from these projections
This prospectus contains various third-party data and projections,
including those relating to the number of Internet users and the amount spent
on Internet advertising. These data and projections have been included in
studies prepared by independent market research firms, and the projections are
based on surveys, financial reports and models used by these firms. Actual
results or circumstances may be materially different from the projections. Any
difference could reduce our revenue and have a material adverse effect on our
results of operations. These data and projections are inherently imprecise and
investors are cautioned not to place undue reliance on them.
Our stock price could be volatile, which could result in substantial losses for
investors purchasing shares in this offering
The trading price of our common stock is likely to be volatile. The stock
market in general, and the market for technology and Internet-related companies
in particular, has experienced extreme volatility. This volatility has often
been unrelated to the operating performance of particular companies. We cannot
be sure that an active public market for our common stock will develop or
continue after this offering. Investors may not be able to sell their common
stock at or above our initial public offering price. Prices for the common
stock will be determined in the marketplace and may be influenced by many
factors, including variations in our financial results, changes in earnings
estimates by industry research analysts, investors' perceptions of us and
general economic, industry and market conditions.
Management may invest or spend the proceeds of this offering in ways with which
you may disagree
Our management will retain broad discretion to allocate the proceeds of
this offering. Management's failure to apply these funds effectively could have
an adverse effect on our ability to implement our strategy.
Our stock price could be adversely affected by future sales of our common stock
Sales of a substantial number of shares of our common stock in the public
market after this offering could depress the market price of our common stock
and could impair our ability to raise capital through the sale of additional
equity securities. See "Shares Eligible for Future Sale."
22
<PAGE>
We are at risk of securities class action litigation which could result in
substantial costs and divert management's attention and resources
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. Due to the potential volatility of our stock price, we may be the
target of securities litigation in the future. Securities litigation could
result in substantial costs and divert management's attention and resources.
We have antitakeover defenses that could delay or prevent an acquisition and
could adversely affect the price of our common stock
Provisions of our certificate of incorporation and by-laws of Delaware law
could delay, defer or prevent an acquisition or change of control of
Switchboard or otherwise adversely affect the price of our common stock. For
example, our certificate of incorporation permits our board to issue shares of
preferred stock without stockholder approval. In addition to delaying or
preventing an acquisition, the issuance of a substantial number of preferred
shares could adversely affect the price of the common stock. Please refer to
"Description of Capital Stock" for a more detailed discussion of these
provisions.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements that are subject to a
number of risks and uncertainties. All statements, other than statements of
historical facts included in this prospectus, regarding our strategy, future
operations, financial position, estimated revenues, projected costs, prospects,
plans and objectives of management are forward-looking statements. When used in
this prospectus, the words "will", "believe", "anticipate", "intend",
"estimate", "expect", "project" and similar expressions are intended to
identify forward-looking statements, although not all forward-looking
statements contain these identifying words. We cannot guarantee future results,
levels of activity, performance or achievements and you should not place undue
reliance on our forward-looking statements. Our forward-looking statements do
not reflect the potential impact of any future acquisitions, mergers,
dispositions, joint ventures or strategic alliances. Our actual results could
differ materially from those anticipated in these forward-looking statements as
a result of various factors, including the risks described in "Risk Factors"
and elsewhere in this prospectus. We do not assume any obligation to update any
of the forward-looking statements we make.
23
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from our sale of shares of common
stock will be approximately $ , assuming an initial public offering price of
$ per share and after deducting estimated underwriting discounts and our
estimated offering expenses. If the underwriters' over-allotment option is
exercised in full, we estimate that the net proceeds will be $ .
As of the date of this prospectus, we have not made any specific
expenditure plans with respect to the proceeds of this offering. Accordingly,
our management will have significant flexibility in applying the net proceeds
of this offering. We cannot specify with certainty the particular uses, other
than working capital and general corporate purposes, for the net proceeds to be
received upon completion of this offering.
The principal purposes of this offering are to increase our working
capital, create a public market for our common stock, facilitate future access
to the public capital markets and increase our visibility in the marketplace.
Pending use of the net proceeds, we intend to invest these proceeds in short-
term, investment grade, interest-bearing instruments.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
intend to retain future earnings, if any, to finance our growth strategy. We do
not anticipate paying cash dividends on our common stock in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of our
board of directors after taking into account various factors, including:
. our financial condition;
. our results of operations; and
. our current and anticipated cash needs.
24
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
. on an actual basis;
. on a pro forma basis to give effect to the automatic conversion of our
series A, C, and D convertible preferred stock into common stock upon
the closing of this offering; and
. on a pro forma basis as adjusted to reflect the issuance and sale by us
of shares of common stock in this offering at an assumed initial
public offering price of $ per share and after deducting the estimated
underwriting discounts and estimated offering expenses payable by
Switchboard.
<TABLE>
<CAPTION>
June 30, 1999
-----------------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------------ ------------ ------------
(unaudited)
(in thousands, except share and
per share data)
<S> <C> <C> <C>
Convertible promissory note--related
party................................ $ 508 $ 508
Redeemable convertible preferred stock,
$0.01 par value; 10,000,000 shares
authorized...........................
Series A--750,000 shares designated,
issued and outstanding actual;
none authorized, issued and
outstanding pro forma and pro
forma as adjusted.................. 3,806 --
Series B--1,500,000 shares
designated; none issued and
outstanding actual, pro forma and
pro forma as adjusted.............. -- --
Series C--4,000,000 shares
designated, 2,655,916 shares
issued and outstanding actual;
none authorized, issued and
outstanding pro forma and pro
forma as adjusted.................. 10,630 --
Series D--1,500,000 shares
designated; 87,345 shares issued
and outstanding actual; none
issued and outstanding pro forma
and pro forma as adjusted.......... 655 --
------------ ------------ -------
Total redeemable convertible
preferred stock................. 15,091
Stockholders' equity (deficit):
Series E special voting preferred
stock, $0.01 par value; one share
designated; one share issued and
outstanding actual, pro forma and
pro forma as adjusted.............. -- --
Common stock, $0.01 par value;
30,000,000 shares authorized,
14,635,215 shares issued and out-
standing actual; 18,128,476 shares
issued and outstanding pro forma;
shares issued and outstanding
pro forma as adjusted.............. 146 181
Additional paid-in capital........... 75,939 90,995
Contribution receivable.............. (70,312) (70,312)
Accumulated deficit.................. (13,528) (13,528)
------------ ------------
Total stockholders' equity
(deficit)....................... (7,755) 7,336
------------ ------------
Total capitalization.............. $ 7,844 $ 7,844
============ ============
</TABLE>
The number of shares outstanding is based on the number of shares of our
common stock outstanding (pro forma) on June 30, 1999 and does not include:
. 1,393,825 shares subject to outstanding options as of June 30, 1999, at
a weighted average exercise price of $2.88;
. one share issuable upon the conversion of one outstanding share of
series E special voting preferred stock, which will not convert
automatically upon the closing of this offering;
25
<PAGE>
. 1,751,174 shares subject to outstanding warrants at a weighted average
exercise price of $2.71 per share, assuming these warrants are all
exercised in full;
. outstanding principal and interest on a convertible note convertible
into 67,704 shares of common stock at a conversion price of $7.50 per
share; and
. 1,574,176 shares reserved for issuance under our 1996 stock incentive
plan.
In addition, there are an aggregate of 1,500,000 shares reserved for
issuance under our 1999 stock incentive plan and 300,000 shares reserved for
issuance under our 1999 employee stock purchase plan, each of which was adopted
in October 1999.
You should read this table together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and related notes included elsewhere in this prospectus.
26
<PAGE>
DILUTION
Our pro forma net tangible book value at June 30, 1999 was approximately
$6,203,000, or $0.34 per share of common stock. Pro forma net tangible book
value per share is determined by dividing the amount of our total tangible
assets less total liabilities by the pro forma number of shares of stock
outstanding at that date, assuming conversion of all outstanding shares of our
series A, C, and D convertible preferred stock into common stock. Dilution in
net tangible book value per share represents the difference between the amount
per share paid by purchasers of shares of common stock in this offering and the
net tangible book value per share of common stock immediately after the
completion of this offering.
After giving effect to our sale of shares of common stock in this
offering at an assumed initial public offering price of $ per share and our
receipt of the net proceeds (after deducting the estimated underwriting
discounts and our estimated offering expenses), our pro forma net tangible book
value as of June 30, 1999 would have been approximately $ , or $ per share.
This represents an immediate increase in pro forma net tangible book value of
$ per share to existing stockholders and an immediate dilution in pro forma
net tangible book value of $ per share to new investors purchasing shares in
this offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $
Pro forma net tangible book value per share as of June 30,
1999....................................................... $0.34
Pro forma increase per share attributable to this offering...
-----
Pro forma net tangible book value per share after this
offering.....................................................
----
Pro forma dilution per share to new investors.................. $
====
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1999,
the total number of shares of common stock purchased from us, the total cash
consideration paid and the average cash consideration paid per share by our
existing stockholders and by the new investors (at an assumed initial public
offering price of $ per share for shares purchased in this offering, before
deducting underwriting discounts and our estimated offering expenses).
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price Per
Number Percent Amount Percent Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 18,128,477 % $21,612,008 % $1.19
New investors................. $
---------- ----- ----------- -----
Total....................... 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>
The foregoing table and calculation assumes no exercise of outstanding
stock options, warrants and other convertible instruments exercisable as of
June 30, 1999. As of June 30, 1999, there were:
. outstanding stock options to purchase 1,393,825 shares of common stock
at a weighted average exercise price of $2.88 per share;
. outstanding warrants to purchase 1,751,174 shares of common stock at a
weighted average exercise price of $2.71 per share; and
. outstanding principal and interest on a convertible note convertible
into 67,704 shares of common stock at a conversion price of $7.50 per
share.
To the extent that these options, warrants and other convertible instruments
are exercised, there will be further dilution to new investors.
If the underwriters' over-allotment option is exercised in full, the number
of shares held by new investors will increase to shares or % of the total
number of shares of common stock outstanding after this offering.
27
<PAGE>
SELECTED FINANCIAL DATA
The selected historical and pro forma financial data should be read
together with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our financial statements and related notes included
elsewhere in this prospectus.
The selected financial data set forth below as of December 31, 1997 and
1998 and for the period from inception (February 19, 1996) through December 31,
1996 and the years ended December 31, 1997 and 1998 are derived from the
financial statements of Switchboard included elsewhere in this prospectus which
have been audited by PricewaterhouseCoopers LLP, independent accountants. The
balance sheet data as of December 31, 1996 is derived from unaudited
consolidated financial statements not included in this prospectus. The selected
financial data as of and for the six months ended June 30, 1998 and 1999, are
derived from unaudited financial statements that have been prepared on the same
basis as the audited financial statements and which, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of Switchboard's financial
position and results of operations. The financial data for the six months ended
June 30, 1999, are not necessarily indicative of the results for the full year
or any future period. The historical results are not necessarily indicative of
the results of operations to be expected in the future.
<TABLE>
<CAPTION>
Period from
Inception Year Ended- Six Months Ended-
to December 31, June 30,
December 31, ---------------- ------------------
1996 1997 1998 1998 1999
------------ ------- ------- -------- --------
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue.................... $ 170 $ 650 $ 6,536 $ 2,761 $ 3,168
Cost of revenue............ 29 793 1,307 622 596
------- ------- ------- -------- --------
Gross profit............... 141 (143) 5,229 2,139 2,572
Operating expenses:
Sales and marketing....... 342 2,307 5,872 3,034 2,104
Product development....... 1,329 2,107 3,188 2,339 877
General and
administrative.......... -- 776 1,130 503 696
------- ------- ------- -------- --------
Total operating
expenses............... 1,671 5,190 10,190 5,876 3,677
------- ------- ------- -------- --------
Loss from operations....... (1,530) (5,333) (4,961) (3,737) (1,105)
Interest income (expense),
net...................... 15 4 (404) (162) (213)
------- ------- ------- -------- --------
Net loss................... $(1,515) $(5,329) $(5,365) $ (3,899) $ (1,318)
------- ------- ------- -------- --------
Accrued dividends for
preferred stockholders... 58 308 293 158 154
------- ------- ------- -------- --------
Net loss attributable to
common stockholders...... $(1,573) $(5,637) $(5,658) $(4,057) $(1,472)
======= ======= ======= ======== ========
Basic and diluted net loss
per share................ $ (0.22) $ (0.81) $ (0.81) $ (0.58) $ (0.21)
Shares used in computing
basic and diluted net
loss per share........... 7,000 7,000 7,011 7,005 7,056
Unaudited pro forma basic
and diluted net loss per
share.................... $ (0.69) $ (0.50) $ (0.17)
Shares used in computing
unaudited pro forma basic
and diluted net loss per
share.................... 7,761 7,755 7,814
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------- June 30,
1996 1997 1998 1999
------ ------- -------- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.............. $3,115 $ 404 $ 387 $ 6,806
Working capital........................ 3,152 (6) 449 5,603
Total assets........................... 3,792 1,491 3,565 10,935
Note payable........................... -- -- 600 --
Convertible promissory notes--related
party................................ 960 2,984 7,000 --
Redeemable convertible preferred
stock................................ 3,058 3,366 3,658 15,091
Total stockholders' deficit............ (330) (5,774) (11,419) (7,755)
</TABLE>
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the financial
statements and related notes appearing elsewhere in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those indicated in
forward-looking statements. See "Forward-Looking Statements."
Overview
Switchboard is a leading Internet-based local merchant network
interconnecting consumers, merchants and national advertisers. We connect
consumers searching for specific products and services with the merchants that
provide them. Our online network gives merchants a fast, easy, cost-effective
way to get their businesses represented online and facilitates commerce by
connecting them with consumers.
We commenced operations in February 1996 and were incorporated in April
1996 as a wholly owned subsidiary of Banyan Worldwide. We developed our Web
site, Switchboard.com, using directory technology transferred to us from Banyan
Worldwide in November 1996. Also in November 1996, America Online and Digital
City made an equity investment of an aggregate of $3.0 million. In May 1998, we
acquired our Maps On Us technology from Lucent Technologies Incorporated. In
June 1999, we entered into a strategic relationship with CBS involving our
licensing of the "CBS" trademark and the "eye" device and an equity investment
by CBS in exchange for advertising and promotion services and $5.0 million in
cash.
Since inception, we have occupied our corporate headquarters in Westboro,
Massachusetts under an agreement with Banyan Worldwide. Banyan Worldwide has
made significant investments in us, primarily in working capital for our
operations. Banyan Worldwide also provides financial, administrative and
operational services and related support functions as part of our corporate
services agreement.
Since commencing operations in February 1996, we have derived our revenue
principally from the sale of national advertising. We have also derived revenue
from syndication and licensing and our merchant aggregation program.
Our revenue from the sale of advertising consists of banner advertisements,
sponsorships, promotions and other forms of national advertising that are sold
on either a fixed fee, cost per thousand impressions or cost per click basis on
our Web pages. We recognize revenue from national advertising upon delivery of
services. As a result of the termination of our agreements with America Online
in November and December 1998, we experienced a significant decrease in the
number of page views to our Web site and the associated advertising revenue.
While growing quarter-to-quarter since December 1998, our quarterly advertising
revenue has not yet reached the levels experienced when our agreements with
America Online were in effect.
We also derive revenue from various syndication and licensing agreements
with corporate customers which typically involve engineering work to integrate
our products and services with the customer's site and brand, as well as
license fees. We recognize these fees to the extent of the cost of the
engineering work performed, with any remaining fees recognized ratably over the
term of the contract. We also generate revenue from building Web sites for
local merchants, running display ads in our yellow pages directory and hosting
Web sites on our servers. In February 1999, we implemented what we term our
merchant aggregation program through a strategic alliance with Discover
Financial Services. This program is aimed at companies that have existing
relationships with small businesses in order to sell our Web site creation,
hosting and advertising services to local merchants. We expect the amount of
revenue generated from the sale of these services to increase as a result of
this program. We recognize customer acquisition fees from this program when the
Web site construction is complete. We recognize revenue on a monthly basis from
the creation and hosting of display ads and Web sites as services are provided.
Our cost of revenue consists primarily of expenses paid to third parties
under data licensing agreements, as well as other direct expenses incurred to
maintain the operations of our Web site. These direct expenses
29
<PAGE>
consist of data communications expenses related to Internet connectivity
charges, salaries and benefits for operations personnel, equipment costs and
related depreciation, and the costs to run our data center which include rent
and utilities. We anticipate that our cost of revenue will increase in absolute
dollars in the future as a result of hiring additional employees and purchasing
additional equipment and outside services. Cost of revenue as a percentage of
revenue has varied in the past, primarily as a result of fluctuations in our
Web site traffic and, to a lesser extent, the cost of third-party content and
technology.
Our sales and marketing expense consists primarily of costs associated with
Web site promotion, third-party revenue share costs, advertising and creative
production expenses, employee salaries and benefits, public relations, market
research and a pro rata share of occupancy and information system expenses. We
expect sales and marketing expense to increase in absolute dollars as we
continue to expand our marketing programs and our sales force and incur
advertising expenditures associated with our CBS-related promotion and
branding, carriage fees, and other marketing expenses associated with building
our merchant aggregation program. We expect to record the net present value of
the $95.0 million of advertising and promotion services from CBS as sales and
marketing expense as incurred through June 2006.
Our product development expense consists primarily of employee salaries and
benefits, fees for outside consultants and related costs associated with the
development of new services and features on our Web site, the enhancement of
existing products, quality assurance, testing and documentation and a pro rata
share of occupancy and information system expenses. Product development expense
will increase in absolute dollars in the future as we maintain and upgrade our
Web site.
Our general and administrative expense consists primarily of employee
salaries and benefits and other personnel-related costs for executive and
financial personnel, as well as legal, accounting and insurance costs and a pro
rata share of occupancy and information system expenses. We expect that our
general and administrative expense will increase in absolute dollars as we
continue to expand our staffing to support growing operations and facilities,
and incur expenses relating to our new responsibilities as a public company.
We have experienced substantial net losses since our inception. As of June
30, 1999, we had an accumulated deficit of $13.5 million. To date, we have made
no provision for income taxes. These net losses and accumulated deficit
resulted from our lack of substantial revenue and the significant costs
incurred in the development of our Web site and the establishment of our
corporate infrastructure and organization. We expect to increase our
expenditures in all areas in order to execute our business plan, particularly
in sales and marketing and in product development.
30
<PAGE>
Results of Operations
The following table sets forth for the periods indicated our results of
operations expressed as a percentage of revenue:
<TABLE>
<CAPTION>
Period Year Ended Six Months Ended
from Inception December 31, June 30,
to December 31, -------------- -------------------
1996 1997 1998 1998 1999
--------------- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue.................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue.......... 17.1 122.0 20.0 22.5 18.8
------ ------ ----- -------- -------
Gross profit........... 82.9 (22.0) 80.0 77.5 81.2
Operating expenses:
Sales and marketing.... 200.8 354.8 89.8 109.9 66.4
Product development.... 781.0 324.2 48.8 84.7 27.7
General and
administrative....... -- 119.4 17.3 18.2 22.0
------ ------ ----- -------- -------
Total operating
expenses............ 981.8 798.4 155.9 212.8 116.1
Loss from operations..... (898.9) (820.4) (75.9) (135.3) (34.9)
Interest income
(expense), net......... 8.9 0.6 (6.2) (5.9) (6.7)
------ ------ ----- -------- -------
Net loss................. (890.0)% (819.8)% (82.1)% (141.2)% (41.6)%
====== ====== ===== ======== =======
</TABLE>
Six months ended June 30, 1999 and June 30, 1998
Revenue. Revenue increased to $3.2 million for the six months ended June
30, 1999 from $2.8 million for the six months ended June 30, 1998. Advertising
revenue during this period decreased primarily due to the termination of the
America Online agreements. Syndication and license revenue increased primarily
due to two new significant customer agreements in March 1999. Revenue also
increased due to the launch of our merchant aggregation program and the
commencement of our strategic alliance with Discover Financial Services in
February 1999. In the six months ended June 30, 1999 no customer accounted for
more than 10% of our revenue. For the six months ended June 30, 1998, one
customer, QuikPage, Inc., accounted for 10.1% of our revenue.
Cost of revenue. Cost of revenue decreased to $596,000, or 18.8% of
revenue, for the six months ended June 30, 1999 from $622,000, or 22.5% of
revenue, for the six months ended June 30, 1998. The dollar decrease and
resulting percentage decrease was primarily due to increased revenue with
decreased personnel and data communications costs, partially offset by
increased depreciation costs relating to our equipment. Gross profit increased
to $2.6 million for the six months ended June 30, 1999 from $2.1 million for
the six months ended June 30, 1998. Gross profit increased primarily due to
higher revenue. As a percentage of revenue, gross profit for the six months
ended June 30, 1999 rose to 81.2% from 77.5% for the six months ended June 30,
1998.
Sales and marketing. Sales and marketing expense decreased to $2.1 million,
or 66.4% of revenue, for the six months ended June 30, 1999 from $3.0 million,
or 109.9% of revenue, for the six months ended June 30, 1998. The decrease in
1999 was primarily related to the decrease in carriage fees resulting from the
termination of the America Online agreements during the three months ended
December 31, 1998.
Product development. Product development expense decreased to $877,000, or
27.7% of revenue, for the six months ended June 30, 1999 from $2.3 million, or
84.7% of revenue, for the six months ended June 30, 1998. Product development
expense for the six months ended June 30, 1998 included $1.4 million we
expensed as incomplete technology related to the Maps On Us technology
acquisition.
31
<PAGE>
General and administrative. General and administrative expense increased to
$696,000, or 22.0% of revenue, for the six months ended June 30, 1999 from
$503,000, or 18.2% of revenue, for the six months ended June 30, 1998.
Substantially all of the increase was due to salaries associated with newly
hired personnel and related costs required to manage our growth and facilities
expansion.
Interest income (expense), net. Interest expense increased to $214,000, or
6.7% of revenue, for the six months ended June 30, 1999 from $162,000, or 5.9%
of revenue, for the six months ended June 30, 1998. The dollar increase in
expense was primarily due to interest expense on increased borrowings from
Banyan Worldwide in order to fund working capital for our operations.
Years ended December 31, 1998 and 1997 and the period from inception to
December 31, 1996
Revenue. Revenue increased to $6.5 million for the year ended December 31,
1998 from $650,000 for the year ended December 31, 1997, and from $170,000 for
the period from inception to December 31, 1996. Advertising revenue increased
for the year ended December 31, 1998 compared to the year ended December 31,
1997 and the period from inception to December 31, 1996 due to the growth in
traffic primarily related to our agreements with America Online. Syndication
and license revenue also increased for the year ended December 31, 1998
compared to the year ended December 31, 1997, and the period from inception to
December 31, 1996 due to the various new customer agreements obtained in 1998.
For the year ended December 31, 1998, QuikPage, Inc. accounted for 10.2% of our
revenue and two other customers accounted for 11.9% and 10.5% of our revenue.
For the year ended December 31, 1997, one customer accounted for 13.7% of our
revenue. For the period from inception to December 31, 1996, four customers
accounted for 35.9%, 25.0%, 19.5%, and 13.0% of our revenue.
Cost of revenue. Cost of revenue increased to $1.3 million, or 20.0% of
revenue, for the year ended December 31, 1998 from $793,000, or 122.0% of
revenue, for the year ended December 31, 1997, and $29,000, or 17.1% of
revenue, for the period from inception to December 31, 1996. The dollar
increases were primarily due to increases in direct costs and data licensing
fees. The increases were also a result of increased depreciation expenses on
the additional computer equipment needed to support our growth. Gross profits
were $5.2 million, or 80.0% of revenue, for the year ended December 31, 1998,
compared to ($143,000), or (22.0)% of revenue, for the year ended December 31,
1997, and $141,000, or 82.9% of revenue, for the period from inception to
December 31, 1996.
Sales and marketing. Sales and marketing expense increased to $5.9 million,
or 89.8% of revenue, for the year ended December 31, 1998 from $2.3 million, or
354.8% of revenue, for the year ended December 31, 1997, and from $342,000, or
200.8% of revenue, for the period from inception to December 31, 1996. The
increase in 1998 was primarily attributable to increased America Online-related
carriage fees. Additionally, the increase in 1997 resulted from salaries and
benefits expense associated with newly hired personnel.
Product development. Product development expense increased to $3.2 million,
or 48.8% of revenue, for the year ended December 31, 1998 from $2.1 million, or
324.2% of revenue, for the year ended December 31, 1997, and from $1.3 million,
or 781.0% of revenue, for the period from inception to December 31, 1996. The
increase in 1998 primarily resulted from expenses related to our purchase of
the Maps On Us technology in May 1998. The increase in 1997 compared to the
period from inception to December 31, 1996 primarily resulted from salaries and
benefits associated with newly hired personnel, as well as the amortization of
the warrants issued to a technology provider in connection with the license of
its Web searching capabilities.
General and administrative. General and administrative expense increased to
$1.1 million, or 17.3% of revenue, for the year ended December 31, 1998 from
$776,000, or 119.4% of revenue, for the year ended December 31, 1997. There was
no general and administrative expense for the period from inception to December
31, 1996 due to our limited operations. The increase in 1998 was primarily due
to an increase in the allowance for doubtful accounts. The increase in 1997
primarily resulted from salaries and benefits expense associated with newly
hired personnel.
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Interest income (expense), net. Interest expense increased to $404,000 for
the year ended December 31, 1998, from interest income of $4,000 for the year
ended December 31, 1997, and interest income of $15,000 for the period from
inception to December 31, 1996. These increases were primarily due to interest
expense on increased borrowings from Banyan Worldwide to fund working capital
for operations, as well as reduced interest income resulting from decreased
cash balances available for investing.
Quarterly Results of Operations
The following tables set forth our unaudited quarterly results of
operations for each of the eight fiscal quarters in the period ended June 30,
1999. This information has been derived from unaudited interim financial
statements, that, in our opinion, have been prepared on a basis consistent with
the financial statements contained elsewhere in this prospectus and include all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair statement of such information when read in conjunction with our financial
statements and notes thereto. Our results of operations for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30,
1997 1997 1998 1998 1998 1998 1999 1999
--------- -------- -------- -------- --------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Revenue................. $ 235 $ 349 $ 1,081 $ 1,680 $ 1,783 $1,992 $1,326 $1,842
Cost of revenue......... 153 325 241 381 354 331 275 321
------- ------- ------- ------- ------- ------ ------ ------
Gross profit........... 82 24 840 1,299 1,429 1,661 1,051 1,521
Operating expenses:
Sales and marketing.... 662 567 1,826 1,208 1,612 1,226 690 1,414
Product development.... 420 639 459 1,880 489 360 435 442
General and
administrative....... 206 163 218 285 227 400 394 302
------- ------- ------- ------- ------- ------ ------ ------
Total operating
expenses: 1,288 1,369 2,503 3,373 2,328 1,986 1,519 2,158
------- ------- ------- ------- ------- ------ ------ ------
Loss from operations.... (1,206) (1,345) (1,663) (2,074) (899) (325) (468) (637)
Interest income
(expense), net........ 4 (46) (69) (93) (124) (118) (118) (95)
------- ------- ------- ------- ------- ------ ------ ------
Net loss................ $(1,202) $(1,391) $(1,732) $(2,167) $(1,023) $ (443) $ (586) $ (732)
======= ======= ======= ======= ======= ====== ====== ======
As a Percentage of
Revenue:
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 65.1 93.1 22.3 22.7 19.9 16.6 20.7 17.4
------- ------- ------- ------- ------- ------ ------ ------
Gross profit........... 34.9 6.9 77.7 77.3 80.1 83.4 79.3 82.6
Operating expenses:
Sales and marketing.... 281.7 162.5 168.9 71.9 90.4 61.5 52.0 76.8
Product development.... 178.7 183.1 42.4 111.9 27.4 18.1 32.8 24.0
General and
administrative....... 87.7 46.7 20.2 17.0 12.7 20.1 29.7 16.4
------- ------- ------- ------- ------- ------ ------ ------
Total operating
expenses........... 548.1 392.3 231.5 200.8 130.5 99.7 114.5 117.2
------- ------- ------- ------- ------- ------ ------ ------
Loss from operations.... (513.2) (385.4) (153.8) (123.5) (50.4) (16.3) (35.2) (34.6)
Interest income
(expense), net........ 1.7 (13.2) (6.4) (5.5) (7.0) (5.9) (8.9) (5.2)
------- ------- ------- ------- ------- ------ ------ ------
Net loss................ (511.5)% (398.6)% (160.2)% (129.0)% (57.4)% (22.2)% (44.1)% (39.8)%
======= ======= ======= ======= ======= ====== ====== ======
</TABLE>
We have experienced significant fluctuations in revenue, expenses and
results of operations from quarter to quarter. We expect these fluctuations to
continue. A significant portion of our revenue has been generated from a
limited number of customers. We anticipate that our results of operations in
any given period will continue to depend to a significant extent upon sales to
a small number of customers. It is difficult to predict the timing of future
contracts to these and other customers due to the length of our sales cycle in
syndication and advertising.
Our agreements with America Online terminated in the fourth quarter of
1998. This termination adversely affected our results in the first two quarters
of 1999 because America Online had previously been responsible for a large
portion of our traffic and associated revenue.
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We have also experienced significant variations in our quarterly gross
profits. Our gross profit has varied due to the volume of traffic to our Web
site, which causes fluctuation in our revenue, direct costs and sales and
marketing expenses. Our product development and general and administrative
expenses have fluctuated on a quarterly basis primarily as a result of the
timing and number of additions in personnel and compensation and related costs.
We have a limited operating history and are subject to the risks, expenses
and uncertainties frequently encountered by companies in the new and rapidly
evolving markets for Internet products and services. Our expense levels are
based, in part, on our expectations regarding future revenue increases, and to
a large extent such expenses are fixed, particularly in the short term. There
can be no assurance that our expectations regarding future revenue are
accurate. We may be unable to adjust spending in a timely manner to compensate
for any unexpected revenue shortfall.
We believe that period-to-period comparisons of our historical results of
operations are not meaningful and should not be relied upon as an indication of
future performance.
Incomplete Technology Write-Off
On May 18, 1998, we acquired the Maps On Us Internet mapping technology
from Lucent Technologies Incorporated for $1.6 million. The technology was
acquired to integrate it into our directory Web site.
A significant portion of the technology acquired was deemed incomplete as
it did not meet the criteria for capitalization. The technology was incomplete
because the technology required a substantial development effort by us in order
to successfully integrate the Maps On Us technology into our Web site. The
technology had no alternative future use to us inasmuch as we had acquired the
technology to improve and integrate it into our Web site and not to market it
as a standalone product. Further, we had no other product, line of business or
product development project that could use the technology. Therefore, we
recorded a charge to product development of $1.4 million for the purchase of
incomplete technology in 1998.
We valued the acquired incomplete technology using a risk adjusted
discounted cash flow approach including stage of completion assumptions. We
evaluated the Maps On Us technology using extensive interviews and analysis of
data concerning the state of the technology and the required development work.
The evaluation assumed an average growth of Maps On Us related advertising
revenue of 54% based on expectations in the industry at the time, a gross
profit of 70% to 80% and sales marketing and administrative expenses of 27% to
36% of revenue. These assumptions should not be construed as forecasts of the
Maps On Us related future operating results. We used a discount rate of 25% in
the evaluation, reflecting the difficulties and uncertainties in completing the
development effort and the inherent uncertainty of predicting cash flows in the
Internet industry. We estimated the technology's stage-of-completion at the
date of acquisition to be 80% based on estimated costs incurred by Lucent prior
to the acquisition of the technology of $1.0 million and our estimated cost to
complete of $250,000. Our estimate of costs incurred prior to the purchase is
based on our understanding of the technology. No development cost data was made
available by Lucent.
The acquired technology was incomplete because a significant amount of
coding, testing and integration was required before the technology would be
viable for use on our Web site. The components of the technology which required
significant development work included the integration of our business data with
the Maps On Us geocoding approach, the development of new tools for the
management and online modification of geocoding information, the design and
integration of the user interface and the cross linkage of the technology with
our advertising technology. The ability to integrate the technology with our
Web site was critical to achieving technological feasibility and was uncertain
at the time of acquisition. We have now completed the design and integration of
the Maps On Us technology on our Web site. The cost of completing the
development effort was $200,000.
Liquidity and Capital Resources
Since our inception, we have been funded primarily by Banyan Worldwide
under our convertible preferred note facilities and through sales of capital
stock. On June 30, 1999, Banyan Worldwide converted approximately
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$11.3 million of the outstanding principal and interest under our convertible
preferred note facilities into preferred stock. As of June 30, 1999, we had
$508,000 outstanding under a convertible preferred note facility with Banyan
Worldwide. The interest rate in effect at June 30, 1999 was 4.98%. The
outstanding amount of principal and interest under this facility is convertible
at the option of Banyan Worldwide into shares of series D preferred stock at a
rate of $7.50 per share. As of June 30, 1999, we had $4.5 million available
under this facilty. Requests for advances under this facility may be refused by
Banyan Worldwide, at its sole discretion.
In November 1996, we received a $3.0 million equity investment from America
Online and Digital City Inc. We used these funds for working capital to fund
our operations. On June 30, 1999, we received $5.0 million in cash as part of
an equity investment from CBS.
As of June 30, 1999, we had cash and cash equivalents totaling $6.8
million.
Net cash used for operating activities for the six months ended June 30,
1999 was $289,000, primarily due to a net loss of $1.3 million offset by the
decrease in accounts receivable and increases in accrued expenses and deferred
revenue. Cash used for operating activities for the year ended December 31,
1998 was $4.5 million, primarily due to a net loss of $5.4 million and an
increase in accounts receivable partially offset by a non-cash write-off of
technology and increases in accrued expenses and deferred revenue.
Net cash used for investing activities for the six months ended June 30,
1999 was $140,000 and for the year ended December 31, 1998 was $906,000.
Investing activities for the periods were primarily purchases of equipment,
consisting largely of computer equipment, as well as the purchase of the Maps
On Us technology in May 1998.
Net cash provided by financing activities for the six months ended June 30,
1999 was $6.8 million, primarily due to the CBS transaction and funds provided
to us by Banyan Worldwide. Net cash provided by financing activities for the
year ended December 31, 1998 was $5.4 million, primarily due to funds provided
to us by Banyan Worldwide.
Our other financial commitments consisted of a note payable related to the
purchase of the Maps On Us technology of $600,000 as of June 30, 1999. The
amount of this note payable was $1.1 million as of December 31, 1998.
As of June 30, 1999, we had net operating loss carryforwards of
approximately $7.3 million available for federal, state and foreign purposes to
reduce future taxable income expiring on various dates beginning in 2001. Under
the provisions of the Internal Revenue Code, certain substantial changes in our
ownership may have limited, or may limit in the future, the amount of net
operating loss carryforwards which could be utilized annually to offset future
taxable income. Based on our current financial status, realization of our
deferred tax assets is uncertain. Accordingly, a valuation allowance for the
entire deferred tax asset amount has been recorded.
Since our inception, we have significantly increased our operating
expenses. We anticipate that we will continue to experience significant
increases in our operating expenses for the foreseeable future and that our
operating expenses and capital expenditures will constitute a material use of
our cash resources. In addition, we may utilize cash resources to fund
acquisitions or investments in businesses, technologies, products or services
that are complementary to our business. Due to the fact that our primary
marketing expense will be the use of our non-cash CBS-related advertising, we
believe that the funds currently available along with support from Banyan
Worldwide will be sufficient to meet our anticipated cash requirements for the
next 12 months. If cash generated from operations is insufficient to satisfy
our liquidity requirements, we may seek to sell additional equity or debt
securities, or obtain additional credit facilities. However, there can be no
assurance that we would be successful in obtaining this additional funding.
The issuance of additional equity or convertible debt securities could result
in additional dilution to our stockholders.
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Recent Development
On October 27, 1999, Banyan Worldwide issued a press release summarizing
Banyan Worldwide's consolidated financial results for the three and nine months
ended September 30, 1999. Some of our financial results were included in Banyan
Worldwide's consolidated financial results. Our revenue increased 25% to $2.5
million for the three months ended September 30, 1999, compared with $2.0
million for the three months ended September 30, 1998. Our higher revenue in
the three months ended September 30, 1999 reflects increased business from our
merchant aggregation program, as well as expanded syndication revenue.
Market Risk
To date we have not utilized derivative financial instruments or derivative
commodity instruments. We do not expect to employ these or other strategies to
hedge market risk in the foreseeable future. We invest our cash in money market
funds, which are subject to minimal credit and market risk. We believe the
market risk associated with these financial instruments is immaterial.
Year 2000 Readiness Disclosure
Many existing computer programs and systems include computer code in which
calendar year data is abbreviated to only two digits. As a result, some of
these programs and systems could fail to operate or fail to produce correct
results if "00" is interpreted to mean 1900, rather than 2000. We refer to this
as the year 2000 problem. We use software, computer technology and services
that are internally developed or provided by third parties, that may fail due
to the year 2000 problem.
In April 1999 we initiated our formal year 2000 project to assess our year
2000 risks and to develop any necessary corrective action plans. We expect to
finalize our assessment in November 1999. To date, we have taken the following
actions under our year 2000 project:
. We have reviewed all hardware and software used in the operation of our
Web site, including internally developed software and third-party
hardware and software that is used in the operation of our Web site;
. we have begun to upgrade the hardware and software which require
modifications to be year 2000 compliant; and
. we have obtained publicly-available year 2000 readiness statements from
third parties who provide hardware, embedded software or packaged
software used in the operation of our Web site and from Exodus
Communications, which provides us with Web hosting facilities for our
Web site.
We expect that substantially all hardware and software upgrades will be
completed by November 1999. In addition we have created a separate quality
assurance test Web site to simulate the transition from 1999 to 2000 and
identify unresolved year 2000 problems with our Web site. We expect to complete
this simulation by November 1999.
We expect that our employees will perform all significant work related to
our year 2000 project. We do not anticipate hiring any additional employees or
incurring significant consulting expenses to perform this work. We expect to
purchase approximately $1,000 of software upgrades and to expend $50,000 on
hardware, infrastructure and desktop upgrades. Although we likely would have
incurred these costs in the normal course of our business activities, the
upgrades will replace non-year 2000 ready software and hardware.
Our business depends upon the ability of consumers and local merchants to
access our Web site from their computers. Consumers who visit our Web site and
the local merchants in our network may not be able to access our Web site due
to their own year 2000 problems. Our users and our local merchant customers are
diverse and highly fragmented, and we have not attempted to contact them to
assess their year 2000 readiness. Many consumers and local merchants may not
have the internal capability or other resources necessary to assure their year
2000 readiness.
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We also depend on the integrity and stability of the Internet. Our ability
to assess the year 2000 readiness of the general Internet infrastructure
necessary to support our operations is limited and relies solely on generally
available news reports, surveys and comparable industry data. Based on these
sources, we believe that most entities and individuals that rely significantly
on the Internet are reviewing and attempting to address issues relating to year
2000 compliance. We cannot predict whether these efforts will be successful in
reducing or eliminating the potential negative impact of year 2000 issues. Our
business would suffer if there were a disruption in the ability of consumers
and local merchants to access the Internet or portions of it.
In addition to computers and related systems, the operation of office and
facilities equipment, such as fax machines, security systems and other common
devices, may be affected by the year 2000 problem. We are currently assessing
the potential effects and costs of remediating the year 2000 problem on our
office and facilities equipment. We expect this process to be completed by the
end of the calendar year 1999. Banyan Worldwide supplies some of our office and
facilities equipment. Because we did not purchase the equipment, we may be
unable to cost-effectively remediate any year 2000 issues relating to that
equipment.
Banyan Worldwide also provides us with various administrative
telecommunications and other services. Our business relies on functional use of
Banyan Worldwide's internal computer systems to process dates after December
31, 1999. Based on Banyan Worldwide's publicly available year 2000 readiness
statements, we believe that Banyan Worldwide has taken steps to assure its year
2000 readiness. If these systems are compromised by year 2000 problems, Banyan
Worldwide's ability to provide us with services could be impaired.
We are in the process of transitioning the primary hosting facility for our
Web site from our corporate headquarters to a third-party hosting facility. A
back-up Web site will continue to be hosted at our headquarters. Although this
transition was not undertaken specifically to address year 2000 compliance
problems, we believe that this transition will mitigate our risk of facility-
or Internet-related failures caused by the year 2000 problem.
At this time, we have not yet developed a contingency plan to address
situations that may result if we, or any third parties on which we rely, are
unable to achieve year 2000 readiness. The cost of developing and implementing
a contingency plan, if necessary, could be significant. Any failure of our
material systems, the systems of the consumers that visit our Web site, the
systems of the merchants participating in our network, the systems of third
parties supplying our products and services, the systems of Banyan Worldwide or
the Internet to be year 2000 compliant could have negative consequences for us.
The most reasonably likely worst case scenarios related to year 2000 risks
would include:
. failure of internal software causing a shutdown of our Web site;
. corruption of data contained in our information systems;
. hardware failure; and
. the failure of infrastructure services provided by third parties, such
as electricity, phone service, etc.
Recently Issued Accounting Pronouncement
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new standard established accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
SFAS No. 133, as amended by SFAS No. 137, is effective for all quarters for
fiscal years beginning after June 15, 2000. We do not expect SFAS No. 133 to
have material effect on our financial position or results of operations.
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BUSINESS
Overview
We are a leading Internet-based local merchant network interconnecting
consumers, merchants and national advertisers. We connect consumers searching
for specific products and services with the merchants that provide them. We
offer our users local information about people and businesses across the United
States, including listings of over 96 million individuals, 12 million
businesses and four million e-mail addresses. Our online network gives
merchants a fast, easy, cost-effective way to get their businesses represented
online and facilitates commerce by connecting them with consumers. We provide
an effective online lead generation engine for these local merchants and for
national advertisers that reaches consumers motivated to buy products and
services in specific geographic locations.
Industry Background
The Internet is fundamentally changing how millions of people and
businesses share information. The number of Internet users worldwide is
projected to increase to 500 million by the end of 2003 from approximately 195
million in 1999, according to International Data Corporation. According to
Forrester Research, total online commerce is projected to increase to $42.0
billion in 2002 from approximately $7.3 billion in 1998. Forrester Research
also estimates that, along with this growth of online commerce, total online
advertising will increase to $10.4 billion in 2003 from approximately $1.3
billion in 1998.
Historically, consumers have used multiple methods to identify and seek out
businesses that provide specific products and services in their area.
Traditional printed materials for finding local information include yellow
pages directories and local maps. These sources, however, typically cover
narrowly defined geographic areas and are updated only once per year. Telephone
directory assistance allows consumers to get updated information, but is often
more costly to use and only provides telephone numbers and addresses.
Recently, consumers have turned to online directories as an alternative
source of local information. These directories can provide more up-to-date
results, and can extend beyond limited geographic boundaries. Many of today's
online directories, however, are merely extensions of traditional printed
directories, offering repackaged content in a static "listings" style layout.
Consumers continue to encounter difficulties obtaining the relevant information
they seek because of the volume and fragmented nature of online local
information.
As the number of users online continues to grow, the Internet is becoming
an accepted and viable commercial and marketing medium. Local merchants are
increasingly recognizing the need to establish an online presence to remain
competitive. According to Forrester Research, the number of small businesses
with a Web presence is projected to increase to 4.2 million by the end of 2003
from approximately 2.1 million in 1999. Forrester Research also predicts local
online commerce will increase to $6.1 billion in 2003 from approximately $680
million in 1998.
Creating an online presence, however, is often a difficult and costly task
for small businesses. Local merchants may struggle with the financial,
technical and administrative challenges associated with creating, maintaining
and promoting an effective Web site. To compete online and to meet evolving
consumer expectations, merchants need more cost-effective and time-efficient
ways to build, promote and enhance the functionality, services and content of
their Web sites.
We believe that consumers demand an online service where they can easily
find detailed information about local merchants and their products and
services. We further believe that merchants demand a convenient and cost-
effective approach to creating a Web presence that will reach large numbers of
these consumers. We believe an opportunity exists to satisfy both
constituencies with a single online destination.
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The Switchboard Solution
We are a leading Internet-based local merchant network focused on bringing
consumers, merchants and national advertisers together at a single online
destination. We connect consumers searching for specific products and services
with the merchants that provide them. Our online network also gives merchants a
fast, easy, cost-effective way to get their businesses represented online, and
facilitates commerce by connecting them with consumers. We provide an effective
online lead generation engine for these local merchants and for national
advertisers that reaches consumers motivated to buy products and services in
specific geographic locations.
Benefits to Consumers
Extensive information base. We provide consumers with detailed local
information about people and businesses across the United States, including
listings of over approximately 96 million individuals, 12 million businesses
and four million e-mail addresses. Switchboard allows consumers to search for
people and businesses beyond the geographic boundaries of traditional print
directories. We offer a free alternative to directory assistance charges and
eliminate the need for consumers to know a specific city or area code
information to obtain the desired results. Our powerful search capabilities,
interactive maps and driving directions allow consumers to locate businesses
based on proximity to their home, office or a planned travel destination. We
link to a growing base of over 350,000 business Web sites and provide consumers
with a powerful tool to research and compare competitive offerings and to
ultimately conduct business, both online and offline. In addition, our patented
ad serving technologies present consumers with multiple merchant advertisements
and allow them to rapidly screen and examine the information they seek.
Powerful search capability. Our proprietary directory architecture,
combined with our intuitive screen displays, allows search results to be
delivered quickly with fewer page views. These search results can be organized
alphabetically or by geographical proximity. Our innovative "What's Nearby?"
service enables a consumer to input an address anywhere in the country and find
detailed information about nearby businesses, people, government and points of
interest and regional maps. This feature is ideal for travel planning, both
personal and business, as well as for people moving or changing job locations
who need to familiarize themselves with their new surroundings.
Integrated maps and driving directions. Our Maps On Us maps and driving
directions technology is fully integrated with our directory services. Once a
consumer identifies a desired address, Maps On Us allows the consumer to plot
the most effective route to that destination, including intermediate stopping
points. Consumers may also store previously accessed maps and directions in a
personal address book.
Personalized experience. We offer our registered users the ability to
personalize their online experience. Users can control their listings in our
white pages and can add information about their profession, education,
affiliations and other interests. Users can choose from a variety of privacy
options to shield various portions of their online identities, and can store
their bookmarks in Switchboard for easy access from any computer. We also offer
personal home pages and custom e-mail accounts.
Benefits to Merchants
Fast, cost-effective Web presence. Our robust system architecture and
sophisticated Web site building tools enable us to quickly and cost effectively
develop and deploy multi-page Web sites for local merchants. We provide local
merchants with a visible Web presence, while eliminating the technical,
administrative and financial challenges typically associated with creating and
maintaining an effective Web site.
Participation in a leading online local merchant network. We provide local
merchants with access to our nationally recognized, highly trafficked merchant
network, Switchboard.com. Unlike traditional phone books and directory
services, our online directory service, maps and driving directions provide
merchants with
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exposure to customers beyond their immediate local area. We acquire and
aggregate local merchant customers into our branded directory and our network
of syndicated directories. We believe our alliance with CBS further enhances
our brand and offers the opportunity to generate additional traffic to our
merchant customers.
Lead generation. Our online merchant network attracts potential consumers
who have qualified themselves by providing information about the types of
products and services they are seeking in a particular location.
Switchboard.com helps our merchant customers to connect with consumers and
facilitates their communications with their customers through email, fax or
regular mail. We believe that this direct line of communication fosters
stronger relationships between local merchants and consumers.
Benefits to National Advertisers
We offer national and local advertisers a wide range of advertising
options. Our patented ad serving technologies allow advertisers to target
specific types of consumers in each of our white pages, yellow pages, maps and
Web search offerings. A national advertiser can buy a site-wide banner to re-
enforce its brand, an in-category sponsorship to drive traffic to specific
offers on their site and a yellow pages trademark ad to drive traffic to local
outlets. These options give advertisers significant flexibility to construct
customized campaigns designed to drive traffic at the local or national level
to businesses both offline and online.
Strategy
We intend to be the leading Internet-based network connecting customers
with local merchants and providing merchants with the content, services and
functionality they need to effectively compete online. We plan to enhance our
lead generation capabilities by building traffic on our Web site, increasing
the number of merchants we serve and expanding the breadth of our products and
services. Key elements of our strategy include:
Building brand. We believe that building greater awareness of the
Switchboard brand is critical to expanding our user base and to building our
local merchant network. We intend to expand our use of advertising, public
relations and other marketing programs designed to promote our brand and build
user and merchant loyalty. In October 1999, we launched our "Think Outside the
Book" national advertising campaign designed to attract new consumers to
Switchboard.com and build awareness among merchants in local markets. We intend
to build on our current relationship with CBS by promoting our brand across
multiple media, including national television, outdoor advertising and radio.
In addition, we expect to pursue other public relations and marketing programs.
Expanding merchant aggregation programs. We have established strategic
alliances with companies that have existing relationships with numerous small
businesses. We refer to these companies as merchant aggregators. We believe we
can attract a larger base of merchants by working together with these merchant
aggregators to implement co-branded sales and marketing programs. In February
1999, we launched our merchant aggregation program through a strategic alliance
with Discover Financial Services. We will continue to work with Discover and
other companies to offer our products and services to their small business
customers. We believe that by expanding our merchant aggregation program we can
increase the number of merchants in our network and provide greater value to
consumers, existing merchants and national advertisers.
Creating specialized vertical directories. We are developing targeted
syndication packages designed to attract vertical content providers seeking to
enhance their sites by offering specialized directories of local merchants in
categories relating to their content. We believe that providing relevant
content for researching products and services will increase the frequency and
duration of visits to our Web site. By forming relationships with providers of
this content, we believe we will enhance the effectiveness of our site for
consumers and for advertisers seeking targeted audiences. By syndicating these
specialized directories, we expect to deliver more highly qualified customer
leads to our local merchants. We anticipate that some of these vertical content
providers will also participate in our merchant aggregation program since they
may have merchant relationships of their own.
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Extending technology leadership. We intend to update and enhance the
features and functionality of Switchboard.com to continue to improve the user's
experience and provide a comprehensive, cost-effective online presence for
merchants. We are developing product and service enhancements aimed at our
users, including increased personalization and customization features and
expanded search options. We plan to offer merchants a more sophisticated Web
presence by integrating online commerce applications into our local merchant
services. We are pursuing additional opportunities to expand network access and
merchant services across a variety of wireless devices and other Internet-
enabled appliances. We believe that technology leadership will continue to be
important to offer compelling services and functionality.
Expanding internationally. We intend to expand internationally as
opportunities arise. We expect to accomplish this expansion by entering into
strategic alliances with companies that are well-positioned to aggregate
merchants in local markets, internationally. In connection with our strategic
relationship to license our technology to Bell ActiMedia, Inc., a wholly owned
subsidiary of Bell Canada, we enhanced our technology infrastructure. We
believe this enhanced technology infrastructure will help us to take advantage
of other international opportunities.
Switchboard.com
The foundation of our local merchant network is our Web site,
Switchboard.com. The site provides a broad range of functions, content and
services designed to connect consumers and businesses on the Internet. Key
features of Switchboard.com include:
Directory Services
Our yellow pages, white pages and e-mail directory services provide
consumers with information about people and businesses and, in many cases,
detailed information about the products and services those businesses offer. In
addition to listing information found in traditional directories, our
directories include integrated maps and directions, information about nearby
businesses, display advertisements and links to merchant Web sites. Consumers
can use our directory services to search by category, geography and names.
We license what we believe to be the most comprehensive and accurate
available database of business and residential information in the United States
through a three-year agreement with infoUSA, a leading provider of online
yellow and white pages directory information. InfoUSA is obligated to provide
us with updated data monthly. To increase our coverage to include Canada, we
entered into a relationship with Bell ActiMedia in September 1999.
Our directories provide users, merchants and advertisers with powerful
tools to customize how they represent themselves on the Web. Users and
merchants can edit their listings in our directories by updating and
supplementing information about themselves. These tools help users and
merchants to be found and ensure that the information about them is accurate
and personalized.
Our e-mail address database provides users with access to e-mail addresses
provided by our own users and a third-party source. Registered users can use
our patented "Knock Knock" technology to control access to their e-mail
address. As a privacy benefit to our users, this service functions as an e-mail
equivalent of caller ID, allowing users to screen e-mails while shielding their
e-mail address from the sender.
Localized Content
Our "What's Nearby?" service provides relevant information about the
surrounding local merchants and establishments related to a user search.
"What's Nearby?" provides links to local businesses in the entertainment,
travel, recreation, shopping, health and real estate sectors based on the
user's target search location. In addition, this service provides mapping
features and links to Web sites related to the region, government offices,
points of interest and other useful information. This information is integrated
into our white pages, yellow pages and mapping features allowing users to
access businesses, information and services in the context of their searches.
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Maps and Directions
Our Maps On Us technology integrates maps and driving directions into many
areas of our Web site. Maps generated by Maps On Us provide users with
sophisticated viewing options including multiple levels of zoom, full and half
screen pans, map center selection, labeling of roads and other points of
interest, map size, color or monochrome rendering and latitude/longitude
display. Our technology provides users with a powerful tool to plan the
shortest or fastest route from a starting point to a destination including up
to five intermediate locations. They can also choose to avoid or use major
highways. Our "best tour" function lets users enter a number of locations in
any order and will designate the most efficient route from start to finish.
Maps are displayed with detailed turn-by-turn directions, all of which can be
forwarded to others by e-mail.
Users can also incorporate the "What's Nearby?" service to identify and
highlight local businesses that are in the vicinity of the mapped selection or
on the created route. In addition to the core features, registered users can
also save maps and routes previously generated by Maps On Us, and store a list
of addresses, markers or favorite places in an address book. Stored information
is highlighted on subsequent maps or route requests.
Web Searching Tools
Our Web searching technology provides users with a powerful search
alternative to existing key-word based search engines. Results are optimized to
deliver the most relevant Web sites instead of Web pages, making searching
easier and more efficient. These sites are linked in a way that allows users to
navigate through them based on their relationship to each other as well as find
them through keyword searches.
Our technology allows registered users to personalize bookmarks and access
these bookmarks from any computer though the Switchboard.com site. As an added
benefit, we can supplement these personalized bookmarks with related Web sites.
Users can also use our bookmark editing tools to add, delete and re-classify
links. Using this feature, our users can move from computer to computer but
still enjoy the same set of bookmarks when they access the Web.
Community
We provide the following services to enhance the user experience on our
site:
. Free e-mail. Users can get free e-mail through our comprehensive set
of e-mail options, including customized addresses, multiple accounts
and other enhanced services.
. Free homepages. With our personal home page builder, users can easily
create sophisticated personal Web sites by selecting from a gallery of
layouts, themes, colors and clip art. Users can also add original
text, favorite links or their own pictures.
. Message boards. We offer users the ability to post and read messages
on message boards across a variety of topics including humor,
relationships, religion, sports, genealogy, politics, teens and
missing persons. In addition, we organize our message boards by city
or state, allowing regional users to interact and communicate.
. Gift shop. From our gift shop, users can purchase electronic photos,
greeting cards, flowers and other items and have them sent to
relatives, friends and business associates located through our
directories.
Local Merchant Services
We provide local merchants with a broad range of services to help them
establish, manage and expand their online presence as their business evolves.
Using a variety of proprietary and licensed technologies and services, we
provide small businesses with solutions to reach qualified customers. Current
services provided to local merchants include:
. construction and hosting of multi-page Web sites with detailed
business information;
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. contact page designed to connect potential customers with merchants;
. integrated mapping and directions functionality powered by Maps On Us;
and
. marketing services including display advertisements on Switchboard.com
and affiliated sites.
For those businesses seeking to construct their own Web site, we also offer
our Web site building tool, Ad Studio, which allows merchants to select from a
gallery of layouts and clip art, upload pictures and choose geographies and
categories in which their Web site will be seen.
Advertising
Banner and Sponsorship Advertising
We offer both site-wide banner and category-specific banner programs. We
provide standard run of site banner ad programs, which include full banners
across the top and bottom of pages and smaller banners on the navigation bar
that allow advertisers to take advantage of our high traffic volume.
Additionally, our patented banner ad serving technology enables us to place and
rotate category-specific banner ads of various sizes in targeted locations
throughout our site. We also sell sponsorship programs on a site-wide basis or
for various categories. Sponsorships of a category means an advertisement is
consistently and prominently displayed on screens relating to the sponsored
categories.
Display Advertising
We provide yellow pages-style display advertisements and ad management
tools to local merchants and national advertisers. We give advertisers a range
of location, category and ad size options at the local and national levels.
When shown on a computer screen, our display ads resemble traditional yellow
page advertisements. Our display ads rotate according to preset priority
placement rules which assure that each advertiser's display ad is periodically
visible near the top of the screen.
Display advertisements are sold on a monthly or annual basis, and are
generally not subject to guaranteed impression levels or click-throughs. We
price and sell advertisements on the basis of ad size, search locations and
priority placement. Display advertisements are category specific and
geographically targeted. When clicked, display ads link the user to a Web site
of the advertiser's choosing. Options available to these advertisers include:
. display priority options designed to allow advertisers to pay to have
their ads seen more frequently and prominently than others;
. trademark ads designed to allow national advertisers to represent
outlets for their products based on their location in selected
categories, for example "Our Dealers Near You";
. ads designed to allow national businesses to advertise in local
category searches; and
. geographical options that allow merchants to place ads in a single zip
code, within a radius around a specific location or nationwide.
Syndication
We license our products and services to other companies in order to
generate traffic on the Switchboard.com Web site. We refer to this as
syndication. Syndication extends the reach of our site and increases the value
proposition to our advertisers. As of September 30, 1999, we syndicated our
directories or maps on a variety of Web sites, including Ask Jeeves, the AtHand
Network, CBS.com and USATODAY.com.
Strategic Alliances
We have formed strategic alliances to:
. build our brand;
. drive increased traffic;
. support our expanding sales and marketing efforts; and
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. develop compelling content, services and functionality for our Web
site and for Web sites that we create for our local merchant
customers.
CBS Corporation. In June 1999, we entered into a strategic relationship
with CBS involving our licensing of the "CBS" trademark and the "eye" device,
an equity investment by CBS and our receipt of advertising and promotion
services and $5.0 million in cash. We will receive $95.0 million in advertising
and promotion through June 2006 across the full range of CBS media properties,
including its radio and outdoor subsidiary, Infinity Broadcasting Corporation.
In addition, CBS has agreed to place links to our Web site on CBS-controlled
Web sites, including CBS.com and to use good faith efforts to obtain similar
links on other Web sites in which CBS has a non-controlling interest. Our
alliance with CBS is helping us to expand our advertising sales resources both
locally and nationally and delivers the credibility and backing of a major
media company.
Discover Financial Services. In the first quarter of 1999, we launched our
merchant aggregation partnership program with Discover Financial Services. The
Discover program provides us with access to Discover's merchant customer base.
Discover offers its merchant customers an online solution through
Switchboard.com. This relationship allows us to offer their base of merchants
additional services and functionality over time.
Bell ActiMedia. To expand our content offering and increase our geographic
coverage, we entered into a three-year agreement in September 1999 with Bell
ActiMedia to provide directory services in Canada. This relationship is
intended to increase Canadian traffic, help us grow our local merchant base
outside the United States and enable us to provide Canadian information to our
U.S. users.
Technology
We have developed a suite of sophisticated technologies that enable rapid
dissemination of requested information over multiple platforms and formats. The
technology was conceived and developed by a staff of senior engineers
experienced in distributed systems design techniques. Our technology is
designed to be highly scalable and reliable. We have particular strengths in
the areas of distributed systems design, database technologies, advertising
management and content customization.
Directory Technology
We have been affiliated with Banyan Worldwide, a pioneer of directory
technology, since our founding in 1996. Directories played a key role in the
enterprise level distributed systems deployed by Banyan Worldwide since 1983.
Our founder, Dean Polnerow, designed and originally developed StreetTalk,
Banyan Worldwide's directory service. We were able to capitalize on this large
scale directory experience to build our own proprietary directory technology.
We created what we believe to be the first national directory of U.S.
residential and business information available on the Internet, as well as our
innovative and proprietary yellow pages directory.
Site Design
The Switchboard.com site was designed to provide high levels of
performance, scalability and reliability. The Web site is implemented as a set
of Windows NT servers organized into replication pods. Individual servers in a
pod can be added or removed without affecting the functional capabilities of
the site, and most changes required are managed automatically by proprietary
configuration management software. This distributed architecture is resistant
to service interruptions and scales easily and inexpensively, typically with
minimal or no time consuming software changes required.
Database Technologies
We have developed a database aggregation interface module to facilitate
resolution of complex queries from the front end replication pods to the
database replication pods. This module allows data from multiple databases to
be accessed and combined, regardless of data structure or content. This
simplifies the development of new user interfaces and facilitates database
updates. The module implements caching capabilities and provides for automatic
load balancing between individual machines, maximizing site performance.
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Our automatic query state recovery mechanism decreases response time by
maintaining the state of a query. This enables ready access to a large amount
of data stored in any of the databases and results in faster response to the
user. Conventional databases often access previous results in order to display
successive results to a given query which increases response time by performing
redundant operations.
Advertising Management
Our ad serving technology is used primarily to control the frequency and
placement of advertisements online. Our dynamic display ad model rotates all
merchant ads in and out of prime locations on our yellow pages screens
according to priorities specifically purchased by our merchant customers. Our
remote ad injection provides a secure, automated chain of software programs
that facilitate the insertion of individual ad campaigns and large, aggregated
volumes of merchant advertising into the Switchboard.com yellow pages. We
developed a radial location placement method to provide a simple way for a
business to target its advertisement to the relevant surrounding communities.
This radial location placement method uses the physical location of a business
and a radius specification to automatically determine the appropriate location
targets. These ad management tools and processes enable our direct sales force
and authorized ad resellers to remotely manage and control national, regional
and local ad campaigns.
Content Customization
We can customize the look and feel of our content so that it resembles our
syndication customers' own Web sites. The customization process is based on our
functional elements, such as white pages, yellow pages, e-mail search and user
registration, which are implemented in modules and embodied in separate dynamic
link libraries. This architectural organization separates the functional
elements from the layout elements, such as site appearance, thus facilitating
rapid development of customized interfaces for our syndication customers. As we
enhance or build new functional elements, the underlying architecture enables
us to deploy them across all of the Web sites of our syndication customers.
Production, Computer and Communications Equipment
Our operations center is located at our Westboro, Massachusetts facility,
and houses the primary production, computer and communications equipment
necessary to operate our Web site, all ancillary services and a quality
assurance staging lab for the orderly upgrades of software onto production
machines. Our operations center is physically secured, but has limited power
failure protection. We have contracted with Exodus Communications, Inc. to
provide facilities in its new data center in Waltham, Massachusetts for the
primary production computer and communications equipment. The Exodus facility
offers physical security, full power failure protection and redundant
communications links. A complete replica of the primary Switchboard site is
being constructed at the Exodus facility. A preliminary version of this replica
is already operational and currently serves as a hot backup site in the event
of a failure of the primary site. In addition, the primary Maps On Us site is
now fully operational at the Exodus facility. We expect the Exodus site to
become our primary site for production computer and communications equipment by
the first quarter of 2000, and we will continue to maintain our operations
center in Westboro, Massachusetts as a backup site with automatic fail-over in
the event of a catastrophic facility or communications failure at the Exodus
location.
Marketing, Merchant Aggregation and Sales
Marketing
We have generated our traffic and merchant participation to date with
limited marketing. In October 1999, we launched an advertising campaign
designed to generate increased awareness of our site among consumers and
merchants. The cornerstone of this campaign will be $95.0 million of
advertising on the CBS properties that we will receive through our strategic
alliance with CBS. This alliance allows us to take advantage of CBS's strong
presence across a variety of advertising media, including:
. radio networks;
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. outdoor advertising; and
. the CBS television network.
Our advertising agreement with CBS provides us with the opportunity to
build brand recognition. As part of our branding strategy, the agreement
provides that Switchboard.com will be incorporated into CBS controlled Web
sites. We believe this will enable us to capture increased traffic.
As part of the CBS initiative, in October 1999 we unveiled two 30 second
television commercials for broadcast in Boston, Chicago, Los Angeles, New York,
Philadelphia and San Francisco. These commercials challenge consumers and
businesses to "Think Outside the Book," and use our online directory service
instead of traditional ones.
We employ a variety of online and offline advertising to promote our
service and generate additional traffic. Prior to our relationship with CBS, we
primarily relied upon promoting and marketing our service through syndication
relationships with telecommunications companies, Internet destination sites and
other companies. We plan to utilize a variety of media to market our online
services including online, print, direct mail, radio, television and outdoor
advertising. We have an ongoing public relations program and participate in
industry conferences and tradeshows.
Merchant Aggregation
We have established strategic affiliations with companies that have
existing relationships with numerous merchants to attract these merchants to
our network. These merchant aggregators contribute to our sales and marketing
efforts by offering our merchant network services for building an online
presence. This merchant aggregation program is designed to cost effectively
reach the highly fragmented small business market. We typically target small
businesses of less than 25 employees. We market our services on a co-branded
basis and generate sales through outsourced telesales agents, or through our
merchant aggregators' direct sales forces. Our current merchant aggregators are
Discover Financial Services and Cox Interactive Media. In addition to our
relationships with these merchant aggregators, we have relationships with other
companies, including Advance Internet, Comcast Online Communciations, Community
Newspapers, iAtlas Corporation and QuikPage, which help us to represent
businesses in the Switchboard network.
Sales
Our internal sales force coordinates our national sales efforts. They are
dedicated to selling advertisements and sponsorships across our Web site. As of
October 25, 1999, our sales organization was comprised of four employees and
one consultant engaged in direct selling efforts.
Competition
Our competitors fall into four primary categories:
. traditional and online white and yellow pages information providers;
. companies providing Web-enabled solutions for small businesses;
. companies targeting consumers seeking local information; and
. companies targeting the consumer Internet product and services market.
We compete in the markets for Internet content, products, services and
advertising. These markets are highly competitive and we expect competition to
increase in the future with the entrance of new competitors. Currently, the
number of companies aggregating small businesses and providing them with a
similar comprehensive solution and scale is small. However, the market is
rapidly developing. Barriers to entry in these markets are not significant and
current and new competitors may be able to launch new Web sites at a relatively
low cost.
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We believe our ability to compete successfully depends on many factors,
several of which are outside of our control. These factors include the quality
of content we provide relative to our competitors, the cost-effectiveness and
reliability of our services relative to our competitors and our ability to
generate leads for merchants.
We also compete with traditional advertising media, including television,
radio and print, for a share of advertisers' total advertising budgets. If
advertisers consider the Internet, or our site, to be limited or ineffective
advertising medium, advertisers may be reluctant to devote a significant amount
of their advertising dollars to advertising on our Web site.
Intellectual Property
We regard our patents, copyrights, service marks, trademarks, trade dress,
trade secrets and other intellectual property as critical to our success. We
rely on a combination of patent, trademark and copyright law, trade secret
protection and confidentiality and/or license agreements with our employees,
consultants, customers, partners and others to protect our proprietary rights.
All of our employees have executed confidentiality and assignment of invention
agreements. Prior to disclosing confidential information to third parties, we
generally require them to sign confidentiality or other agreements restricting
the use and disclosure of our confidential information.
We currently have four patents issued by the U.S. Patent and Trademark
Office and three patent applications pending before the Canadian Intellectual
Property Office, all of which relate to the operation, features or performance
of Switchboard.com. We pursue registration of our key trademarks and service
marks in the United States and, in some cases, internationally. However,
effective trademark, service mark, copyright and trade secret protection may
not be available or sought by us in every country in which our products and
services are made available online. There can be no assurance that our patents,
trademarks, or other intellectual property rights will not be successfully
challenged by others or invalidated through administrative process or
litigation. Further, the validity, enforceability and scope of protection of
proprietary rights in Internet-related industries is uncertain and still
evolving.
We license our proprietary rights, such as patents, trademarks and
copyrighted material, to third parties. Despite our efforts to protect our
proprietary rights, third parties may infringe or misappropriate our rights or
diminish the quality or reputation associated with our brand, which could have
a material adverse affect on our business, results of operations, or financial
condition.
In addition, we license software, content and other intellectual property,
including trademarks, patents, and copyrighted material, from third parties. In
particular, we license the rights to use the "CBS" trademark and "eye" device
under a license with CBS which expires by its terms in June 2009. We also
license residential and business listing data from infoUSA, Inc. under an
agreement that expires in December 2002, and maps and driving directions data
and related software from Etak, Inc. under an agreement that expires in
November 2000. Further, the software code underlying Switchboard.com contains
software code which is licensed to us by third parties. If any of these
licenses are terminated or expire, it could have a material adverse effect on
our business, results of operations or financial condition.
We could be subject to legal proceedings and claims of alleged infringement
of the trademarks, patents, copyrights or other intellectual property rights of
our licensors or other third parties. These claims and any resulting
litigation, should it occur, could subject us to significant liability for
damages and could result in an injunction. Even if we prevail, any defense or
litigation could be time-consuming and expensive to defend, and could result in
the diversion of management's time and attention, any of which could materially
adversely affect our business, results of operations or financial condition.
We currently own a number of Internet domain names, including
Switchboard.com, MapsOnUs.com and SideClick.com. In addition, we co-own with
CBS the domain names CBS.Switchboard.com and
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CBSSwitchboard.com. Domain names generally are regulated by Internet regulatory
bodies. The relationship between regulations governing domain names and laws
protecting trademarks and similar proprietary rights is unclear. We therefore,
could be unable to prevent third parties from acquiring domain names that
infringe or otherwise decrease the value of our trademarks and other
proprietary rights.
Employees
As of September 30, 1999, we had 42 full-time employees. None of our
employees is represented by a labor union. We believe our relations with our
employees are good.
Facilities
Our headquarters are located in Westboro, Massachusetts, where we occupy
approximately 8,000 square feet under an agreement with Banyan Worldwide. Since
our inception through June 30, 1999 we have incurred expenses of $455,000 under
an agreement with Banyan Worldwide relating to facilities fees, which cover
rent and costs of furnishings, equipment, telephone service, security in our
building, the fitness center, shared cafeteria costs and building maintenance.
Our agreement with Banyan Worldwide continues in effect until November 1999
and renews on a year-to-year basis unless we or Banyan Worldwide terminate the
agreement upon 90 days' written notice. We believe our facilities will be
adequate for our anticipated growth and that we will be able to obtain
additional space as needed on commercially reasonable terms.
Legal Proceedings
We are not currently a party to any material legal proceedings.
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MANAGEMENT
Executive Officers and Directors
Our executive officers and directors as of October 28, 1999, are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Douglas J. Greenlaw............ 55 Chief Executive Officer
Dean Polnerow.................. 43 President and Director
John P. Jewett................. 56 Vice President and Chief Financial Officer,
Treasurer and Secretary
James M. Canon................. 48 Vice President, Business Development
William P. Ferry (1)........... 47 Chairman of the Board of Directors
Daniel R. Mason (1)............ 48 Director
Fredric G. Reynolds (2)........ 49 Director
Richard M. Spaulding (2)....... 40 Director
David N. Strohm (1)............ 51 Director
Robert M. Wadsworth (2)........ 39 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Douglas J. Greenlaw has served as our Chief Executive Officer since October
1999. Prior to joining Switchboard, from January 1997 to October 1999, Mr.
Greenlaw served as an independent management consultant. From January 1994 to
December 1996, Mr. Greenlaw served as President and Chief Operating Officer of
Multimedia, Inc., a publisher of newspapers and operator of television and
radio stations.
Dean Polnerow founded Switchboard and has served as our President since
March 1998 and as a director since September 1998. Prior to his appointment as
our President, from April 1996 to March 1998, Mr. Polnerow served as our Vice
President, Product and Business Development. From September 1983 to April 1996
Mr. Polnerow served in various capacities, including as Vice President,
Advanced Development, at Banyan Worldwide.
John P. Jewett has served as our Vice President and Chief Financial Officer
since October 1998, as our Treasurer since April 1999 and as our Secretary
since October 1999. Prior to joining Switchboard, from July 1997 to October
1998, Mr. Jewett served as an independent financial consultant to early stage
Internet companies. From March 1995 to July 1997, Mr. Jewett served in various
capacities, including, Vice President, Finance and Operations and Chief
Financial Officer, at PointCast, Inc., an Internet news and service provider.
From 1991 to March 1995, Mr. Jewett served as President and Chief Executive
Officer of Calidus Systems, Inc., a logistics software application developer.
James M. Canon has served as our Vice President, Business Development since
March 1998. Prior to his appointment as our Vice President, Business
Development, from January 1997 to March 1998, Mr. Canon served in various
capacities at Switchboard, most recently as Director, Product Management. From
1991 to January 1997 Mr. Canon served in various capacities, including as
Information Products Architect, at Banyan Worldwide.
William P. Ferry has served as a director since March 1997 and as our
Chairman of the Board of Directors since February 1998. Mr. Ferry has served as
Chairman of the Board of Banyan Worldwide since October 1997 and as President,
Chief Executive Officer and a director of Banyan Worldwide since February 1997.
From 1990 to February 1997, Mr. Ferry served in various capacities, most
recently as President, Services Division, at Wang Laboratories, Inc., an
information technology service provider.
Daniel R. Mason has served as a director since September 1999. Mr. Mason
has served as President of the Infinity Radio Group, a majority-owned
subsidiary of CBS and an operator of radio stations, since November 1995. From
1992 to November 1995, Mr. Mason served as President of Group W. Radio, a
division
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of Westinghouse Broadcasting Company. Mr. Mason is also a director of
MarketWatch.com, Inc., a Web-based provider of business news, financial
programming and analytic tools.
Fredric G. Reynolds has served as a director since September 1999. Mr.
Reynolds has served as Executive Vice President and Chief Financial Officer of
CBS Corporation, a media company, since March 1994. Mr. Reynolds is also a
director of Sportsline USA, Inc., which publishes several sports Web sites,
including CBS.SportsLine.com.
Richard M. Spaulding has served as a director since April 1996. Mr.
Spaulding is Vice President and Chief Financial Officer of Banyan Worldwide,
where he has served in various capacities since September 1990.
David N. Strohm has served as a director since February 1998. He has been a
general partner of Greylock Management Corporation, a venture capital group,
since 1980, and he is a general partner of several venture capital funds
affiliated with Greylock. Since 1983, Mr. Strohm has served as a director of
Banyan Worldwide. He is also a director of DoubleClick Inc., Legato Systems,
Inc. and Internet Security Systems, Inc.
Robert M. Wadsworth has served as a director since September 1999. He has
been a managing director and Vice President of HarbourVest Partners, LLC, a
venture capital management company, since February 1997. He joined Hancock
Venture Partners, the predecessor of HarbourVest Partners, LLC, in July 1986.
Mr. Wadsworth is a general partner of several private equity funds managed by
HarbourVest. Since March 1998, Mr. Wadsworth has been a director of Banyan
Worldwide. He is a director of Concord Communications, Inc., GSS Holdings, Inc.
and Outsourcing Services Group, Inc.
Executive Officers
Each officer serves at the discretion of our Board of Directors and holds
office until his successor is elected and qualified or until his earlier
resignation or removal. There are no family relationships among any of our
directors or executive officers.
Election of Directors
Series E directors. CBS is the holder of the one outstanding share of our
series E special voting preferred stock. As the holder of that share, CBS is
presently entitled under our certificate of incorporation to elect the number
of directors to our board of directors, rounded down, that equals CBS's fully
diluted ownership percentage in Switchboard. Directors elected pursuant to
CBS's special voting rights may be removed by CBS at any time without cause.
See "Certain Transactions" and "Description of Capital Stock". In September
1999, CBS elected Messrs. Mason and Reynolds to our board of directors,
pursuant to its special voting rights.
As of June 30, 1999, CBS held 7,463,216 shares of our common stock and one
share of our series E special voting preferred stock, representing a fully
diluted ownership percentage in Switchboard of 36.9%. CBS also holds warrants
to purchase 1,066,174 shares of our common stock which become exercisable upon
the closing of this offering.
Other directors. All other directors are elected annually and hold office
until the next annual meeting of stockholders or until their resignation or
removal.
Board Committees
The audit committee reports to the board of directors regarding the
appointment of our independent public accountants, the scope and results of our
annual audits, compliance with our accounting and financial policies and
management's procedures and policies relative to the adequacy of our internal
accounting controls. The audit committee currently consists of Messrs.
Reynolds, Spaulding and Wadsworth.
The compensation committee reviews and makes recommendations to the board
of directors regarding our compensation policies and all forms of compensation
to be provided to our executive officers and directors.
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In addition, the compensation committee reviews bonus and stock compensation
arrangements for all of our other employees. The current members of the
compensation committee are Messrs. Ferry, Mason and Strohm. In 1998 no
interlocking relationships existed between our board of directors or
compensation committee and the board of directors or compensation committee of
any other company.
Director Compensation
We reimburse directors for reasonable out-of-pocket expenses incurred in
attending meetings of the Board of Directors and any meetings of its
committees. From time to time, in our discretion, we grant equity awards to our
non-employee directors under our stock incentive plans. We have granted our
non-employee directors the following stock options under our 1996 stock
incentive plan:
. In January 1997, we granted Mr. Spaulding an option to purchase up to
5,000 shares of our common stock at a per share exercise price of
$1.00. This option vests in four equal annual installments beginning
one year after the date of grant.
. In September 1999, we granted to each of Messrs. Ferry, Mason,
Reynolds, Spaulding, Strohm and Wadsworth an option to purchase up to
40,000 shares of our common stock at a per share exercise price of
$8.50. These options vest in four equal annual installments beginning
one year after the date of grant.
. In October 1999, we granted to Mr. Ferry an option to purchase up to
60,000 shares of our common stock at a per share exercise price of
$9.00. This option vests in two equal annual installments beginning one
year after the date of grant.
Executive Compensation
The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1998 to our:
. President; and
. one other executive officer who was serving as an executive officer on
December 31, 1998 and whose individual total salary and bonus exceeded
$100,000.
We refer to these officers collectively as our Named Executive Officers.
In accordance with the rules of the SEC the compensation set forth in the
table below does not include medical, group life or other benefits which are
available to all of our salaried employees, and perquisites and other benefits,
securities or property which do not exceed the lesser of $50,000 or 10% of the
person's salary and bonus shown in the table. In the table below, columns
required by the regulations of the SEC have been omitted where no information
was required to be disclosed under those columns.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
--------------------- ----------------------
Shares of Common Stock All Other
Name and Principal Position Salary Bonus(1) Underlying Options Compensation
- --------------------------- ---------- ---------- ---------------------- ------------
<S> <C> <C> <C> <C>
Dean Polnerow............. $ 155,769 $ 57,003 70,000 $2,978(2)
President
James M. Canon............ $ 103,846 $ 20,969 30,000 --
Vice President, Business
Development
</TABLE>
- --------
(1)Represents amounts awarded as annual incentive bonuses.
(2)Represents matching 401(k) Plan contributions.
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Option Grants in Last Fiscal Year
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers in 1998. Unless otherwise noted,
each stock option grant vests in four equal installments beginning one year
after the date of grant. The per share exercise price of all options granted to
our Named Executive Officers represents the fair market value of our common
stock on the grant date.
Amounts described in the following table under the heading "Potential
Realizable Value at Assumed Rates of Stock Price Appreciation for Option Term"
represent hypothetical gains that could be achieved for the options if
exercised at the end of the option term. These gains are based on assumed rates
of stock appreciation of 5% and 10% compounded annually from the date the
options were granted at their expiration date. Actual gains, if any, on stock
option exercises will depend on the future performance of the common stock and
the date on which the options are exercised. No gain to the optionees is
possible without an appreciation in stock price, which will benefit all
stockholders commensurately.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Percent of Annual Rates of
Number of Shares Total Options Stock Price Appreciation
of Common Stock Granted to Exercise for Option Term
Underlying Employees in Price Per Expiration ------------------------
Name Options Granted Fiscal Year Share Date 5% 10%
- ---- ---------------- ------------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dean Polnerow........... 70,000 13.39% $2.00 3/26/08 $ 88,045 $ 223,124
James M. Canon.......... 30,000 5.74% $2.00 3/26/08 $ 37,734 $ 95,625
</TABLE>
For information relating to the acceleration of options granted to Messrs.
Polnerow and Canon, see "Employment Arrangements."
Fiscal Year-End Option Values
The following table sets forth information concerning option holdings
through December 31, 1998 by each of the Named Executive Officers. Amounts
described in the following table under the heading "Value Of In-the-Money
Options at Year End" are based upon the fair market value of the common stock
as of December 31, 1998, which was $2.50, as determined by the Board of
Directors.
<TABLE>
<CAPTION>
Number of Shares of
Common Stock Value of Unexercised
Underlying Unexercised In-the-
Shares Options at Year End Money Options at Year End
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dean Polnerow........... -- -- 90,000 160,000 $135,000 $170,000
James M. Canon.......... -- -- 75,000 105,000 $112,500 $127,500
</TABLE>
Benefit Plans
1996 Stock Incentive Plan
Our 1996 stock incentive plan was adopted by our board of directors and
approved by our stockholders in September 1996. The 1996 plan authorizes the
issuance of up to 3,000,000 shares of our common stock. As of June 30, 1999,
options to purchase an aggregate of 1,393,825 shares of our common stock at a
weighted average exercise price of $2.88 per share were outstanding under the
1996 plan. Upon the closing of this offering, no additional grants of stock
options or other awards will be made under the 1996 plan.
1999 Stock Incentive Plan
Up to 1,500,000 shares of our common stock (subject to adjustment in the
event of stock splits and other similar events) may be issued pursuant to
awards granted under our 1999 stock incentive plan. The 1999 plan is
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intended to replace our 1996 plan. The 1999 plan provides for the grant of
incentive stock options intended to qualify under Section 422 of the Internal
Revenue Code, nonstatutory stock options, restricted stock awards and other
stock-based awards. The granting of awards under the 1999 plan is
discretionary.
Our officers, employees, directors, consultants and advisors and those of
our subsidiaries are eligible to receive awards under the 1999 plan. Under
present law, however, incentive stock options may only be granted to employees.
No participant may receive any award for more than 1,000,000 shares in any
calendar year. As of September 30, 1999, approximately 49 persons would have
been eligible to receive awards under the 1999 plan, including three executive
officers and six non-employee directors.
Optionees receive the right to purchase a specified number of shares of our
common stock at a specified option price and subject to such other terms and
conditions as are specified in connection with the option grant. We may grant
options at an exercise price less than, equal to or greater than the fair
market value of our common stock on the date of grant. Under present law,
incentive stock options and options intended to qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code may not be
granted at an exercise price less than the fair market value of the common
stock on the date of grant or less than 110% of the fair market value in the
case of incentive stock options granted to optionees holding more than 10% of
the voting power of Switchboard. The 1999 plan permits our board of directors
to determine how optionees may pay the exercise price of their options,
including by cash, check or in connection with a "cashless exercise" through a
broker, by surrender to us of shares of common stock, by delivery to us of a
promissory note, or by any combination of the permitted forms of payment.
Our board of directors administers the 1999 plan. Our board of directors
has the authority to adopt, amend and repeal the administrative rules,
guidelines and practices relating to the plan and to interpret its provisions.
It may delegate authority under the 1999 plan to one or more committees of the
board of directors. Subject to any applicable limitations contained in the 1999
plan, our board of directors or a committee of the board of directors or
executive officer to whom our board of directors delegates authority, as the
case may be, selects the recipients of awards and determines:
. the number of shares of common stock covered by options and the dates
upon which such options become exercisable;
. the exercise price of options;
. the duration of options; and
. the number of shares of common stock subject to any restricted stock or
other stock-based awards and the terms and conditions of such awards,
including the conditions for repurchase, issue price and repurchase
price.
In the event of a merger, liquidation or other acquisition event, our board
of directors is authorized to provide for outstanding options or other stock-
based awards to be assumed or substituted for by the acquiror. If the acquiror
refuses to assume or substitute for outstanding options, they will accelerate
in part, becoming exercisable with respect to 50% of the unvested portion of
the options, prior to consummation of the acquisition event.
No award may be granted under the 1999 plan after October 2009, but the
vesting and effectiveness of awards previously granted may extend beyond that
date. Our board of directors may at any time amend, suspend or terminate the
1999 plan, except that no award granted after an amendment of the 1999 plan and
designated as subject to Section 162(m) of the Internal Revenue Code by our
board of directors shall become exercisable, realizable or vested, to the
extent the amendment was required to grant such award, unless and until such
amendment is approved by our stockholders.
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1999 Employee Stock Purchase Plan
Under our 1999 employee stock purchase plan, up to a total of 300,000
shares of our common stock may be issued to participating employees.
The following employees, including our directors who are employees and
employees of any participating subsidiaries, are eligible to participate in the
purchase plan:
. Employees who are customarily employed for more than 20 hours per week
and for more than five months per year; and
. Employees employed for at least three months prior to enrolling in the
purchase plan.
Employees who would immediately after the grant own 5% or more of the total
combined voting power or value of our stock or any subsidiary are not eligible
to participate. As of September 30, 1999, approximately 36 of our employees
would have been eligible to participate in the purchase plan.
On the first day of a designated payroll deduction period, or "offering
period", we will grant to each eligible employee who has elected to participate
in the purchase plan an option to purchase shares of our common stock as
follows: the employee may authorize between 1% to 10% of his or her base pay to
be deducted by us from his or her base pay during the offering period. On the
last day of this offering period, the employee is deemed to have exercised the
option, at the option exercise price, to the extent of accumulated payroll
deductions. Under the terms of the purchase plan, the option price is an amount
equal to 85% of the per share closing price of our common stock on either the
first day or the last day of the offering period, whichever is lower. No
employee may be granted an option which would allow their rights to purchase
our common stock to accrue at a rate which exceeds $25,000 of the fair market
value of such shares, determined on the first day of the offering period, for
each calendar year in which the option is outstanding. The board of directors
will choose the timing and length of offering periods under the purchase plan.
An employee who is not a participant on the last day of the offering period
is not entitled to exercise any option, and the employee's accumulated payroll
deductions will be refunded. An employee's rights under the purchase plan
terminate upon voluntary withdrawal from the purchase plan at any time, or when
the employee ceases employment for any reason.
401(k) Plan
In 1989, Banyan Worldwide's board of directors adopted an employee savings
and profit sharing plan qualified under Section 401(k) of the Internal Revenue
Code and covering substantially all of its U.S. employees, including all of our
employees. Our employees are eligible to participate in this plan on the same
terms as Banyan Worldwide employees. Pursuant to the plan, employees may elect
to reduce their current compensation by up to the statutorily prescribed annual
limit and have the amount of such reduction contributed to the plan. In January
1994, Banyan Worldwide's board of directors elected to match employee's
elective deferrals to the plan based upon a prescribed formula. The maximum
matching contribution was 2% of an employees annual compensation. Vesting is
over a four-year period and begins on the date of hire.
Employment Arrangements
Douglas J. Greenlaw
In October 1999 the board of directors approved the employment arrangements
for Douglas J. Greenlaw, our Chief Executive Officer. Mr. Greenlaw will receive
an annual base salary of $225,000 and is eligible to receive an annual
performance bonus targeted at $75,000, based upon a combination of our
performance and Mr. Greenlaw's achievement of individual objectives. In
addition, we provide Mr. Greenlaw with executive life
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<PAGE>
insurance at a value equal to five times his base salary. Mr. Greenlaw also
received non-qualified options to purchase up to 900,000 shares of our common
stock at an exercise price of $9.00 per share which will vest according to the
following schedule:
. 150,000 will vest after each of the first, second, third and fourth
years of employment;
. 200,000 will vest after the fifth year of employment; and
. 100,000 will vest after the sixth year of employment.
The vesting of the 150,000 shares to vest after each of the third and fourth
years of Mr. Greenlaw's employment and the vesting of the 200,000 shares to
vest after the fifth year of Mr. Greenlaw's employment will accelerate if and
when Switchboard achieves a market capitalization for 90 consecutive days of
$1.0 billion with respect to the third year options, for 90 consecutive days of
$1.5 billion for the fourth year options and for 180 consecutive days of $2.0
billion for the fifth year options. In addition, the vesting of the 100,000
shares to vest after the sixth year of Mr. Greenlaw's employment accelerates
upon the completion of this offering.
If a change in control of Switchboard occurs, the vesting of 50% of any
unvested portion of Mr. Greenlaw's options acclerates. One year after a change
in control of Switchboard, the vesting of 100% of the then unvested portion of
Mr. Greenlaw's options accelerates. If we terminate Mr. Greenlaw within one
year of a change in control or if we materially reduce his responsibilities
from those in effect immediately prior to a change in control and Mr. Greenlaw
resigns, the vesting of 100% of the then unvested portion of his options
accelerates. If we terminate Mr. Greenlaw for any reason, except for cause, Mr.
Greenlaw will be entitled to:
. his base salary and bonus, pro rated for assumed on-target achievement
of performance objectives, for six months from the date of termination;
and
. continued employee benefits coverage for six months.
Dean Polnerow
In October 1999 the board of directors approved the employment arrangements
for Dean Polnerow, our President. Mr. Polnerow will receive an annual salary of
$165,000 and is eligible to receive an annual performance bonus targeted at
$60,000. Mr. Polnerow may earn an additional $35,000 for overachievement of
specified goals. In addition, we provide Mr. Polnerow with executive life
insurance at a value equal to five times his base salary.
Since January 1997, we have granted options to Mr. Polnerow to purchase up
to an aggregate of 435,000 shares of our common stock at a weighted average
exercise price of $4.42 per share. Of these options:
. 250,000 of these options vest over a four-year period of continuous
employment, with 25% vesting each year;
. 40,000 of these options vest over a four-year period of continuous
employment, with zero vesting after the first year, 25% vesting after
the second year, 25% vesting after the third year and 50% vesting after
the fourth year; and
. 145,000 of these options vest over a four-year period of continuous
employment, with 35,000 vesting after the second year, 35,000 vesting
after the third year, 50,000 vesting after the fourth year and 25,000
shares vesting after the fifth year, provided, that, the vesting of the
35,000 shares to vest after the second and third years and the 50,000
shares to vest after the fourth year will accelerate if and when
Switchboard achieves a market capitalization for 90 consecutive days of
$1.0 billion with respect to the second year options, for 90
consecutive days of $1.5 billion with respect to the third year
options, and for 180 consecutive days of $2.0 billion with respect to
the fourth year options, and the vesting of the 25,000 shares to vest
after the fifth year accelerates upon the completion of this offering.
55
<PAGE>
If a change in control of Switchboard occurs, the vesting of 50% of any
unvested portion of Mr. Polnerow's options accelerates. If we terminate Mr.
Polnerow within one year of a change in control of Switchboard or if we
materially reduce his responsibilities from those in effect immediately prior
to a change in control and Mr. Polnerow resigns, the vesting of 100% of the
then unvested portion of his options accelerates. If we terminate Mr. Polnerow
for any reason, except for cause, or if we relocate Mr. Polnerow to an office
more than 35 miles from Westboro, Massachusetts, Mr. Polnerow will be entitled
to:
. his base salary and bonus, pro rated for assumed on-target achievement
of performance objectives, for six months from the date of termination;
and
. continued employee benefits coverage for six months.
John P. Jewett
In October 1999 the board of directors confirmed the prior employment
arrangements for John P. Jewett, our Vice President, Finance and Administration
and Chief Financial Officer, under which Mr. Jewett receives an annual salary
of $125,000 and is eligible to receive an annual performance bonus targeted at
$55,000 each as may be adjusted from time to time in the discretion of our
board of directors.
Since October 1998, we have granted options to Mr. Jewett to purchase up to
an aggregate of 150,000 shares of our common stock at a weighted average
exercise price of $4.66 per share. Of these options, 100,000 vest over a four-
year period, with 25% vesting each year of employment. The remaining 50,000 of
these options vest according to the following schedule:
. 12,500 of these options will vest after each of the second and third
years of continuous employment;
. 15,000 of these options will vest after the fourth year of continuous
employment; and
. 10,000 of these options will vest after the fifth year of continuous
employment.
The vesting of the 12,500 shares to vest after each of the second and third
years of continuous employment and the vesting of the 15,000 shares after the
fourth year of continuous employment will accelerate if and when Switchboard
achieves a market capitalization for 90 consecutive days of $1.0 billion with
respect to the second year options, for 90 consecutive days of $1.5 billion
with respect to the third year options and for 180 consecutive days of $2.0
billion with respect to the fourth year options. In addition, the vesting of
the 10,000 shares to vest after the fifth year of continuous employment
accelerates upon the completion of this offering.
If a change in control of Switchboard occurs, the vesting of 50% of any
unvested portion of Mr. Jewett's options accelerates. If we materially reduce
Mr. Jewett's responsibilities from those in effect immediately prior to a
change in control and Mr. Jewett resigns, the vesting of 100% of the then
unvested portion of his options accelerates. If we terminate Mr. Jewett for any
reason, except for cause, or if Mr. Jewett resigns his employment after a
change in control of Switchboard and after we have materially reduced his
responsibilities, Mr. Jewett will be entitled to:
. his base salary for six months from the date of termination, or, if he
obtains employment elsewhere at a lower salary, he will receive the
difference in salary for six months; and
. continued employee benefits coverage for six months.
James M. Canon
In October 1999 the board of directors confirmed the prior employment
arrangements for James M. Canon, our Vice President, Business Development,
under which Mr. Canon receives an annual salary of $130,000 and is eligible to
receive an annual performance bonus targeted at $32,500.
Since June 1996, we have granted options to Mr. Canon to purchase up to an
aggregate of 250,000 shares of our common stock, at a weighted average exercise
price of $3.24 per share. The remaining 50,000 of these options vest according
to the following schedule:
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<PAGE>
Of these options:
. 180,000 vest over a four-year period of continuous employment, with 25%
vesting each year;
. 20,000 of these options vest over a four-year period of continuous
employment, with zero vesting after the first year, 25% vesting after
the second year, 25% vesting after the third year and 50% vesting after
the fourth year; and
. 50,000 of these options vest over a four-year period of continuous
employment, with 12,500 vesting after the second year, 12,500 vesting
after the third year, 15,000 vesting after the fourth year and 10,000
vesting after the fifth year; provided, that, the vesting of the 12,500
shares to vest after the second and third years and the 15,000 shares
to vest after the fourth year will accelerate if and when Switchboard
achieves a market capitalization for 90 consecutive days of $1.0
billion with respect to the second year options, for 90 consecutive
days of $1.5 billion with respect to the third year options, and for
180 consecutive days of $2.0 billion with respect to the fourth year
options and the vesting of the 10,000 shares after the fifth year
accelerates upon the completion of this offering.
If a change in control of Switchboard occurs, the vesting of 50% of any
unvested portion of Mr. Canon's options accelerates. If we materially reduce
Mr. Canon's responsibilities from those in effect immediately prior to a change
in control, and Mr. Canon resigns, the vesting of 100% of the then unvested
portion of his options accelerates. If we terminate Mr. Canon for any reason,
except for cause, or if we relocate Mr. Canon to an office more than 35 miles
from Westboro, Massachusetts, or if Mr. Canon resigns his employment after a
change in control of Switchboard and after we have materially reduced his
responsibilities, Mr. Canon will be entitled to:
. his base salary for six months from the date of termination, or, if he
obtains employment elsewhere at a lower salary, he will receive the
difference in salary for six months; and
. continued employee benefits coverage for six months.
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<PAGE>
CERTAIN TRANSACTIONS
Banyan Worldwide
We were incorporated in April 1996 as a wholly owned subsidiary of Banyan
Worldwide.
Issuances of Securities
Banyan Worldwide acquired our securities in the following transactions:
. In April 1996, in connection with our formation, we issued ten shares
of our common stock to Banyan Worldwide for nominal consideration.
. In November 1996, we issued 6,999,990 shares of our common stock to
Banyan Worldwide in consideration for the transfer of our core
technologies and net assets and in settlement of advances from Banyan
Worldwide.
. On June 30, 1999, we issued 2,655,916 shares of our series C
convertible preferred stock to Banyan Worldwide in connection with the
conversion by Banyan Worldwide of principal and interest of $10,623,664
under our convertible secured note dated August 29, 1997.
. On June 30, 1999, we issued 87,345 shares of our series D convertible
preferred stock to Banyan Worldwide in connection with the conversion
by Banyan Worldwide of principal and interest of $655,089 under our
convertible secured note dated May 3, 1999.
Officers and Directors
Our Chairman of the Board of Directors, William P. Ferry, is Chairman of
the Board of Directors, President and Chief Executive Officer of Banyan
Worldwide. Our directors, David N. Strohm and Robert M. Wadsworth, are
directors of Banyan Worldwide. Our director Richard M. Spaulding is Vice
President and Chief Financial Officer of Banyan Worldwide. See "Compensation
Committee Interlocks and Insider Participation."
Corporate Services Agreement
We are party to a corporate services agreement with Banyan Worldwide. Under
this agreement, we currently pay Banyan Worldwide a fixed monthly fee of
approximately $41,000 for facilities, utilities, maintenance and various
administrative and other services. These services include:
. financial and accounting advice;
. human resources advice and routine related services;
. payroll advice and routine related services;
. treasury, insurance and tax services; and
. routine data processing, technical support and equipment maintenance
services.
At our request, Banyan Worldwide will also provide us with some other
services for an additional charge based on Banyan Worldwide's labor costs,
including benefits, for the applicable Banyan Worldwide employee performing the
services. These services include:
. development of data processing systems and programs;
. legal support, including patent prosecution;
. support in financing and acquisition transactions;
. general executive and management services; and
. support for contract bidding and other proposals.
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In addition, we reimburse Banyan Worldwide for our pro rata share of telephone,
photocopying and postage expenses and our pro rata share of Banyan Worldwide's
expenses relating to our participation in its employee benefits plans.
Beginning in November 1999, this corporate services agreement renews
annually unless either party terminates the agreement with 90 days' notice to
the other. Our total expense to Banyan Worldwide under the corporate services
agreement through June 30, 1999 was approximately $1,138,000.
Secured Convertible Note Facilities
On August 29, 1997, we entered into a secured convertible note facility
with Banyan Worldwide. The facility was initially for $3.0 million, and was
increased on February 20, 1998 to $7.0 million and on May 3, 1999 to $10.0
million. Outstanding amounts under the facility bore interest at a rate equal
the applicable federal rate under Section 1274 of the Internal Revenue Code of
1986, as amended, for short-term loans with annual compounding of interest for
the month in which such loan is made. The outstanding amount of principal and
interest were convertible at the option of Banyan Worldwide into shares of our
series C preferred stock at a rate of $4.00 per share, subject to adjustment,
at any time. The entire outstanding amount of principal and interest was
converted on June 30, 1999 in connection with the CBS transaction described
below. We may not borrow any additional amounts under this facility.
On May 3, 1999, we entered into a second secured convertible note facility
with Banyan Worldwide. This facility is for $5.0 million and outstanding
amounts bear interest at a rate equal the applicable federal rate under Section
1274 of the Internal Revenue Code of 1986, as amended, for short-term loans
with annual compounding of interest for the month in which such loan is made.
The outstanding amount of principal and interest was convertible at the option
of Banyan Worldwide into shares of our series D preferred stock at a rate of
$7.50 per share, subject to adjustment, at any time and after the offering is
convertible into shares of common stock at the same rate. On June 30, 1999, in
connection with the CBS transaction described below, Banyan Worldwide converted
principal and interest to series D preferred stock. The facility remains in
place and the maximum remaining amount we may borrow under the facility was
approximately $4.5 million, as of June 30, 1999. Our requests for advances
under the facility may be refused by Banyan Worldwide, at its sole discretion.
Investor Rights Agreements
A description of these agreements is set forth below under the headings "--
CBS Corporation--Equity Agreements," "--Other Transactions and Relationships--
Investor Rights Agreements" and "Description of Capital Stock--Registration
Rights."
Indemnification
As described below under the heading "CBS Corporation--Advertising and
Promotion Agreement," we have agreed to indemnify Banyan Worldwide for amounts
that Banyan Worldwide may be required to pay to CBS pursuant to Banyan
Worldwide's indemnification obligations to CBS.
CBS Corporation
In June 1999, we entered into a strategic relationship with CBS Corporation
involving our licensing of the "CBS" trademark and "eye" device, an equity
investment by CBS and our receipt of advertising and promotion services and
$5.0 million in cash.
Issuances of Securities
CBS acquired our securities on June 30, 1999 pursuant to the transaction
described below. The following securities were issued to CBS:
. 7,463,216 shares of our common stock;
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. one share of our series E special voting preferred stock; and
. warrants to purchase 1,066,174 shares of our common stock.
The warrants are exercisable from the date of the closing of the offering
until the second anniversary of that date at an exercise price of $1.00 per
share. The exercise price is subject to adjustment in the event of stock splits
and other similar events and in the event of certain issuances of common stock
at less than $16.00 per share.
The number of shares of common stock and warrants issued to CBS was
calculated so that CBS would acquire shares of common stock equaling 35% of our
fully diluted common stock and warrants to acquire another 5% of our fully
diluted common stock. We made assumptions in determining what our fully diluted
capital stock was and agreed to increase the number of shares and warrants
issued to CBS if specified assumptions turn out to be incorrect. We are
required to issue additional shares and warrants to CBS if:
. we issue any shares pursuant to the series B convertible preferred
stock purchase warrant originally issued to America Online, which we
believe has expired pursuant to its terms;
. we issue any shares pursuant to our stock warrant agreement dated March
31, 1999 between us and each of the members of the AtHand Network,
which agreement could, under specified circumstances which we do not
expect to occur, requires us to issue up to 50,000 shares of our common
stock; or
. we elect prior to November 1999 to issue 1,000,000 shares of common
stock shares in exchange for the purchase of technology under our
technology development and marketing agreement dated November 7, 1997
with Continuum Software Inc.
If we issue shares of our capital stock in connection with one or more of
the above events, we are required to issue to CBS, within ten business days and
for no additional consideration, the additional number of shares of common
stock that would have been issued to CBS on June 30, 1999 had we included in
our calculations the number of shares we issue upon the occurrence of one or
more of the above events.
Voting Rights and Directors
We issued one share of our series E special voting preferred stock to CBS.
This share, which will remain outstanding after the offering, entitles CBS to
elect that number of members of our board of directors, rounded down to the
nearest whole number, as equals CBS's fully diluted ownership percentage of our
securities. The number of directors determined by this formula may not be less
than one at any time when the license agreement is in effect and may not be
greater than the maximum number which would constitute a minority of our board
of directors. In addition, even if CBS does not own any of our securities, they
are entitled to elect one director so long as the license agreement is in
effect. The special voting rights of the series E preferred stock terminate
upon the first to occur of:
. when CBS no longer owns any of our securities and the license agreement
is no longer in effect;
. the date on which a competitor of Switchboard owns more than 30% of the
common stock or securities representing more than 30% of the voting
power of CBS; and
. the date on which the share of series E preferred stock is owned by a
person other than CBS or an entity controlling, controlled by or under
common control with CBS.
Our directors, Fredric G. Reynolds, Executive Vice President and Chief
Financial Officer of CBS, and Daniel Mason, President of the Infinity Radio
Group, a majority-owned subsidiary of CBS, were elected to our board of
directors under the rights of the series E preferred stock described above.
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License Agreement
On June 30, 1999, we entered into a license agreement with CBS. Under the
license agreement, CBS granted us a non-exclusive license to use the "CBS"
trademark and "eye" device together with the Switchboard mark to identify,
market and promote our Web site. Under the agreement, CBS will retain approval
rights over the use and presentation of its trademarks. For example:
. our use of the CBS trademarks must conform to CBS's guidelines, which
may be changed from time to time by CBS;
. each use of the CBS trademarks in connection with our marketing or
promotional materials requires obtaining CBS's prior written approval;
and
. CBS may require us to remove from our Web site any content that CBS
determines conflicts with, or interferes with or is detrimental to
CBS's interests, reputation or business or which might subject CBS to
legal liability or regulatory action.
The agreement also places restrictions on our rights to accept advertising
from competitors of CBS.
During the term of the agreement, CBS may not license the CBS trademarks in
connection with naming or promoting in the United States any Internet site that
has as its primary function and theme the delivery of directory information for
residential listings, business listings, email addresses or Web sites. This
restriction does not apply to:
. any activity conducted by CBS as of June 30, 1999;
. any activity conducted by CBS television or radio affiliates that are
not CBS owned or operated;
. any Internet services or Web sites in which CBS had an equity interest
as of June 30, 1999; and
. the use of any CBS trademarks to identify CBS as the source of any
content.
The license agreement expires on June 30, 2009. CBS may terminate the
agreement before the end of its term if:
. we breach any material term of the license agreement;
. we or Banyan Worldwide breach any material term of the advertising and
promotion agreement, the common stock and warrant purchase agreement or
any of the equity agreements with CBS described below under the heading
"Advertising and Promotion Agreement";
. we become insolvent or commence or become subject to bankruptcy or
similar proceedings;
. we issue to a CBS competitor or assist a CBS competitor in acquiring 9%
or more of our common stock or total voting power; or
. any CBS competitor owns or controls 15% or more of our common stock or
total voting power.
In the event of a breach by CBS of a material term of the license agreement
or the advertising and promotion agreement, we may terminate the license
agreement. If we so terminate the license agreement, CBS will pay us $3.5
million for each year that was remaining under the term of the agreement, pro
rated for any partial year.
The agreement provides for the joint ownership of domain names for the
Switchboard Web site featuring both the "CBS" and "Switchboard" trademarks and
contains provisions governing the use of those domain names following any
termination or expiration of the license agreement.
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Advertising and Promotion Agreement
On June 30, 1999, we entered into an advertising and promotion agreement
with CBS. Over the term of the advertising and promotion agreement, CBS will
arrange for the placement of up to $95.0 million worth of advertising and
promotion of our Web site. The possible media categories in which this
advertising and promotion will be placed include:
. radio networks;
. outdoor advertising; and
. the CBS television network.
CBS's advertising and promotion commitment is divided into seven one-year
periods during the term of the agreement. CBS's commitment during the first
three years of the agreement is $13.0 million per year and during the last four
years of the agreement is $14.0 million per year. We may carry forward to a
subsequent period up to 35% of the advertising value to which we are entitled
during any one-year period. However, CBS is not obligated to provide
advertising value aggregating more than $18.9 million during any one-year
period. The value of advertising and promotion services provided by CBS is
generally determined by reference to the average price paid by others to CBS
for comparable advertising and promotion.
All our advertising is subject to CBS's advertising guidelines and
preemption policies and CBS is not required to make any ad placements if the
exigencies of time or contractual obligations prevent or restrict CBS from
doing so. CBS may suspend advertising for us:
. if at any time in the future a claim arises regarding our right to use
the Switchboard trademark; or
. in the event our Web site is not operational for a 48-hour period,
until it becomes operational again consistent with operations prior to
the disruption.
Under the agreement, CBS has the right to sell advertising on our Web site
and co-branded Web pages. We will pay CBS a commission for any sales by CBS.
In addition, CBS has agreed to place links to our Web site on CBS
controlled Web sites and to use good faith efforts to obtain similar links on
other Web sites in which CBS has a non-controlling interest. We will pay CBS a
percentage of net revenue derived from co-branded pages displayed through those
links. We and CBS have also agreed to work together in good faith during the
term of the agreement to identify other opportunities to integrate our
directory features into CBS's Web sites and to integrate local content from
CBS's Web site into our Web site.
The advertising and promotion agreement expires on June 30, 2006. CBS may
terminate the agreement before the end of its term if:
. we or Banyan Worldwide breach any material term of the advertising and
promotion agreement or our other agreements with CBS described in this
prospectus;
. we become insolvent or commence or become subject to bankruptcy or
similar proceedings;
. we issue to a CBS competitor or assist a CBS competitor in acquiring 9%
or more of our common stock or total voting power;
. any CBS competitor owns or controls 15% or more of our common stock or
total voting power;
. we discontinue using the "Switchboard" trademark and fail to establish
a substitute mark acceptable to CBS;
. our license agreement with CBS is terminated or expired; or
. our Web site ceases to operate for specified periods of time.
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In the event of a breach by CBS of a material term of the advertising and
promotion agreement or the license agreement that is not cured within 30 days
after receipt of our notice, we may terminate the agreement. If we so terminate
the agreement CBS's obligation to provide advertising and promotion would
continue unless CBS elects to pay us, over the remaining term of the agreement
or in a lump sum payment, the present value cash equivalent of the difference
between $95.0 million and the value of advertising and promotion already
provided to us.
Banyan Worldwide is also a party to the advertising and promotion agreement
and, among other things, indemnifies CBS for any breach by us of our
representations, warranties or covenants in the agreement. Banyan Worldwide's
indemnification obligations with respect to our covenants will expire upon the
first to occur of:
. the first business day after June 30, 2001 when Banyan Worldwide owns
or controls less than a majority of our voting power; and
. the first business day after any person owns or controls more of our
voting power than Banyan Worldwide does.
We have agreed to indemnify Banyan Worldwide for any amounts Banyan
Worldwide is required to pay to CBS pursuant to Banyan Worldwide's indemnity
obligations described above.
In addition, if a CBS competitor acquires a 30% or more interest in Banyan
Worldwide or all or substantially all of Banyan Worldwide's assets at a time
when Banyan Worldwide owns 10% or more of our common stock, then CBS has the
right to purchase Banyan Worldwide's shares of our capital stock or require
that those shares be transferred to an independent trustee for sale to a third
party. If CBS were to exercise this right, a change of control of Switchboard
may occur.
We have agreed with CBS that we will use our reasonable best efforts to
adhere to performance standards for our Web site, including to:
. maintain availability of our Web site seven days a week, 24 hours a
day, other than during periods of scheduled maintenance;
. maintain 97% uptime over a 12 month period for our Web site and the co-
branded interfaces we display to users, barring events that are beyond
our control;
. maintain competitive standards of quality and ease of use with those
offered by other leading Internet-based directory services; and
. achieve specified response times to user inquiries.
Equity Agreements
The common stock, series E preferred stock and warrant described above were
issued to CBS pursuant to a purchase agreement dated June 30, 1999. We and
Banyan Worldwide indemnify CBS for breaches of representations and warranties
under the purchase agreement.
We also entered into a series of equity-related agreements with CBS:
. Right of First Refusal Agreement. This agreement restricts CBS's right
to transfer its shares of our common stock. Under this agreement:
. prior to the first anniversary of this offering, if CBS wishes to
sell any of its shares of our common stock it must first offer them
to us and then to Banyan Worldwide; and
. prior to June 30, 2001, if the license agreement or the advertising
and promotion agreement has terminated for any reason and CBS
wishes to sell any of its shares of our common stock, we have a
right of first refusal to buy those shares on the same terms that a
third party identified by CBS has offered to buy the shares and
Banyan Worldwide has a right of first refusal if we do not first
exercise our right.
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. Participation Agreement. Under this agreement we agreed to use our
reasonable best efforts to issue and sell to CBS and Banyan Worldwide,
simultaneously with the closing of this offering, additional shares of
our common stock so that each of CBS and Banyan Worldwide could own
37.5% of our common stock on a fully diluted basis after the offering.
Neither CBS nor Banyan Worldwide is obligated to purchase any shares of
our common stock pursuant to this agreement. This agreement will
terminate following the offering.
. Stockholders' Voting Agreement. Under this agreement CBS has agreed to
vote all of its shares of our common stock to elect to our board of
directors a number of persons designated by Banyan Worldwide as would
represent a majority of our board of directors. This agreement
terminates on the first to occur of:
. July 2, 2001;
. the date on which CBS has required Banyan Worldwide to transfer its
shares of our common stock to a trustee pursuant to the mandatory
transfer provisions contained in the advertising and promotion
agreement; and
. the first business day after any person beneficially owns or
controls more of our voting power than Banyan Worldwide does.
CBS has agreed that any transfer by it of shares of our common stock
will require the person receiving the shares to be bound by this
agreement, except that CBS may transfer shares free of the obligations
imposed by this agreement if, after giving effect to such transfer, CBS
would continue to own shares subject to this agreement that represent
at least 25% of our outstanding common stock. Banyan Worldwide has
agreed, during the term of this agreement, to retain shares of our
common stock that represent at least 25% of our outstanding common
stock.
. Registration Rights Agreement. This agreement is described in
"Description of Capital Stock--Registration Rights."
Other Transactions and Relationships
Issuances of Securities
November 1996, we issued to each of America Online, Inc. and Digital City
Inc. 375,000 shares of our series A preferred stock at a purchase price of
$4.00 per share. In addition, we issued to each of America Online and Digital
City a warrant to purchase shares of our series B preferred stock equal to
3.75% of our capital stock on the date of exercise, on a fully diluted basis.
The per share exercise price of the warrants is equal to $60.0 million divided
by the number of fully diluted shares of our capital stock on the date of
exercise, and is subject to adjustment. Digital City's warrant to purchase
shares of our series B preferred stock expired prior to the exercise of any
shares under the warrant.
We believe that America Online's warrant to purchase shares of our series B
preferred stock has also expired pursuant to its terms. America Online has in
the past indicated to us that it does not agree that its warrant has expired.
If America Online seeks to exercise its warrant, we intend to assert that the
warrant is not exercisable and will vigorously defend against any legal actions
America Online may commence. See "Risk Factors."
Business Agreements
In November 1996, in connection with our securities issuances to America
Online and Digital City described above, we entered into an agreement with
America Online and Digital City under which America Online agreed to integrate
Switchboard into its interactive services, and we granted America Online and
Digital City exclusive sales licenses for specified types of advertisements on
our Web site.
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The November 1996 agreement was replaced by two agreements entered into
between us and America Online in December 1997:
. an interactive yellow pages marketing agreement under which America
Online agreed to promote and distribute our yellow pages directory
services; and
. an interactive white pages marketing agreement under which America
Online agreed to promote and distribute our white pages directory
services.
The yellow pages agreement terminated in December 1998, and the white pages
agreement terminated in November 1998. Since November 1996, we have received an
aggregate of approximately $780,000 in license and advertising fees from
America Online and paid America Online an aggregate of approximately $3.0
million in revenue share, carriage fees and sales commissions.
Since January 1, 1998, we and Digital City have conducted local advertising
sales and distribution activities. Under both the November 1996 agreement
described above, and those local advertising activities, we have received an
aggregate of approximately $413,000 in license and advertising fees from
Digital City, and paid to Digital City an aggregate of approximately $72,000.
In March 1999, we resolved a number of outstanding intercompany balances
between us and America Online and Digital City under our prior agreements,
resulting in a net payment by us to America Online of $423,000. In addition, we
agreed to provide America Online with 100 million impressions on our Web site
over a two year term, and America Online granted us the right to receive up to
$200,000 in advertising on specified America Online properties over a two year
term. If we do not receive the full $200,000 in advertising during that term,
America Online will pay us the difference between $200,000 and the value of the
advertising we actually received. In connection with these transactions, we
amended a number of the rights of America Online and Digital City as preferred
stockholders and pursuant to their investment agreements with Switchboard,
Banyan Worldwide and Continuum, as described below. We also granted to America
Online and its affiliates a royalty-free nonexclusive license to any service or
product of America Online which is covered by any claim of specified patents
owned by Switchboard. The status of America Online's warrant to purchase series
B preferred stock was not resolved as part of this agreement.
Investor Rights Agreements
In connection with our issuances of securities to America Online, Digital
City and Banyan Worldwide we granted to America Online, Digital City and Banyan
Worldwide demand and piggy-back registration rights and a right of first
refusal on future issuances of securities by Switchboard. This right of first
refusal was later terminated in March 1999. Banyan Worldwide, America Online
and Digital City also agreed to grant rights of first refusal and co-sale
rights on transfers of their shares. These agreements have been amended from
time to time, including to add parties. These agreements, as amended to date,
will provide for registration rights after the offering. See "Description of
Capital Stock--Registration Rights."
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of September 30, 1999, and as adjusted to
reflect the sale of the shares of common stock in this offering, by:
. each person or entity we know to own beneficially more than 5% of our
common stock;
. each of our directors;
. each of the Named Executive Officers; and
. all directors and executive officers as a group.
Except as indicated below, none of these persons or entities has a
relationship with us or, to our knowledge, any of the underwriters or their
respective affiliates. Unless otherwise indicated, each person or entity named
in the table has sole voting power and investment power, or shares such power
with his or her spouse, with respect to all shares of capital stock listed as
owned by such person or entity. The address of each of our employees, officers
and directors is c/o Switchboard Incorporated, 115 Flanders Road, Westboro,
Massachusetts 01581.
The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission and assumes
the underwriters do not exercise their over-allotment option. The information
is not necessarily indicative of beneficial ownership for any other purpose.
Under these rules, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and any shares
as to which the individual has the right to acquire beneficial ownership within
60 days after September 30, 1999 through the exercise of any stock option,
warrant or other right. The inclusion in the following table of those shares,
however, does not constitute an admission that the named stockholder is a
direct or indirect beneficial owner of those shares.
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially Owned
Prior to the Offering After the Offering
----------------------------- -----------------------------
Name and Address Number Percent Number Percent
- ---------------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
5% Stockholders
CBS Corporation (1)..... 7,463,217 51.0% 8,529,391 54.3%
51 West 52nd Street
New York, NY 10019
Banyan Worldwide (2).... 9,743,261 56.1% 9,743,261 56.1%
120 Flanders Road
Westboro, MA 01581
Directors and Named
Executive Officers
Dean Polnerow (3)....... 107,500 * 132,500 *
James Canon (4)......... 82,500 * 92,500 *
William P. Ferry........ -- * -- *
Richard M. Spaulding
(5)................... 2,500 * 2,500 *
David N. Strohm......... -- * -- *
Robert M. Wadsworth..... -- * -- *
Fredric G. Reynolds..... -- * -- *
Daniel Mason............ -- * -- *
All directors and
executive officers as
a group
(10 persons) (6)...... 212,500 1.4% 357,500 2.4%
</TABLE>
- --------
* Less than 1%
(1) The number of shares CBS beneficially owns prior to this offering includes
one share of common stock issuable upon the conversion of one outstanding
share of series E special voting preferred stock. The number of shares CBS
beneficially owns after this offering includes 1,066,174 shares of common
stock issuable upon the exercise of a warrant, which becomes exercisable
upon the closing of this offering, and one share of common stock issuable
upon the conversion of one outstanding share of series E special voting
preferred stock.
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(2) The number of shares Banyan Worldwide beneficially owns prior to and after
this offering includes 2,655,916 and 87,345 shares of common stock issuable
upon the conversion of 2,655,916 shares of series C preferred stock and
87,345 shares of series D preferred stock, which are both presently
convertible at Banyan Worldwide's option. All shares of common stock owned
by Banyan Worldwide now, and upon conversion of the series C and D
preferred stock, have been pledged to Foothill Capital Corporation in
connection with a Loan and Security Agreement dated September 4, 1997. The
number of shares does not include shares owned by CBS which CBS has agreed
to vote in favor of Banyan's designees in elections for our board of
directors.
(3) The number of shares Dean Polnerow beneficially owns prior to this offering
consists of 107,500 shares of common stock issuable upon the exercise of
stock options which are presently exercisable. The number of shares Mr.
Polnerow beneficially owns after this offering includes 25,000 shares of
common stock issuable upon the exercise of stock options which vest upon
the completion of this offering.
(4) The number of shares James M. Canon beneficially owns prior to this
offering consists of 82,500 shares of common stock issuable upon the
exercise of stock options which are presently exercisable. The number of
shares Mr. Canon beneficially owns after this offering includes 10,000
shares of common stock issuable upon the exercise of stock options which
vest upon the completion of this offering.
(5) The number of shares Richard M. Spaulding beneficially owns before and
after this offering consists of 2,500 shares of common stock issuable upon
the exercise of stock options which are presently exercisable.
(6) The number of shares beneficially owned prior to the offering includes
20,000 shares underlying options owned by an additional executive officer
which are presently exercisable. The number of shares beneficially owned
after the offering includes 20,000 shares underlying options owned by an
additional executive officer which are presently exercisable and 110,000
shares of common stock issuable upon the exercise of stock options which
are held by two additional executive officers and which vest upon the
completion of this offering.
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DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 85,000,000 shares of common stock, $.01 par
value per share, and 5,000,000 shares of preferred stock, $0.01 par value per
share. As of June 30, 1999, we had outstanding 18,128,476 shares of common
stock held by 17 stockholders of record, options to purchase an aggregate of
1,393,825 shares of our common stock and one share of series E special voting
preferred stock.
The following summary of certain provisions of our common stock, preferred
stock, certificate of incorporation and by-laws is not intended to be complete.
It is qualified by reference to the provisions of applicable law and to our
certificate of incorporation and by-laws included as exhibits to the
registration statement of which this prospectus is a part. See "Where Can You
Find More Information."
Common Stock
Under our amended and restated certificate of incorporation, holders of
common stock are entitled to one vote for each share held on all matters
submitted to a vote of stockholders and do not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock entitled to
vote in any election of directors may elect all of the directors standing for
election. Holders of common stock are entitled to receive proportionately any
dividends as may be declared by our board of directors, subject to any
preferential dividend rights of outstanding preferred stock. Upon our
liquidation, dissolution or winding up, the holders of common stock are
entitled to receive proportionately our net assets available after the payment
of all debts and other liabilities and subject to the prior rights of any
outstanding preferred stock. Holders of common stock have no preemptive,
subscription, redemption or conversion rights. Our outstanding shares of common
stock are, and the shares offered by us in this offering will be, when issued
and paid for, fully paid and nonassessable. The rights, preferences and
privileges of holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of preferred
stock which we may designate and issue in the future.
Common Stock Warrants
On December 31, 1997, we issued to Continuum Software Inc. a warrant to
purchase 300,000 shares of our common stock. The warrant is exercisable, in
whole or in part, until the earlier of December 31, 2000 or the termination of
a technology development and marketing agreement between Switchboard and
Continuum. The exercise price is $2.00 per share, as adjusted from time to
time.
On March 31, 1999, we issued warrants to purchase an aggregate of 385,000
shares of our common stock. Warrants were issued in connection with a co-
branded Web site and linking agreement among Switchboard and the warrant
holders. The warrants are exercisable, in whole or in part, until the later of
March 31, 2002 or until the date one year subsequent to the effective date of
the termination of the co-branded Web site and linking agreement. The exercise
price is $8.00 per share, as adjusted from time to time. If we receive notice
prior to December 1, 1999 that the other parties to the co-branded Web site and
linking agreement desire to terminate that agreement on December 31, 1999, the
warrants cease to be exercisable with respect to an aggregate of 151,250 shares
of common stock.
On June 30, 1999, we issued to CBS a warrant to purchase 1,066,174 shares
of our common stock. The warrant is exercisable, in whole or in part, beginning
on the earlier of (i) June 30, 2001 and (ii) the closing of this offering, and
ending on the earlier of (i) the second anniversary of the closing of this
offering and (ii) June 30, 2004. The exercise price is $1.00 per share, as
adjusted from time to time. The shares issuable upon exercise of this warrant
are subject to antidilution protection, including for issuances of our
securities at a per share price below $16.00, which price is subject to
adjustment.
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Preferred Stock
Series E Special Voting Preferred Stock
Under our certificate of incorporation, our board of directors is
authorized to issue one share of our series E special voting preferred stock.
The series E share has the rights, preferences, powers, privileges and
restrictions of one share of our common stock. The series E preferred stock is
junior to any other series of preferred stock we may issue with respect to
redemption rights and the right to receive dividends or amounts distributable
upon our liquidation, dissolution or winding up.
On June 30, 1999 we issued the series E share to CBS. The series E share
entitles CBS to elect that number of directors to the board which equals CBS's
fully diluted percentage ownership of us, up to a maximum of the number of
directors which would constitute a minority of the authorized number of members
of the board. If CBS's ownership percentage is 0%, it may still elect one
director to the board, so long as the license agreement which we entered into
with CBS on June 30, 1999 remains in effect.
CBS's right to elect directors will terminate upon the first to occur of:
. the date on which CBS' fully-diluted ownership percentage is 0% and the
license agreement is no longer in effect;
. the date on which one of our competitors acquires more than 30% of the
outstanding shares of common stock or voting power of CBS; and
. the date on which the series E share is held by any person or entity
other than CBS or an entity controlling, controlled by or under common
control of CBS.
Upon the termination of CBS's special voting right, the series E share will
automatically convert into one share of common stock. Upon written request at
any time prior to the termination date, CBS may convert its series E share to
one share of common stock.
Blank Check Preferred Stock
Under our amended and restated certificate of incorporation, our board of
directors is authorized to issue shares of preferred stock in one or more
series without stockholder approval. Our board of directors has the discretion
to determine the rights, preferences, privileges and restrictions, including
voting rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences, of each series of preferred stock.
The purpose of authorizing our board of directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of preferred stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could have the effect of making it more difficult
for a third party to acquire, or could discourage a third party from acquiring,
a majority of our outstanding voting stock. Besides our one outstanding share
of series E special voting preferred, we have no present plans to issue any
shares of preferred stock.
Delaware Law and Certain Charter and By-Law Provisions
We are subject to the provisions of Section 203 of the General Corporation
Law of Delaware. Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the person became an interested stockholder,
unless the business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in
a financial benefit to the interested stockholder. Subject to certain
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within the prior three years did own, 15%
or more of the corporation's voting stock.
Our certificate of incorporation provides that directors, other than
directors elected by the holder of the series E share, or series E directors,
may be removed only for cause by the affirmative vote of the holders of at
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least seventy-five percent (75%) of our shares of capital stock entitled to
vote. Series E directors may be removed at any time and from time to time
without cause by the holder of the series E share. Except for series E
directors, any vacancy on our board of directors, including a vacancy resulting
from an enlargement of our board of directors, may only be filled by vote of a
majority of our directors then in office, or by a sole remaining director.
Vacancies in any series E directorship may only be filled by the holder of the
one outstanding share of series E special voting preferred stock or by any
remaining series E directors. The limitations on the removal of directors and
filling of vacancies could make it more difficult for a third party to acquire,
or discourage a third party from acquiring, control of us.
Our certificate of incorporation also provides that any action required or
permitted to be taken by our stockholders at an annual meeting or special
meeting of stockholders may only be taken if it is properly brought before such
meeting and may not be taken by written action in lieu of a meeting. Our
certificate of incorporation further provides that special meetings of the
stockholders may only be called by our chairman of the board, president or
board of directors. Under our by-laws, in order for any matter to be considered
"properly brought" before a meeting, a stockholder must comply with certain
advance notice requirements. These provisions could have the effect of
delaying, until the next stockholders' meeting, stockholder actions which are
favored by the holders of a majority of our outstanding voting securities.
These provisions may also discourage a third party from making a tender offer
for our common stock, because even if it acquired a majority of our outstanding
voting securities, the third party would be able to take action as a
stockholder (such as electing new directors or approving a merger) only at a
duly called stockholders' meeting, and not by written consent.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. Our certificate of incorporation and by-laws
require the affirmative vote of the holders of at least 75% of the shares of
our capital stock issued and outstanding and entitled to vote to amend or
repeal any of the provisions described in the prior two paragraphs.
Our certificate of incorporation contains certain provisions permitted
under the General Corporation Law of Delaware relating to the liability of
directors. The provisions eliminate a director's liability for monetary damages
for a breach of fiduciary duty as a director, except in certain circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty or
acts or omissions that involve intentional misconduct or a knowing violation of
law. Further, our certificate of incorporation contains provisions to indemnify
our directors and officers to the fullest extent permitted by the General
Corporation Law of Delaware. We believe that these provisions will assist us in
attracting and retaining qualified individuals to serve as directors.
Registration Rights
After this offering, the holders of approximately 12,462,651 shares of
common stock and rights to acquire common stock have the right to cause us to
register their shares of common stock pursuant to various registration rights
agreements as follows:
Demand Registration Rights
. CBS holds 8,529,390 shares of our common stock and rights to acquire
common stock, and may request, in writing on up to two occasions, any
time after the first anniversary of the closing of this offering, that
we register shares having an aggregate value of at least $10.0 million.
Our obligation to register such shares terminates five years after the
closing of this offering.
. America Online and Digital City together hold 750,000 shares of common
stock and may request in writing any time after the date six months
after the closing of this offering but prior to the time we become
eligible to file a registration statement on Form S-3, that we register
their registrable shares
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by filing a registration statement on Form S-1. Banyan Worldwide may
include in this registration up to 2,743,261 shares of our common
stock. Our obligation to register these shares terminates five years
after the closing of this offering.
. America Online and Digital City may also request in writing any time
after we become eligible to file a registration statement on Form S-3,
that we register their shares by filing a registration statement on
Form S-3. Banyan Worldwide may include in this registration up to
2,743,261 shares of our common stock. Our obligation to register these
shares terminates five years after the closing of this offering.
Under the terms of the registration rights agreement with America Online and
Digital City, we are not required to effect more than one registration on
Form S-1 and in the aggregate, not more than two registrations on Forms S-1
and S-3.
Incidental Registration Rights
If we propose to register any of our securities under the Securities Act,
either for our own account or for the account of other security holders
exercising registration rights, the remaining holders of 12,462,651
registrable shares of common stock and rights to acquire common stock, are
entitled to notice of and to include shares of common stock in the
registration. We are required to use our best efforts to effect that
registration. The holders of these incidental rights are as follows:
. CBS holds 7,463,216 registrable shares of our common stock and the
right to purchase 1,066,174 registrable shares pursuant to a warrant;
. America Online and Digital City Inc. together own 750,000 registrable
shares of our common stock;
. Banyan Worldwide holds 2,743,261 registrable shares of our common
stock; and
. one other stockholder holds the right to purchase 300,000 registrable
shares pursuant to a warrant.
All of the demand and incidental registration rights are subject to
various conditions and limitations, among them the right of the underwriters
of an offering to limit the number of shares included in a registration and
our right not to effect a requested registration within six months after the
effective date of any other registration statement.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is .
71
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our securities.
After we complete this offering, based upon the number of shares outstanding at
, 1999, there will be shares of our common stock outstanding (assuming
no exercise of the underwriters' over-allotment option and no exercise of
outstanding options to purchase common stock). Of these outstanding shares, the
shares sold in this offering will be freely tradeable without restriction or
further registration under the Securities Act of 1933, except that any shares
purchased by our "affiliates", as that term is defined in Rule 144 under the
Securities Act, may generally only be sold in compliance with the limitations
of Rule 144 described below.
Sales of Restricted Shares
The remaining shares of common stock outstanding after this offering are
deemed "restricted securities" under Rule 144. Of these restricted securities:
. shares may be sold immediately after completion of this offering;
. additional shares may be sold 90 days after the effective date of this
offering; and
. additional shares may be sold upon expiration of the 180-day lock-up
agreements described below.
Our officers and directors and certain of our securityholders, who in the
aggregate hold approximately shares, or %, of our common stock (including
shares of common stock that may be acquired pursuant to the exercise of
options held by them) on the date of this prospectus, have agreed that, for a
period of 180 days after the date of this prospectus, they will not sell,
consent to sell or otherwise dispose of any shares of our common stock, or any
shares convertible into or exchangeable for shares of our common stock, owned
directly by such persons or with respect to which they have the power of
disposition, without the prior written consent of BancBoston Robertson
Stephens, acting on behalf of the representatives of the underwriters.
In general, under Rule 144 a stockholder, including one of our affiliates,
who has beneficially owned his or her restricted securities for at least one
year is entitled to sell, within any three-month period commencing 90 days
after the date of this prospectus, a number of shares that does not exceed the
greater of 1% of the then outstanding shares of our common stock (approximately
shares immediately after this offering) or the average weekly trading volume
in our common stock during the four calendar weeks preceding the date on which
notice of such sale was filed under Rule 144, provided certain requirements
concerning availability of public information, manner of sale and notice of
sale are satisfied. In addition, a stockholder that is not one of our
affiliates at any time during the three months preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years is
entitled to sell the shares immediately under Rule 144(k) without compliance
with the above described requirements under Rule 144.
Securities issued in reliance on Rule 701 (such as shares of our common
stock acquired pursuant to the exercise of certain options granted under our
stock plans) are also restricted securities and, beginning 90 days after the
date of this prospectus, may be sold by stockholders other than our affiliates
subject only to the manner of sale provisions of Rule 144 and by affiliates
under Rule 144 without compliance with its one-year holding period requirement.
Stock Options
We intend to file registration statements on Form S-8 under the Securities
Act to register an aggregate of shares of common stock issuable under the
1996 plan, the 1999 plan and the employee stock purchase plan. Shares issued
upon the exercise of stock options after the effective date of the Form S-8
registration statements will be eligible for resale in the public market
without restriction, subject to Rule 144 limitations applicable to affiliates
and the lock-up agreements noted above, if applicable.
72
<PAGE>
Effect of Sales of Shares
Prior to this offering, there has been no public market for our common
stock, and no prediction can be made as to the effect, if any, that market
sales of shares of common stock or the availability of shares for sale will
have on the market price of our common stock prevailing from time to time.
Nevertheless, sales of significant numbers of shares of our common stock in the
public market could adversely affect the market price of the common stock and
could impair our future ability to raise capital through an offering of our
equity securities.
73
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the underwriting
agreement, the underwriters named below, acting through their representatives,
BancBoston Robertson Stephens, Inc., J.P. Morgan Securities Inc. and Wit
Capital Corporation have severally agreed to purchase, and we have agreed to
sell to them, the respective number of shares of common stock set forth below
opposite their respective names.
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc.................................
J.P. Morgan Securities Inc. ......................................
Wit Capital Corporation...........................................
---
Total...........................................................
===
</TABLE>
The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered in this offering are
subject to the approval of various legal matters by their counsel and to other
delineated conditions. The underwriters are obligated to take and pay for all
of the shares of common stock offered in this offering, other than those
covered by the over-allotment option described below, if any shares are taken.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the initial public offering price set forth on
the cover page hereof and part to dealers at a price that represents a
concession not in excess of $ a share under the public offering price. Any
underwriters may allow, and the dealers may reallow, a concession not in excess
of $ a share to other underwriters or to other dealers. After the initial
offering of the shares of common stock, the offering price and other selling
terms may from time to time be varied by the representatives of the
underwriters.
The underwriters' representatives have advised us that the underwriters do
not intend to confirm sales to any account over which they exercise
discretionary authority.
Over-Allotment Option
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of additional
shares of common stock at the public offering price set forth on the cover page
of this prospectus, less underwriting discounts and commissions. The
underwriters may exercise such option solely for the purpose of covering over-
allotments, if any, made in connection with the offering of the shares of
common stock offered in this offering. To the extent such option is exercised,
each underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of common
stock as the number set forth next to such underwriter's name in the preceding
table bears to the total number of shares of common stock set forth next to the
names of all underwriters in the preceding table. If the underwriter's over-
allotment option is exercised in full, the total price to public would be $ ,
the total underwriters' discounts and commissions would be $ , and the total
proceeds to us would be $ . The following table sets forth the public
offering price and all discounts and commissions to be allowed to the
underwriters:
<TABLE>
<CAPTION>
Underwriting
Public Offering Discounts Proceeds to
Price and Commissions Switchboard
--------------- --------------- -----------
<S> <C> <C> <C>
Per share........................ $ $ $
Total............................ $ $ $
</TABLE>
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to five percent of the shares of common stock offered
in this offering for our directors, officers, employees and related
74
<PAGE>
persons. The number of shares of common stock available for sale to the general
public will be reduced to the extent such individuals purchase such reserved
shares. Any reserved shares which are not so purchased will be offered by the
underwriters to the general public on the same basis as the other shares
offered hereby.
Lock-Up Agreements
Switchboard, our directors and executive officers and certain other of our
stockholders and option holders have each agreed that, without the prior
written consent of BancBoston Robertson Stephens Inc. on behalf of the
underwriters, during the period ending 180 days after the date of this
prospectus, he, she or it will not, subject to limited exceptions, directly or
indirectly:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock
(whether such shares or any such securities are then owned by such
person or are thereafter acquired directly from us); or
. enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of
common stock,
whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise.
In the event a request for consent to a transfer within the lock-up period
is made, BancBoston Robertson Stephens Inc. may consider the following factors
in determining whether to consent to the proposed transfer:
. the number of shares proposed to be sold;
. the reason for the sale;
. the proximity in time to this offering; and
. the trading volume of our stock at the time of the requested transfer.
The decision to consent to a proposed transfer during the lock-up period is
within the sole discretion of BancBoston Robertson Stephens Inc.
Stabilization
In order to facilitate this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the market price of
our common stock. Specifically, the underwriters may over-allot shares of our
common stock in connection with this offering, thereby creating a short
position in the underwriters' syndicate account. A short position results when
an underwriter sells more shares of common stock than the underwriter is
committed to purchase. Additionally, to cover over-allotments or to stabilize
the market price of our common stock, the underwriters may bid for, and
purchase, shares of our common stock in the open market. Any of these
activities may maintain the market price of our common stock at a level above
that which might otherwise prevail in the open market. The underwriters are not
required to engage in these activities, and, if commenced, the activities may
be discontinued at any time. The underwriters' representatives, on behalf of
the underwriters, also may reclaim selling concessions allowed to an
underwriter or dealer, if the syndicate repurchases shares distributed by that
underwriter or dealer.
The underwriters and their respective affiliates may be lenders to, engage
in transactions with, and perform services for us in the ordinary course of
business.
Indemnity
The underwriting agreement contains covenants of indemnity between the
underwriters and us against specified liabilities, including liabilities under
the Securities Act of 1933, as amended, and liabilities arising from breaches
of representations and warranties contained in the underwriting agreement.
75
<PAGE>
Pricing of the Offering
Prior to this offering, there has been no public market for the shares of
common stock. Consequently, the initial public offering price for the shares of
common stock will be determined by negotiations between Switchboard and the
representatives of the underwriters. Among the factors to be considered in
determining the initial public offering price will be:
. our record of operations, our current financial position and future
prospects;
. the experience of our management;
. sales, earnings and certain of our other financial and operating
information in recent periods; and
. the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies
engaged in activities similar to ours.
The estimated initial public offering price range set forth on the cover
page of this preliminary prospectus is subject to change as a result of market
conditions and other factors.
Wit Capital, a member of the National Association of Securities Dealers,
Inc., will participate in this offering as one of the representatives of the
underwriters. The National Association of Securities Dealers, Inc. approved the
membership of Wit Capital on September 4, 1997. Since that time, Wit Capital
has acted as an underwriter, e-manager or selected dealer in over 145 public
offerings.
A prospectus in electronic format is being made available on an Internet
Web site maintained by Wit Capital. In addition, all dealers purchasing shares
from Wit Capital in this offering have agreed to make a prospectus in
electronic format available on Web sites maintained by each of these dealers.
LEGAL MATTERS
The validity of the shares of common stock we are offering will be passed
upon for us by Hale and Dorr LLP, Boston, Massachusetts. Testa, Hurwitz &
Thibeault, LLP, Boston, Massachusetts, will pass upon certain legal matters in
connection with this offering for the underwriters.
EXPERTS
The financial statements as of December 31, 1997 and 1998 and for the
period from inception (February 19, 1996) through December 31, 1996 and the
years ended December 31, 1997 and 1998 included in this prospectus and the
registration statement of which this prospectus is a part have been so included
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
76
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission for the common stock being offered by this prospectus. This
prospectus does not include all of the information contained in the
registration statement. You should refer to the registration statement and its
exhibits for additional information. Whenever we make reference in this
prospectus to any of our contracts, agreements or other documents, the
references are not necessarily complete and you should refer to the exhibits
attached to the registration statement for copies of the actual contract,
agreement or other document. When we complete this offering, we will also be
required to file annual, quarterly and special reports, proxy statements and
other information with the SEC.
You can read our SEC filings, including the registration statement, over
the Internet at the SEC's Web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's following locations:
. Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549;
. New York Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048; and
. Chicago Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511.
You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference facilities.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.
77
<PAGE>
SWITCHBOARD INCORPORATED
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2
Balance Sheets as of December 31, 1997, 1998 and June 30, 1999........... F-3
Statements of Operations for the period from inception (February 19,
1996) to December 31, 1996, the years ended December 31, 1997 and 1998
and the six months ended June 30, 1998 (unaudited) and 1999
(unaudited)............................................................ F-4
Statements of Stockholders' Deficit for the period from inception
(February 19, 1996) to December 31, 1996, the years ended December 31,
1997 and 1998 and the six months ended June 30, 1999 (unaudited)....... F-5
Statements of Cash Flows for the period from inception (February 19,
1996) to December 31, 1996, the years ended December 31, 1997 and 1998
and the six months ended June 30, 1998 (unaudited) and 1999
(unaudited)............................................................ F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Switchboard Incorporated:
In our opinion, the accompanying balance sheets and the related statements
of operations, stockholders' deficit and cash flows present fairly, in all
material respects, the financial position of Switchboard Incorporated at
December 31, 1997 and 1998 and the results of its operations and its cash flows
for the period from inception (February 19, 1996) through December 31, 1996 and
the years ended December 31, 1997 and 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Switchboard's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
September 22, 1999, except
for Note O for which the date
is October 22, 1999
F-2
<PAGE>
SWITCHBOARD INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, Pro Forma
------------------------ June 30, June 30,
1997 1998 1999 1999
----------- ----------- ------------ ------------
(unaudited) (Note B)
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 404,333 $ 386,590 $ 6,806,444 $ 6,806,444
Accounts receivable, net
of allowance for
doubtful accounts of
$18,619 and $300,000
at December 31, 1997
and 1998,
respectively, and
$281,600 at June 30,
1999 actual
(unaudited) and pro
forma (unaudited)..... 491,090 2,390,045 2,004,827 2,004,827
Other current assets.... 14,658 10,360 390,599 390,599
----------- ----------- ------------ ------------
Total current
assets............ 910,081 2,786,995 9,201,870 9,201,870
Property and equipment,
net.................... 523,013 638,301 599,781 599,781
Other assets, net........ 58,007 139,779 1,133,333 1,133,333
----------- ----------- ------------ ------------
Total assets........ $ 1,491,101 $ 3,565,075 $ 10,934,984 $ 10,934,984
=========== =========== ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable........ 128,379 25,007 67,763 67,763
Accrued expenses........ 456,635 1,363,960 1,860,303 1,860,303
Deferred revenue........ 330,902 449,236 563,025 563,025
Note payable, current
portion............... -- 500,000 600,000 600,000
Convertible promissory
notes -- related
party, current
portion............... -- -- 507,780 507,780
----------- ----------- ------------ ------------
Total current
liabilities....... 915,916 2,338,203 3,598,871 3,598,871
Note payable............. -- 600,000 -- --
Convertible promissory
notes -- related
party.................. 2,983,646 7,000,000 -- --
Commitments and
contingencies (Notes J
and M)
Redeemable convertible
preferred stock, $0.01
par value; 10,000,000
shares authorized;
750,000 shares issued
and outstanding at
December 31, 1997 and
1998, and 3,493,261 and
no shares issued and
outstanding at June 30,
1999 actual (unaudited)
and pro forma
(unaudited),
respectively
(liquidation value
$14,278,752 at June 30,
1999).................. 3,365,886 3,658,386 15,091,349 --
Due to parent............ -- 1,387,145 -- --
Stockholders' equity
(deficit):
Series E Special Voting
Preferred Stock, $0.01
par value; one share
designated; one share
issued and
outstanding, at June
30, 1999 actual
(unaudited) and pro
forma (unaudited)..... -- -- -- --
Common stock, $0.01 par
value; 30,000,000
shares authorized;
7,000,000 and
7,013,250 shares
issued and outstanding
at December 31, 1997
and 1998,
respectively, and
14,635,215 and
18,128,476 shares
issued and outstanding
at June 30, 1999
actual (unaudited) and
pro forma (unaudited),
respectively.......... 70,000 70,133 146,352 181,285
Additional paid-in
capital............... 1,000,285 720,902 75,938,450 90,994,866
Contribution
receivable............ -- -- (70,312,084) (70,312,084)
Accumulated deficit..... (6,844,632) (12,209,694) (13,527,954) (13,527,954)
----------- ----------- ------------ ------------
Total stockholders'
equity (deficit).. (5,774,347) (11,418,659) (7,755,236) 7,336,113
----------- ----------- ------------ ------------
Total liabilities
and stockholders'
equity
(deficit)........ $ 1,491,101 $ 3,565,075 $ 10,934,984 $ 10,934,984
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
SWITCHBOARD INCORPORATED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
Inception
(February 19, Years Ended Six Months Ended
1996) to December 31, June 30,
December 31, -------------------------- --------------------------
1996 1997 1998 1998 1999
------------- ------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue................. $ 170,249 $ 650,037 $ 6,536,024 $ 2,761,386 $ 3,168,292
Cost of revenue......... 29,161 793,157 1,307,208 622,342 596,025
------------ ------------ ------------ ------------ ------------
Gross profit....... 141,088 (143,120) 5,228,816 2,139,044 2,572,267
Operating expenses:
Sales and marketing.... 341,861 2,306,603 5,871,561 3,033,909 2,103,942
Product development.... 1,329,656 2,107,589 3,188,215 2,338,890 876,571
General and
administrative....... -- 776,272 1,129,829 503,433 696,347
------------ ------------ ------------ ------------ ------------
Total operating
expenses......... 1,671,517 5,190,464 10,189,605 5,876,232 3,676,860
------------ ------------ ------------ ------------ ------------
Loss from operations.... (1,530,429) (5,333,584) (4,960,789) (3,737,188) (1,104,593)
Interest income
(expense), net........ 15,209 4,172 (404,273) (161,839) (213,667)
------------ ------------ ------------ ------------ ------------
Net loss................ (1,515,220) (5,329,412) (5,365,062) (3,899,027) (1,318,260)
------------ ------------ ------------ ------------ ------------
Accrued dividends for
preferred
stockholders.......... 58,386 307,500 292,500 157,500 154,211
------------ ------------ ------------ ------------ ------------
Net loss attributable to
common stockholders... $ (1,573,606) $ (5,636,912) $ (5,657,562) $ (4,056,527) $ (1,472,471)
============ ============ ============ ============ ============
Basic and diluted net
loss per share........ $ (0.22) $ (0.81) $ (0.81) $ (0.58) $ (0.21)
============ ============ ============ ============ ============
Shares used in computing
basic and diluted net
loss per share........ 7,000,000 7,000,000 7,011,471 7,005,068 7,056,234
Unaudited pro forma
basic and diluted net
loss per share........ $ (0.69) $ (0.50) $ (0.17)
============ ============ ============
Shares used in computing
unaudited pro forma
basic and diluted net
loss per share........ 7,761,471 7,755,068 7,813,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
SWITCHBOARD INCORPORATED
STATEMENTS OF STOCKHOLDERS' DEFICIT
for the period from inception (February 19, 1996) through December 31, 1996,
the years
ended December 31, 1997 and 1998 and the six months ended June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Series E Special Voting
Preferred Stock Common Stock
-------------------------- -------------------- Additional Total
Number of Number of Paid-in Contribution Accumulated Stockholders'
Shares Value Shares Value Capital Receivable Deficit Deficit
------------- ----------- ---------- --------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock to Banyan
Worldwide....... -- -- 7,000,000 $ 70,000 $ 1,173,571 -- -- $ 1,243,571
Accrued dividends
for preferred
stockholders.... -- -- -- -- (58,386) -- -- (58,386)
Net loss.......... -- -- -- -- -- -- $ (1,515,220) (1,515,220)
---------- --------- ------------ ------------- ------------
Balance, December
31, 1996........ -- -- 7,000,000 70,000 1,115,185 -- (1,515,220) (330,035)
Issuance of
warrants related
to technology
development and
marketing
agreement....... -- -- -- -- 192,600 -- -- 192,600
Accrued dividends
for preferred
stockholders.... -- -- -- -- (307,500) -- -- (307,500)
Net loss.......... -- -- -- -- -- -- (5,329,412) (5,329,412)
---------- --------- ------------ ------------- ------------
Balance, December
31, 1997........ -- -- 7,000,000 70,000 1,000,285 -- (6,844,632) (5,774,347)
Issuance of common
stock under
stock option
plans........... -- -- 13,250 133 13,117 -- -- 13,250
Accrued dividends
for preferred
stockholders.... -- -- -- -- (292,500) -- -- (292,500)
Net loss.......... -- -- -- -- -- -- (5,365,062) (5,365,062)
---------- --------- ------------ ------------- ------------
Balance, December
31, 1998........ -- -- 7,013,250 70,133 720,902 -- (12,209,694) (11,418,659)
Issuance of common
stock under
stock option
plans........... -- -- 18,749 187 26,248 -- -- 26,435
Issuance of common
stock and common
stock warrants
to CBS
Corporation, net
of issuance
costs of
$1,077,000...... -- -- 7,463,216 74,632 74,160,452 $ (70,312,084) -- 3,923,000
Issuance of
preferred stock
to CBS
Corporation..... 1 -- -- -- -- -- -- --
Issuance of common
stock under
technology
agreement....... -- -- 140,000 1,400 1,048,600 -- -- 1,050,000
Issuance of
warrants related
to a Web site
agreement....... -- -- -- -- 136,459 -- -- 136,459
Accrued dividends
for preferred
stockholders.... -- -- -- -- (154,211) -- -- (154,211)
Net loss.......... -- -- -- -- -- -- (1,318,260) (1,318,260)
----------- ----------- ---------- --------- ------------ ------------- ------------- ------------
Balance, June 30,
1999
(unaudited)..... 1 -- 14,635,215 $ 146,352 $ 75,938,450 $ (70,312,084) $ (13,527,954) $ (7,755,236)
=========== =========== ========== ========= ============ ============= ============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
SWITCHBOARD INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
Inception
(February 19, For the Years Ended Six Months Ended
1996) to December 31, June 30,
December 31, -------------------------- --------------------------
1996 1997 1998 1998 1999
------------- ------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating
activities:
Net loss............. $ (1,515,220) $ (5,329,412) $ (5,365,062) $ (3,899,027) $ (1,318,260)
Adjustments to
reconcile net loss
to net cash used in
operating
activities:........
Depreciation and
amortization...... 76,449 259,144 464,434 169,084 235,424
Loss on disposal of
property and
equipment......... -- 3,450 2,936 -- --
Provision for
doubtful
accounts.......... -- 18,619 281,381 75,000 --
Issuance of common
stock for
operating expenses
paid by Banyan
Worldwide......... 697,093 -- -- -- --
Expense related to
warrant grants.... -- 192,600 -- -- 136,459
Write-off of
technology........ -- -- 1,400,000 1,400,000 --
Changes in operating
assets and
liabilities:
Accounts
receivable....... (111,785) (369,077) (2,180,336) (1,125,594) 385,218
Other current
assets........... -- (14,658) 4,298 (579,127) (380,239)
Accounts payable... -- 128,379 (103,372) 199,539 42,756
Accrued expenses... 103,811 352,824 907,325 321,906 496,343
Deferred revenue... (28,646) 330,902 118,334 131,799 113,789
------------ ------------ ------------ ------------ ------------
Net cash used in
operating
activities..... (778,298) (4,427,229) (4,470,062) (3,306,420) (288,510)
Cash flows from
investing
activities:
Purchase of property
and equipment...... (137,069) (295,953) (464,430) (406,039) (140,458)
Purchase of
technology......... -- -- (500,000) (500,000) --
Capitalized software
costs.............. -- (10,764) -- -- --
------------ ------------ ------------ ------------ ------------
Net cash used in
investing
activities..... (137,069) (306,717) (964,430) (906,039) (140,458)
Cash flows from
financing
activities:
Due to parent........ -- -- 1,387,145 69,945 --
Proceeds from
convertible
promissory notes--
related party...... 1,030,157 4,603,543 6,646,900 5,111,497 3,399,387
Proceeds from
issuance of common
stock, net......... -- -- 13,250 10,251 3,949,435
Payments on
convertible
promissory notes--
related party...... -- (2,580,054) (2,630,546) (1,105,546) --
Payments on notes
payable............ -- -- -- -- (500,000)
Proceeds from
issuance of
redeemable
convertible
preferred stock.... 3,000,000 -- -- -- --
------------ ------------ ------------ ------------ ------------
Net cash provided
by financing
activities..... 4,030,157 2,023,489 5,416,749 4,086,147 6,848,822
Net increase
(decrease) in cash
and cash
equivalents......... 3,114,790 (2,710,457) (17,743) (126,312) 6,419,854
------------ ------------ ------------ ------------ ------------
Cash and cash
equivalents at
beginning of
period.............. -- 3,114,790 404,333 404,333 386,590
------------ ------------ ------------ ------------ ------------
Cash and cash
equivalents at end
of period........... $ 3,114,790 $ 404,333 $ 386,590 $ 278,021 $ 6,806,444
============ ============ ============ ============ ============
Supplemental schedule
of cash flow
information:
Interest paid........ -- $ 48,948 $ 399,142 $ 207,474 $ 216,443
============ ============ ============ ============ ============
Supplemental schedule
of noncash financing
activity:
Issuance of note
payable for
technology......... $ 1,100,000
Issuance of common
stock for net
assets transferred
from Banyan
Worldwide.......... $ 546,478
Settlement of
convertible
promissory notes
through issuance of
preferred stock.... $ 11,278,752
Issuance of common
stock for
technology......... $ 1,050,000
Issuance of common
stock to CBS
Corporation........ $ 70,312,084
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
A. Nature of Business:
Switchboard is an Internet-based local merchant network interconnecting
consumers, merchants and national advertisers. Switchboard connects consumers
searching for specific products and services with the merchants that provide
them. Switchboard offers its users local information about people and
businesses across the United States. Switchboard's online network gives
merchants a way to get their businesses represented online and facilitates
commerce by connecting them with consumers. Switchboard provides an online lead
generation engine for these local merchants and for national advertisers that
reaches consumers motivated to buy products and services in specific geographic
locations.
From Switchboard's inception (February 19, 1996) until June 30, 1999,
Switchboard has been a unit and later as subsidiary of Banyan Systems
Incorporated ("Banyan Worldwide").
Switchboard is subject to risks and uncertainties common to growing
technology-based companies, including rapid technological change, growth and
commercial acceptance of the Internet, acceptance and effectiveness of Internet
advertising, dependence on principal products and third-party technology, new
product development, new product introductions and other activities of
competitors, dependence on key personnel, security and privacy issues,
dependence on strategic relationships, lengthening sales cycles and limited
operating history.
Switchboard has also experienced substantial net losses since its inception
and, as of June 30, 1999, had an accumulated deficit of $13.5 million. Such
losses and accumulated deficit resulted from Switchboard's lack of substantial
revenue and significantly increased costs incurred in the development of
Switchboard's products and services and in the preliminary establishment of
Switchboard's infrastructure. For the foreseeable future, Switchboard expects
to continue to experience significant growth in its operating expenses in order
to execute its current business plan, particularly product development and
sales and marketing expenses. As a result, Switchboard's business plan
indicates that additional financing would be required to support its planned
expenditures. In the event that an initial public offering is not completed on
a timely basis, Switchboard believes that the funds currently available, along
with support from Banyan Worldwide (Note B), would be sufficient to fund
operations through at least the next 12 months.
B. Summary of Significant Accounting Policies:
Basis of Presentation
From inception, Switchboard has been a unit of and later a subsidiary of
Banyan Worldwide. The accompanying financial statements, which are derived from
the historical books and records of Banyan Worldwide, include the assets,
liabilities, revenues and expenses of Switchboard at historical cost.
These financial statements are intended to present management's estimates
of the results of operations and financial condition of Switchboard as if it
had operated as a stand-alone company since inception. Certain of the costs and
expenses are management estimates of the cost of services provided by Banyan
Worldwide and its subsidiaries. As a result, the financial statements presented
may not be indicative of the results that would have been achieved had
Switchboard operated as a nonaffiliated entity.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-7
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
liabilities and the disclosures of contingent liabilities at the period end,
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
Switchboard considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash equivalents are
carried at amortized cost, which approximates market, and consist primarily of
interest bearing deposits with major financial institutions.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the following estimated asset lives:
<TABLE>
<S> <C>
Computers, peripherals and servers............................. 3 years
Equipment...................................................... 2-5 years
Software....................................................... 3 years
</TABLE>
Maintenance and repairs are charged to expense when incurred, while
betterments are capitalized. When property is retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the respective
amounts and any gain or loss is reflected in operations.
Product Development
Costs incurred in the development of Switchboard's Web site are expensed as
incurred, except for certain software development costs. Costs associated with
the development of computer software are expensed prior to the establishment of
technological feasibility and capitalized thereafter. Amortization of
capitalized software costs is computed on an individual project basis and is
calculated using the straight-line method over the estimated economic life of
the software. Currently, Switchboard uses an estimated economic life of 12 to
36 months for capitalized software costs.
Switchboard evaluates the net realizable value of capitalized software on
an ongoing basis, relying on a number of factors including operating results,
business plans, budgets, and economic projections and undiscounted cash flows.
In addition, Switchboard's evaluation considers nonfinancial data such as
market trends, project development cycles and changes in management's market
emphasis.
Revenue Recognition
Switchboard generates its revenue from Web site advertising, syndication
and licensing fees for its directory technologies, and its merchant aggregation
program.
Switchboard's advertising revenue is derived principally from short-term
advertising contracts and sponsorship agreements in which Switchboard receives
a fixed fee or earns a fee based on a per thousand impressions or per click
basis. Revenue from advertising is recognized as the services are delivered
provided that no significant Switchboard obligations remain and collection of
the resulting receivable is probable. The duration of Switchboard's advertising
commitments from customers typically range from two weeks to one year. Revenue
from revenue-sharing agreements is recognized in the period following that in
which the services are provided and when the revenue amount can be determined.
F-8
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
Switchboard's syndication and licensing revenue consists of fees for
engineering work performed to integrate Switchboard's directory sites with a
customer's Web site, as well as for supplying access to Switchboard's directory
sites. The syndication and licensing fees are usually paid at the beginning of
the contract period and are typically nonrefundable. The fees are recognized to
the extent of the cost of the engineering work performed, with any remaining
fees recognized ratably over the term of the contract.
Switchboard's merchant aggregation program revenue consists of subscription
fees for merchant Web sites, which are linked to Switchboard's yellow pages
directory site, as well as customer acquisition fees paid by program partners
for the initiation and set-up of new local merchant web sites. Subscription
fees are recognized over the period that the local merchant Web site is in
place, usually on a monthly basis. Customer acquisition fees are recognized
when the local merchant Web site construction is complete.
Deferred revenue is principally comprised of billings in excess of
recognized revenue relating to advertising agreements and licensing fees
received pursuant to advertising or services agreements in advance of revenue
recognition.
Risks and Uncertainties
Switchboard invests its cash and cash equivalents primarily in deposits and
money market funds with financial institutions. Switchboard has not experienced
any losses to date on its invested cash.
A potential exposure to Switchboard is a concentration of credit risk in
trade accounts receivable. Switchboard maintains reserves for credit losses
and, to date, such losses have been within management's expectations. As of
December 31, 1997, two customers accounted for 19.6% and 17.5% of accounts
receivable, while one customer accounted for 16.8% of accounts receivable as of
December 31, 1998 and three customers accounted for 22.6%, 11.5% and 10.9% of
accounts receivable at June 30, 1999. In addition, one customer accounted for
13.7% of revenue for the year ended December 31, 1997, while three customers
accounted for 11.9%, 10.5% and 10.2% of revenue for the year ended December 31,
1998. No customer accounted for more than 10% of revenue in the six months
ended June 30, 1999.
Income Taxes
Switchboard accounts for income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted rates in effect for the year in which those temporary differences
are expected to be recovered or settled. A deferred tax asset is established
for the expected future benefit of net operating loss and credit carryforwards.
A valuation reserve against net deferred tax assets is required if, based upon
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.
Fair Value of Financial Instruments
The carrying amounts of Switchboard's financial instruments, which include
cash equivalents, accounts receivable, accounts payable, accrued expenses and a
note payable approximate their fair values.
F-9
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
Accounting for Stock-Based Compensation
Switchboard accounts for stock-based awards to employees using the
intrinsic value method as prescribed by Accounting Principles Board ("APB") No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, no compensation expense is recorded for options issued to
employees in fixed amounts and with fixed exercise prices at least equal to the
fair market value of Switchboard's common stock at the date of grant.
Switchboard has adopted the provisions of Statement of Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," through disclosure
only (Note N). All stock-based awards to nonemployees are accounted for at
their fair value in accordance with SFAS No. 123.
Unaudited Interim Financial Statements
In the opinion of Switchboard's management, the June 30, 1998 and 1999
unaudited interim financial statements include all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of the
financial position and results of operations for those periods. The results of
operations for the six months ended June 30, 1999 are not necessarily
indicative of the results of operations for the full year ended December 31,
1999.
Unaudited Pro Forma Balance Sheet
Upon the closing of Switchboard's anticipated initial public offering, all
of the outstanding shares of Series A, B, C and D Convertible Preferred Stock
will automatically convert into 3,493,261 shares of common stock. These
conversions have been reflected in the unaudited pro forma balance sheet as of
June 30, 1999. The one outstanding share of Series E Special Voting Preferred
Stock will not convert to common stock upon the closing of the anticipated
initial public offering (Note I and M).
Net Loss per Share and Pro Forma Net Loss per Share
Basic net loss per share is computed using the weighted average number of
shares of common stock outstanding. Net loss used in the calculation is
increased by the accrued dividends for the preferred stock outstanding in each
period. Diluted net loss per share does not differ from basic net loss per
share since potential common shares from conversion of preferred stock, stock
options and warrants are antidilutive for all periods presented and are
therefore excluded from the calculation. During the period from inception
(February 19, 1996) to December 31, 1996, the years ended December 31, 1997 and
1998 and the six months ended June 30, 1999, options to purchase 837,000,
1,007,000, 1,157,375 and 1,393,825 shares of common stock, respectively,
preferred stock convertible into 750,000, 750,000, 750,000 and 3,493,262 shares
of common stock, respectively, and warrants for 300,000, 300,000, 300,000 and
1,751,174 shares of common stock, respectively, were not included in the
computation of diluted net loss per share since their inclusion would be
antidilutive. Pro forma basic and diluted net loss per share have been
calculated assuming the conversion of all outstanding shares of preferred stock
into common stock, as if the shares had converted immediately upon their
issuance.
Derivative Instruments and Hedging
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new standard establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
SFAS No. 133, as amended by SFAS 137, is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. Switchboard does not expect SFAS
No. 133 to have a material effect on its financial position or results of
operations.
F-10
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
Other Comprehensive Income
Comprehensive income is equal to net income for the period from inception
(February 19, 1996) to December 31, 1996, the years ended December 31, 1997 and
1998 and the six months ended June 30, 1999.
C. Property and Equipment:
Property and equipment consist of the following at:
<TABLE>
<CAPTION>
December 31,
--------------------- June 30,
1997 1998 1999
--------- ---------- ----------
<S> <C> <C> <C>
Equipment................................. $ 181,030 $ 252,275 $ 258,667
Computers, peripherals and servers........ 753,801 1,144,050 1,258,464
Software.................................. 16,223 16,223 35,875
--------- ---------- ----------
951,054 1,412,548 1,553,006
Accumulated depreciation.................. (428,041) (774,247) (953,225)
--------- ---------- ----------
Total................................ $ 523,013 $ 638,301 $ 599,781
========= ========== ==========
</TABLE>
Depreciation expense for the period from inception (February 19, 1996) to
December 31, 1996, the years ended December 31, 1997 and 1998, and the six
months ended June 30, 1998 and 1999 was $66,250, $218,348, $346,206, $148,686
and $178,978, respectively.
D. Other Assets:
Other assets consist of the following at:
<TABLE>
<CAPTION>
December 31,
---------------- June 30,
1997 1998 1999
------- -------- ----------
<S> <C> <C> <C>
Capitalized software costs, net................. $58,007 $ 6,446
Purchased technology, net....................... -- 133,333 $ 83,333
Software licenses, net.......................... -- -- 1,050,000
------- -------- ----------
Total...................................... $58,007 $139,779 $1,133,333
======= ======== ==========
</TABLE>
During 1996 and 1997, Switchboard capitalized $98,238 and $10,764 of
software costs, respectively. There were no costs eligible for capitalization
in 1998. Amortization expense for other assets was $10,199, $40,796, $118,228,
$20,398 and $56,446 for the period from inception (February 19, 1996) to
December 31, 1996, the years ended December 31, 1997 and 1998, and the six
months ended June 30, 1998 and 1999, respectively.
On May 18, 1998, Switchboard acquired the Maps On Us Internet mapping
technology from Lucent Technologies Incorporated. The technology was acquired
to integrate it into Switchboard's directory Web site. Switchboard paid Lucent
$500,000 in cash and executed a note payable of $1,100,000 to be paid over a
two-year period. The note bears interest at a rate of 6.75%. At June 30, 1999,
$600,000 of principal is outstanding under the note.
F-11
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
A significant portion of the technology acquired was deemed incomplete as
it did not meet the criteria for capitalization. The technology was incomplete
because the technology required a substantial development effort by Switchboard
in order to successfully integrate the Maps On Us technology into Switchboard's
Web site. In addition, the technology had no alternative future use to
Switchboard inasmuch as Switchboard had acquired the technology to improve and
integrate it into the Switchboard Web site and not to market it as a standalone
product. Further, Switchboard had no other product, line of business or product
development project that could use the technology. Therefore, Switchboard
recorded a charge to product development of $1,400,000 for the purchase of
incomplete technology in 1998.
E. Accrued Expenses:
Accrued expenses consist of the following at:
<TABLE>
<CAPTION>
December 31,
--------------------- June 30,
1997 1998 1999
--------- ----------- -----------
<S> <C> <C> <C>
Payroll................................... $ 151,535 $ 7,695 $ 161,009
Commissions, bonus and other incentives... 70,312 81,878 126,055
Vacation.................................. -- 79,124 79,124
Royalties................................. 148,625 847,778 334,943
Professional services..................... 13,682 46,933 202,675
Accrued interest.......................... -- 48,125 7,708
Other..................................... 72,481 252,427 948,789
--------- ----------- -----------
Total..................................... $ 456,635 $ 1,363,960 $ 1,860,303
========= =========== ===========
</TABLE>
F. Convertible Promissory Notes:
On August 29, 1997, Switchboard entered into a collateralized convertible
note facility with Banyan Worldwide. The facility was initially for $3,000,000,
and was increased on February 20, 1998 to $7,000,000 and on May 3, 1999 to
$10,000,000. Outstanding amounts under the facility bore interest at a rate
defined in the agreement and were due and payable on June 30, 2000. At December
31, 1997 and 1998, and June 30, 1999 the interest rate in effect was 5.68%,
4.33%, and 4.98%, respectively. The outstanding amount of principal and
interest was convertible at the option of Banyan Worldwide into shares of
Series C Convertible Preferred Stock at a rate of $4.00 per share, subject to
adjustment, at any time. The entire outstanding amount of principal and
interest was converted on June 30, 1999 (Note M). Switchboard may not borrow
any additional amounts under this facility.
On May 3, 1999, Switchboard entered into a second collateralized
convertible note facility with Banyan Worldwide. This facility is for
$5,000,000 and outstanding amounts bear interest at a rate defined in the
agreement and are due and payable on June 30, 2000. At June 30, 1999, the
interest rate in effect was 4.98%. The outstanding amount of principal and
interest is convertible at the option of Banyan Worldwide into shares of Series
D Convertible Preferred Stock at a rate of $7.50 per share, subject to
adjustment, at any time and after an initial public offering is convertible
into shares of common stock at the same rate. Principal and interest was
converted on June 30, 1999 (Note M). The facility remains in place and the
maximum remaining amount available under the facility is $4,492,220. Requests
for advances under the facility may be refused by Banyan Worldwide, at its sole
discretion.
F-12
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
G. Related Parties:
Switchboard and Banyan Worldwide have entered into a corporate services
agreement dated November 1, 1996 under which Banyan Worldwide's corporate staff
provides certain administrative services, including financial and accounting,
human resources and payroll advice, treasury, tax and insurance services and
routine data processing, technical support and equipment maintenance services
for which Switchboard pays Banyan Worldwide a monthly fee based on
Switchboard's headcount. The fee is reviewed and adjusted periodically by
mutual agreement of the parties. For these services, Switchboard was charged
$335,229, $199,852 and $147,894 in 1997 and 1998, and the six months ended June
30, 1999, respectively. No general and administrative costs were allocated in
1996 due to limited operations at Switchboard. Management believes that the
service fees charged by Banyan Worldwide are reasonable and that such fees are
representative of the expenses Switchboard would have incurred on a stand-alone
basis. The corporate services agreement extends for a period of three years and
thereafter on a year-to-year basis, but can be terminated upon ninety days
written notice from Switchboard to Banyan Worldwide.
For additional items such as development of data processing systems and
programs, legal support, support in financing and acquisition transactions,
general executive and management services, and support for contract bidding,
Switchboard is charged based on Banyan Worldwide's labor costs for the employee
performing the services. Further, Switchboard reimburses Banyan Worldwide for
its pro rata share of telephone, photocopying, postage and employee benefit
plan expenses.
Switchboard leases the space it occupies under an agreement with Banyan
Worldwide. Switchboard pays Banyan Worldwide rent in an amount that is
approximately equal to its pro rata share of Banyan Worldwide's occupancy
costs. Switchboard's share of Banyan Worldwide's occupancy costs was $184,464,
$172,501, and $97,578 in 1997 and 1998 and the six months ended June 30, 1999,
respectively.
H. Strategic Alliance:
As of November 6, 1996, Switchboard entered into an agreement with America
Online, Inc. ("AOL") and Digital City Inc. ("DCI") whereby Switchboard provided
yellow pages and white pages services on the AOL service. Under the terms of
the agreement, Switchboard derived advertising revenue based on the sale of
advertising by Switchboard, AOL and DCI. The agreement was to extend until
December 31, 1997. As of December 31, 1997, the November 1996 agreement was
replaced by two agreements, one for the promotion of Switchboard's yellow pages
service on certain AOL properties and the other for similar promotion of
Switchboard's white pages service. These agreements were to extend until
December 31, 1998.
In 1998, AOL terminated each agreement, and removed Switchboard from its
Web site in November and December 1998. On December 31, 1998, Switchboard, AOL
and DCI agreed to a settlement to resolve the amounts due between the parties.
According to the terms of the settlement, Switchboard was required to pay AOL
$839,194 for certain carriage payments and other amounts due, and DCI was
required to pay Switchboard $116,064 for publication fees. Additionally, AOL
was required to pay Switchboard $500,000, of which $200,000 is to be paid in
the form of advertising inventory on certain AOL properties or, to the extent
that such advertising inventory has not been provided by the end of a two-year
period, in cash. The amounts due from AOL were recorded as revenue in 1998. As
of June 30, 1999, the $200,000 has not yet been paid.
I. CBS Advertising, Promotion and License Agreement:
As of June 30, 1999, Switchboard and CBS Corporation ("CBS") consummated an
agreement under which CBS acquired a 35% equity stake in Switchboard, through
the issuance of 7,463,216 shares of Switchboard common stock and one share of
Series E Special Voting Preferred Stock (Notes L and M). In
F-13
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
exchange, Switchboard received $5,000,000 in cash and will receive advertising
and promotional value over a term of seven years, across the full range of CBS
media properties, as well as those of its radio and outdoor subsidiary,
Infinity Broadcasting Corporation. As part of the transaction, CBS was also
issued warrants to purchase up to an additional 1,066,174 shares of Switchboard
common stock at a per share exercise price of $1.00, which would increase its
ownership position in Switchboard to 40%. The warrants are not exercisable by
CBS until the earlier of (i) June 30, 2001 or (ii) the closing of an initial
public offering of Switchboard's common stock and are not exercisable after the
earlier of (i) the second anniversary of an initial public offering of
Switchboard's common stock or (ii) June 30, 2004. The number of shares of
common stock and warrants issued to CBS are subject to antidilution provisions.
The Advertising and Promotion Agreement dated as of June 30, 1999 provides
advertising with a future value of $95 million to Switchboard over a seven-year
period, subject to one year renewals upon the mutual written agreement of
Switchboard, Banyan and CBS. The net present value of the advertising has been
recorded as a contribution receivable for the common stock issued. The
contribution receivable will be reduced as Switchboard utilizes advertising
based on the proportion of advertising provided to the total amount to be
provided over the seven-year term. CBS is required to provide advertising and
promotion services on an annual basis as follows:
<TABLE>
<CAPTION>
Contract Year Ended June 30,
----------------------------
<S> <C>
2000..................................................... $13 million
2001..................................................... $13 million
2002..................................................... $13 million
2003..................................................... $14 million
2004..................................................... $14 million
2005..................................................... $14 million
2006..................................................... $14 million
</TABLE>
The value of advertising provided will be based on the average paid unit
price, excluding barter, for similar services provided to third parties during
the month prior to the delivery of the advertising services. Switchboard may
elect to defer to a subsequent contract year up to 35% of the advertising and
promotional value, provided, however, that CBS not be required to provide
advertising and promotional value in excess of $18,900,000 in any given
contract year.
Switchboard is required to pay CBS a 25% revenue share on the net
advertising revenues derived from the sale of advertising displayed to CBS
users through the co-branded interfaces or vertical guides during the term of
the agreement. Additionally, Switchboard is required to pay a 12% sales
commission for advertising sold by CBS on the Switchboard Web site, or on
advertisements displayed to CBS users through co-branded interfaces or vertical
guides. In the event that the agreement is terminated by Switchboard for cause,
as defined in the agreement, in lieu of performing the advertising and
promotional obligations CBS may elect to pay in cash the difference between $95
million and the amount of promotional value provided to date. CBS may pay the
cash over the original term of the agreement or in a lump sum payment equal to
the net present value of the amount due.
CBS, Banyan Worldwide and Switchboard also entered into a License Agreement
dated as of June 30, 1999 which provides a ten-year license, subject to
extension, to Switchboard for the utilization of the CBS trademarks in
identifying, marketing and promoting the Switchboard Web site. If Switchboard
terminates the agreement for cause, as defined in the agreement, CBS must pay
$3.5 million to Switchboard for each year remaining in the agreement at the
date of termination.
F-14
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
Additionally, Banyan Worldwide issued a common stock purchase warrant to
CBS on June 30, 1999, whereby CBS received warrants to purchase 250,000 shares
of Banyan Worldwide's common stock at $11.27 per share. Switchboard has
recorded the fair value of the Banyan Worldwide warrants based on the Black-
Scholes model as a common stock issuance cost of $375,000.
J. Commitments and Contingencies:
Switchboard's facilities are provided by Banyan Worldwide as part of the
corporate services agreement, which is renegotiated on a periodic basis (Note
G).
K. Income Taxes:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Period from
Inception Years Ended Six Months
(February 19, 1996) December 31, Ended
to December 31, ---------------------- June 30,
1996 1997 1998 1999
------------------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Deferred tax benefit.... $(591,000) $(2,087,000) $(772,000) $(37,000)
Valuation allowance..... $ 591,000 2,087,000 772,000 37,000
--------- ----------- --------- --------
-- -- -- --
========= =========== ========= ========
</TABLE>
Switchboard's effective tax rate varies from the statutory rate as follows:
<TABLE>
<CAPTION>
Period from
Inception
(February 19, 1996) Years Ended
to December 31, Six Months Ended
December 31, --------------- June 30,
1996 1997 1998 1999
------------------- ------ ------ ----------------
<S> <C> <C> <C> <C>
Federal income tax
rate.................. (34.0)% (34.0)% (34.0)% (34.0)%
State taxes............. (6.1)% (6.1)% (2.2)% (0.5)%
Use of net operating
losses by Banyan
Worldwide............. 1.1 % 0.9 % 21.9 % 31.7 %
Valuation allowance..... 39.0 % 39.2 % 14.3 % 2.8 %
----- ------ ------ -----
0.0 % 0.0 % 0.0 % 0.0 %
===== ====== ====== =====
</TABLE>
F-15
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
Based on Switchboard's current financial status, realization of
Switchboard's deferred tax assets is uncertain and, accordingly, a valuation
allowance for the entire deferred tax asset amount has been recorded. The
components of the net deferred tax asset (liability) and the related valuation
allowance are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------ June 30,
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.... $ 2,686,000 $ 2,935,000 $ 2,935,000
Writeoff of technology.............. -- 562,000 592,000
Allowance for doubtful accounts..... -- 121,000 113,000
Accrued compensation................ 20,300 60,000 73,000
Other............................... (4,300) -- --
----------- ----------- -----------
2,702,000 3,678,000 3,713,000
Deferred tax liability:
Capitalized software................ (23,000) (3,000) --
----------- ----------- -----------
(23,000) (3,000) --
Less valuation allowance............. (2,679,000) (3,675,000) (3,713,000)
----------- ----------- -----------
Net deferred tax assets............ -- -- --
=========== =========== ===========
</TABLE>
Of the $3,713,000 valuation allowance at June 30, 1999, $226,000 relating
to deductions for nonqualified stock options will be credited to paid-in
capital, if realized.
As of June 30, 1999, Switchboard has federal and state net operating loss
carryforwards of approximately $7,277,000, which begin to expire in 2011 and
2001, respectively. Switchboard's available net operating loss carryforwards
have been reduced by approximately $1,657,000 due to the utilization of the net
operating losses in Banyan Worldwide's consolidated 1998 tax return.
Ownership changes resulting from Switchboard's issuance of capital stock
may limit the amount of net operating loss carryforwards that can be utilized
annually to offset future taxable income. The amount of the annual limitation
is determined based upon the Switchboard's value immediately prior to the
ownership change. Subsequent significant changes in ownership could further
affect the limitation in the future.
L. Common Stock and Common Stock Warrants:
In 1996, Banyan Worldwide assigned all of its rights, titles and interest
in the Switchboard software to Switchboard, transferred net assets including
accounts receivable, property and equipment, capitalized software costs, and
deferred revenue, valued at $546,478 and settled advances of $697,093 from
Banyan Worldwide in exchange for 7,000,000 shares of Switchboard common stock.
In November 1997, Switchboard entered into a technology development and
marketing agreement with a software provider. Under the terms of the agreement,
Switchboard received certain rights in the technology of the software provider
and certain services from the software provider to further develop the
technology. Upon the initial delivery of the technology, Switchboard issued a
warrant to purchase 300,000 shares of common stock at $2.00 per share. The
warrants were fully vested at the issue date. The fair value of the warrant at
the time of issuance was estimated to be $192,600 using the Black-Scholes
model. The fair value was recorded as product development expense at the date
of issuance, because the technology had not reached technological feasibility.
The software provider agreement provided for an additional issuance of
equity in Switchboard upon delivery of the next release of the technology in
accordance with jointly developed specifications, either in the
F-16
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
form of a warrant for or shares of common stock. In May 1999, Switchboard
issued 140,000 shares of common stock to the software provider upon acceptance
of the technology by Switchboard. Switchboard capitalized $1,050,000, the fair
value of Switchboard common stock on the date of issuance, as the technology
had reached technological feasibility, and is amortizing that value over a two-
year period.
In March 1999, in connection with a co-branded website and linking
agreement ("Web site Agreement") with a joint venture customer, Switchboard
issued a series of warrants for 385,000 shares of common stock at $8.00 per
share. The Web site Agreement expires on October 31, 2000, except in the event
of the dissolution of the joint venture. In that case, the Web site Agreement
will terminate at the time of the joint venture dissolution, provided that the
customer informs Switchboard of the joint venture dissolution before December
1, 1999. If the customer terminates the agreement for any reason other than
cause or the dissolution of the joint venture, the customer will be required to
pay $200,000 to Switchboard.
At the execution of the Web site Agreement, warrants to purchase up to an
aggregate of 233,750 shares of common stock vested immediately ("Initial
Warrants"). The warrants for the remaining shares ("Additional Warrants") vest
on December 31, 1999, provided that the joint venture is not dissolved. The
value of the Initial Warrants was estimated to be $200,558 on the date of
issuance using the Black-Scholes model and is being amortized as sales and
marketing expense over the nineteen-month term of the Web site Agreement. The
value of the Additional Warrants was estimated to be $129,773 on the date of
issuance using the Black-Scholes model. The value of the Additional Warrants
will be adjusted to market at each balance sheet date until December 31, 1999
and is being amortized as sales and marketing expense over the nineteen-month
term of the Web site Agreement. On June 30, 1999, the total value of the
Additional Warrants was $663,885.
In June 1999, Switchboard issued 7,463,216 shares of common stock and a
warrant to purchase up to 1,066,174 shares of common stock to CBS Corporation
(Note I).
M. Preferred Stock and Preferred Stock Warrants:
A summary of redeemable convertible preferred stock activity for the period
from inception (February 19, 1996) to December 31, 1996, the years ended
December 31, 1997, and 1998 and the six months ended June 30, 1999 (unaudited)
is as follows:
<TABLE>
<CAPTION>
Series A Series C Series D
Redeemable Redeemable Redeemable
Convertible Convertible Convertible
Preferred Stock Preferred Stock Preferred Stock
------------------ --------------------- ---------------
Shares Amount Shares Amount Shares Amount Total
------- ---------- --------- ----------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A
redeemable convertible
preferred stock,....... 750,000 $3,000,000 $ 3,000,000
Accrued dividends for
preferred
stockholders.......... 58,386 58,386
------- ---------- -----------
Balance at December 31,
1996.................. 750,000 3,058,386 3,058,386
Accrued dividends for
preferred
stockholders.......... 307,500 307,500
------- ---------- -----------
Balance at December 31,
1997.................. 750,000 3,365,886 3,365,886
Accrued dividends for
preferred
stockholders.......... 292,500 292,500
------- ---------- -----------
Balance at December 31,
1998.................. 750,000 3,658,386 3,658,386
Conversion of amounts
due to parent and
convertible promissory
notes.................. 2,655,916 $10,623,664 87,345 $655,088 11,278,752
Accrued dividends for
preferred
stockholders.......... 147,945 5,902 364 154,211
------- ---------- --------- ----------- ------ -------- -----------
Balance at June 30,
1999.................. 750,000 $3,806,331 2,655,916 $10,629,566 87,345 $655,452 $15,091,349
======= ========== ========= =========== ====== ======== ===========
</TABLE>
F-17
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
Switchboard is authorized to issue 10,000,000 shares of preferred stock,
$0.01 par value, 750,000 of which are designated as Series A Convertible
Preferred Stock ("Series A Preferred Stock"), 1,500,000 of which are designated
as Series B Convertible Preferred Stock ("Series B Preferred Stock"), 4,000,000
of which are designated as Series C Convertible Preferred Stock ("Series C
Preferred Stock"), 1,500,000 of which are designated as Series D Convertible
Preferred Stock ("Series D Preferred Stock") and one of which is designated as
Series E Special Voting Preferred Stock ("Series E Preferred Stock").
At June 30, 1999, Switchboard had 3,493,262 shares of common stock reserved
for conversion of the preferred stock.
Series A, B, C and D Preferred Stock
The Series A, B, C and D Preferred Stock is voting. Dividends may be
declared and paid when determined by the Board of Directors. The Series A, B, C
and D Preferred Stock is convertible at any time by the holders, at the then
applicable conversion rate adjusted from time to time (one to one on the date
of issuance). Upon liquidation, the holders of the Series A, B, C and D
Preferred Stock are entitled to receive, out of funds then generally available,
an amount equal to $4.00 per share in the case of Series A Preferred Stock and
Series C Preferred Stock, $6.00 per share in the case of Series B Preferred
Stock and $7.50 per share in the case of Series D Preferred Stock, plus any
declared and unpaid dividends. Following payment to holders of all other
classes of preferred stock, the Series A, B, C and D Preferred Stock holders
are then entitled to share in the remaining available funds on an "as if
converted" basis.
Shares of the Series A, B, C and D Preferred Stock automatically convert
into common stock upon the closing of a qualified initial public offering.
In the case of a liquidation due to a consolidation or merger of
Switchboard with or into another company in which Switchboard is not the
surviving entity, the holders of Series A, B, C and D Preferred Stock can elect
to convert their shares of preferred stock into the shares of stock or other
securities of the surviving entity in lieu of receiving cash payments.
At the option of the holders of preferred stock, Switchboard is required to
redeem the Series A, B, C and D Preferred Stock at a price equal to $4.00,
$6.00, $4.00 and $7.50, respectively, plus accrued interest at the prime rate
plus 2% (10.0% on June 30, 1999), plus any declared and unpaid dividends, in
three equal annual payments, plus interest thereon, beginning June 30, 2000.
The accrued interest is recorded as accrued dividends to preferred stockholders
in the statement of operations.
In November 1996, Switchboard issued 750,000 shares of Series A Preferred
Stock at $4.00 per share to American Online, Inc. ("AOL") and Digital City Inc.
("DCI") for total consideration of $3,000,000. In connection with this
transaction, Switchboard issued warrants to each of AOL and DCI to purchase
shares of Series B Preferred Stock equal to 3.75% of Switchboard's capital
stock on the date of exercise, on a fully diluted basis. The per share exercise
price is equal to $60 million divided by the number of fully diluted shares of
Switchboard's capital stock on the date of exercise, and is subject to
adjustment. The warrant expires at the earlier of (i) the date on which AOL
ceases to promote Switchboard through a link to the Switchboard Web site
through the AOL service or AOL.com or (ii) November 5, 2000. The warrant to DCI
expired unexercised on December 31, 1997. AOL has indicated in the past that
its warrant is still outstanding; however, management believes that the warrant
to AOL expired, pursuant to its terms.
No shares of Series B Preferred Stock have been issued to date.
F-18
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
In June 1999, Switchboard issued 2,655,916 shares of Series C Preferred
Stock and 87,345 shares of Series D Preferred Stock to Banyan Worldwide upon
the conversion of outstanding convertible promissory notes outstanding (Note
F).
Series E Preferred Stock
On June 30, 1999, Switchboard issued one share of Series E Preferred Stock
to CBS Corporation ("CBS") in connection with the Advertising, Promotion and
License Agreements (Note I).
The Series E Preferred Stock is voting. Additionally, the holder of the
Series E Preferred Stock, voting as a separate class, shall be entitled to
elect a certain number directors, depending on whether the license agreement
between CBS and Switchboard remains in effect and the percentage ownership in
Switchboard that CBS holds. The Series E Preferred Stock is convertible at any
time by CBS. The share of Series E Preferred Stock will automatically be
converted to one share of common stock (i) on the date both the license
agreement is no longer in effect and CBS's fully diluted ownership interest in
Switchboard equals zero; (ii) on the date a competitor of Switchboard acquires
a direct or indirect beneficial ownership interest of more than 30% of the
outstanding shares of common stock, or securities representing, in the
aggregate of more than 30% of the voting power of CBS, or all or substantially
all of CBS's assets; or (iii) the date on which the outstanding share of Series
E Preferred Stock is held by any person or entity other than CBS or its
affiliates. The Series E Preferred Stock is junior to the Series A, B, C and D
Preferred Stock with respect to redemption rights and the right to receive
either dividends or amounts distributable upon liquidation, dissolution or
winding up of Switchboard.
N. Stock Option Plans:
The 1996 Stock Incentive Plan (the "1996 Option Plan") was adopted by the
Board of Directors and received stockholder approval in February 1996. A total
of 3,000,000 shares of common stock are reserved for issuance under the 1996
Option Plan. As of June 30, 1999, 1,425,824 shares of Switchboard common stock
had been granted under the 1996 Option Plan. Generally the options vest over
four years.
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
--------- --------
<S> <C> <C>
Granted.................................................. 837,000 $1.00
Outstanding at December 31, 1996......................... 837,000 1.00
Granted.................................................. 336,000 1.44
Canceled................................................. (166,000) 1.00
--------- -----
Outstanding at December 31, 1997......................... 1,007,000 1.15
Granted.................................................. 522,875 2.17
Exercised................................................ (13,250) 1.00
Canceled................................................. (359,250) 1.53
--------- -----
Outstanding at December 31, 1998......................... 1,157,375 1.49
Granted.................................................. 326,950 7.50
Exercised................................................ (18,749) 1.41
Canceled................................................. (71,751) 1.84
--------- -----
Outstanding at June 30, 1999............................. 1,393,825 $2.88
========= =====
</TABLE>
As of June 30, 1999, 1,574,176 shares were available for grant under the
1996 Option Plan.
F-19
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Information as of June 30, 1999 and for the six months ended June 30, 1999 and
1998 is unaudited
The following table summarizes information about the stock options at June
30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------- --------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life Price Exercisable Price
------------------------ ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$1.00--2.50............. 1,065,000 8.1 $ 1.46 430,872 $ 1.29
7.5--8.00............. 328,825 9.8 $ 7.50 -- --
</TABLE>
Had compensation cost for Switchboard's stock option plan been determined
based on the fair value at the grant date for awards in 1996, 1997 and 1998 and
the six months ended June 30, 1999, consistent with the provisions of SFAS 123,
Switchboard's net loss and basic and diluted net loss per share would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Period from
Inception (February Year Ended December 31,
19, 1996) to ----------------------------------------------------- Six Months Ended
December 31, 1996 1997 1998 June 30, 1999
-------------------------- -------------------------- ------------------------- --------------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
------------ ------------ ------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net loss........ $ (1,573,606) $ (1,578,884) $ (5,636,912) $ (5,779,334) $(5,657,562) $ (5,944,629) $ (1,472,471) $ (1,736,795)
Basic and
diluted loss
per share...... $ (0.22) $ (0.23) $ (0.81) $ (0.83) $ (0.81) $ (0.85) $ (0.21) $ (0.25)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in each of the following periods:
<TABLE>
<CAPTION>
Period from Year Ended
Inception December 31, Six Months
(February 19, 1996) --------------- Ended
to December 31, 1996 1997 1998 June 30, 1999
-------------------- ------- ------- -------------
<S> <C> <C> <C> <C>
Dividend yield........... 0% 0% 0% 0%
Expected volatility...... 90% 90% 90% 90%
Risk for interest rate... 6.42% 6.16% 5.48% 5.22%
Expected lives........... 8 years 7 years 6 years 5 years
</TABLE>
The weighted average grant date fair values using the Black-Scholes option
pricing model were $0.84, $1.17, $1.66, and $5.43 during the period from
inception (February 19, 1996) to December 31, 1996, the years ended December
31, 1997 and 1998 and the six months ended June 30, 1999. The effects of
applying SFAS 123 in this disclosure were not indicative of future amounts.
Additional grants in future years are anticipated.
O. Subsequent Events:
In October 1999, the Board of Directors approved the amendment and
restatement of the Certificate of Incorporation to authorize capitalization of
Switchboard of 85,000,000 shares of common stock, $0.01 par value per share,
and 5,000,000 shares of preferred stock, $0.01 par value per share. The
amendment will be effective upon the closing of an initial public offering and
the conversion of all the outstanding shares of Series A, B, C and D Preferred
Stock to common stock. Switchboard also adopted the 1999 Stock Incentive Plan
and the 1999 Employee Stock Purchase Plan. A total of 1,500,000 and 300,000,
respectively, shares of common stock have been reserved for issuance under the
two plans.
F-20
<PAGE>
[Inside Back Cover]
<PAGE>
[Back Cover]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $16,680
NASD filing fee.................................................. 6,500
Nasdaq National Market listing fee...............................
Blue Sky fees and expenses.......................................
Transfer Agent and Registrar fees................................
Accounting fees and expenses.....................................
Legal fees and expenses..........................................
[Director and Officer Liability Insurance].......................
Printing and mailing expenses....................................
Miscellaneous....................................................
-------
Total.......................................................... $
=======
</TABLE>
Item 14. Indemnification of Directors and Officers
Article SEVENTH of the Registrant's amended and restated certificate of
incorporation provides that no director of the Registrant shall be personally
liable for any monetary damages for any breach of fiduciary duty as a director,
except to the extent that the Delaware General Corporation Law prohibits the
elimination or limitation of liability of directors for breach of fiduciary
duty.
Article EIGHTH of the Registrant's amended and restated certificate of
incorporation provides that a director or officer of the Registrant:
(a) shall be indemnified by the Registrant against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement incurred in
connection with any litigation or other legal proceeding (other than an action
by or in the right of the Registrant) brought against him by virtue of his
position as a director or officer of the Registrant if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Registrant, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful and
(b) shall be indemnified by the Registrant against all expenses (including
attorneys' fees) and amounts paid in settlement incurred in connection with any
action by or in the right of the Registrant brought against him by virtue of
his position as a director or officer of the Registrant if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Registrant, except that no indemnification shall be made
with respect to any matter as to which such person shall have been adjudged to
be liable to the Registrant, unless a court determines that, despite such
adjudication but in view of all of the circumstances, he is entitled to
indemnification of such expenses.
Notwithstanding the foregoing, to the extent that a director or officer has
been successful, on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, he is required to be indemnified by
the Registrant against all expenses (including attorneys' fees) incurred in
connection therewith. Expenses shall be advanced to a director or officer at
his request, provided that he undertakes to repay the amount advanced if it is
ultimately determined that he is not entitled to indemnification for such
expenses.
II-1
<PAGE>
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that the director
or officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent to
the right of indemnification, the director or officer must give the Registrant
notice of the action for which indemnity is sought and the Registrant has the
right to participate in such action or assume the defense thereof.
Article EIGHTH of the Registrant's amended and restated certificate of
incorporation further provides that the indemnification provided therein is not
exclusive, and provides that in the event that the Delaware General Corporation
Law is amended to expand the indemnification permitted to directors or officers
the Registrant must indemnify those persons to the fullest extent permitted by
such law as so amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent
of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, in any criminal proceeding, if such
person had no reasonable cause to believe his conduct was unlawful; provided
that, in the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such
person shall have been adjudged to be liable to the corporation unless and only
to the extent that the adjudicating court determines that such indemnification
is proper under the circumstances.
Under the Underwriting Agreement, the underwriters are obligated, under
certain circumstances, to indemnify directors and officers of the Registrant
against certain liabilities, including liabilities under the Securities Act.
Reference is made to the form of Underwriting Agreement filed as Exhibit 1
hereto.
Item 15. Recent Sales of Unregistered Securities
Certain Sales of Securities. Since July 1996, the Registrant has issued the
following securities that were not registered under the Securities Act, as
summarized below.
(a) Issuances of capital stock.
1. On April 18, 1996, the Registrant issued and sold 10 shares of its
common stock to Banyan Worldwide for nominal consideration, in
connection with its formation.
2. On November 5, 1996, the Registrant issued and sold 6,999,990 shares
of its common stock to Banyan Worldwide in consideration for the
transfer of its core technologies and other assets.
3. On November 5, 1996, the Registrant issued and sold an aggregate of
750,000 shares of its Series A Convertible Preferred Stock, $0.01 par
value per share, to Digital City Inc. and America Online, Inc.
(375,000 shares to each entity) for an aggregate purchase price of
$3,000,000, pursuant to a Series A Preferred Stock Purchase Agreement.
4. On May 4, 1999, the Registrant issued and sold 140,000 shares of its
common stock to Continuum Software Inc. in consideration for delivery
of a subsequent technology release Marketing Agreement, dated as of
November 7, 1997.
5. On June 30, 1999, the Registrant issued and sold 7,463,216 shares of
its common stock and one share of its Series E Special Voting
Preferred Stock to CBS Corporation for consideration of $5
II-2
<PAGE>
million in cash, advertising and promotion value and a license to use
the "CBS" trademarks, and "eye" device pursuant to a Common Stock and
Warrant Purchase Agreement.
6. On June 30, 1999, the Registrant issued 2,655,916 shares of its Series
C Convertible Preferred Stock to Banyan Worldwide in connection with
the conversion of a Convertible Secured Note issued by the Registrant
on August 29, 1997, with a principal and interest balance of
$10,623,664 on the date of conversion.
7. On June 30, 1999, the Registrant issued 87,345 shares of its Series D
Convertible Preferred Stock to Banyan Worldwide in connection with the
conversion of a Convertible Secured Note issued by the Registrant on
May 3, 1999, with a principal and interest balance of $655,089 on the
date of conversion.
8. On July 21, 1999, the Registrant issued 1,875 shares of its common
stock to an executive search firm pursuant to a stock option exercise,
for a purchase price of $15,000.
9. Since January 1998, the Registrant has issued and sold 53,499 shares
of common stock to employees of the Registrant pursuant to stock
option exercises, for an aggregate purchase price of $77,185.
(b) Stock option grants.
Since the adoption of the 1996 Stock Incentive Plan, the Registrant
granted options to purchase an aggregate of 2,929,600 shares of its common
stock, net of cancellations of 661,851 options and exercises of 55,374 options
at a per share weighted average exercise price of $1.66.
(c) Grants of other securities.
1. On December 31, 1997, the Registrant issued a common stock purchase
warrant to Continuum Software Inc. to purchase 300,000 shares of its
common stock at an exercise price of $2.00 per share.
2. On March 31, 1999, the Registrant issued a common stock purchase
warrant to US West Dex, Inc. to purchase 96,250 shares of its common
stock at an exercise price of $8.00 per share.
3. On March 31, 1999, the Registrant issued a common stock purchase
warrant to Ameritech Interactive Media, Inc. to purchase 96,250 shares
of its common stock at an exercise price of $8.00 per share.
4. On March 31, 1999, the Registrant issued a common stock purchase
warrant to Intelligent Media Ventures, Inc. to purchase 96,250 shares
of its common stock at an exercise price of $8.00 per share.
5. On April 13, 1999, the Registrant issued a common stock purchase
warrant to SBC Communications Inc. to purchase 96,250 shares of its
common stock at an exercise price of $8.00.
6. On June 30, 1999, the Registrant issued a common stock purchase
warrant to CBS Corporation to purchase 1,066,174 shares of its common
stock at an exercise price of $1.00 per share.
No underwriters were involved in any of the foregoing sales of securities.
Such sales were made in reliance upon an exemption from the registration
provisions of the Securities Act set forth in Section 4(2) thereof relative to
sales by an issuer not involving any public offering or the rules and
regulations thereunder, or, in the case of the options to purchase common
stock described in paragraph (b) above, Rule 701 of the Securities Act. All of
the foregoing securities are deemed restricted securities for the purposes of
the Securities Act.
II-3
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1* Form of Underwriting Agreement.
3.1* Certificate of Incorporation of the Registrant, as amended.
3.2* Amended and Restated Certificate of Incorporation of the Registrant.
3.3* Amended and Restated By-Laws of the Registrant.
4* Specimen certificate for shares of Common Stock, $0.01 par value per
share, of the Registrant.
5* Opinion of Hale and Dorr LLP.
10.1 1996 Stock Incentive Plan, as amended, including forms of stock option
agreement for incentive and nonstatutory stock options.
10.2 1999 Stock Incentive Plan, including forms of stock option agreement
for incentive and nonstatutory stock options.
10.3 1999 Employee Stock Purchase Plan.
10.4 Common Stock and Warrant Purchase Agreement, as amended, by and among
Switchboard Incorporated, Banyan Worldwide and CBS Corporation, dated
June 1, 1999 (Incorporated herein by reference to Exhibit 10.1 of
Banyan System Incorporated's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, File No. 000-20364, filed August 16, 1999
(the "August 16, 1999 Banyan Worldwide 10-Q")).
10.5 Advertising and Promotion Agreement by and among Switchboard
Incorporated, Banyan Worldwide and CBS Corporation, dated June 30,
1999 (Incorporated by reference to Exhibit 10.3 of the August 16, 1999
Banyan Worldwide 10-Q).
10.6 License Agreement by and between Switchboard Incorporated and CBS
Corporation, dated June 30, 1999 (Incorporated by reference to Exhibit
10.4 of the August 16, 1999 Banyan Worldwide 10-Q).
10.7 Common Stock Purchase Warrant issued by Switchboard Incorporated to
CBS Corporation, dated June 30, 1999 (Incorporated by reference to
Exhibit 10.2 of the August 16, 1999 Banyan Worldwide 10-Q).
10.8 Registration Rights Agreement by and between Switchboard Incorporated
and CBS Corporation, dated June 30, 1999.
10.9 Right of First Refusal Agreement by and among Switchboard
Incorporated, Banyan Worldwide and CBS Corporation, dated June 30,
1999.
10.10 Reserved.
10.11 Stockholders' Voting Agreement by and among Switchboard Incorporated,
Banyan Worldwide and CBS Corporation, dated June 30, 1999.
10.12 Common Stock Purchase Warrant issued by Switchboard Incorporated to
Continuum Software Inc., dated December 31, 1997.
10.13 Registration Rights Agreement by and between Switchboard Incorporated
and Continuum Software Inc., dated December 31, 1997.
10.14 Common Stock Purchase Warrant issued by Switchboard Incorporated to US
WEST Dex, Inc., dated March 31, 1999.
10.15 Common Stock Purchase Warrant issued by Switchboard Incorporated to
Ameritech Interactive Media, Inc., dated March 31, 1999.
10.16 Common Stock Purchase Warrant issued by Switchboard Incorporated to
Intelligent Media Ventures, Inc., dated March 31, 1999.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.17 Common Stock Purchase Warrant issued by Switchboard Incorporated to
SBC Communications Inc., dated April 13, 1999.
10.18 Amended and Restated Registration Rights Agreement, as amended, by and
among Switchboard Incorporated, America Online, Inc., Digital City
Inc. and Banyan Worldwide, dated February 20, 1998.
10.19 Amended and Restated Registration Rights Agreement by and between
Switchboard Incorporated and Banyan Worldwide, dated May 3, 1999.
10.20 Services Agreement between Switchboard Incorporated and Banyan
Worldwide, dated November 1, 1996.
10.21* Database License Agreement, as amended, by and between Switchboard
Incorporated and infoUSA Inc., dated December 31, 1997.
10.22* Internet Provider Agreement, as amended, by and between Switchboard
Incorporated and Etak, Inc., dated November 25, 1996.
21 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Hale and Dorr LLP (included in Exhibit 5).
24 Power of Attorney (included on page II-8).
27.1 Financial Data Schedule for the ten months ended December 31, 1996.
27.2 Financial Data Schedule for the fiscal years ended December 31, 1997
and 1998.
27.3 Financial Data Schedule for the six months ended June 30, 1998 and
1999.
</TABLE>
- --------
* To be filed by amendment.
(b) Financial Statement Schedules
All other schedules have been omitted because they are not required or
because the required information is given in the Registrant's consolidated
financial statements or notes to those statements.
II-5
<PAGE>
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Amended and Restated
Certificate of Incorporation of the Registrant and the laws of the State of
Delaware, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
II-6
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Boston, Massachusetts,
on this 29th day of October, 1999.
Switchboard Incorporated
/s/ Douglas J. Greenlaw
By:
-----------------------------------
Douglas J. Greenlaw
Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Switchboard Incorporated,
hereby severally constitute and appoint Douglas J. Greenlaw, Dean Polnerow,
John P. Jewett and Virginia K. Kapner, and each of them singly, our true and
lawful attorneys with full power to them, and each of them singly, to sign for
us and in our names in the capacities indicated below, the Registration
Statement on Form S-1 filed herewith and any and all pre-effective and post-
effective amendments to said Registration Statement, and any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b), and generally to do all such things in our names and on our behalf in
our capacities as officers and directors to enable Switchboard Incorporated to
comply with the provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any
of them, to said Registration Statement and any and all amendments thereto or
to any subsequent Registration Statement for the same offering which may be
filed under Rule 462(b).
II-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Douglas J. Greenlaw Chief Executive Officer October 29, 1999
______________________________________ (Principal Executive
Douglas J. Greenlaw Officer)
/s/ Dean Polnerow President and Director October 29, 1999
______________________________________
Dean Polnerow
/s/ John P. Jewett Vice President, Chief October 29, 1999
______________________________________ Financial Officer,
John P. Jewett Treasurer and Secretary
(Principal Financial
Officer and Principal
Accounting Officer)
/s/ William P. Ferry Chairman of the Board of October 29, 1999
______________________________________ Directors
William P. Ferry
/s/ Richard M. Spaulding Director October 29, 1999
______________________________________
Richard M. Spaulding
/s/ David N. Strohm Director October 29, 1999
______________________________________
David N. Strohm
/s/ Robert M. Wadsworth Director October 29, 1999
______________________________________
Robert M. Wadsworth
/s/ Fredric G. Reynolds Director October 29, 1999
_____________________________________
Fredric G. Reynolds
/S/ Daniel R. Mason Director October 29, 1999
______________________________________
</TABLE> Daniel R. Mason
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1* Form of Underwriting Agreement.
3.1* Certificate of Incorporation of the Registrant, as amended.
3.2* Amended and Restated Certificate of Incorporation of the Registrant.
3.3* Amended and Restated By-Laws of the Registrant.
4* Specimen certificate for shares of Common Stock, $0.01 par value per
share, of the Registrant.
5* Opinion of Hale and Dorr LLP.
10.1 1996 Stock Incentive Plan, as amended, including forms of stock option
agreement for incentive and nonstatutory stock options.
10.2 1999 Stock Incentive Plan, including forms of stock option agreement
for incentive and nonstatutory stock options.
10.3 1999 Employee Stock Purchase Plan.
10.4 Common Stock and Warrant Purchase Agreement, as amended, by and among
Switchboard Incorporated, Banyan Worldwide and CBS Corporation, dated
June 1, 1999 (Incorporated herein by reference to Exhibit 10.1 of
Banyan System Incorporated's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, File No. 000-20364, filed August 16, 1999
(the "August 16, 1999 Banyan Worldwide 10-Q")).
10.5 Advertising and Promotion Agreement by and among Switchboard
Incorporated, Banyan Worldwide and CBS Corporation, dated June 30,
1999 (Incorporated by reference to Exhibit 10.3 of the August 16, 1999
Banyan Worldwide 10-Q).
10.6 License Agreement by and between Switchboard Incorporated and CBS
Corporation, dated June 30, 1999 (Incorporated by reference to Exhibit
10.4 of the August 16, 1999 Banyan Worldwide 10-Q).
10.7 Common Stock Purchase Warrant issued by Switchboard Incorporated to
CBS Corporation, dated June 30, 1999 (Incorporated by reference to
Exhibit 10.2 of the August 16, 1999 Banyan Worldwide 10-Q).
10.8 Registration Rights Agreement by and between Switchboard Incorporated
and CBS Corporation, dated June 30, 1999.
10.9 Right of First Refusal Agreement by and among Switchboard
Incorporated, Banyan Worldwide and CBS Corporation, dated June 30,
1999.
10.10 Reserved.
10.11 Stockholders' Voting Agreement by and among Switchboard Incorporated,
Banyan Worldwide and CBS Corporation, dated June 30, 1999.
10.12 Common Stock Purchase Warrant issued by Switchboard Incorporated to
Continuum Software Inc., dated December 31, 1997.
10.13 Registration Rights Agreement by and between Switchboard Incorporated
and Continuum Software Inc., dated December 31, 1997.
10.14 Common Stock Purchase Warrant issued by Switchboard Incorporated to US
WEST Dex, Inc., dated March 31, 1999.
10.15 Common Stock Purchase Warrant issued by Switchboard Incorporated to
Ameritech Interactive Media, Inc., dated March 31, 1999.
10.16 Common Stock Purchase Warrant issued by Switchboard Incorporated to
Intelligent Media Ventures, Inc., dated March 31, 1999.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.17 Common Stock Purchase Warrant issued by Switchboard Incorporated to
SBC Communications Inc., dated April 13, 1999.
10.18 Amended and Restated Registration Rights Agreement, as amended, by and
among Switchboard Incorporated, America Online, Inc., Digital City
Inc. and Banyan Worldwide, dated February 20, 1998.
10.19 Amended and Restated Registration Rights Agreement by and between
Switchboard Incorporated and Banyan Worldwide, dated May 3, 1999.
10.20 Services Agreement between Switchboard Incorporated and Banyan
Worldwide, dated November 1, 1996.
10.21* Database License Agreement, as amended, by and between Switchboard
Incorporated and infoUSA Inc., dated December 31, 1997.
10.22* Internet Provider Agreement, as amended, by and between Switchboard
Incorporated and Etak, Inc., dated November 25, 1996.
21 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Hale and Dorr LLP (included in Exhibit 5).
24 Power of Attorney (included on page II-8).
27.1 Financial Data Schedule for the ten months ended December 31, 1996.
27.2 Financial Data Schedule for the fiscal years ended December 31, 1997
and 1998
27.3 Financial Data Schedule for the six months ended June 30, 1998 and
1999.
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
Exhibit 10.1
------------
SWITCHBOARD INCORPORATED
1996 Stock Incentive Plan
-------------------------
Section 1. Purpose
-------
The purpose of this Stock Incentive Plan (the "Plan") is to advance the
interests of Switchboard Incorporated by enhancing its ability to attract and
retain key employees, officers, directors, consultants and advisors who are in a
position to contribute to the Company's future growth and success.
Section 2. Definitions
-----------
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock or Unrestricted Stock awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means a committee of not less than two members of the Board
appointed by the Board to administer the Plan.
"Common Stock" or "Stock" means the Common Stock, $.01 par value per share,
of the Company.
"Company" means Switchboard Incorporated, a Delaware corporation, and,
except where the content otherwise requires, all present and future subsidiaries
of the Company as defined in Section 424(f) of the Code.
"Designated Beneficiary" means the beneficiary designated by a Participant,
in a manner determined by the Board, to receive amounts due or exercise rights
of the Participant in the event of the Participant's death. In the absence of
an effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Board in
good faith or in the manner established by the Board from time to time.
"Incentive Stock Option" means an option to purchase shares of Common Stock
awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
<PAGE>
"Nonstatutory Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is not intended to be an
Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock Option.
"Participant" means a person selected by the Board to receive an Award
under the Plan.
"Performance Shares" mean shares of Common Stock which may be earned by the
achievement of performance goals awarded to a Participant under Section 8.
"Reporting Person" means a person subject to Section 16 of the Securities
Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time selected by the Board during
which shares subject to a Restricted Stock Award may be repurchased by or
forfeited to the Company.
"Restricted Stock" means shares of Common Stock awarded to a Participant
under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess in
Fair Market Value of shares of Common Stock over the exercise price awarded to a
Participant under Section 7.
"Unrestricted Stock" means shares of Common Stock awarded to a Participant
under Section 9(c).
Section 3. Administration
--------------
The Plan will be administered by the Board. The Board shall have authority
to make Awards and to adopt, amend and repeal such administrative rules,
guidelines and practices relating to the Plan as it shall deem advisable from
time to time, and to interpret the provisions of the Plan. The Board's
decisions shall be final and binding. No member of the Board shall be liable
for any action or determination relating to the Plan made in good faith. To the
extent permitted by applicable law, the Board may delegate to one or more
executive officers of the Company the power to make Awards to Participants who
are not Reporting Persons and all determinations under the Plan with respect
thereto, provided that the Board shall fix the maximum amount of such Awards to
be made by such executive officers and a maximum amount for any one Participant.
To the extent permitted by applicable law, the Board may appoint a Committee to
administer the Plan and, in such event, all references to the Board in the Plan
shall mean such Committee or the Board. All decisions by the Board or the
Committee pursuant to the Plan
2
<PAGE>
shall be final and binding on all persons having or claiming any interest in the
Plan or in any Award.
Section 4. Eligibility
-----------
All of the Company's employees, officers, directors, consultants and
advisors who are expected to contribute to the Company's future growth and
success, other than persons who have irrevocably elected not to be eligible, are
eligible to be Participants in the Plan. Subject to adjustment pursuant to
Section 5(b) below, the maximum number of shares of Common Stock which may be
the subject of Awards made to any one employee under the Plan during any
calendar year shall be 250,000 shares of Common Stock. For the purposes of
calculating such maximum number, (a) an Award shall continue to be treated as
outstanding notwithstanding its repricing, cancellation or expiration and (b)
the repricing of an outstanding Award or the issuance of a new Award in
substitution for a cancelled Award shall be deemed to constitute the grant of a
new additional Award separate from the original grant of the Award that is
repriced or cancelled. Incentive Stock Options may be awarded only to persons
eligible to receive Incentive Stock Options under the Code.
Section 5. Stock Available for Awards
--------------------------
(a) Subject to adjustment under subsection (b) below, Awards may be made
under the Plan for up to 1,500,000 shares of Common Stock. If any Award in
respect of shares of Common Stock expires or is terminated unexercised or is
forfeited for any reason or settled in a manner that results in fewer shares
outstanding than were initially awarded, the shares subject to such Award or so
surrendered, as the case may be, to the extent of such expiration, termination,
forfeiture or decrease, shall again be available for award under the Plan,
subject, however, in the case of Incentive Stock Options, to any limitation
required under the Code. Shares issued under the Plan may consist in whole or
in part of authorized but unissued shares or treasury shares.
(b) In the event that the Board, in its sole discretion, determines that
any stock dividend, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination or other
similar transaction affects the Common Stock such that an adjustment is required
in order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Board, subject, in the case of Incentive
Stock Options and any adjustments made to Section 4, to any limitation required
under the Code, shall equitably adjust any or all of (i) the number and kind of
shares in respect of which Awards may be made under the Plan, (ii) the number
and kind of shares in respect to the maximum number of
3
<PAGE>
Awards issuable to any one employee, (iii) the number and kind of shares subject
to outstanding Awards, and (iv) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Board may
make provision for a cash payment with respect to an outstanding Award, provided
that the number of shares subject to any Award shall always be a whole number.
(c) The Board may grant Awards under the Plan in substitution for stock and
stock based awards held by employees of another corporation who concurrently
become employees of the Company as a result of a merger or consolidation of the
employing corporation with the Company or a Subsidiary or the acquisition by the
Company or a subsidiary of property or stock of the employing corporation. The
substitute Awards shall be granted on such terms and conditions as the Board
considers appropriate in the circumstances. The shares which may be delivered
under such substitute Awards shall be in addition to the maximum number of
shares provided for in Section 5(a) only to the extent that the substitute
Awards are (i) granted to persons whose relationship to the Company does not
make (and is not expected to make) them Reporting Persons; (ii) granted in
substitution for awards issued under a plan approved, to the extent then
required under Rule 16b-3, by the stockholders of the entity which issued such
predecessor awards; and (iii) not intended to be Incentive Stock Options or
exempt from Section 162(m) of the Code.
Section 6. Stock Options
-------------
(a) General.
-------
(i) Subject to the provisions of the Plan, the Board may award
Incentive Stock Options and Nonstatutory Stock Options, and determine the number
of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder.
(ii) The Board shall establish the exercise price at the time each
Option is awarded. In the case of Incentive Stock Options, such price shall not
be less than 100% of the Fair Market Value of the Common Stock on the date of
award.
(iii) Each Option shall be exercisable at such times and subject to
such terms and conditions as the Board may specify in the applicable Award or
thereafter. The Board may impose such conditions with respect to the exercise
of options, including conditions relating to applicable federal or state
securities laws, as it considers necessary or advisable.
4
<PAGE>
(iv) Options granted under the Plan may provide for the payment of
the exercise price by delivery of cash or check in an amount equal to the
exercise price of such options or, to the extent permitted by the Board at or
after the award of the Option, by (A) delivery of shares of Common Stock owned
by the optionee for at least six months (or such shorter period as is approved
by the Board), valued at their Fair Market Value, (B) delivery of a promissory
note of the optionee to the Company on terms determined by the Board, (C)
delivery of an irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price or delivery of irrevocable
instructions to a broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price, (D) payment of such other lawful
consideration as the Board may determine, or (E) any combination of the
foregoing.
(v) The Board may provide for the automatic award of an Option upon
the delivery of shares to the Company in payment of the exercise price of an
Option for up to the number of shares so delivered.
(vi) The Board may at any time accelerate the time at which all or
any part of an Option may be exercised.
(b) Incentive Stock Options.
-----------------------
Options granted under the Plan which are intended to be Incentive
Stock Options shall be subject to the following additional terms and conditions:
(i) All Incentive Stock Options granted under the Plan shall, at the
time of grant, be specifically designated as such in the option agreement
covering such Incentive Stock options. The option exercise period shall not
exceed ten years from the date of grant.
(ii) If any employee to whom an Incentive Stock Option is to be
granted under the Plan is, at the time of the grant of such option, the owner of
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company (after taking into account the attribution of stock
ownership rule of Section 424(d) and of the Code), then the following special
provisions shall be applicable to the Incentive Stock Option granted to such
individual:
(x) The purchase price per share of the Common Stock subject to
such Incentive Stock option shall not be less than 110% of the Fair Market Value
of one share of Common Stock at the time of grant; and
5
<PAGE>
(y) The option exercise period shall not exceed five years from
the date of grant.
(iii) For so long as the Code shall so provide, options granted
to any employee under the Plan (and any other incentive stock option plans of
the Company) which are intended to constitute Incentive Stock Options shall not
constitute Incentive Stock Options to the extent that such options, in the
aggregate, become exercisable for the first time in any one calendar year for
shares of Common Stock with an aggregate Fair Market Value (determined as of the
respective date or dates of grant) of more than $100,000.
(iv) No Incentive Stock Option may be exercised unless, at the
time of such exercise, the Participant is, and has been continuously since the
date of grant of his or her Option, employed by the Company, except that:
(x) an Incentive Stock Option may be exercised within the
period of three months after the date the Participant ceases to be an employee
of the Company (or within such lesser period as may be specified in the
applicable option agreement), provided, that the agreement with respect to such
--------
option may designate a longer exercise period and that the exercise after such
three-month period shall be treated as the exercise of a Nonstatutory Stock
Option under the Plan;
(y) if the Participant dies while in the employ of the Company,
or within three months after the Participant ceases to be such an employee, the
Incentive Stock Option may be exercised by the Participant's Designated
Beneficiary within the period of one year after the date of death (or within
such lesser period as may be specified in the applicable option agreement); and
(z) if the Participant becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision thereto) while in the
employ of the Company, the Incentive Stock Option may be exercised within the
period of one year after the date of death (or within such lesser period as may
be specified in the Option agreement).
For all purposes of the Plan and any Option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
Section 7. Stock Appreciation Rights
-------------------------
6
<PAGE>
(a) The Board may grant Stock Appreciation Rights entitling recipients on
exercise of the SAR to receive an amount, in cash or Stock or a combination
thereof (such form to be determined by the Board), determined in whole or in
part by reference to appreciation in the Fair Market Value of the Stock between
the date of the Award and the exercise of the Award. A Stock Appreciation Right
shall entitle the Participant to receive, with respect to each share of Stock as
to which the SAR is exercised, the excess of the share's Fair Market Value on
the date of exercise over its Fair Market Value on the date the SAR was granted.
The Board may also grant Stock Appreciation Rights that provide that, following
a change in control of the Company (as defined by the Board at the time of the
Award), the holder of such SAR will be entitled to receive, with respect to each
share of Stock subject to the SAR, an amount equal to the excess of a specified
value (which may include an average of values) for a share of Stock during a
period preceding such change in control over the Fair Market Value of a share of
Stock on the date the SAR was granted.
(b) Stock Appreciation Rights may be granted in tandem with, or
independently of, Options granted under the Plan. A Stock Appreciation Right
granted in tandem with an option which is not an Incentive Stock Option may be
granted either at or after the time the Option is granted. A Stock Appreciation
Right granted in tandem with an Incentive Stock Option may be granted only at
the time the Option is granted.
(c) When Stock Appreciation Rights are granted in tandem with Options, the
following provisions will apply:
(i) The Stock Appreciation Right will be exercisable only at such
time or times, and to the extent, that the related Option is exercisable and
will be exercisable in accordance with the procedure required for exercise of
the related Option.
(ii) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related option, except that
a Stock Appreciation Right granted with respect to less than the full number of
shares covered by an Option will not be reduced until the number of shares as to
which the related option has been exercised or has terminated exceeds the number
of shares not covered by the Stock Appreciation Right.
(iii) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(iv) The Stock Appreciation Right will be transferable only with the
related Option.
7
<PAGE>
(v) A Stock Appreciation Right granted in tandem with an Incentive
Stock Option may be exercised only when the market price of the Stock subject to
the Option exceeds the exercise price of such option.
(d) A Stock Appreciation Right not granted in tandem with an Option will
become exercisable at such time or times, and on such conditions, as the Board
may specify.
(e) The Board may at any time accelerate the time at which all or any part
of the SAR may be exercised.
Section 8. Performance Shares
------------------
(a) The Board may make Performance Share Awards entitling recipients to
acquire shares of Stock upon the attainment of specified performance goals. The
Board may make Performance Share Awards independent of or in connection with the
granting of any other Award under the Plan. The Board in its sole discretion
shall determine the performance goals applicable under each such Award, the
periods during which performance is to be measured, and all other limitations
and conditions applicable to the awarded Performance Shares; provided, however,
that the Board may rely on the performance goals and other standards applicable
to other performance plans of the Company in setting the standards for
Performance Share Awards under the Plan.
(b) Performance Share Awards and all rights with respect to such Awards
may not be sold, assigned, transferred, pledged or otherwise encumbered.
(c) A Participant receiving a Performance Share Award shall have the
rights of a stockholder only as to shares actually received by the Participant
under the Plan and not with respect to shares subject to an Award but not
actually received by the Participant. A Participant shall be entitled to receive
a stock certificate evidencing the acquisition of shares of Stock under a
Performance Share Award only upon satisfaction of all conditions specified in
the agreement evidencing the Performance Share Award.
(d) The Board may at any time accelerate or waive any or all of the goals,
restrictions or conditions imposed under any Performance Share Award.
Section 9. Restricted and Unrestricted Stock
---------------------------------
(a) The Board may grant Restricted Stock Awards entitling recipients to
acquire shares of Stock, subject to the right of the Company to repurchase all
or part of such shares at their purchase price (or to require forfeiture of such
shares if
8
<PAGE>
purchased at no cost) from the recipient in the event that conditions specified
by the Board in the applicable Award are not satisfied prior to the end of the
applicable Restricted Period or Restricted Periods established by the Board for
such Award. Conditions for repurchase (or forfeiture) may be based on continuing
employment or service or achievement of pre-established performance or other
goals and objectives.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Board, during the
applicable Restricted Period. Shares of Restricted Stock shall be evidenced in
such manner as the Board may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and, unless otherwise determined by the Board, deposited by the Participant,
together with a stock power endorsed in blank, with the Company (or its
designee). At the expiration of the Restricted Period, the Company (or such
designee) shall deliver such certificates to the Participant or if the
Participant has died, to the Participant's Designated Beneficiary.
(c) The Board may, in its sole discretion, grant (or sell at a purchase
price determined by the Board, which shall not be lower than 85% of Fair Market
Value on the date of sale) to Participants shares of Stock free of any
restrictions under the Plan ("Unrestricted Stock").
(d) The purchase price for each share of Restricted Stock and Unrestricted
Stock shall be determined by the Board of Directors and may not be less than the
par value of the Common Stock. Such purchase price may be paid in the form of
past services or such other lawful consideration as is determined by the Board.
(e) The Board may at any time accelerate the expiration of the Restricted
Period applicable to all, or any particular, outstanding shares of Restricted
Stock.
Section 10. General Provisions Applicable to Awards
---------------------------------------
(a) Applicability of Rule 16b-3. Those provisions of the Plan which make
---------------------------
an express reference to Rule 16b-3 shall apply to the Company only at such time
as the Company's Common Stock is registered under the Securities Exchange Act of
1934, or any successor provision, and then only to Reporting Persons.
(b) Nontransferability. Except as otherwise permitted by the Board in the
------------------
applicable Award, Awards shall not be assignable or transferable by the
Participant to whom they are granted, either voluntarily or by operation of law.
9
<PAGE>
(c) Documentation. Each Award under the Plan shall be evidenced by an
-------------
instrument delivered to the Participant specifying the terms and conditions
thereof and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Board considers necessary or advisable. Such
instruments may be in the form of agreements to be executed by both the Company
and the Participant, or certificates, letters or similar documents, acceptance
of which will evidence agreement to the terms thereof and of this Plan.
(d) Board Discretion. Each type of Award may be made alone, in addition
----------------
to or in relation to any other type of Award. The terms of each type of Award
need not be identical, and the Board need not treat Participants uniformly.
Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Board at the time of
award or at any time thereafter.
(e) Termination of Status. Subject to the provisions of Section 6(b)(iv),
---------------------
the Committee shall determine the effect on an Award of the disability, death,
retirement, authorized leave of absence or other termination of employment or
other status of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may exercise rights under such Award.
(f) Mergers, Etc. In the event of a consolidation, merger or other
-------------
reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (an "Acquisition") or in the event of a liquidation of the
Company, the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions as to outstanding Awards: (i)
provide that such Awards shall be assumed, or substantially equivalent Awards
shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof) on such terms as the Board determines to be appropriate, (ii)
upon written notice to Participants, provide that all unexercised options or
SARs will terminate immediately prior to the consummation of such transaction
unless exercised by the Participant within a specified period following the date
of such notice, (iii) in the event of an Acquisition under the terms of which
holders of the Common Stock of the Company will receive upon consummation
thereof a cash payment for each share surrendered in the Acquisition (the
"Acquisition Price"), make or provide for a cash payment to Participants equal
to the difference between (A) the Acquisition Price times the number of shares
of Common Stock subject to outstanding Options or SARs (to the extent then
exercisable at prices not in excess of the Acquisition Price) and (B) the
aggregate exercise price of all
10
<PAGE>
such outstanding Options or SARs in exchange for the termination of such Options
and SARs, and (iv) provide that all or any outstanding Awards shall become
exercisable or realizable in full prior to the effective date of such
Acquisition.
(g) Withholding. The Participant shall pay to the Company, or make
-----------
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in respect of Awards under the Plan no later than the date of the
event creating the tax liability. In the Board's discretion, and subject to
such conditions as the Board may establish, such tax obligations may be paid in
whole or in part in shares of Common Stock, including shares retained from the
Award creating the tax obligation, valued at their Fair Market Value. The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to the Participant.
(h) Foreign Nationals. Awards may be made to Participants who are foreign
-----------------
nationals or employed outside the United States on such terms and conditions
different from those specified in the Plan as the Board considers necessary or
advisable to achieve the purposes of the Plan or comply with applicable laws.
(i) Amendment of Award. The Board may amend, modify or terminate any
------------------
outstanding Award, including substituting therefor another Award of the same or
a different type, changing the date of exercise or realization and converting an
Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
(j) Cancellation and New Grant of Options. The Board of Directors shall
-------------------------------------
have the authority to effect, at any time and from time to time, with the
consent of the affected optionees, (i) the cancellation of any or all
outstanding options under the Plan and the grant in substitution therefor of new
Options under the Plan covering the same or different numbers of shares of
Common Stock and having an option exercise price per share which may be lower or
higher than the exercise price per share of the cancelled Options or (ii) the
amendment of the terms of any and all outstanding Options under the Plan to
provide an option exercise price per share which is higher or lower than the
then current exercise price per share of such outstanding Options.
(k) Conditions on Delivery of Stock. The Company will not be obligated to
-------------------------------
deliver any shares of Stock pursuant to the Plan or to remove restrictions from
shares previously delivered under the Plan (i) until all conditions of the Award
have been satisfied or removed, (ii) until, in the opinion of the Company's
11
<PAGE>
counsel, all applicable federal and state laws and regulations have been
complied with, (iii) if the outstanding Stock is at the time listed on any stock
exchange, until the shares to be delivered have been listed or authorized to be
listed on such exchange upon official notice of notice of issuance, and (iv)
until all other legal matters in connection with the issuance and delivery of
such shares have been approved by the Company's counsel. If the sale of Stock
has not been registered under the Securities Act of 1933, as amended, the
Company may require, as a condition to exercise of the Award, such
representations or agreements as the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
Section 11. Miscellaneous
-------------
(a) No Right To Employment or Other Status. No person shall have any
--------------------------------------
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or service
for the Company. The Company expressly reserves the right at any time to dismiss
a Participant free from any liability or claim under the Plan, except as
expressly provided in the applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
------------------------
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed under
the Plan until he or she becomes the record holder thereof.
(c) Exclusion from Benefit Computations. No amounts payable upon exercise
-----------------------------------
of Awards granted under the Plan shall be considered salary, wages or
compensation to Participants for purposes of determining the amount or nature of
benefits that Participants are entitled to under any insurance, retirement or
other benefit plans or programs of the Company.
(d) Effective Date and Term.
------------------------
(i) Effective Date. The Plan shall become effective when adopted by
--------------
the Board of Directors, but no Award granted under the Plan shall become
exercisable or effective unless and until the Plan shall have been approved by
the Company's stockholders. If such stockholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, each Award
previously granted under the Plan shall be deemed to be cancelled and no Awards
shall be granted thereafter. Amendments to the Plan not requiring stockholder
approval shall become effective when adopted by the Board of Directors;
amendments requiring stockholder approval shall become effective
12
<PAGE>
when adopted by the Board of Directors, but no Award granted after the date of
such amendment shall become exercisable or vested (to the extent that such
amendment to the Plan was required to enable the Company to grant such Award to
a particular optionee) unless and until such amendment shall have been approved
by the Company's stockholders. If such stockholder approval is not obtained
within twelve months of the Board's adoption of such amendment, any Award
granted on or after the date of such amendment shall terminate to the extent
that such amendment to the Plan was required to enable the Company to grant such
Award to a particular optionee. Subject to the limitations set forth in this
Section 11(d), Awards may be made under the Plan at any time after the effective
date and before the date fixed for termination of the Plan.
(ii) Termination. The Plan shall terminate upon the earlier of (i)
-----------
the close of business on the day next preceding the tenth anniversary of the
date of its adoption by the Board of Directors, or (ii) the date on which all
shares available for issuance under the Plan shall have been issued pursuant to
Awards under the Plan. Awards outstanding on such date shall continue to have
force and effect in accordance with the provisions of the instruments evidencing
such Awards.
(e) Amendment of Plan. The Board may amend, suspend or terminate the Plan
-----------------
or any portion thereof at any time, provided that no amendment shall be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement, including any requirements for
compliance with Rule 16b-3. Prior to any such approval, Awards may be made
under the Plan expressly subject to such approval.
(f) Governing Law. The provisions of the Plan shall be governed by and
-------------
interpreted in accordance with the laws of the State of Delaware.
Adopted by the Board of
Directors, and approved by the
stockholders, on October 11,
1996
13
<PAGE>
SWITCHBOARD INCORPORATED
INCENTIVE STOCK OPTION AGREEMENT
1. Grant of Option. Switchboard Incorporated, a Delaware corporation (the
---------------
"Company"), hereby grants to [NAME] (the "Optionee"), an option, pursuant to the
Company's 1996 Stock Incentive Plan (the "Plan"), to purchase an aggregate of
[NO.] shares of Common Stock, $.01 par value per share, of the Company ("Common
Stock"), at a price of $[PRICE] per share, purchasable as set forth in and
subject to the terms and conditions of this option and the Plan. The date of
grant of this option is [DATE]. Except where the context otherwise requires,
----
the term "Company" shall include the parent and all present and future
subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended or replaced from time to time (the
"Code").
2. Incentive Stock Option. This option is intended to qualify as an
----------------------
incentive stock option ("Incentive Stock Option") within the meaning of Section
422 of the Code.
3. Exercise of Option and Provisions for Termination.
-------------------------------------------------
(a) Vesting Schedule. Except as otherwise provided in this Agreement, this
----------------
option may be exercised prior to the tenth anniversary of the date of grant
(hereinafter the "Expiration Date") in installments as to not more than the
number of shares set forth in the table below during the respective installment
periods set forth in the table below.
PERCENTAGE OF SHARES AS TO
EXERCISE PERIOD WHICH OPTION IS EXERCISABLE
--------------- ---------------------------
Prior to 24 months after -0-
the date of grant.
From and after 24 months -25%-
after the date of grant but
prior to 36 months after
the date of grant.
From and after 36 months -50%-
after the date of grant but
prior to 48 months after the
date of grant.
From and after 48 months -100%-
after the date of grant
<PAGE>
The right of exercise shall be cumulative so that if the option is not exercised
to the maximum extent permissible during any exercise period, it shall be
exercisable, in whole or in part, with respect to all shares not so purchased at
any time prior to the Expiration Date or the earlier termination of this option.
This option may not be exercised at any time on or after the Expiration Date.
(b) Exercise Procedure. Subject to the conditions set forth in this
------------------
Agreement, this option shall be exercised by the Optionee's delivery of written
notice of exercise to the Treasurer of the Company, specifying the number of
shares to be purchased and the purchase price to be paid therefor and
accompanied by payment in full in accordance with Section 4. Such exercise
shall be effective upon receipt by the Treasurer of the Company of such written
notice together with the required payment. The Optionee may purchase less than
the number of shares covered hereby, provided that no partial exercise of this
option may be for any fractional share or for fewer than ten whole shares.
(c) Continuous Employment Required. This option may not be exercised
------------------------------
unless the Optionee, at the time he or she exercises this option, is, and has
been at all times since the date of grant of this option, an employee of the
Company. For all purposes of this option, (i) "employment" shall be defined in
accordance with the provisions of Section 1.421-7(h) of the Income Tax
Regulations or any successor regulations, and (ii) if this option shall be
assumed or a new option substituted therefor in a transaction to which Section
424(a) of the Code applies, employment by such assuming or substituting
corporation (hereinafter called the "Successor Corporation") shall be considered
for all purposes of this option to be employment by the Company.
(d) Termination of Employment. If the Optionee ceases to be employed
-------------------------
by the Company for any reason (including without limitation death, disability,
or voluntary or involuntary termination), then the right to exercise this option
shall terminate immediately upon such cessation.
4. Payment of Purchase Price.
-------------------------
(a) Method of Payment. Payment of the purchase price for shares
-----------------
purchased upon exercise of this option shall be made by delivery of cash or a
check in an amount equal to the exercise price of such option or, with the prior
consent of the Company (which may be withheld in its sole discretion), by (A)
delivery of shares of Common Stock owned by the Optionee for at least six
months, valued at their fair market value, as determined in (b) below, (B)
delivery of a promissory note of the Optionee to the Company on terms determined
by the Board, (C) delivery of an irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price or delivery
of irrevocable instructions to a broker to deliver promptly to the Company cash
or a check sufficient to pay the exercise price, (D) payment of such other
lawful consideration as the Board may determine, or (E) any combination of the
foregoing.
(b) Valuation of Shares or Other Non-Cash Consideration Tendered in
---------------------------------------------------------------
Payment of Purchase Price. For the purposes hereof, the fair market value of
- -------------------------
any share of the Company's Common Stock or other non-cash consideration which
may be delivered to the
<PAGE>
Company in exercise of this option shall be determined in good faith by the
Board of Directors of the Company.
(c) Delivery of Shares Tendered in Payment of Purchase Price. If the
--------------------------------------------------------
Optionee exercises this option by delivery of shares of Common Stock of the
Company, the certificate or certificates representing the shares of Common Stock
of the Company to be delivered shall be duly executed in blank by the Optionee
or shall be accompanied by a stock power duly executed in blank suitable for
purposes of transferring such shares to the Company. Fractional shares of
Common Stock of the Company will not be accepted in payment of the purchase
price of shares acquired upon exercise of this option.
(d) Restrictions on Use of Option Stock. Notwithstanding the
-----------------------------------
foregoing, no shares of Common Stock of the Company may be tendered in payment
of the purchase price of shares purchased upon exercise of this option if the
shares to be so tendered were acquired within six (6) months before the date of
such tender, through the exercise of an option granted under the Plan or any
other stock option or restricted stock plan of the Company.
5. Delivery of Shares; Compliance With Securities Laws, Etc.
--------------------------------------------------------
(a) General. The Company shall, upon payment of the option price for
-------
the number of shares purchased and paid for, make prompt delivery of such shares
to the Optionee, provided that if any law or regulation requires the Company to
take any action with respect to such shares before the issuance thereof, then
the date of delivery of such shares shall be extended for the period necessary
to complete such action.
(b) Compliance With Securities Laws, Etc. The Company will not be
------------------------------------
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restriction from shares previously delivered under the Plan (i) until all
conditions of the option have been satisfied or removed, (ii) until, in the
opinion of the Company's counsel, all applicable federal and state laws and
regulation have been complied with, (iii) if the outstanding Stock is at the
time listed on any stock exchange, until the shares to be delivered have been
listed or authorized to be listed on such exchange upon official notice of
issuance, and (iv) until all other legal matters in connection with the issuance
and delivery of such shares have been approved by the Company's counsel.
6. Nontransferability of Option. This option is personal and no rights
----------------------------
granted hereunder may be transferred, assigned, pledged or hypothecated in any
way (whether by operation of law or otherwise) nor shall any such rights be
subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this option or of
such rights contrary to the provisions hereof, or upon the levy of any
attachment or similar process upon this option or such rights, this option and
such rights shall, at the election of the Company, become null and void.
7. Proxy. The Optionee hereby appoints Banyan Systems Incorporated, a
-----
Massachusetts corporation, and/or its designee(s) ("Banyan"), as the Optionee's
attorney-in-fact and proxy, with full power of substitution, for and in the
Optionee's name, to vote, express
<PAGE>
consent or disapproval, or otherwise act in such manner (including pursuant to
written consent) and upon such matters as Banyan Systems Incorporated or its
designee(s), proxy or substitute(s) shall, in its or their sole discretion, deem
proper with respect to any and all of the shares issued upon any exercise of
this option or issued in respect to such shares as a stock dividend, stock split
or otherwise (collectively, for purposes of Sections 7, 8 and 9 hereof, the
"Shares"). The proxy granted hereby shall be irrevocable and may be exercised at
any meeting or in respect of any written consent of stockholders. This proxy is
coupled with an interest sufficient in law to support such proxy. This proxy
shall remain in full force and effect and be enforceable against any donee,
transferee or assignee of the stock. In addition to any other applicable
limitations pursuant to the terms of this option, the Optionee agrees not to
sell, assign, transfer, loan, tender, pledge, hypothecate, exchange, encumber or
otherwise dispose of, or issue an option or call with respect to, any of the
Shares, or impair such Shares, in each case unless, and as a condition precedent
thereto, the transferee of such Shares executes and delivers to Banyan an
agreement to be bound by the terms of this Section 7. Any purported transfer in
violation of this Section 7 shall be null and void and shall not be recognized
by the Company or reflected on the stock records of the Company. The Optionee
shall cause the Company to require any certificates representing any and all
Shares issued upon any exercise of this option to bear a legend referencing the
restrictions on transfer set for in this Section 7, which legend shall be
subject to the approval of Banyan. Notwithstanding anything to the contrary in
the foregoing, the provisions of, including, without limitation, the proxy
appointed by, this Section 7 shall terminate upon the closing of the Company's
initial public offering, underwritten by a nationally recognized underwriter,
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act").
8. Repurchase of Shares Upon Termination of Employment. The following
---------------------------------------------------
repurchase provisions shall apply to any and all Shares;
(a) Repurchase Rights. If the Optionee for any reason whatsoever
-----------------
(including without limitation death, disability, or voluntary or involuntary
termination) ceases to be employed by the Company prior to the date specified in
Section 8(d) below for the expiration of these restrictions, then during the 90-
day period following such termination the Company may elect, by written notice
delivered to the Optionee, to repurchase all or any portion of the Shares, at a
price per share equal to the fair market value of such Shares as of the close of
business on the date of termination of the Optionee's employment. Such fair
market value shall be determined by mutual agreement of the Company and the
Optionee. Failing such agreement between the Optionee and the Company within 30
days of the date of the Company's notice electing to repurchase such Shares, the
fair market value of such Shares shall be determined by three appraisers, one
designated within five days after the termination of said 30-day period by the
Optionee or his or her legal representatives (which appraiser shall not be the
Optionee or his or her legal representative), one within said period of five
days by the Company (which appraiser shall not be an officer, director or
employee of the Company) and the third within five days after said appointment
last occurring by the two appraisers so chosen. Successor appraisers, if any
shall be required, shall be appointed, within a reasonable time, as nearly as
may be in the manner provided as to the related original appointment. No
appointment shall be deemed as having been accomplished unless such appraiser
shall have accepted in writing his appointment as such within the time limited
for his appointment. Notice of each appointment of an appraiser shall be
<PAGE>
given promptly to the other parties in interest. Any expenses relating to the
appointment and service of an appraiser shall be paid by the party appointing
such appraiser or, in the case of the appraiser appointed by the appraisers
chosen by the Company and the Optionee, shall be paid by the Company. Said
appraisers shall proceed promptly to determine the fair market value of said
Share or Shares by agreement of any two of the appraisers, which shall be
conclusive upon all parties in interest in such Shares. Promptly following such
determination, the appraisers shall mail or deliver such notice of such
determination to the Optionee and the Company.
(b) Repurchase Procedure. Upon notice from the Company of exercise of
--------------------
its rights under this Section 8 and determination of the purchase price for the
Shares so repurchased, the Optionee shall transfer the Shares or appropriate
part thereof to the Company against payment by the Company of the purchase price
therefor. If upon the expiration of the 90-day period following the Optionee's
termination of employment the Company shall have failed to elect to repurchase
all of the Shares, the repurchase rights with respect to the Shares not so
elected to be repurchased imposed by this Section 8 shall terminate, and the
Optionee or his or her legal representatives may thereafter transfer such
Shares. The Optionee or his or her legal representatives may in no event
transfer any Shares prior thereto, other than to the Company.
(c) Failure of Optionee to Comply. If the Optionee fails to comply
-----------------------------
with any of the provisions of this Section 8, the Company, at its option and in
addition to its other remedies, may suspend the rights of the Optionee to vote
and to receive dividends on the Shares, or may refuse to register on its books
any transfer or change in the ownership of the Shares or in the right to vote
thereon, until the provisions of this Section 8 are complied with to the
satisfaction of the Company.
(d) Expiration. The restriction contained in this Section 8 shall
----------
expire upon the closing of the Company's initial public offering, underwritten
by a nationally recognized underwriter, pursuant to an effective registration
statement under the Securities Act (such expiration date shall be referred to
herein as the "Expiration Date").
(e) Safekeeping. The Optionee acknowledges that the Company may, in
-----------
its discretion, retain for safekeeping stock certificates representing all
Shares purchased hereunder by the Optionee. The Optionee further acknowledges
that the Company may, to insure that the Optionee complies with the restriction
of this Section 8, continue to retain such stock certificates until the earlier
of the Expiration Date or the date of expiration of these repurchase rights
under Section 8(b) above. At the time of any exercise of this option, in whole
or in part, the Optionee shall execute such further agreement as the Company may
require to implement the foregoing.
9. Right of First Refusal.
----------------------
(a) General. The Optionee shall not sell, assign, pledge, or in any
-------
manner transfer any of the Shares or any right or interest therein, whether
voluntarily or by operation of law, or by gift or otherwise, except by a
transfer which meets the requirements of the provisions of this Section 9.
<PAGE>
(b) Restrictions on Transfer. If at any time or from time to time the
------------------------
Optionee intends to sell or transfer any Shares to a third party, the Optionee
shall provide notice thereof to the Company prior to such transfer (which in the
case of a sale shall include a bona fide purchase agreement with a viable
purchaser). The Company shall have an option for 30 days following the date of
receipt of the Optionee's notice to purchase such Shares on the terms upon which
the Shares were to be purchased by or transferred to the third party by the
Optionee. If the Company does not exercise its right of first refusal under
this Section 9(b) with respect to such proposed sale or transfer within such 30-
day period, the Optionee shall be free to sell or transfer such Shares to the
third party identified in the Optionee's notice for a period of 45 days after
the expiration of the 30-day period following the date of receipt of the
Optionee's notice. Such sale or transfer must be on terms no more favorable to
the recipient than those set forth in the Optionee's notice. In no event may
Shares be sold or transferred to any then-current competitor of the Company.
Any transfer or sale of Shares by the Optionee will be conditional upon the
recipient acknowledging in writing the option set forth in this Section 9(b) and
the other restrictions to which the Shares are subject.
(c) Failure of Optionee to Comply. If the Optionee's notice in
-----------------------------
respect of any Shares is not received by the Company as provided in Section 9(b)
above, or if the Optionee fails to comply with the provisions of Section 9(b)
above in respect of any such Shares in any other regard, the Company, at its
option and in addition to its other remedies, may suspend the rights to vote or
to receive dividends on said Shares, or may refuse to register on its books any
transfer or change in ownership of said Shares or in the right to vote thereon,
until the provisions of Section 9(b) are complied with to the satisfaction of
the Company; and if the required Optionee's notice is not received by the
Company after written demand by the Company, the Company may also independently
proceed as though a proper Optionee's notice has been received at the expiration
of ten days after mailing such demand, and, if the Company exercises its rights
under Section 9(b) with respect to said Shares or any of them, the Shares
specified shall be transferred accordingly.
(d) Expiration. The Company's right of first refusal contained in
----------
this Section 9 with respect to any sale or transfer of Shares shall expire upon
the Expiration Date.
10. No Special Employment Rights. Nothing contained in the Plan or this
----------------------------
option shall be construed or deemed by any person under any circumstances to
bind the Company to continue the employment of the Optionee for the period
within which this option may be exercised.
11. Rights as a Shareholder. The Optionee shall have no rights as a
-----------------------
shareholder with respect to any shares which may be purchased by exercise of
this option (including, without limitation, any rights to receive dividends or
non-cash distributions with respect to such shares) unless and until a
certificate representing such shares is duly issued and delivered to the
Optionee. No adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock certificate is issued.
<PAGE>
12. Adjustment Provisions.
---------------------
(a) General. In the event of a consolidation, merger or other
-------
reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (an "Acquisition") or in the event of a liquidation of the
Company, the Board of Directors of the Company or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions as to this option: (i) provide
that this option shall be assumed, or a substantially equivalent option shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof) on such terms as the Board determines to be appropriate, (ii) upon
written notice to the Optionee, provide that if unexercised, this option will
terminate immediately prior to the consummation of such transaction unless
exercised by the Optionee within a specified period following the date of such
notice, (iii) in the event of an Acquisition under the terms of which holders of
the Common Stock of the Company will receive upon consummation thereof a cash
payment for each share surrendered in the Acquisition (the "Acquisition Price"),
make or provide for a cash payment to the Optionee equal to the difference
between (A) the Acquisition Price times the number of shares of Common Stock
subject to outstanding options (to the extent then exercisable at prices not in
excess of the Acquisition Price) and (B) the aggregate exercise price of all
such outstanding options in exchange for the termination of such options, and
(iv) provide that all or any outstanding options shall become exercisable or
realizable in full prior to the effective date of such Acquisition.
(b) Board Authority to Make Adjustments. Any adjustments under this
-----------------------------------
Section 12 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued pursuant to this
option on account of any such adjustments.
13. Withholding Taxes. The Company's obligation to deliver shares upon
-----------------
the exercise of this option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements. The Optionee shall pay to the Company, or make provision
satisfactory to the Board for payment of, any taxes required by law to be
withheld in respect of options under the Plan no later than the date of the
event creating the tax liability. In the Board's discretion, and subject to
such conditions as the Board may establish, such tax obligations may be paid in
whole or in part in shares of Common Stock, including shares retained from the
option creating the tax obligation, valued at their fair market value. The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to the Optionees.
14. Limitations on Disposition of Incentive Stock Option Shares. It is
-----------------------------------------------------------
understood and intended that this option shall qualify as an "incentive stock
option" as defined in Section 422 of the Code. Accordingly, the Optionee
understands that in order to obtain the benefits of an incentive stock option
under Section 421 of the Code, no sale or other disposition may be made of any
shares acquired upon exercise of the option within one year after the day of the
transfer of such shares to him, nor within two years after the grant of the
option. If the Optionee intends to dispose, or does dispose (whether by sale,
exchange, gift, transfer or otherwise), of any such shares within said periods,
he or she will notify the Company in writing within ten days after such
disposition.
<PAGE>
15. Investment Representations; Legends.
-----------------------------------
(a) Representations. The Optionee represents, warrants and covenants
---------------
that:
(i) Any shares purchased upon exercise of this option shall be
acquired for the Optionee's account for investment only and not with a view
to, or for sale in connection with, any distribution of the shares in
violation of the Securities Act or any rule or regulation under the
Securities Act.
(ii) The Optionee has had such opportunity as he or she has deemed
adequate to obtain from representatives of the Company such information as
is necessary to permit the Optionee to evaluate the merits and risks of his
or her investment in the Company.
(iii) The Optionee is able to bear the economic risk of holding
shares acquired pursuant to the exercise of this option for an indefinite
period.
(iv) The Optionee understands that (A) the shares acquired pursuant to
the exercise of this option will not be registered under the Securities Act
and are "restricted securities" within the meaning of Rule 144 under the
Securities Act; (B) such shares cannot be sold, transferred or otherwise
disposed of unless they are subsequently registered under the Securities
Act or an exemption from registration is then available; (C) in any event,
an exemption from registration under Rule 144 or otherwise under the
Securities Act may not be available for at least two years and even then
will not be available unless a public market then exists for the Common
Stock, adequate information concerning the Company is then available to the
public and other terms and conditions of Rule 144 are complied with; and
(D) there is now no registration statement on file with the Securities and
Exchange Commission with respect to any stock of the Company and the
Company has no obligation or current intention to register any shares
acquired pursuant to the exercise of this option under the Securities Act.
(v) The Optionee agrees that, if the Company offers for the first time
any of its Common Stock for sale pursuant to a registration statement under
the Securities Act, the Optionee will not, without the prior written
consent of the Company, publicly offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any shares purchased upon exercise of
this option for a period of 180 days after the effective date of such
registration statement.
By making payment upon exercise of this option, the Optionee shall be deemed to
have reaffirmed, as of the date of such payment, the representations made in
this Section 15.
(b) Legends on Stock Certificates. All stock certificates
-----------------------------
representing shares of Common Stock issued to the Optionee upon exercise of this
option shall have affixed thereto legends substantially in the following forms,
in addition to any other legends required by applicable state law:
<PAGE>
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 and may not be transferred,
sold or otherwise disposed of in the absence of an effective registration
statement with respect to the shares evidenced by this certificate, filed
and made effective under the Securities Act of 1933, or an opinion of
counsel satisfactory to the Company to the effect that registration under
such Act is not required."
"The shares of stock represented by this certificate are subject to certain
restrictions on transfer and repurchase rights contained in an Option
Agreement, a copy of which will be furnished upon request by the issuer."
To ensure compliance with the terms of this agreement, the Company may issue to
its transfer agent appropriate stop transfer instructions with respect to the
Shares.
16. Miscellaneous.
-------------
(a) The Board may amend, modify or terminate any outstanding option,
including substituting therefor another option of the same or a different type,
changing the date of exercise or realization, provided that the Optionee's
consent to such action shall be required unless the Board determines that the
action, taking into account any related action, would not materially and
adversely affect the Optionee. The Board may at any time accelerate the time at
which all or any part of an Option may be exercised.
(b) All notices under this option shall be mailed or delivered by hand
to the parties at their respective addresses set forth beneath their names below
or at such other address as may be designated in writing by either of the
parties to one another.
(c) This option shall be governed by and construed in accordance with
the laws of the State of Delaware.
Date of Grant: SWITCHBOARD INCORPORATED
[DATE]
By:
----------------------------------
Title:
-------------------------------
Address: 115 Flanders Road
Westboro, MA 01581
<PAGE>
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy
of the Company's 1996 Stock Incentive Plan.
OPTIONEE:
--------------------------------
Address:
--------------------------------
--------------------------------
<PAGE>
SWITCHBOARD INCORPORATED
NON-STATUTORY STOCK OPTION AGREEMENT
1. Grant of Option. Switchboard Incorporated, a Delaware corporation (the
---------------
"Company"), hereby grants to [NAME] (the "Optionee") an option, pursuant to the
Company's 1996 Stock Incentive Plan (the "Plan"), to purchase an aggregate of
[NO.] shares of Common Stock, $.01 par value per share, of the Company ("Common
Stock"), at a price of $[PRICE] per share, purchasable as set forth in and
subject to the terms and conditions of this option and the Plan. The date of
grant of this option is [DATE]. Except where the context otherwise requires,
------
the term "Company" shall include the parent and all present and future
subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended or replaced from time to time (the
"Code").
2. Non-Statutory Stock Option. This option is not intended to qualify as
--------------------------
an incentive stock option within the meaning of Section 422 of the Code.
3. Exercise of Option and Provisions for Termination.
-------------------------------------------------
(a) Vesting Schedule. Except as otherwise provided in this Agreement, this
----------------
option may be exercised prior to the _____ anniversary of the date of grant
(hereinafter the "Expiration Date") in installments as to not more than the
number of shares set forth in the table below during the respective installment
periods set forth in the table below.
- --------------------------------------------------------------------------------
Percentage of
Shares as to which
Exercise Period Option is Exercisable
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[insert vesting schedule]
The right of exercise shall be cumulative so that if the option is not exercised
to the maximum extent permissible during any exercise period, it shall be
exercisable, in whole or in part, with respect to all shares not so purchased at
any time prior to the Expiration Date or the earlier termination of this option.
This option may not be exercised at any time on or after the Expiration Date.
(b) Exercise Procedure. Subject to the conditions set forth in this
------------------
Agreement, this option shall be exercised by the Optionee's delivery of written
notice of exercise to the Treasurer of the Company, specifying the number of
shares to be purchased and the purchase price to be paid therefor and
accompanied by payment in full in accordance with Section 4. Such exercise
shall be effective upon receipt by the Treasurer of the Company of such written
notice together with the required payment. The Optionee may purchase less than
the number of shares covered hereby, provided that no partial exercise of this
option may be for any fractional share or for fewer than ten whole shares.
<PAGE>
(c) Continuous Relationship with the Company Required. This option may not
-------------------------------------------------
be exercised unless the Optionee, at the time he or she exercises this option,
is, and has been at all times since the date of grant of this option, an
employee, officer or director of, or consultant or advisor to, the Company (an
"Eligible Optionee").
(d) Termination of Employment. If the Optionee ceases to be employed by
-------------------------
the Company for any reason (including without limitation death, disability, or
voluntary or involuntary termination), then the right to exercise this option
shall terminate immediately upon such cessation.
4. Payment of Purchase Price.
-------------------------
(a) Method of Payment. Payment of the purchase price for shares purchased
-----------------
upon exercise of this option shall be made by delivery of cash or a check in an
amount equal to the exercise price of such option or, with the prior consent of
the Company (which may be withheld in its sole discretion), by (A) delivery of
shares of Common Stock owned by the Optionee for at least six months, valued at
their fair market value, as determined in (b) below, (B) delivery of a
promissory note of the Optionee to the Company on terms determined by the Board,
(C) delivery of an irrevocable undertaking by a broker to deliver promptly to
the Company sufficient funds to pay the exercise price or delivery of
irrevocable instructions to a broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price, (D) payment of such other lawful
consideration as the Board may determine, or (E) any combination of the
foregoing.
(b) Valuation of Shares or Other Non-Cash Consideration Tendered in Payment
-----------------------------------------------------------------------
of Purchase Price. For the purposes hereof, the fair market value of any share
- -----------------
of the Company's Common Stock or other non-cash consideration which may be
delivered to the Company in exercise of this option shall be determined in good
faith by the Board of Directors of the Company.
(c) Delivery of Shares Tendered in Payment of Purchase Price. If the
--------------------------------------------------------
Optionee exercises this option by delivery of shares of Common Stock of the
Company, the certificate or certificates representing the shares of Common Stock
of the Company to be delivered shall be duly executed in blank by the Optionee
or shall be accompanied by a stock power duly executed in blank suitable for
purposes of transferring such shares to the Company. Fractional shares of
Common Stock of the Company will not be accepted in payment of the purchase
price of shares acquired upon exercise of this option.
(d) Restrictions on Use of Option Stock. Notwithstanding the foregoing, no
-----------------------------------
shares of Common Stock of the Company may be tendered in payment of the purchase
price of shares purchased upon exercise of this option if the shares to be so
tendered were acquired within six (6) months before the date of such tender,
through the exercise of an option granted under the Plan or any other stock
option or restricted stock plan of the Company.
<PAGE>
5. Delivery of Shares; Compliance With Securities Laws, Etc.
--------------------------------------------------------
(a) General. The Company shall, upon payment of the option price for
-------
the number of shares purchased and paid for, make prompt delivery of such shares
to the Optionee, provided that if any law or regulation requires the Company to
take any action with respect to such shares before the issuance thereof, then
the date of delivery of such shares shall be extended for the period necessary
to complete such action.
(b) Compliance With Securities Laws, Etc. The Company will not be
------------------------------------
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restriction from shares previously delivered under the Plan (i) until all
conditions of the option have been satisfied or removed, (ii) until, in the
opinion of the Company's counsel, all applicable federal and state laws and
regulation have been complied with, (iii) if the outstanding Stock is at the
time listed on any stock exchange, until the shares to be delivered have been
listed or authorized to be listed on such exchange upon official notice of
issuance, and (iv) until all other legal matters in connection with the issuance
and delivery of such shares have been approved by the Company's counsel.
6. Nontransferability of Option. This option is personal and no rights
----------------------------
granted hereunder may be transferred, assigned, pledged or hypothecated in any
way (whether by operation of law or otherwise) nor shall any such rights be
subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this option or of
such rights contrary to the provisions hereof, or upon the levy of any
attachment or similar process upon this option or such rights, this option and
such rights shall, at the election of the Company, become null and void.
7. Proxy. The Optionee hereby appoints Banyan Systems Incorporated, a
-----
Massachusetts corporation, and/or its designee(s) ("Banyan"), as the Optionee's
attorney-in-fact and proxy, with full power of substitution, for and in the
Optionee's name, to vote, express consent or disapproval, or otherwise act in
such manner (including pursuant to written consent) and upon such matters as
Banyan Systems Incorporated or its designee(s), proxy or substitute(s) shall, in
its or their sole discretion, deem proper with respect to any and all of the
shares issued upon any exercise of this option or issued in respect to such
shares as a stock dividend, stock split or otherwise (collectively, for purposes
of Sections 7, 8 and 9 hereof, the "Shares"). The proxy granted hereby shall be
irrevocable and may be exercised at any meeting or in respect of any written
consent of stockholders. This proxy is coupled with an interest sufficient in
law to support such proxy. This proxy shall remain in full force and effect and
be enforceable against any donee, transferee or assignee of the stock. In
addition to any other applicable limitations pursuant to the terms of this
option, the Optionee agrees not to sell, assign, transfer, loan, tender, pledge,
hypothecate, exchange, encumber or otherwise dispose of, or issue an option or
call with respect to, any of the Shares, or impair such Shares, in each case
unless, and as a condition precedent thereto, the transferee of such Shares
executes and delivers to Banyan an agreement to be bound by the terms of this
Section 7. Any purported transfer in violation of this Section 7 shall be null
and void and shall not be recognized by the Company or reflected on the stock
records of the Company. The Optionee shall cause the Company to require any
certificates representing any and all Shares issued upon any exercise of this
option to bear a legend referencing the restrictions on transfer set for in this
Section 7, which legend shall be subject to
<PAGE>
the approval of Banyan. Notwithstanding anything to the contrary in the
foregoing, the provisions of, including, without limitation, the proxy appointed
by, this Section 7 shall terminate upon the closing of the Company's initial
public offering, underwritten by a nationally recognized underwriter, pursuant
to an effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act").
8. Repurchase of Shares Upon Termination of Employment. The following
---------------------------------------------------
repurchase provisions shall apply to any and all Shares;
(a) Repurchase Rights. If the Optionee for any reason whatsoever
-----------------
(including without limitation death, disability, or voluntary or involuntary
termination) ceases to be employed by the Company prior to the date specified in
Section 8(d) below for the expiration of these restrictions, then during the 90-
day period following such termination the Company may elect, by written notice
delivered to the Optionee, to repurchase all or any portion of the Shares, at a
price per share equal to the fair market value of such Shares as of the close of
business on the date of termination of the Optionee's employment. Such fair
market value shall be determined by mutual agreement of the Company and the
Optionee. Failing such agreement between the Optionee and the Company within 30
days of the date of the Company's notice electing to repurchase such Shares, the
fair market value of such Shares shall be determined by three appraisers, one
designated within five days after the termination of said 30-day period by the
Optionee or his or her legal representatives (which appraiser shall not be the
Optionee or his or her legal representative), one within said period of five
days by the Company (which appraiser shall not be an officer, director or
employee of the Company) and the third within five days after said appointment
last occurring by the two appraisers so chosen. Successor appraisers, if any
shall be required, shall be appointed, within a reasonable time, as nearly as
may be in the manner provided as to the related original appointment. No
appointment shall be deemed as having been accomplished unless such appraiser
shall have accepted in writing his appointment as such within the time limited
for his appointment. Notice of each appointment of an appraiser shall be given
promptly to the other parties in interest. Any expenses relating to the
appointment and service of an appraiser shall be paid by the party appointing
such appraiser or, in the case of the appraiser appointed by the appraisers
chosen by the Company and the Optionee, shall be paid by the Company. Said
appraisers shall proceed promptly to determine the fair market value of said
Share or Shares by agreement of any two of the appraisers, which shall be
conclusive upon all parties in interest in such Shares. Promptly following such
determination, the appraisers shall mail or deliver such notice of such
determination to the Optionee and the Company.
(b) Repurchase Procedure. Upon notice from the Company of exercise of
--------------------
its rights under this Section 8 and determination of the purchase price for the
Shares so repurchased, the Optionee shall transfer the Shares or appropriate
part thereof to the Company against payment by the Company of the purchase price
therefor. If upon the expiration of the 90-day period following the Optionee's
termination of employment the Company shall have failed to elect to repurchase
all of the Shares, the repurchase rights with respect to the Shares not so
elected to be repurchased imposed by this Section 8 shall terminate, and the
Optionee or his or her legal representatives may thereafter transfer such
Shares. The Optionee or his or her legal representatives may in no event
transfer any Shares prior thereto, other than to the Company.
<PAGE>
(c) Failure of Optionee to Comply. If the Optionee fails to comply
-----------------------------
with any of the provisions of this Section 8, the Company, at its option and in
addition to its other remedies, may suspend the rights of the Optionee to vote
and to receive dividends on the Shares, or may refuse to register on its books
any transfer or change in the ownership of the Shares or in the right to vote
thereon, until the provisions of this Section 8 are complied with to the
satisfaction of the Company.
(d) Expiration. The restriction contained in this Section 8 shall
----------
expire upon the closing of the Company's initial public offering, underwritten
by a nationally recognized underwriter, pursuant to an effective registration
statement under the Securities Act (such expiration date shall be referred to
herein as the "Expiration Date").
(e) Safekeeping. The Optionee acknowledges that the Company may, in
-----------
its discretion, retain for safekeeping stock certificates representing all
Shares purchased hereunder by the Optionee. The Optionee further acknowledges
that the Company may, to insure that the Optionee complies with the restriction
of this Section 8, continue to retain such stock certificates until the earlier
of the Expiration Date or the date of expiration of these repurchase rights
under Section 8(b) above. At the time of any exercise of this option, in whole
or in part, the Optionee shall execute such further agreement as the Company may
require to implement the foregoing.
9. Right of First Refusal.
----------------------
(a) General. The Optionee shall not sell, assign, pledge, or in any
-------
manner transfer any of the Shares or any right or interest therein, whether
voluntarily or by operation of law, or by gift or otherwise, except by a
transfer which meets the requirements of the provisions of this Section 9.
(b) Restrictions on Transfer. If at any time or from time to time the
------------------------
Optionee intends to sell or transfer any Shares to a third party, the Optionee
shall provide notice thereof to the Company prior to such transfer (which in the
case of a sale shall include a bona fide purchase agreement with a viable
purchaser). The Company shall have an option for 30 days following the date of
receipt of the Optionee's notice to purchase such Shares on the terms upon which
the Shares were to be purchased by or transferred to the third party by the
Optionee. If the Company does not exercise its right of first refusal under
this Section 9(b) with respect to such proposed sale or transfer within such 30-
day period, the Optionee shall be free to sell or transfer such Shares to the
third party identified in the Optionee's notice for a period of 45 days after
the expiration of the 30-day period following the date of receipt of the
Optionee's notice. Such sale or transfer must be on terms no more favorable to
the recipient than those set forth in the Optionee's notice. In no event may
Shares be sold or transferred to any then-current competitor of the Company.
Any transfer or sale of Shares by the Optionee will be conditional upon the
recipient acknowledging in writing the option set forth in this Section 9(b) and
the other restrictions to which the Shares are subject.
(c) Failure of Optionee to Comply. If the Optionee's notice in
-----------------------------
respect of any Shares is not received by the Company as provided in Section 9(b)
above, or if the Optionee fails to comply with the provisions of Section 9(b)
above in respect of any such Shares in any other
<PAGE>
regard, the Company, at its option and in addition to its other remedies, may
suspend the rights to vote or to receive dividends on said Shares, or may refuse
to register on its books any transfer or change in ownership of said Shares or
in the right to vote thereon, until the provisions of Section 9(b) are complied
with to the satisfaction of the Company; and if the required Optionee's notice
is not received by the Company after written demand by the Company, the Company
may also independently proceed as though a proper Optionee's notice has been
received at the expiration of ten days after mailing such demand, and, if the
Company exercises its rights under Section 9(b) with respect to said Shares or
any of them, the Shares specified shall be transferred accordingly.
(d) Expiration. The Company's right of first refusal contained in
----------
this Section 9 with respect to any sale or transfer of Shares shall expire upon
the Expiration Date.
10. No Special Employment Rights. Nothing contained in the Plan or this
----------------------------
option shall be construed or deemed by any person under any circumstances to
bind the Company to continue the employment of the Optionee for the period
within which this option may be exercised.
11. Rights as a Shareholder. The Optionee shall have no rights as a
-----------------------
shareholder with respect to any shares which may be purchased by exercise of
this option (including, without limitation, any rights to receive dividends or
non-cash distributions with respect to such shares) unless and until a
certificate representing such shares is duly issued and delivered to the
Optionee. No adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock certificate is issued.
12. Adjustment Provisions.
---------------------
(a) General. In the event of a consolidation, merger or other
-------
reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (an "Acquisition") or in the event of a liquidation of the
Company, the Board of Directors of the Company or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions as to this option: (i) provide
that this option shall be assumed, or a substantially equivalent option shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof) on such terms as the Board determines to be appropriate, (ii) upon
written notice to the Optionee, provide that if unexercised, this option will
terminate immediately prior to the consummation of such transaction unless
exercised by the Optionee within a specified period following the date of such
notice, (iii) in the event of an Acquisition under the terms of which holders of
the Common Stock of the Company will receive upon consummation thereof a cash
payment for each share surrendered in the Acquisition (the "Acquisition Price"),
make or provide for a cash payment to the Optionee equal to the difference
between (A) the Acquisition Price times the number of shares of Common Stock
subject to outstanding options (to the extent then exercisable at prices not in
excess of the Acquisition Price) and (B) the aggregate exercise price of all
such outstanding options in exchange for the termination of such options, and
(iv) provide that all or any outstanding options shall become exercisable or
realizable in full prior to the effective date of such Acquisition.
<PAGE>
(b) Board Authority to Make Adjustments. Any adjustments under this
-----------------------------------
Section 12 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued pursuant to this
option on account of any such adjustments.
13. Withholding Taxes. The Company's obligation to deliver shares upon
-----------------
the exercise of this option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements.
14. Investment Representations; Legends.
-----------------------------------
(a) Representations. The Optionee represents, warrants and covenants
---------------
that:
(i) Any shares purchased upon exercise of this option shall be
acquired for the Optionee's account for investment only and not with a view
to, or for sale in connection with, any distribution of the shares in
violation of the Securities Act or any rule or regulation under the
Securities Act.
(ii) The Optionee has had such opportunity as he or she has deemed
adequate to obtain from representatives of the Company such information as
is necessary to permit the Optionee to evaluate the merits and risks of his
or her investment in the Company.
(iii) The Optionee is able to bear the economic risk of holding
shares acquired pursuant to the exercise of this option for an indefinite
period.
(iv) The Optionee understands that (A) the shares acquired pursuant to
the exercise of this option will not be registered under the Securities Act
and are "restricted securities" within the meaning of Rule 144 under the
Securities Act; (B) such shares cannot be sold, transferred or otherwise
disposed of unless they are subsequently registered under the Securities
Act or an exemption from registration is then available; (C) in any event,
an exemption from registration under Rule 144 or otherwise under the
Securities Act may not be available for at least two years and even then
will not be available unless a public market then exists for the Common
Stock, adequate information concerning the Company is then available to the
public and other terms and conditions of Rule 144 are complied with; and
(D) there is now no registration statement on file with the Securities and
Exchange Commission with respect to any stock of the Company and the
Company has no obligation or current intention to register any shares
acquired pursuant to the exercise of this option under the Securities Act.
(v) The Optionee agrees that, if the Company offers for the first time
any of its Common Stock for sale pursuant to a registration statement under
the Securities Act, the Optionee will not, without the prior written
consent of the Company, publicly offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any shares purchased upon exercise of
this option for a period of 180 days after the effective date of such
registration statement.
<PAGE>
By making payment upon exercise of this option, the Optionee shall be deemed to
have reaffirmed, as of the date of such payment, the representations made in
this Section 14.
(b) Legends on Stock Certificates. All stock certificates
-----------------------------
representing shares of Common Stock issued to the Optionee upon exercise of this
option shall have affixed thereto legends substantially in the following forms,
in addition to any other legends required by applicable state law:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 and may not be transferred,
sold or otherwise disposed of in the absence of an effective registration
statement with respect to the shares evidenced by this certificate, filed
and made effective under the Securities Act of 1933, or an opinion of
counsel satisfactory to the Company to the effect that registration under
such Act is not required."
"The shares of stock represented by this certificate are subject to certain
restrictions on transfer and repurchase rights contained in an Option
Agreement, a copy of which will be furnished upon request by the issuer."
To ensure compliance with the terms of this agreement, the Company may issue to
its transfer agent appropriate stop transfer instructions with respect to the
Shares.
15. Miscellaneous.
-------------
(a) The Board may amend, modify or terminate any outstanding option,
including substituting therefor another option of the same or a different type,
changing the date of exercise or realization, provided that the Optionee's
consent to such action shall be required unless the Board determines that the
action, taking into account any related action, would not materially and
adversely affect the Optionee. The Board may at any time accelerate the time at
which all or any part of an Option may be exercised.
(b) All notices under this option shall be mailed or delivered by hand
to the parties at their respective addresses set forth beneath their names below
or at such other address as may be designated in writing by either of the
parties to one another.
(c) This option shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
Date of Grant: SWITCHBOARD INCORPORATED
[DATE]
By:
----------------------------------
Title:
-------------------------------
Address: 115 Flanders Road
Westboro, MA 01581
<PAGE>
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy
of the Company's 1996 Stock Incentive Plan.
OPTIONEE:
--------------------------------
Address:
--------------------------------
--------------------------------
<PAGE>
Exhibit 10.2
------------
SWITCHBOARD INCORPORATED
1999 Stock Incentive Plan
1. Purpose
-------
The purpose of this 1999 Stock Incentive Plan (the "Plan") of Switchboard
Incorporated, a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any of the Company's present or future subsidiary corporations as defined in
Section 424(f) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the "Code").
2. Eligibility
-----------
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant."
3. Administration, Delegation
--------------------------
(a) Administration by Board of Directors. The Plan will be administered by
------------------------------------
the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
(b) Delegation to Executive Officers. To the extent permitted by
--------------------------------
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board
<PAGE>
may determine, provided that the Board shall fix the maximum number of shares
subject to Awards and the maximum number of shares for any one Participant to be
made by such executive officers.
(c) Appointment of Committees. To the extent permitted by applicable
-------------------------
law,the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "Committee"). All references in
the Plan to the "Board" shall mean the Board or a Committee of the Board or the
executive officer referred to in Section 3(b) to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.
4. Stock Available for Awards
--------------------------
(a) Number of Shares. Subject to adjustment under Section 8, Awards may be
----------------
made under the Plan for up to the sum of (i) One Million Five Hundred Thousand
(1,500,000) shares of common stock, $0.01 par value per share, of the Company
(the "Common Stock") plus (ii) such additional number of shares of Common Stock
(up to 3,000,000 shares) as is equal to the sum of (x) the number of shares
which remain available for grant under the Company's 1996 Stock Incentive Plan
(the "1996 Plan") upon the closing of the Company's initial public offering and
(y) the number of shares subject to awards granted under the 1996 Plan which are
not actually issued pursuant to such awards because such awards expire or are
terminated, surrendered or canceled without having been fully exercised or are
forfeited in whole or in part or otherwise result in any Common Stock not being
issued. If any Award expires or is terminated, surrendered or canceled without
having been fully exercised or is forfeited in whole or in part or results in
any Common Stock not being issued, the unused Common Stock covered by such Award
shall again be available for the grant of Awards under the Plan, subject,
however, in the case of Incentive Stock Options (as hereinafter defined), to any
limitation required under the Code. Shares issued under the Plan may consist in
whole or in part of authorized but unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 8, for
---------------------
Awards granted after the Common Stock is registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the maximum number of
shares of Common Stock with respect to which an Award may be granted to any
Participant under the Plan shall be 1,000,000 per calendar year. The per-
Participant limit described in this Section 4(b) shall be construed and applied
consistently with Section 162(m) of the Code ("Section 162(m)").
5. Stock Options
-------------
-2-
<PAGE>
(a) General. The Board may grant options to purchase Common Stock (each,
-------
an "Option") and determine the number of shares of Common Stock to be covered
by each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive
Stock Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option."
(b) Incentive Stock Options. An Option that the Board intends to be an
-----------------------
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of
Section 422 of the Code. The Company shall have no liability to a Participant,
or any other party, if an Option (or any part thereof) which is intended to be
an Incentive Stock Option is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at
--------------
the time each Option is granted and specify it in the applicable option
agreement.
(d) Duration of Options. Each Option shall be exercisable at such times
-------------------
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
(e) Exercise of Option. Options may be exercised by delivery to the
------------------
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an
----------------------
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise
provide in an option agreement, by (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price;
-3-
<PAGE>
(3) when the Common Stock is registered under the Exchange Act, by
delivery of shares of Common Stock owned by the Participant valued at their fair
market value as determined by (or in a manner approved by) the Board in good
faith ("Fair Market Value"), provided (i) such method of payment is then
permitted under applicable law and (ii) such Common Stock was owned by the
Participant at least six months prior to such delivery;
(4) to the extent permitted by the Board, in its sole discretion by
(i) delivery of a promissory note of the Participant to the Company on terms
determined by the Board, or (ii) payment of such other lawful consideration as
the Board may determine; or
(5) by any combination of the above permitted forms of payment.
6. Restricted Stock
----------------
(a) Grants. The Board may grant Awards entitling recipients to acquire
------
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
--------------------
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. Other Stock-Based Awards
------------------------
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
-4-
<PAGE>
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
8. Adjustments for Changes in Common Stock and Certain Other Events
----------------------------------------------------------------
(a) Changes in Capitalization. In the event of any stock split, reverse
-------------------------
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding Award shall
be appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 8(a)
applies and Section 8(c) also applies to any event, Section 8(c) shall be
applicable to such event, and this Section 8(a) shall not be applicable.
(b) Liquidation or Dissolution. In the event of a proposed liquidation or
--------------------------
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any Restricted Stock Award or other Award granted under the Plan
at the time of the grant of such Award.
(c) Acquisition Events
------------------
(1) Definition. An "Acquisition Event" shall mean: (a) any merger or
----------
consolidation of the Company with or into another entity as a result of which
the Common Stock is converted into or exchanged for the right to receive cash,
securities or other property or (b) any exchange of shares of the Company for
cash, securities or other property pursuant to a statutory share exchange
transaction.
(2) Consequences of an Acquisition Event on Options. Upon the
-----------------------------------------------
occurrence of an Acquisition Event, or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall provide that all
outstanding Options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof). For purposes hereof, an Option shall be considered to be assumed if,
following consummation of the Acquisition Event, the
-5-
<PAGE>
Option confers the right to purchase, for each share of Common Stock subject to
the Option immediately prior to the consummation of the Acquisition Event, the
consideration (whether cash, securities or other property) received as a result
of the Acquisition Event by holders of Common Stock for each share of Common
Stock held immediately prior to the consummation of the Acquisition Event (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares of Common Stock);
provided, however, that if the consideration received as a result of the
Acquisition Event is not solely common stock of the acquiring or succeeding
corporation (or an affiliate thereof), the Company may, with the consent of the
acquiring or succeeding corporation, provide for the consideration to be
received upon the exercise of Options to consist solely of common stock of the
acquiring or succeeding corporation (or an affiliate thereof) equivalent in Fair
Market Value to the per share consideration received by holders of outstanding
shares of Common Stock as a result of the Acquisition Event.
Notwithstanding the foregoing, if the acquiring or succeeding
corporation (or an affiliate thereof) does not agree to assume, or substitute
for, such Options, then the Board shall, upon written notice to the
Participants, provide that all then outstanding Options will become vested and
exercisable with respect to 25% of their unvested shares as of a specified time
prior to the Acquisition Event and all of such Options (whether or not then
exercisable) will terminate immediately prior to the consummation of such
Acquisition Event, except to the extent exercised by the Participants before the
consummation of such Acquisition Event; provided, however, that in the event of
an Acquisition Event under the terms of which holders of Common Stock will
receive upon consummation thereof a cash payment for each share of Common Stock
surrendered pursuant to such Acquisition Event (the "Acquisition Price"), then
the Board may instead provide that all outstanding Options shall terminate upon
consummation of such Acquisition Event and that each Participant shall receive,
in exchange therefor, a cash payment equal to the amount (if any) by which (A)
the Acquisition Price multiplied by the number of shares of Common Stock with
respect to which such outstanding Options are then exercisable (including the
25% additional vested shares the vesting of which accelerated pursuant to the
preceding clauses of this paragraph), exceeds (B) the aggregate exercise price
of such Options.
(3) Consequences of an Acquisition Event on Restricted Stock Awards.
---------------------------------------------------------------
Upon the occurrence of an Acquisition Event, the repurchase and other rights of
the Company under each outstanding Restricted Stock Award shall be assumed or
substituted by and shall inure to the benefit of the Company's successor and
shall apply to the cash, securities or other property which the Common Stock was
converted into or exchanged for pursuant to such Acquisition Event in the same
manner and to the same extent as they applied to the Common Stock subject to
such Restricted Stock Award.
-6-
<PAGE>
(4) Consequences of an Acquisition Event on Other Awards. The Board
----------------------------------------------------
shall specify the effect of an Acquisition Event on any other Award granted
under the Plan at the time of the grant of such Award.
9. General Provisions Applicable to Awards
---------------------------------------
(a) Transferability of Awards. Except as the Board may otherwise determine
-------------------------
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) Documentation. Each Award shall be evidenced by a written instrument
-------------
in such form as the Board shall determine. Each Award may contain terms and
conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each Award
----------------
may be made alone or in addition or in relation to any other Award. The terms
of each Award need not be identical, and the Board need not treat Participants
uniformly.
(d) Termination of Status. The Board shall determine the effect on an
---------------------
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) Withholding. Each Participant shall pay to the Company, or make
-----------
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, when the Common Stock is registered under the Exchange Act,
Participants may, to the extent then permitted under applicable law, satisfy
such tax obligations in whole or in part by delivery of shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(f) Amendment of Award. The Board may amend, modify or terminate any
------------------
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and
-7-
<PAGE>
converting an Incentive Stock Option to a Nonstatutory Stock Option, provided
that the Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
(g) Conditions on Delivery of Stock. The Company will not be obligated to
-------------------------------
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) Acceleration. The Board may at any time provide that any Options
------------
shall become immediately exercisable in full or in part, that any Restricted
Stock Awards shall be free of restrictions in full or in part or that any other
Awards may become exercisable in full or in part or free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.
10. Miscellaneous
-------------
(a) No Right To Employment or Other Status. No person shall have any
--------------------------------------
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
------------------------
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock
-8-
<PAGE>
acquired upon such Option exercise, notwithstanding the fact that such shares
were not outstanding as of the close of business on the record date for such
stock dividend.
(c) Effective Date and Term of Plan. The Plan shall become effective on
-------------------------------
the date on which it is adopted by the Board, but no Award granted to a
Participant that is intended to comply with Section 162(m) shall become
exercisable, vested or realizable, as applicable to such Award, unless and until
the Plan has been approved by the Company's stockholders to the extent
stockholder approval is required by Section 162(m) in the manner required under
Section 162(m) (including the vote required under Section 162(m)). No Awards
shall be granted under the Plan after the completion of ten years from the
earlier of (i) the date on which the Plan was adopted by the Board or (ii) the
date the Plan was approved by the Company's stockholders, but Awards previously
granted may extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
-----------------
or any portion thereof at any time, provided that to the extent required by
Section 162(m), no Award granted to a Participant that is intended to comply
with Section 162(m) after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award, unless and until such
amendment shall have been approved by the Company's stockholders as required by
Section 162(m) (including the vote required under Section 162(m)).
(e) Governing Law. The provisions of the Plan and all Awards made
-------------
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
-9-
<PAGE>
SWITCHBOARD INCORPORATED
Incentive Stock Option Agreement
Granted Under 1999 Stock Incentive Plan
1. Grant of Option.
---------------
This agreement evidences the grant by Switchboard Incorporated, a Delaware
corporation (the "Company"), on [____________, _____] (the "Grant Date") to
[_______________], an employee of the Company (the "Participant"), of an option
to purchase, in whole or in part, on the terms provided herein and in the
Company's 1999 Stock Incentive Plan (the "Plan"), a total of
[__________________] shares (the "Shares") of common stock, $0.01 par value per
share, of the Company ("Common Stock") at $[__________] per Share. Unless
earlier terminated, this option shall expire on [_______] (the "Final Exercise
Date").
It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended and any regulations promulgated thereunder (the "Code"). Except
as otherwise indicated by the context, the term "Participant", as used in this
option, shall be deemed to include any person who acquires the right to exercise
this option validly under its terms.
2. Vesting Schedule.
----------------
This option will become exercisable ("vest") as to 25% of the original
number of Shares on the first anniversary of the Grant Date and as to an
additional 6.25% of the original number of Shares at the end of each successive
three-month period following the first anniversary of the Grant Date until the
fourth anniversary of the Grant Date.
The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
A-1-
<PAGE>
3. Exercise of Option.
------------------
(a) Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share or for fewer than ten whole shares.
(b) Continuous Relationship with the Company Required. Except as otherwise
-------------------------------------------------
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the Grant Date, an employee, officer or director of, or
consultant or advisor to, the Company or any parent or subsidiary of the Company
as defined in Section 424(e) or (f) of the Code (an "Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant
--------------------------------------------
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
30 days after such cessation (but in no event after the Final Exercise Date),
provided, that, this option shall be exercisable only to the extent that the
- -------- ----
Participant was entitled to exercise this option on the date of such cessation.
Notwithstanding the foregoing, if the Participant, prior to the Final Exercise
Date, violates the non-competition or confidentiality provisions of the Plan or
any employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon such violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
----------------------------------------
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of six
months following the date of death or disability of the Participant by the
Participant, provided, that, this option shall be exercisable only to the extent
-------- ----
that this option was exercisable by the Participant on the date of his or her
death or disability, and further provided that this option shall not be
exercisable after the Final Exercise Date.
(e) Discharge for Cause. If the Participant, prior to the Final Exercise
-------------------
Date, is discharged by the Company for "cause" (as defined below), the right to
exercise this option shall terminate immediately upon the effective date of such
discharge. "Cause" shall mean, with respect to any Participant who has entered
into an employment or
A-2-
<PAGE>
consulting agreement with the Company, a material breach of such agreement by
the Participant, or if such agreement provides for termination for cause, the
definition of "cause" set forth in such agreement. With respect to any other
Participant, "cause" shall mean (i) conviction or pleading guilty (including a
plea of nolo contendere) with respect to the commission of a felony, (ii) acts
of dishonesty or moral turpitude which are materially detrimental to the Company
and/or its affiliates as determined in good faith by the Board, (iii) failure of
the Participant to obey the reasonable and lawful orders of the Board or the
chief executive officer of the Company after written demand that the Participant
do so, (iv) gross negligence by the Participant in the performance of, or wilful
disregard by the Participant of, the Participant's obligations to the Company,
or (v) the breach by the Participant of any of the Participant's obligations of
confidentiality with respect to the Company. The Participant shall be considered
to have been discharged for "cause" if the Company determines, within 30 days
after the Participant's resignation, that discharge for cause was warranted.
4. Withholding.
-----------
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
5. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
6. Disqualifying Disposition.
-------------------------
If the Participant disposes of Shares acquired upon exercise of this option
within two years from the Grant Date or one year after such Shares were acquired
pursuant to exercise of this option, the Participant shall notify the Company in
writing of such disposition.
7. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
A-3-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take effect
as a sealed instrument.
SWITCHBOARD INCORPORATED
Dated: _________ By:______________________
Name:
Title:
A-4-
<PAGE>
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy of
the Company's 1999 Stock Incentive Plan.
PARTICIPANT:
__________________________________
Print Name:
Address:__________________________
__________________________
A-5-
<PAGE>
SWITCHBOARD INCORPORATED
Nonstatutory Stock Option Agreement
Granted Under 1999 Stock Incentive Plan
1. Grant of Option.
---------------
This agreement evidences the grant by Switchboard Corporation, a Delaware
corporation (the "Company"), on [______________, _____] (the "Grant Date") to
[________________], an [employee], [consultant], [director] of the Company (the
"Participant"), of an option to purchase, in whole or in part, on the terms
provided herein and in the Company's 1999 Stock Incentive Plan (the "Plan"), a
total of [________] shares (the "Shares") of common stock, $0.01 par value per
share, of the Company ("Common Stock") at $[__________] per Share. Unless
earlier terminated, this option shall expire on [_______] (the "Final Exercise
Date").
It is intended that the option evidenced by this agreement shall not be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended and any regulations promulgated thereunder (the "Code"). Except
as otherwise indicated by the context, the term "Participant", as used in this
option, shall be deemed to include any person who acquires the right to exercise
this option validly under its terms.
2. Vesting Schedule.
----------------
This option will become exercisable ("vest") as to 25% of the original
number of Shares on the first anniversary of the Grant Date and as to an
additional 6.25% of the original number of Shares at the end of each successive
three-month period following the first anniversary of the Grant Date until the
fourth anniversary of the Grant Date.
The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
B-1-
<PAGE>
3. Exercise of Option.
------------------
(a) Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share or for fewer than ten whole shares.
(b) Continuous Relationship with the Company Required. Except as otherwise
-------------------------------------------------
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the Grant Date, an employee, officer or director of, or
consultant or advisor to, the Company or any parent or subsidiary of the Company
as defined in Section 424(e) or (f) of the Code (an "Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant
--------------------------------------------
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
30 days after such cessation (but in no event after the Final Exercise Date),
provided, that, this option shall be exercisable only to the extent that the
- -------- ----
Participant was entitled to exercise this option on the date of such cessation.
Notwithstanding the foregoing, if the Participant, prior to the Final Exercise
Date, violates the non-competition or confidentiality provisions of the Plan or
any employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon such violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
----------------------------------------
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of six
months following the date of death or disability of the Participant, by the
Participant, provided, that, this option shall be exercisable only to the extent
-------- ----
that this option was exercisable by the Participant on the date of his or her
death or disability, and further provided that this option shall not be
exercisable after the Final Exercise Date.
(e) Discharge for Cause. If the Participant, prior to the Final Exercise
-------------------
Date, is discharged by the Company for "cause" (as defined below), the right to
exercise this option shall terminate immediately upon the effective date of such
discharge. "Cause" shall mean, with respect to any Participant who has entered
into an employment or
B-2-
<PAGE>
consulting agreement with the Company, a material breach of such agreement by
the Participant, or if such agreement provides for termination for cause, the
definition of "cause" set forth in such agreement. With respect to any other
Participant, "cause" shall mean (i) conviction or pleading guilty (including a
plea of nolo contendere) with respect to the commission of a felony, (ii) acts
of dishonesty or moral turpitude which are materially detrimental to the Company
and/or its affiliates as determined in good faith by the Board, (iii) failure of
the Participant to obey the reasonable and lawful orders of the Board or the
chief executive officer of the Company after written demand that the Participant
do so, (iv) gross negligence by the Participant in the performance of, or wilful
disregard by the Participant of, the Participant's obligations to the Company,
or (v) the breach by the Participant of any of the Participant's obligations of
confidentiality with respect to the Company. The Participant shall be considered
to have been discharged for "cause" if the Company determines, within 30 days
after the Participant's resignation, that discharge for cause was warranted.
4. Withholding.
-----------
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
5. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
6. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
B-3-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take effect
as a sealed instrument.
SWITCHBOARD INCORPORATED
Dated: _____________ By:________________________
Name:
Title:
B-4-
<PAGE>
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy of
the Company's 1999 Stock Incentive Plan.
PARTICIPANT:
_____________________________
Print Name:
Address:_____________________
_____________________
B-5-
<PAGE>
Exhibit 10.3
------------
SWITCHBOARD INCORPORATED
1999 Employee Stock Purchase Plan
The purpose of this 1999 Employee Stock Purchase Plan (this "Plan") is to
provide eligible employees of Switchboard Incorporated, a Delaware corporation
(the "Company"), and certain of its subsidiaries with opportunities to purchase
shares of the Company's common stock, $0.01 par value per share (the "Common
Stock"). Three Hundred Thousand (300,000) shares of Common Stock in the
aggregate have been approved for this purpose. This Plan is intended to qualify
as an "employee stock purchase plan" as defined in Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder, and shall be interpreted consistent therewith.
1. Administration. The Plan will be administered by the Board or by a
--------------
Committee appointed by the Board (the "Committee"). The Board or the Committee
has authority to make rules and regulations for the administration of the Plan
and its interpretation and decisions with regard thereto shall be final and
conclusive.
2. Eligibility. All employees of the Company, including Directors who are
-----------
employees, and all employees of any subsidiary of the Company (as defined in
Section 424(f) of the Code) designated by the Board or the Committee from time
to time (a "Designated Subsidiary"), are eligible to participate in any one or
more of the offerings of Options (as defined in Section 9) to purchase Common
Stock under the Plan provided that:
(a) they are customarily employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and
(b) they have been employed by the Company or a Designated Subsidiary
for at least three months prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in
<PAGE>
determining the stock ownership of an employee, and all stock which the employee
has a contractual right to purchase shall be treated as stock owned by the
employee.
3. Offerings. The Company will make one or more offerings ("Offerings")
---------
to employees to purchase stock under this Plan. Offerings will begin on such
date or dates as may be established by the Board or the Committee from time to
time (the "Offering Commencement Dates"). Each Offering Commencement Date will
begin a six-month period (a "Plan Period") during which payroll deductions will
be made and held for the purchase of Common Stock at the end of the Plan Period.
The Board or the Committee may, at its discretion, choose a different Plan
Period of twelve (12) months or less for its Offerings.
4. Participation. An employee eligible on the Offering Commencement Date
-------------
of any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least 14 days prior to the applicable Offering Commencement Date. The
form will authorize a regular payroll deduction from the Compensation received
by the employee during the Plan Period. Unless an employee files a new form or
withdraws from the Plan, his deductions and purchases will continue at the same
rate for future Offerings under the Plan as long as the Plan remains in effect.
The term "Compensation" means the amount of money reportable on the employee's
Federal Income Tax Withholding Statement, excluding overtime, shift premium,
incentive or bonus awards, allowances and reimbursements for expenses such as
relocation allowances for travel expenses, income or gains on the exercise of
Company stock options or stock appreciation rights, and similar items, whether
or not shown on the employee's Federal Income Tax Withholding Statement, but
including, in the case of salespersons, sales commissions to the extent
determined by the Board or the Committee.
5. Deductions. The Company will maintain payroll deduction accounts for
----------
all participating employees. With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction, as set forth below, from the
Compensation he or she receives during the Plan Period or such shorter period
during which deductions from payroll are made. Payroll deductions may be at the
rate of 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9% or 10% of Compensation with any
change in compensation during the Plan Period to result in an automatic
corresponding change in the dollar amount withheld.
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other
employee stock purchase plan (as defined in Section 423(b) of the Code) of the
Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the
fair market value of such
-2-
<PAGE>
Common Stock (determined at the Offering Commencement Date of the Plan Period)
for each calendar year in which the Option is outstanding at any time.
6. Deduction Changes. An employee may decrease or discontinue his payroll
-----------------
deduction once during any Plan Period, by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. Interest. Interest will not be paid on any employee accounts, except
--------
to the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
8. Withdrawal of Funds. An employee may at any time prior to the close of
-------------------
business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee.
9. Purchase of Shares. On the Offering Commencement Date of each Plan
------------------
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, the largest number of whole shares of Common Stock of the Company
as does not exceed the number of shares determined by multiplying $2,083 by the
number of full months in the Offering Period and dividing the result by the
closing price (as defined below) on the Offering Commencement Date of such Plan
Period.
The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business day of such Plan Period or
(ii) the Exercise Date, whichever closing price shall be less. Such closing
price shall be (a) the closing price on any national securities exchange on
which the Common Stock is listed, (b) the closing price of the Common Stock on
the Nasdaq National Market or (c) the average of the closing bid and asked
prices in the over-the-counter-market, whichever is applicable, as published in
The Wall Street Journal. If no sales of Common Stock were made on such a day,
- -----------------------
the price of the Common Stock for purposes of clauses (a) and (b) above shall be
the reported price for the next preceding day on which sales were made.
-3-
<PAGE>
Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date and shall be deemed to have purchased from the Company the number of full
shares of Common Stock reserved for the purpose of the Plan that his accumulated
payroll deductions on such date will pay for, but not in excess of the maximum
number determined in the manner set forth above.
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of Common
------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the name
of a brokerage firm, bank or other nominee holder designated by the employee.
The Company may, in its sole discretion and in compliance with applicable laws,
authorize the use of book entry registration of shares in lieu of issuing stock
certificates.
11. Rights on Retirement, Death or Termination of Employment. In the
--------------------------------------------------------
event of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. Neither the granting of an Option to an
--------------------------
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
-4-
<PAGE>
13. Rights Not Transferable. Rights under this Plan are not transferable
-----------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. Application of Funds. All funds received or held by the Company under
--------------------
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event of
----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, and the
share limitation set forth in Section 9, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock,
such adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. Merger. If the Company shall at any time merge or consolidate with
------
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger or consolidation, and the Board or the Committee
shall take such steps in connection with such merger or consolidation as the
Board or the Committee shall deem necessary to assure that the provisions of
Section 15 shall thereafter be applicable, as nearly as reasonably may be, in
relation to the said securities or property as to which such holder of such
Option might thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participating
employees; or (c) all outstanding Options may be cancelled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such
-5-
<PAGE>
cancellation shall be given to each holder of an Option, and each holder of an
Option shall have the right to exercise such Option in full based on payroll
deductions then credited to his account as of a date determined by the Board or
the Committee, which date shall not be less than ten (10) days preceding the
effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to
---------------------
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the stockholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.
18. Insufficient Shares. In the event that the total number of shares of
-------------------
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by
-----------------------
the Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and
------------------------
deliver Common Stock under this Plan is subject to listing on a national stock
exchange or quotation on the Nasdaq National Market (to the extent the Common
Stock is then so listed or quoted) and the approval of all governmental
authorities required in connection with the authorization, issuance or sale of
such stock.
21. Governing Law. The Plan shall be governed by Delaware law except to
-------------
the extent that such law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an Option
------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. Notification upon Sale of Shares. Each employee agrees, by entering
--------------------------------
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
24. Effective Date and Approval of Shareholders. The Plan shall take
-------------------------------------------
effect upon the effectiveness of the Company's registration statement under the
Securities Act
-6-
<PAGE>
of 1933, as amended, relating to the Company's initial public offering of Common
Stock, subject to approval by the stockholders of the Company as required by
Section 423 of the Code, which approval must occur within twelve months of the
adoption of the Plan by the Board.
-7-
<PAGE>
Exhibit 10.8
------------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") dated as of June 30,
1999 is entered into by and between Switchboard Incorporated, a Delaware
corporation (the "Company"), and CBS Corporation, a Pennsylvania corporation
(the "Purchaser").
Recitals
--------
WHEREAS, the Company and the Purchaser have entered into a Common Stock and
Warrant Purchase Agreement of even date herewith (the "Purchase Agreement"); and
WHEREAS, the Company and the Purchaser desire to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Certain Definitions.
-------------------
As used in this Agreement, the following terms shall have the following
respective meanings:
"Commission" means the Securities and Exchange Commission, or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.01 par value per share, of
------------
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any successor federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
"Initial Public Offering" means the initial underwritten public
-----------------------
offering of shares of Common Stock pursuant to an effective Registration
Statement.
"Other Holders" shall have the meaning set forth in Section 2.1(c).
-------------
<PAGE>
"Prospectus" means the prospectus included in any Registration
----------
Statement, as amended or supplemented by an amendment or prospectus supplement,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
"Registration Statement" means a registration statement filed by the
----------------------
Company with the Commission for a public offering and sale of securities of the
Company (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Registration Expenses" means the expenses described in Section 2.4.
---------------------
"Registrable Shares" means (i) the Shares and any shares of Common
------------------
Stock issued or issuable upon exercise of the Warrant, (ii) any shares of Common
Stock acquired by the Purchaser pursuant to the Participation Agreement dated
the date hereof between the Purchaser and the Company, and (iii) any other
shares of Common Stock issued in respect of such shares (because of stock
splits, stock dividends, reclassifications, recapitalizations, or similar
events); provided, however, that shares of Common Stock that are Registrable
-------- -------
Shares shall cease to be Registrable Shares upon (i) any sale pursuant to a
Registration Statement or Rule 144 under the Securities Act, (ii) any
eligibility for sale pursuant to Rule 144(k) under the Securities Act or (iii)
any sale in any manner to a person or entity which, by virtue of Section 3 of
this Agreement, is not entitled to the rights provided by this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
successor federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Selling Stockholder" means any Stockholder owning Registrable Shares
-------------------
included in a Registration Statement.
"Shares" shall have the meaning specified in Section 1 of the Purchase
------
Agreement.
"Stockholders" means the Purchaser and any persons or entities to whom
------------
the rights granted under this Agreement are transferred by the Purchaser, its
successors or assigns pursuant to Section 3 hereof.
"Warrant" shall have the meaning specified in Section 1 of the
-------
Purchase Agreement.
-2-
<PAGE>
2. Registration Rights
-------------------
2.1 Required Registrations.
----------------------
(a) At any time after the first anniversary of the closing of
the Initial Public Offering, the Purchaser may request, in writing, that the
Company effect the registration on Form S-1 (or any successor form) or, if then
available to the Company, Form S-3 (or any successor form) of Registrable Shares
owned by the Purchaser having an aggregate value of at least $10,000,000 (based
on the then current market price or fair value).
(b) Upon receipt of any request for registration pursuant to
this Section 2, the Company shall promptly give written notice of such proposed
registration to all other Stockholders. Such Stockholders shall have the right,
by giving written notice to the Company within 10 days after the Company
provides its notice, to elect to have included in such registration such of
their Registrable Shares as such Stockholders may request in such notice of
election, subject in the case of an underwritten offering to the approval of the
managing underwriter as provided in Section 2.1(c) below. Thereupon, the Company
shall, as expeditiously as possible, use its reasonable best efforts to effect
the registration on an appropriate registration form of all Registrable Shares
which the Company has been requested to so register.
(c) If the Purchaser intends to distribute the Registrable
Shares covered by its request by means of an underwriting, it shall so advise
the Company as a part of its request made pursuant to Section 2.1(a), and the
Company shall include such information in its written notice referred to in
Section 2.1(b). The right of any other Stockholder to include its Registrable
Shares in such registration pursuant to Section 2.1(a) shall be conditioned upon
such other Stockholder's participation in such underwriting on the terms set
forth herein. If other holders of securities of the Company who are entitled, by
contract with the Company, to have securities included in such a registration
(the "Other Holders") request such inclusion, the Company may include the
securities of such Other Holders in such registration and underwriting on the
terms set forth herein. The Company shall (together with all Stockholders and
Other Holders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form (including,
without limitation, customary indemnification and contribution provisions on the
part of the Company) with the managing underwriter. Notwithstanding any other
provision of this Section 2.1(c), if the managing underwriter advises the
Company in writing that the inclusion of all shares requested to be registered
would adversely affect the offering, and if a limitation of the number of shares
is required, the number of shares that may be included in such registration and
underwriting shall, except as otherwise provided in any contract to which the
Company is a party, be allocated among all holders of
-3-
<PAGE>
Registrable Shares and Other Holders requesting registration in proportion, as
nearly as practicable, to the respective number of shares held by them at the
time of the request for registration made pursuant to Section 2.1(a). If any
holder of Registrable Shares or Other Holder who has requested inclusion in such
registration as provided above disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to the Company,
and the securities so withdrawn shall also be withdrawn from registration. If
the managing underwriter has not limited the number of Registrable Shares or
other securities to be underwritten, the Company may include securities for its
own account in such registration if the managing underwriter so agrees and if
the number of Registrable Shares and other securities which would otherwise have
been included in such registration and underwriting will not thereby be limited.
(d) The Company shall have the right to select the managing
underwriter(s) for any underwritten offering requested pursuant to Section
2.1(a), subject to the approval of the Purchaser, which approval will not be
unreasonably withheld.
(e) The Company shall not be required to effect more than two
(2) registrations pursuant to Section 2.1(a). In addition, the Company shall not
be required to effect any registration within six months after the effective
date of any other Registration Statement of the Company. For purposes of this
Section 2.1(e), a Registration Statement shall not be counted until such time as
such Registration Statement has been declared effective by the Commission
(unless the Purchaser withdraws its request for such registration (other than as
a result of material information concerning the business or financial condition
of the Company which is first made known to the Purchaser after the date on
which such registration was requested) and elect not to pay the Registration
Expenses therefor pursuant to Section 2.4). In the event the Purchaser is, as a
result of the cut-back provisions in Section 2.1(c), prohibited from selling at
least 50% of the Registrable Shares with respect to which it requested
registration, then such registration shall not count as a registration under
this Section 2.1(e).
(f) If at the time of any request to register Registrable Shares
by the Purchaser pursuant to this Section 2.1, the Company is engaged or has
plans to engage in a registered public offering or is engaged in any other
activity which, in the good faith determination of the Company's Board of
Directors, would be adversely affected by the requested registration, then the
Company, upon furnishing a certificate signed by an executive officer or the
Chairman of the Board of the Company stating that the Board has made the
foregoing determination, may at its option direct that such request be delayed
for a period not in excess of 75 days from the date of such request;
-4-
<PAGE>
provided, however that the Company may not utilize this right more than twice in
- -------- -------
any twelve month period.
2.2 Incidental Registration.
-----------------------
(a) Whenever the Company proposes to file a Registration
Statement (other than a Registration Statement filed pursuant to Section 2.1 and
a Registration Statement covering shares to be sold solely for the account of
Other Holders in which the Company is contractually prohibited from including
Registrable Shares) at any time and from time to time, it will, prior to such
filing, give written notice to all Stockholders of its intention to do so;
provided, that no such notice need be given if no Registrable Shares are to be
- --------
included therein as a result of a determination of the managing underwriter
pursuant to Section 2.2(b). Upon the written request of a Stockholder or
Stockholders given within 10 days after the Company provides such notice (which
request shall state the intended method of disposition of such Registrable
Shares), the Company shall use its best efforts to cause all Registrable Shares
which the Company has been requested by such Stockholder or Stockholders to
register to be registered under the Securities Act to the extent necessary to
permit their sale or other disposition in accordance with the intended methods
of distribution specified in the request of such Stockholder or Stockholders;
provided that the Company shall have the right to postpone or withdraw any
registration effected pursuant to this Section 2.2 without obligation to any
Stockholder.
(b) If the registration for which the Company gives notice
pursuant to Section 2.2(a) is a registered public offering involving an
underwriting, the Company shall so advise the Stockholders as a part of the
written notice given pursuant to Section 2.2(a). In such event, the right of any
Stockholder to include its Registrable Shares in such registration pursuant to
Section 2.2 shall be conditioned upon such Stockholder's participation in such
underwriting on the terms set forth herein. All Stockholders proposing to
distribute their securities through such underwriting shall (together with the
Company and Other Holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for the underwriting by the Company.
Notwithstanding any other provision of this Section 2.2, if the managing
underwriter determines that the inclusion of all shares requested to be
registered would adversely affect the offering, the Company may limit the number
of Registrable Shares to be included in the registration and underwriting. The
Company shall so advise all holders of Registrable Shares requesting
registration, and the number of shares that are entitled to be included in the
registration and underwriting shall be allocated in the following manner. The
number of shares that may be included in such registration and underwriting
shall, except as otherwise required in any contract to which the Company is a
party, be allocated among all Stockholders and Other Holders requesting
-5-
<PAGE>
registration in proportion, as nearly as practicable, to the respective number
of shares of Common Stock (on an as-converted basis) which they held at the time
the Company gives the notice specified in Section 2.2(a). If any Stockholder or
Other Holder would thus be entitled to include more securities than such holder
requested to be registered, the excess shall be allocated among other requesting
Stockholders and Other Holders pro rata in the manner described in the preceding
sentence. If any holder of Registrable Shares or Other Holder disapproves of the
terms of any such underwriting, such person may elect to withdraw therefrom by
written notice to the Company, and any Registrable Shares or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
2.3 Registration Procedures.
-----------------------
(a) If and whenever the Company is required by the provisions of
this Agreement to use its reasonable best efforts to effect the registration of
any Registrable Shares under the Securities Act, the Company shall:
(i) with respect to a registration under Section 2.1
above, (1) file with the Commission a Registration Statement with respect to
such Registrable Shares as soon as practicable (but in any event within 60 days
after receipt of the request under Section 2, unless the filing of such
registration statement will require the preparation of financial statements that
have not been prepared as of the date of the receipt of the request, in which
case the filing will be made within 90 days after receipt of the request) and
(2) use its reasonable best efforts to cause that Registration Statement to
become effective as soon as possible;
(ii) with respect to a registration under Section 2.1
above, as expeditiously as reasonably possible prepare and file with the
Commission any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to comply
with the provisions of the Securities Act (including the anti-fraud provisions
thereof) and to keep the Registration Statement effective for 120 days from the
effective date or such lesser period until all such Registrable Shares are sold;
(iii) as expeditiously as reasonably possible furnish to
each Selling Stockholder such reasonable numbers of copies of the Prospectus,
including any preliminary Prospectus, in conformity with the requirements of the
Securities Act, and such other documents as such Selling Stockholder may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Shares owned by such Selling Stockholder;
-6-
<PAGE>
(iv) as expeditiously as reasonably possible use its
reasonable best efforts to register or qualify the Registrable Shares covered by
the Registration Statement under the securities or Blue Sky laws of such states
as the Selling Stockholders shall reasonably request; provided, however, that
-------- -------
the Company shall not be required in connection with this paragraph (iv) to
qualify as a foreign corporation or execute a general consent to service of
process in any jurisdiction;
(v) as expeditiously as reasonably possible, cause all
such Registrable Shares to be listed on each securities exchange or automated
quotation system on which similar securities issued by the Company are then
listed;
(vi) promptly provide a transfer agent and registrar for
all such Registrable Shares not later than the effective date of such
registration statement;
(vii) notify each Selling Stockholder, reasonably promptly
after it shall receive notice thereof, of the time when such Registration
Statement has become effective or a supplement to any Prospectus forming a part
of such Registration Statement has been filed; and
(viii) notify each seller of such Registrable Shares of any
request by the Commission for the amending or supplementing of such Registration
Statement or Prospectus.
(b) If the Company has delivered a Prospectus to the Selling
Stockholders and after having done so the Prospectus is amended to comply with
the requirements of the Securities Act, the Company shall reasonably promptly
notify the Selling Stockholders and, if requested, the Selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
Prospectuses to the Company. The Company shall reasonably promptly provide the
Selling Stockholders with revised Prospectuses and, following receipt of the
revised Prospectuses, the Selling Stockholders shall be free to resume making
offers of the Registrable Shares.
(c) In the event that, in the judgment of the Company, it is
advisable to suspend use of a Prospectus included in a Registration Statement
due to pending material developments or other events that have not yet been
publicly disclosed and as to which the Company believes public disclosure would
be detrimental to the Company, the Company shall notify all Selling Stockholders
in writing to such effect, and, upon receipt of such notice, each such Selling
Stockholder shall immediately discontinue any sales of Registrable Shares
pursuant to such Registration Statement until such Selling Stockholder has
received copies of a supplemented or amended Prospectus or until such Selling
Stockholder is advised in writing by the Company that the then current
Prospectus may be used and has received copies of any additional or
-7-
<PAGE>
supplemental filings that are incorporated or deemed incorporated by reference
in such Prospectus. The Company, as expeditiously as reasonably possible, shall
advise the Selling Stockholders that use of the then current Prospectus may be
resumed or deliver copies of a supplemented or amended Prospectus.
2.4 Allocation of Expenses. The Company will pay all Registration
----------------------
Expenses for all registrations under this Agreement; provided, however, that if
-------- -------
a registration under Section 2.1 is withdrawn at the request of the Purchaser
(other than as a result of information concerning the business or financial
condition of the Company which is first made known to the Purchaser after the
date on which such registration was requested or pursuant to the final sentence
of Section 2.1(e)) and if the Purchaser elects not to have such registration
counted as a registration requested under Section 2.1, the Purchaser shall pay
the Registration Expenses of such registration. For purposes of this Section,
the term "Registration Expenses" shall mean all expenses incurred by the Company
in complying with this Agreement, including, without limitation, all
registration and filing fees, Nasdaq and exchange listing fees, printing
expenses, fees and expenses of counsel for the Company, compensation of the
employees of the Company and the reasonable fees and expenses of one counsel
selected by the Selling Stockholders to represent the Selling Stockholders,
state Blue Sky fees and expenses, and the expense of any special audits incident
to or required by any such registration, but excluding underwriting discounts,
selling commissions and the fees and expenses of Selling Stockholders' own
counsel (other than the counsel selected to represent all Selling Stockholders).
2.5 Indemnification and Contribution.
--------------------------------
(a) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless the seller of such Registrable Shares and each of
its officers, directors, employees and partners, each underwriter of such
Registrable Shares, and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act or the Exchange Act against
any losses, claims, damages or liabilities, joint or several, to which such
seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement, or
arise out of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Company
-8-
<PAGE>
will reimburse such seller, underwriter and each such controlling person on at
least a quarterly basis for any legal or any other expenses reasonably incurred
by such seller, underwriter or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
- -------- -------
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission made in such Registration Statement,
preliminary prospectus or prospectus, or any such amendment or supplement, in
reliance upon and in conformity with information furnished to the Company, in
writing, by or on behalf of such seller, underwriter or controlling person
specifically for use in the preparation thereof.
(b) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, each seller of
Registrable Shares, severally and not jointly, will indemnify and hold harmless
the Company, each of its director s and officers and each underwriter (if any)
and each person, if any, who controls the Company or any such underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages or liabilities, joint or several, to which the Company, such
directors and officers, underwriter or controlling person may become subject
under the Securities Act, Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information relating to such seller furnished in writing
to the Company by or on behalf of such seller specifically for use in connection
with the preparation of such Registration Statement, prospectus, amendment or
supplement; provided, however, that the indemnity contained in this section
-------- -------
shall not apply to amounts paid in settlement of any such claim, loss, damage,
liability or action if such action is effected without the consent of the
applicable Stockholder (which consent shall not be unreasonably withheld);
provided, further, that the obligations of a Stockholder hereunder shall be
- -------- -------
limited to an amount equal to the net proceeds to such Stockholder of
Registrable Shares sold in connection with such registration.
(c) Each party entitled to indemnification under this Section
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit
-9-
<PAGE>
the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
--------
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
-------- -------
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section except to the extent that the Indemnifying Party
is adversely affected by such failure. The Indemnified Party may participate in
such defense at such party's expense; provided, however, that the Indemnifying
-------- -------
Party shall pay such reasonable expense if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between the Indemnified Party and
any other party represented by such counsel in such proceeding; provided further
-------- -------
that in no event shall the Indemnifying Party be required to pay the expenses of
more than one law firm per jurisdiction as counsel for the Indemnified Party.
The Indemnifying Party also shall be responsible for the reasonable expenses of
such defense if the Indemnifying Party does not elect to assume such defense.
No Indemnifying Party, in the defense of any such claim or litigation shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such claim or litigation, and no
Indemnified Party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 2.5 is
due in accordance with its terms but for any reason is held to be unavailable to
an Indemnified Party in respect to any losses, claims, damages and liabilities
referred to herein, then the Indemnifying Party shall, in lieu of indemnifying
such Indemnified Party, contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities to
which such party may be subject in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Stockholders on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company and the Stockholders shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of material fact related to information supplied by the Company
or the Stockholders and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Stockholders agree that it would not be just and equitable
if contribution pursuant to this Section 2.5 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to
-10-
<PAGE>
above. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this
Section, notify such party or parties from whom contribution may be sought, but
the omission so to notify such party or parties from whom contribution may be
sought shall not relieve such party from any other obligation it or they may
have thereunder or otherwise under this Section. No party shall be liable for
contribution with respect to any action, suit, proceeding or claim settled
without its prior written consent, which consent shall not be unreasonably
withheld.
2.6 Other Matters with Respect to Underwritten Offerings. In the
----------------------------------------------------
event that Registrable Shares are sold pursuant to a Registration Statement in
an underwritten offering pursuant to Section 2.1, the Company agrees to (a)
enter into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of the Company and
customary covenants and agreements to be performed by the Company, including
without limitation customary provisions with respect to indemnification by the
Company of the underwriters of such offering; (b) use its reasonable best
efforts to cause its legal counsel to render customary opinions to the
underwriters with respect to the Registration Statement; and (c) use its
reasonable best efforts to cause its independent public accounting firm to issue
customary "cold comfort letters" to the underwriters with respect to the
Registration Statement.
2.7 Information by Holder. Each holder of Registrable Shares
---------------------
included in any registration shall furnish to the Company such information
regarding such holder and the distribution proposed by such holder as the
Company may reasonably request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this
Agreement.
2.8 "Lock-up" Agreement; Confidentiality of Notices.
-----------------------------------------------
(a) The Purchaser and each Stockholder, if requested by the
managing underwriter of an underwritten public offering by the Company of Common
Stock, hereby agrees that it shall not sell or otherwise transfer or dispose of
any Registrable Shares or other securities of the Company held by such Purchaser
or Stockholder for a period of 180 days following the effective date of a
Registration Statement. In addition, the Purchaser and each Stockholder shall
execute such other customary lock-up agreements as may be requested by such
managing underwriters.
-11-
<PAGE>
(b) The Company may impose stop-transfer instructions with
respect to the Registrable Shares or other securities subject to the foregoing
restrictions until the end of the applicable lock-up period.
(c) Any Stockholder receiving any written notice from the
Company regarding the Company's plans to file a Registration Statement shall
treat such notice confidentially and shall not disclose such information to any
person other than as necessary to exercise its rights under this Agreement.
2.9 Rule 144 Requirements. After the earliest of (i) the closing of
---------------------
the sale of securities of the Company pursuant to a Registration Statement or
(ii) the registration by the Company of a class of securities under Section 12
of the Exchange Act, the Company agrees to:
(a) make and keep current public information about the Company
available, as those terms are understood and defined in Rule 144;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) so long as a Stockholder owns any Registrable Shares, to
furnish to such Stockholder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
and of the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as the Stockholder may reasonably request in complying with any
rule or regulation of the SEC allowing the Stockholder to sell any such
securities without registration.
2.10 Termination. All of the Company's obligations to register
-----------
Registrable Shares under Sections 2.1 and 2.2 of this Agreement shall terminate
five (5) years after the closing of the Initial Public Offering.
3. Transfers of Rights. This Agreement, and the rights and obligations
-------------------
of the Purchaser hereunder, may not be assigned by such Purchaser except that
any person to which at least 3,600,000 Shares are validly transferred by the
Purchaser shall be deemed a "Purchaser" for purposes of this Agreement and any
other person to which Shares are validly transferred shall be deemed a
"Stockholder" (but not a "Purchaser") hereunder; provided in each case that the
transferee provides written notice of such assignment to the Company and agrees
in writing to be bound hereby.
-12-
<PAGE>
4. General.
-------
(a) Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(b) Specific Performance. In addition to any and all other
--------------------
remedies that may be available at law in the event of any breach of this
Agreement, the Purchaser shall be entitled to specific performance of the
agreements and obligations of the Company hereunder and to such other injunctive
or other equitable relief as may be granted by a court of competent
jurisdiction.
(c) Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York (without
reference to the conflicts of law provisions thereof).
(d) Notices. All notices, requests, consents, and other
-------
communications under this Agreement shall be in writing and shall be deemed
delivered (i) two business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth
below:
If to the Company, at 115 Flanders Road, Westboro, MA 01581, Attention:
Chief Financial Officer, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchaser, with a copy to the Company
at the foregoing address, Attention: General Counsel, and with a copy to Hale
and Dorr LLP, 60 State Street, Boston, MA, Attention: Mark G. Borden, Esq.; or
If to the Purchaser, at CBS Corporation, 51 West 52nd Street, New York, NY
10019, Attention: Chief Financial Officer, or at such other address or addresses
as may have been furnished to the Company in writing by the Purchaser, with a
copy to CBS Corporation, 51 West 52nd Street, New York, NY 10019, Attention:
General Counsel.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
-13-
<PAGE>
(e) Complete Agreement. This Agreement constitutes the entire
------------------
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter.
(f) Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company, on the one hand, and
the Purchaser or holders of over 50% of the Registrable Shares held by all of
the Stockholders, on the other hand; provided, that this Agreement may be
--------
amended with the consent of the holders of less than all Registrable Shares only
in a manner which applies to all such holders in the same fashion. Any such
amendment, termination or waiver effected in accordance with this Section 4(f)
shall be binding on all parties hereto, even if they do not execute such
consent. Upon the effectuation of any such amendment, the Company shall
promptly give written notice to the Stockholders, if any, who have not
previously consented thereto in writing. No waivers of or exceptions to any
term, condition or provision of this Agreement, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
(g) Pronouns. Whenever the context may require, any pronouns
--------
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.
(h) Counterparts; Facsimile Signatures. This Agreement may be
----------------------------------
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute one and the same document.
This Agreement may be executed by facsimile signatures.
(i) Section Headings. The section headings are for the
----------------
convenience of the parties and in no way alter, modify, amend, limit or restrict
the contractual obligations of the parties.
[signatures on following page]
-14-
<PAGE>
Executed as of the date first written above.
COMPANY:
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
---------------------------------------
Name: Dean Polnerow
Title:President
PURCHASER:
CBS CORPORATION
By: /s/ Fredric G. Reynolds
---------------------------------------
Name: Fredric G. Reynolds
Title: Executive Vice President and
Chief Financial Officer
-15-
<PAGE>
(signature page to registration rights agreement)
-16-
<PAGE>
Exhibit 10.9
------------
RIGHT OF FIRST REFUSAL AGREEMENT
---------------------------------
This Right of First Refusal Agreement (this "Agreement") is made this 30th
day of June, 1999 by and among Switchboard Incorporated, a Delaware corporation
(the "Company"), Banyan Systems Incorporated, a Massachusetts corporation
("Banyan"), and CBS Corporation, a Pennsylvania corporation (the "Purchaser").
Preliminary Statement
---------------------
A. On the date hereof, the parties are entering into (i) an Advertising
and Promotion Agreement by and among the Company, Banyan and the Purchaser and
(ii) a License Agreement by and between the Company and the Purchaser
(collectively, the "Switchboard Agreements").
B. The parties desire to provide for the right of first refusal and right
of first offer provisions set forth below as a means of protecting the
management and control of the Company from influence by any person not
acceptable to the Company or to Banyan.
NOW, THEREFORE, for valuable consideration, receipt of which is
acknowledged, the parties hereto agree as follows:
1. Certain Definitions.
-------------------
As used in this Agreement, the following terms shall have the following
respective meanings:
"Common Stock" means the common stock, $.01 par value per share, of the
Company.
"Purchase Agreement" means the Common Stock and Warrant Purchase Agreement
dated June 1, 1999 by and among the Company, Banyan and the Purchaser.
"Shares" means all shares of Common Stock issued, now or in the future,
pursuant to the Purchase Agreement, including the Shares (as defined therein)
and the Warrant Shares (as defined therein), but excluding the Conversion Share
(as defined therein).
"Transfer" means any sale, transfer or other disposition, whether
voluntarily or by operation of law.
<PAGE>
2. Restrictions on Transfer.
------------------------
2.1 Any Transfer of any of the Shares by the Purchaser, other than
according to the terms of this Agreement, shall be void and transfer
no right, title, or interest in or to any such Shares to the purported
transferee.
2.2 All certificates representing Shares shall have affixed thereto (in
addition to any other legends that may be required contractually or
under federal or state laws) a legend in substantially the following
form, and the Purchaser agrees to present the certificates
representing the Shares presently owned or hereafter acquired by it to
the Secretary of the Company and cause the Secretary of the Company to
stamp such a legend on each such certificate in a prominent manner:
"The shares of stock represented by this certificate are subject to
restrictions on transfer and an option to purchase set forth in a
certain Right of First Refusal Agreement dated ____________, 1999, as
amended from time to time. A copy of such Agreement is available for
inspection without charge at the office of the Secretary of the
corporation."
2.3 The Purchaser agrees, to ensure compliance with the restrictions
referred to herein, that the Company may issue appropriate "stop
transfer" certificates or instructions and that, if the Company
transfers its own securities, it may make appropriate notations to the
same effect in its records.
3. Rights of First Offer.
---------------------
3.1 Offer by the Purchaser. Subject to Section 3.3, in the event at any
----------------------
time prior to the first anniversary of the closing date of the
Company's initial public offering the Purchaser desires to make a
Transfer of any or all of its Shares, the Purchaser shall first
deliver a notice (the "Right of First Offer Notice") to such effect to
the Company and to Banyan, which notice shall include an offer to sell
to the Company and Banyan (i) a specified number of Shares, which such
number of Shares shall constitute all of the Shares the Purchaser is
then interested in Transferring (the "Option Shares"), at (iii) a
specified per share price (the "Offer Price"). The Company shall have
the first right and option and Banyan shall have the next right and
option to purchase from the Purchaser, for a per share purchase price
equal to the Offer Price, some or all of the Option Shares. The
Company
-2-
<PAGE>
and/or Banyan shall have 15 business days to accept such offer. If the
Company and/or Banyan accepts such offer as to some or all of the
Option Shares, they will proceed in good faith to negotiate with the
Purchaser a definitive agreement and consummate such sale.
3.2 Purchaser's Right to Sell. If neither the Company nor Banyan
-------------------------
accepts the Purchaser's offer set forth in Section 3.1, or if such
offer is accepted by the Company and/or Banyan only in part, then, for
a period of 120 days following the expiration of the 15-business day
period set forth in Section 3.1, the Purchaser may, subject to
compliance with Section 4 below, if applicable, consummate the sale of
the Option Shares or any portion thereof not subject to the Company's
and/or Banyan's acceptance at a price not less than the Offer Price.
If the Purchaser wishes to Transfer any Option Shares offered by the
Purchaser in the Right of First Offer Notice at a price per Share less
than the Offer Price or more than 120 days after the expiration of the
15-business day period set forth in Section 3.1, then, as a condition
precedent to such transaction, the Purchaser must again comply with
the provisions of Section 3.
3.3 Limitation. The Purchaser shall not be required to comply with
----------
Section 3 following a termination for any reason of one or both of the
Switchboard Agreements prior to the second anniversary thereof.
4. Rights of First Refusal.
-----------------------
4.1 Offer of Sale; Notice of Proposed Sale. If, following a termination
--------------------------------------
for any reason of one or both of the Switchboard Agreements prior to
the second anniversary thereof, the Purchaser desires to Transfer any
of its Shares, or any interest in such Shares, it shall first deliver
written notice of its desire to do so (the "Notice") to the Company
and Banyan. The Notice must specify: (i) the name and address of the
party to which the Purchaser proposes to sell or otherwise dispose of
the Shares or an interest in the Shares (the "Offeror"), (ii) the
number of Shares the Purchaser proposes to sell or otherwise dispose
of (the "Offered Shares"), (iii) the consideration per Share to be
delivered to the Purchaser for the proposed Transfer, and (iv) all
other material terms and conditions of the proposed transaction.
4.2 Company's Option to Purchase.
----------------------------
(a) The Company shall have the first option, exercisable for a period
of 15 business days from the date of delivery of the Notice, to
purchase all or any part of the Offered Shares for the
consideration
-3-
<PAGE>
per share and on the terms and conditions specified in the
Notice. Such option shall be exercised by the delivery by the
Company of written notice to the Purchaser and Banyan.
(b) In the event the Company does not exercise its option within such
15-business day period with respect to all of the Offered Shares,
the Company shall, by the last day of such period, give written
notice of that fact to Banyan (the "Banyan Notice"). The Banyan
Notice shall specify the number of Offered Shares not purchased
by the Company (the "Remaining Shares").
(c) In the event the Company exercises its option to purchase all or
part of the Offered Shares, the closing of such purchase shall
take place at the offices of the Company on (i) the date five
days after the expiration of the Banyan Option Period (as defined
in Section 4.3(a) of this Agreement) if Banyan does not elect to
purchase any Offered Shares or (ii) the date that Banyan
consummates its purchase of Remaining Shares under Section 4.3(b)
of this Agreement.
4.3 Banyan's Option to Purchase.
---------------------------
(a) Banyan shall have an option, exercisable during the period
beginning on the date 16 business days after the delivery to
Banyan of the Notice and ending on the date 21 business days
after the delivery to Banyan of the Notice (the "Banyan Option
Period"), to purchase all or any part of the Remaining Shares for
the consideration per share and on the terms and conditions set
forth in the Notice. Such option shall be exercised by delivery
by Banyan of written notice to the Purchaser and the Company.
(b) The closing of the purchase of the Remaining Shares shall take
place at the offices of the Company no later than five (5) days
after the date of such notice to the Purchaser.
4.4 Consideration. To the extent that the consideration proposed to be
-------------
paid by the Offeror for the Offered Shares consists of property other
than cash or a promissory note, the consideration required to be paid
by the Company or Banyan exercising their respective options under
Sections 4.2 and 4.3 of this Agreement may consist of cash equal to
the value of such property, as determined in good faith by agreement
of the Purchaser and the Company or Banyan, as applicable.
-4-
<PAGE>
4.5 Purchaser's Right to Sell.
-------------------------
(a) If, following compliance by the Purchaser with the provisions of
Section 4, the Company and Banyan do not exercise their options
to purchase all of the Offered Shares under Section 4 within the
periods described in this Agreement (the "Option Period"), then
the Purchaser shall be entitled to sell, at the price and on the
terms and conditions no less favorable to the Purchaser than the
price and terms set forth in the Notice, the Shares not purchased
by the Company and Banyan. The transaction contemplated by the
Notice shall be consummated not later than 60 days after the
expiration of the Option Period.
(b) If the Purchaser wishes to Transfer any Shares at a price per
Share less than the price set forth in the Notice, upon terms
different from those previously offered to the Company and
Banyan, or more than 60 days after the expiration of the Option
Period, then, as a condition precedent to such transaction, the
Purchaser must again comply with the provisions of Section 4.
5. Adjustments for Stock Splits, Stock Dividends, etc. If from time to time
---------------------------------------------------
there is any stock split, stock dividend, stock distribution or other
reclassification of the Common Stock of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of its ownership of the Shares shall be immediately subject to the
purchase options, the rights of first refusal, the restrictions on Transfer and
the other provisions of this Agreement in the same manner and to the same extent
as the Shares.
6. General.
-------
6.1 Severability. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, and each other provision of this
Agreement shall be severable and enforceable to the extent permitted
by law.
6.2 Transfers of Rights. Any permitted Transfer of Shares by the
-------------------
Purchaser shall be subject to the transferee providing written notice
of such assignment to the Company and Banyan and agreeing in writing
to be bound hereby, and such transferee shall be deemed a "Purchaser"
for purposes of this Agreement. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
heirs,
-5-
<PAGE>
executors, administrators, legal representatives, successors and
assigns, subject to any applicable restrictions on Transfer. The
Purchaser acknowledges that the Purchase Agreement and the Warrant (as
defined therein) impose certain restrictions on the Purchaser's right
to Transfer any Shares. Nothing contained herein shall prohibit Banyan
from assigning its rights hereunder to one or more persons or
entities.
6.3 Notice. All notices, requests, consents, and other communications
------
under this Agreement shall be in writing and shall be deemed delivered
(i) two business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business
day after being sent via a reputable nationwide overnight courier
service guaranteeing next business day delivery, in each case to the
intended recipient as set forth below:
If to the Company, at 115 Flanders Road, Westboro, MA 01581, Attention:
Chief Financial Officer, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchaser, with a copy to the Company
at the foregoing address, Attention: General Counsel, and with a copy to Hale
and Dorr LLP, 60 State Street, Boston, MA 02109, Attention: Mark G. Borden,
Esq.; or
If to Banyan, at 120 Flanders Road, Westboro, MA 01581, Attention: Chief
Financial Officer, or at such other address or addresses as may have been
furnished to the Company and the Purchaser in writing by Banyan, with a copy to
Hale and Dorr LLP, 60 State Street, Boston, MA 02109, Attention: Mark G.
Borden, Esq.
If to the Purchaser, CBS Corporation, 51 West 52nd Street, New York, NY
10019, attention: Chief Financial Officer, or at such other address or
addresses as may have been furnished to the Company in writing by the Purchaser,
with a copy to attention: General Counsel.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section 6.3.
-6-
<PAGE>
6.4 Pronouns. Whenever the context may require, any pronouns used in this
--------
Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall
include the plural, and vice versa.
6.5 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties, and supersedes all prior agreements and
understandings, relating to the subject matter of this Agreement. No
amendment, modification or termination of, or waiver under, any
provisions of this Agreement shall be valid unless in writing and
signed by each of the parties hereto.
6.6 Specific Performance. In addition to any and all other remedies that
--------------------
may be available at law in the event of any breach of this Agreement,
each party shall be entitled to specific performance of the agreements
and obligations of the other parties hereunder and to such other
injunctive or other equitable relief as may be granted by a court of
competent jurisdiction.
6.7 Counterparts; Facsimile Signatures. This Agreement may be executed in
----------------------------------
any number of counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute one and the same
document. This Agreement may be executed by facsimile signature.
6.8 Section Headings. The section headings used in this Agreement are for
----------------
the convenience of the parties and in no way alter, modify, amend,
limit or restrict the contractual obligations of the parties.
6.9 Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the internal laws of the State of New York
without regard to any applicable conflicts of laws.
6.10 Tolling of Periods. The lapsing of any and all periods described in
------------------
Sections 3 and 4 of this Agreement for providing any notice, for
closing any exercise of any option or any right of first refusal or
otherwise shall be tolled for the duration of (i) any legal or
regulatory requirement forestalling any such notice, closing or other
event or (ii) the determination pursuant to Section 4.4 of this
Agreement of the value of the consideration other than cash or a
promissory note proposed to be paid by the Offeror for the Offered
shares.
-7-
<PAGE>
6.11 Termination. This Agreement shall terminate on the first anniversary
-----------
of the closing date of the Company's initial public offering.
6.12 Notice of Termination of Switchboard Agreements. Within five (5) days
-----------------------------------------------
of the termination for any reason, prior to the second anniversary
thereof, of either or both of the Switchboard Agreements, the Company
shall deliver to Banyan a notice of such termination and the
effective date thereof.
[signatures on following page]
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
---------------------------------------
Name: Dean Polnerow
Title: President
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
---------------------------------------
Name: Richard M. Spaulding
Title: Vice President & CFO
CBS CORPORATION
By: /s/ Fredric G. Reynolds
---------------------------------------
Name: Fredric G. Reynolds
Title: Executive Vice President
and Chief Financial Officer
(signature page to right of first refusal agreement)
-9-
<PAGE>
Exhibit 10.11
-------------
STOCKHOLDERS' VOTING AGREEMENT
------------------------------
This Stockholders' Voting Agreement (the "Agreement") dated as of June 30,
1999 is entered into by and among CBS Corporation, a Pennsylvania corporation
(the "Purchaser"), Banyan Systems Incorporated, a Massachusetts corporation
("Banyan"), and Switchboard Incorporated, a Delaware corporation (the
"Company"). The Purchaser and Banyan are sometimes referred to in this
Agreement individually as a "Stockholder" or collectively as the "Stockholders."
Recitals:
--------
1. Banyan owns certain outstanding shares of the common stock, par value
$.01 per share ("Common Stock"), and preferred stock, $.01 par value per share,
of the Company as set forth in more detail on Exhibit A hereto;
---------
2. The Purchaser is purchasing, concurrently herewith, certain shares of
Common Stock, a warrant to purchase shares of Common Stock of the Company (the
"Warrant") and one share of the Company's Series E Special Voting Preferred
Stock (the "Series E Preferred Stock") pursuant to the Common Stock and Warrant
Purchase Agreement dated June 1, 1999 among the Purchaser, Banyan and the
Company (the "Purchase Agreement") as set forth in more detail on Exhibit A
---------
hereto; and
3. The Purchaser and Banyan wish to provide for their continuing
representation on the Board of Directors of the Company in the manner set forth
below.
In consideration of the mutual covenants contained herein and the
consummation of the sale and purchase of the shares of Common Stock, the Warrant
and the Series E Preferred Stock pursuant to the Purchase Agreement, and for
other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Voting of Shares.
----------------
(a) In any and all elections of members of the Board of Directors of
the Company (whether at a meeting or by written consent in lieu of a meeting),
the Purchaser shall vote or cause to be voted all Shares (as defined in Section
2 below) owned by it, or over which it has voting control, and otherwise use its
best efforts, so as to elect such number of members designated by Banyan as
represents a majority of the total authorized number of directors of the Company
(the "Banyan Designees").
<PAGE>
(b) The number of directors shall initially be fixed at 7 (including
the directors entitled to be elected by the Series E Preferred Stock). Banyan
shall notify the Purchaser of the directors designated by Banyan.
(c) In the event of the resignation, death, removal or
disqualification of a Banyan Designee, Banyan shall promptly provide written
notice of its nominee for the directorship so vacated to the Purchaser, and the
Company shall use its best efforts to promptly cause the appointment of such
nominee to the vacated directorship.
(d) Banyan may remove its designated directors at any time and from
time to time, without cause (subject to the Bylaws of the Company and any
requirements of law), in its sole discretion, and after written notice to the
Purchaser of the new nominee, the Company shall use its best efforts to promptly
cause the appointment of such nominee to the vacated directorship. The
Purchaser shall not vote to remove any Banyan Designee, except for bad faith or
willful misconduct.
2. Shares. "Shares" shall mean and include any and all shares of Common
------
Stock and/or shares of capital stock of the Company, by whatever name called,
which carry voting rights (including voting rights which arise by reason of
default) and shall include any such shares now owned or subsequently acquired by
the Purchaser, however acquired, including without limitation stock splits and
stock dividends; provided, however, that such term shall not include the share
of Series E Preferred Stock.
3. Termination. This Agreement shall terminate in its entirety on the
-----------
first to occur of (a) one business day after the second anniversary of the date
of this Agreement, (b) the date on which the Purchaser has required Banyan to
transfer its Shares to a trustee as required pursuant to Section 10.2(b) of the
Advertising and Promotion Agreement, dated of even date herewith, and (c) the
first business day after any person or entity beneficially owns or controls,
directly or indirectly, shares of the Company's capital stock representing more
voting power (based on then outstanding shares) than those beneficially owned or
controlled, directly or indirectly, by Banyan.
4. No Revocation. The voting agreements contained herein are coupled
-------------
with an interest and may not be revoked, except by an amendment, modification or
termination effected in accordance with Section 7(e) hereof. Nothing in this
Section 4 shall be construed as limiting the provisions of Section 3 or Section
7(e) hereof.
5. Restrictive Legend.
------------------
-2-
<PAGE>
(a) All certificates representing Shares owned or hereafter acquired
by the Purchaser or any transferee of the Purchaser bound by this Agreement
shall have affixed thereto a legend substantially in the following form:
"The shares of stock represented by this certificate are
subject to a Stockholders' Voting Agreement, as amended from
time to time, by and among the registered owner of this
certificate, the Company and certain other stockholders of
the Company, a copy of which is available for inspection at
the offices of the Secretary of the Company and by accepting
any interest in such shares the person accepting such
interest shall be deemed to agree to and shall become bound
by all of the provisions of said Stockholders' Voting
Agreement."
(b) The Company will cause such legend to be removed upon the
termination of this Agreement or any transfer covered by the proviso clause
contained in Section 6.
6. Transfers of Rights. Any transferee to whom Shares are transferred by
-------------------
the Purchaser, whether voluntarily or by operation of law, shall be bound by the
voting obligations imposed upon the transferor under this Agreement, to the same
extent as if such transferee were the Purchaser hereunder and the Purchaser
shall not transfer any Shares unless the transferee agrees in writing to be
bound by this Agreement; provided, however, that this restriction shall not
-------- -------
apply to any transfer of Shares by the Purchaser if, after giving effect to such
transfer, the Purchaser continues to beneficially own, immediately after such
transfer, Shares subject to this Agreement which represent at least 25% of the
then outstanding shares of the Company's common stock (determined on an as
converted basis). During the term of this Agreement, Banyan agrees that it will
not transfer shares held by it if, after giving effect to such transfer, Banyan
would beneficially own, immediately after such transfer, shares which represent
less than 25% of the then outstanding shares of the Company's common stock
(determined on an as converted basis).
7. General.
-------
(a) Severability. The invalidity or unenforceability of any provision
------------
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(b) Specific Performance. In addition to any and all other remedies
--------------------
that may be available at law in the event of any breach of this Agreement, each
party shall be entitled to specific performance of the agreements and
obligations of the other
-3-
<PAGE>
party hereunder and to such other injunctive or other equitable relief as may be
granted by a court of competent jurisdiction.
(c) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws of the State of Delaware (without reference
to the conflicts of law provisions thereof).
(d) Notices. All notices, requests, consents, and other
-------
communications under this Agreement shall be in writing and shall be deemed
delivered (i) two business days after being send by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth
below:
If to the Purchaser, at CBS Corporation, 51 West 52nd Street, New York, NY
10019, Attention: Chief Financial Officer, or at such other address or addresses
as may have been furnished to Banyan in writing by the Purchaser, with a copy to
CBS Corporation, 51 West 52nd Street, New York, NY 10019, Attention: General
Counsel; or
If to Banyan, at 120 Flanders Road, Westboro, MA 01581, Attn: Chief
Financial Officer, or at such other address or addresses as may have been
furnished to the Purchaser in writing by Banyan, with a copy to Hale and Dorr
LLP, 60 State Street, Boston, MA 02109, Attn: Mark G. Borden, Esq.
If to the Company, at 115 Flanders Road, Westboro, MA 01581, Attention:
Chief Financial Officer, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchaser, with a copy to the Company
at the foregoing address, Attention: General Counsel, and with a copy to Hale
and Dorr LLP, 60 State Street, Boston, MA 02109 Attention: Mark G. Borden, Esq.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
(e) Complete Agreement; Amendments. This Agreement constitutes the
------------------------------
entire agreement and understanding of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings
relating to such
-4-
<PAGE>
subject matter. No amendment, modification or termination of, or waiver under,
any provision of this Agreement shall be valid unless in writing and signed by
the parties.
(f) Pronouns. Whenever the context may require, any pronouns used in
--------
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa.
(g) Counterparts; Facsimile Signatures. This Agreement may be
----------------------------------
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute one and the same document.
This Agreement may be executed by facsimile signatures.
(h) Section Headings. The section headings are for the convenience of
----------------
the parties and in no way alter, modify, amend, limit or restrict the
contractual obligations of the parties.
(i) Successors and Assigns. Except as specifically set forth in this
----------------------
Agreement, nothing in this Agreement, express or implied, is intended to confer
upon any party other than the signatories hereto any rights, remedies,
obligations or liabilities under or by reason of this Agreement. Except as
specifically set forth in this Agreement, the rights and obligations of each
party hereto shall be binding on and inure to the benefit of its successors and
assigns.
[signatures on following page]
-5-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first above written.
CBS CORPORATION.
By: /s/ Fredric G. Reynolds
---------------------------------------------
Name: Fredric G. Reynolds
Title: Executive Vice President and
Chief Financial Officer
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
----------------------------------------------
Name: Richard M. Spaulding
Title: Vice President and CFO
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
----------------------------------------------
Name: Dean Polnerow
Title: President
(signature page to voting agreement)
-6-
<PAGE>
EXHIBIT A
---------
Ownership of Stockholder
------------------------
Banyan:
- ------
. 7,000,000 shares of Common Stock
. 2,500,000 shares of the Company's Series C Convertible Preferred Stock,
$.01 par value per share
Purchaser:
- ---------
. 7,321,314 shares of Common Stock
. Common Stock Purchase Warrant No. SB-CBS-#1 to purchase 1,045,902 shares
of Common Stock issued by the Company to the Purchaser on June 30, 1999
. One share of the Company's Series E Special Voting Preferred Stock, $.01
par value per share
-7-
<PAGE>
Exhibit 10.12
-------------
THIS WARRANT AND THE SHARES OF COMMON
STOCK ISSUED UPON ITS EXERCISE ARE SUBJECT
TO THE RESTRICTIONS ON TRANSFER
SET FORTH IN SECTION 4 OF THIS WARRANT
-----------------------------------------------
Common Stock Purchase Warrant No. 1 Number of Shares: 300,000
Date of Issuance: December 31, 1997
Switchboard Incorporated
------------------------
Common Stock Purchase Warrant
-----------------------------
Switchboard Incorporated, a Delaware corporation (the "Company"), for value
received, hereby certifies that Continuum Software Inc., or its registered
assigns (the "Registered Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company up to 300,000 shares (the "Warrant Shares")
of Common Stock, $.01 par value per share (the "Common Stock"), for a purchase
price of $2.00 per share, at any time or from time to time on or after the date
specified in the following paragraph and before 5:00 p.m. (Boston, Massachusetts
time) on the earlier of the following dates (the "Termination Date"): (i)
December 31, 2000 and (ii) the termination of the Technology Development and
Marketing Agreement dated as of November ___, 1997 by and between the Company
and the Registered Holder.
1. Exercise.
--------
(a) This Warrant may be exercised by the Registered Holder, in whole
or in part, to the extent then exercisable, by surrendering this Warrant, with
the purchase form appended hereto as Exhibit I duly executed by such Registered
---------
Holder or by such Registered Holder's duly authorized attorney, at the principal
office of the Company, or at such other office or agency as the Company may
designate, accompanied by payment in full, by certified or bank check or wire
transfer, of the Purchase Price payable in respect of the number of Warrant
Shares purchased upon such exercise.
(b) In the event of the exercise of this Warrant, if the Registered
Holder so elects, the Registered Holder will receive shares of Common Stock
equal to the value of the Warrant Shares to be purchased upon such exercise by
surrender of this Warrant at the location and in the manner described in Section
1(a) together with notice of such election, in which event the Company shall
issue to the Registered Holder that number of shares of the Company's Common
Stock computed using the following formula:
<PAGE>
X = Y (A-B)
-------
A
Where: X = the number of shares of Common Stock to be issued to
the Registered Holder.
Y = the number of shares of Common Stock requested to be
exercised under this Warrant (at the date of such
calculation).
A = the Fair Market Value (as defined below) of one share
of the Company's Common Stock (at the date of such
calculation).
B = Purchase Price (as adjusted to the date of such
calculation).
An example of this calculation is attached hereto as Exhibit II.
----------
(c) For purposes of this Section 1, "Fair Market Value" of one share
of the Company's Common Stock shall mean (i) if the Company's Common Stock is
then listed on a national securities exchange or on The Nasdaq Stock Market, the
last reported sale price on such date; or (ii) otherwise, the fair market value
as determined by the Board of Directors of the Company.
(d) Each exercise of this Warrant shall be deemed to have been
effected at the close of business on the day on which this Warrant shall have
been surrendered to the Company as provided in subsection 1(a) above. At such
time, the person or persons in whose name or names any certificates for Warrant
Shares shall be issuable upon such exercise as provided in subsection 1(e) below
shall be deemed to have become the holder or holders of record of the Warrant
Shares represented by such certificates.
(e) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 10 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the
-2-
<PAGE>
number of Warrant Shares equal (without giving effect to any adjustment therein)
to the number of such shares called for on the face of this Warrant minus the
number of such shares purchased by the Registered Holder upon such exercise
2. Adjustments.
-----------
(a) General. The Purchase Price shall be subject to adjustment from
-------
time to time pursuant to the terms of this Section 2.
(b) Recapitalizations. If outstanding shares of the Company's Common
-----------------
Stock shall be subdivided into a greater number of shares or a dividend in
Common Stock shall be paid in respect of Common Stock, the Purchase Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased.
(c) Mergers, etc. If there shall occur any capital reorganization or
------------
reclassification of the Company's Common Stock (other than a change in par value
or a subdivision or combination as provided for in subsection 2(b) above), or
any consolidation or merger of the Company with or into another corporation, or
a transfer of all or substantially all of the assets of the Company, then, as
part of any such reorganization, reclassification, consolidation, merger or
sale, as the case may be, lawful provision shall be made so that the Registered
Holder of this Warrant shall have the right thereafter to receive upon the
exercise hereof the kind and amount of shares of stock or other securities or
property (including cash) which such Registered Holder would have been entitled
to receive if, immediately prior to any such reorganization, reclassification,
consolidation, merger or sale, as the case may be, such Registered Holder had
held the number of shares of Common Stock which were then purchasable upon the
exercise of this Warrant. In any such case, appropriate adjustment (as
reasonably determined in good faith by the Board of Directors of the Company)
shall be made in the application of the provisions set forth herein with respect
to the rights and interests thereafter of the Registered Holder of this Warrant,
such that the provisions set forth in this Section 2 (including provisions with
respect to adjustment of the Purchase Price) shall thereafter be applicable, as
nearly as is reasonably practicable, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of this Warrant.
For purposes of any such adjustment, the number of Warrant Shares of the Company
for which this Warrant is exercisable shall be fixed immediately prior to the
effective time of such transaction based on the formula set forth in the second
paragraph of this Warrant.
(d) Adjustment in Number of Warrant Shares. When any adjustment is
--------------------------------------
required to be made in the Purchase Price, the number of Warrant Shares
purchasable upon the exercise of this Warrant shall be changed to the number
determined by dividing (i) an amount
-3-
<PAGE>
equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase Price in effect
immediately prior to such adjustment, by (ii) the Purchase Price in effect
immediately after such adjustment.
(e) Certificate of Adjustment. When any adjustment is required to be
-------------------------
made pursuant to this Section 2, the Company shall promptly mail to the
Registered Holder a certificate setting forth the Purchase Price and number of
Warrant Shares after such adjustment and setting forth a brief statement of the
facts requiring such adjustment. Such certificate shall also set forth the kind
and amount of stock or other securities or property into which this Warrant
shall be exercisable following such adjustment.
3. Fractional Shares. The Company shall not be required upon the
-----------------
exercise of this Warrant to issue any fractional shares, but shall make a
proportionate adjustment therefor in cash.
4. Requirements for Transfer.
-------------------------
(a) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Act, or (ii) the Company first shall have been furnished with an opinion of
legal counsel, reasonably satisfactory to the Company, to the effect that such
sale or transfer is exempt from the registration requirements of the Act.
(b) Notwithstanding the provisions of paragraph 4(a) above, no
registration or opinion of counsel shall be required for (i) a transfer by a
Registered Holder which is a partnership to a partner of such partnership or a
retired partner of such partnership who retires after the date hereof, or to the
estate of any such partner or retired partner, if the transferee agrees in
writing to be subject to the terms of this Section 4, or (ii) a transfer made in
accordance with Rule 144 under the Act.
(c) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be offered, sold
or otherwise transferred, pledged or hypothecated (i) without the prior
written consent of the Company and (ii) unless and until such securities
are registered under such Act or an opinion of counsel reasonably
satisfactory to the Company is obtained to the effect that such
registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as (i) they
are sold pursuant to an effective registration statement under the Act
registering such Warrant Shares, Section 4(1) of the Act or
-4-
<PAGE>
Rule 144 under the Act or (ii) they become eligible for resale pursuant to Rule
144(k) under the Act.
(d) Any sale or other disposition of this Warrant and the Warrant
Shares is restricted by a Right of First Refusal and Co-Sale Agreement, dated as
of the date hereof, to which the Company and the Registered Holder are parties.
5. No Impairment. The Company will not, by amendment of its charter or
-------------
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
6. Notices of Record Date, etc. In case:
---------------------------
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right; or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the surviving entity), or any transfer of all or substantially
all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days prior to the
record date or effective date for the event specified in such notice.
-5-
<PAGE>
7. Reservation of Stock. The Company will authorize and at all times
--------------------
reserve and keep available from its authorized but unissued stock, solely for
issuance and delivery upon the exercise of this Warrant, such number of Warrant
Shares and other stock, securities and property, as from time to time shall be
issuable upon the exercise of this Warrant.
8. Exchange of Warrants. Upon the surrender by the Registered Holder of
--------------------
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
9. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
10. Transfers, etc.
--------------
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this warrant and
all rights hereunder are transferrable, in whole or in part, upon surrender of
this Warrant with a properly executed assignment (in the form of Exhibit III
-----------
hereto) at the principal offices of the Company.
(c) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
-------- -------
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
11. Mailing of Notices, etc. All notices and other communications from
-----------------------
the Company to the Registered Holder of this Warrant shall be delivered by hand,
mailed by overnight courier using a nationally recognized courier or first-class
certified or registered mail, postage prepaid, to the address furnished to the
Company in writing by the last Registered Holder of this Warrant who shall have
furnished an address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in connection
herewith to the
-6-
<PAGE>
Company shall be delivered by hand, mailed by overnight courier using a
nationally recognized courier or first-class certified or registered mail,
postage prepaid, to the Company at its principal office set forth below. Notices
provided in accordance with this Section 11 shall be deemed delivered upon
personal delivery, one business day after being sent by overnight courier or two
business days after deposit in the mail. If the Company should at any time
change the location of its principal office to a place other than as set forth
below, it shall give prompt written notice to the Registered Holder of this
Warrant and thereafter all references in this Warrant to the location of its
principal office at the particular time shall be as so specified in such notice.
12. No Rights as Stockholder. Until the exercise of this Warrant, the
------------------------
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
13. Change or Waiver. Any term of this Warrant may be changed or waived
----------------
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
14. Headings. The headings in this Warrant are for purposes of reference
--------
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
15. Governing Law. This Warrant will be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
16. Costs. The prevailing party in any dispute arising out of or relating
-----
to this Warrant shall be entitled to reasonable attorneys' fees and costs
incurred in defending or pursuing such dispute.
17. Facsimile Signatures. This Warrant may be executed by facsimile
--------------------
signature.
SWITCHBOARD INCORPORATED
By: /s/ Douglas McIntyre
-----------------------------
Title: President
--------------------------
-7-
<PAGE>
EXHIBIT I
---------
PURCHASE FORM
-------------
To: ____________________ Dated: ___________________
The undersigned, pursuant to the provisions set forth in the attached
Common Stock Purchase Warrant (No. _), hereby irrevocably elects to purchase
_____ shares of the Common Stock covered by such Warrant. The undersigned
herewith makes payment of $____________, in lawful money of the United States,
representing the full purchase price for such shares at the price per share
provided for in such Warrant.
Signature: _________________________
Address: ___________________________
___________________________
-8-
<PAGE>
EXHIBIT II
----------
EXAMPLE OF CALCULATION
----------------------
The Registered Holder exercises this Warrant with respect to 50,000 Warrant
Shares. The Fair Market Value per Warrant Share on the date of such exercise is
$12.00. The Purchase Price per Warrant Share on the date of such exercise is
$6.00. The number of Warrant Shares that the Registered Holder will be issued
by the Company is 25,000, as follows:
X = 25,000
Y = 50,000
A = 12.00
B = 6.00
25,000 = 50,000 (12.00 - 6.00)
---------------------
12.00
-9-
<PAGE>
EXHIBIT III
-----------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, _______________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Common Stock Purchase Warrant (No. _) with respect to the number of shares of
Common Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Dated: __________________ Signature: ______________________________
Dated: __________________ Witness: ________________________________
-10-
<PAGE>
Exhibit 10.13
-------------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Agreement dated as of December 31, 1997 is entered into by and among
Switchboard Incorporated, a Delaware corporation, (the "Company"), and Continuum
Software Inc., a Delaware corporation (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a Technology
Development and Marketing Agreement dated November 7, 1997 (the "Technology
Agreement"); and
WHEREAS, the Company and the Purchaser desire to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission, or any
----------
other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.01 par value per share, of
------------
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Registration Statement" means a registration statement filed by the
----------------------
Company with the Commission for a public offering and sale of Common Stock
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Registration Expenses" means the expenses described in Section 5.
---------------------
"Registrable Shares" means (i) the Shares and (ii) any other shares of
------------------
Common Stock issued in respect of such shares (because of stock splits, stock
dividends, reclassifications, recapitalizations, or similar events); provided,
--------
however, that shares of Common Stock which are Registrable Shares shall cease to
- -------
be Registrable Shares (i) upon eligibility for any sale pursuant to a
Registration Statement or Rule 144 under the Securities Act or (ii) upon any
sale in any
<PAGE>
manner to a person or entity which, by virtue of Section 12 of this Agreement,
is not entitled to the rights provided by this Agreement. Wherever reference is
made in this Agreement to a request of consent of holders of a certain
percentage of Registrable Shares, the determination of such percentage shall
include shares of Common Stock issuable upon conversion of the Shares even if
such conversion has not yet been effected.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each many, from time to time, be in effect.
"Shares" shall mean the shares of Common Stock issued or issuable upon
------
exercise of the warrants to purchase Common Stock issued to the Purchaser
pursuant to the Technology Agreement.
"Stockholders" means the Purchaser and any persons or entities to whom
------------
the rights granted under this Agreement are transferred by the Purchaser, its
successors or assigns pursuant to Section 12 hereof.
2. Incidental Registration
-----------------------
(a) Whenever the Company proposes to file a Registration Statement at
any time and from time to time, it will, prior to such filing, give written
notice to all Stockholders of its intention to do so and, upon the written
request of a Stockholder or Stockholders given within 20 days after the Company
provides such notice (which request shall state the intended method of
disposition of such Registrable Shares), the Company shall use its reasonable
best efforts to cause all Registrable Shares which the Company has been
requested by such Stockholder or Stockholders to register to be registered under
the Securities Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution specified in
the request of such Stockholder or Stockholders provided, however, that this
--------
Section 2 shall not apply to any Registration Statement filed or proposed to be
filed by the Company pursuant to any agreement to which the Company is or may
become a party if, pursuant to the terms of such agreement, the Company is
prohibited from permitting the Stockholders to participate in such registration;
and provided further that the Company shall have the right to postpone or
----------------
withdraw any registration effected pursuant to this Section 2 without obligation
to any Stockholder.
(b) In connection with any registration under this Section 2
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such registration unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (provided that such terms must be consistent with
this Agreement). If in the opinion of the managing underwriter it is
appropriate because of marketing factors to limit the number of Registrable
Shares to be included in the offering, then the Company shall be required to
include in the registration only that number of Registrable Shares, if any,
which the managing underwriter believes should be included therein. If the
number of Registrable Shares to be included in the offering in accordance with
the foregoing is less than the total number of shares which the holders of
Registrable Shares have
<PAGE>
requested to be included, then the holders of Registrable Shares who have
requested registration and other holders of securities entitled to include them
in such registration shall participate in the registration as follows:
(i) first, there shall be included in the registration any shares
proposed to be sold by the Company and any shares permitted to be included in
the registration pursuant to Section 2 or 3 of the Registration Rights Agreement
dated as of November 5, 1996 by and among the Company, America Online Inc. and
Digital City Inc., as amended from time to time (the "Original Agreement") or
any other agreement(s) entered into by the Company from time to time, on the
terms set forth therein; and
(ii) second, there shall be included in the registration any
Registrable Shares proposed to be sold in accordance with this Agreement, pro
rata based upon the total ownership of shares of Common Stock by the holders of
Registrable Shares requested to be included therein.
If any holder would thus be entitled to include more securities than such holder
requested to be registered, the excess shall be allocated among other requesting
holders pro rata in the manner described in the preceding sentence.
3. Registration Procedures. If and whenever the Company is required by the
-----------------------
provisions of this Agreement to use its reasonable best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall furnish to each selling Stockholder such reasonable numbers of
copies of the prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as the selling
Stockholder may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Shares owned by the selling Stockholder.
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
4. Allocation of Expenses. The selling Stockholders shall pay their
----------------------
respective pro rata portions of all Registration Expenses of all registrations
under this Agreement. For purposes of this Section 4, the term "Registration
Expenses" shall mean (i) all expenses incurred by the Company in complying with
this Agreement, include, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees and expenses of counsel for the
Company, state Blue Sky fees and expenses, the expense of any special audits
incident to or required by any such registration, underwriting discounts,
selling commissions and the fees and expenses of selling Stockholders' counsel
(including any counsel selected to represent all selling Stockholders).
<PAGE>
5. Indemnification and Contribution
- -- --------------------------------
(a) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act of the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement, or
arise out of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Company will reimburse such seller, underwriter
and each such controlling person for any legal or any other expenses reasonably
incurred by such seller, underwriter or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
- -------- -------
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission made in such Registration Statement,
preliminary prospectus or final prospectus, or any such amendment or supplement,
in reliance upon and in conformity with information furnished to the Company, in
writing, by or on behalf of any seller, underwriter, controlling person or any
other person specifically for use in the preparation thereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information relating to such seller furnished in writing
to the Company by or on behalf of such seller specifically for use in connection
with the preparation of such Registration Statement, prospectus, amendment or
supplement; provided, however, that the obligations
-------- -------
<PAGE>
of such Stockholders hereunder shall be limited to an amount equal to the
proceeds to each Stockholder of Registrable Shares sold in connection with such
registration.
(c) Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom. The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
-------- -------
shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation, and no Indemnified Party shall
consent to entry of any judgment or settle such claim or litigation without
prior written consent of the Indemnifying Party.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 5 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 5 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Stockholder or any such controlling
person in circumstances for which indemnification is provided under this Section
5; then, in each such case, the Company and such Stockholder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportions so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Shares offered by the Registration Statement
bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
-------- -------
required to contribute any amount in excess of the proceeds to it of all
Registrable Shares sold by its pursuant to such Registration Statement, and (B)
no person or entity guilty of fraudulent misrepresentation, within the meaning
of Section 11 (f) of the Securities Act, shall be entitled to contribution from
any person or entity who is not guilty of such fraudulent misrepresentation.
6. Information by Holder. Each Stockholder including Registrable Shares in
---------------------
any registration shall furnish to the Company such information regarding such
Stockholder and the distribution proposed by such Stockholder as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
<PAGE>
7. "Stand-Off" Agreement. Each Stockholder, if requested by the Company
----------------------
and the managing underwriter of an offering by the Company of Common Stock or
other securities of the Company pursuant to a Registration Statement, shall
agree not to sell publicly or otherwise transfer or dispose of any Registrable
Shares or other securities of the Company held by such Stockholder for a
specified period of time (not to exceed 180 days) following the effective date
of such Registration Statement; provided, that all officers and directors of the
--------
Company enter into similar agreements.
8. No Limitations on Subsequent or Previous Registration Rights. The
------------------------------------------------------------
Company may at any time and from time to time, without the prior written consent
of Stockholders, enter into any agreement relating to registration rights,
including without limitation any agreement with any holder or prospective holder
of any securities of the Company which would allow such holder or prospective
holder (a) to include securities of the Company in any Registration Statement
prior to the inclusion by any Stockholder and (b) to require a registration in
which no Stockholder is permitted to participate. In addition, this Agreement
shall in all respects be subject and subordinate to the provisions of the
Original Agreement, and in the event of any inconsistency between the terms of
this Agreement and the Original Agreement, the terms of the Original Agreement
shall prevail.
9. Rule 144 Requirements. After the earliest of (i) the closing of the
---------------------
sale of securities of the Company pursuant to a Registration Statement, (ii) the
registration by the Company of a class of securities under Section 12 of the
Exchange Act, or (iii) the issuance by the Company of an offering circular
pursuant to Regulation A under the Securities Act, the Company agrees to:
(a) use its best efforts to comply with the requirements of Rule
144(c) under the Securities Act with respect to current public information about
the Company;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
(c) furnish to any holder of Registrable Shares upon request (i) a
written statement by the Company as to its compliance with the requirements of
said Rule 144(c), and the reporting requirements of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents of the Company as such
holder may reasonably request to avail itself of any similar rule or regulation
of the Commission allowing it to sell any such securities without registration.
10. Mergers, Etc. The Company shall not, directly or indirectly, enter
------------
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Company under this Agreement, and for that purpose
references hereunder to "Registrable Shares" shall be deemed to be references to
the securities which the Stockholders would be entitled to receive in exchange
<PAGE>
for Registrable Shares under any such merger, consolidation or reorganization;
provided, however, that the provisions of this Section 10 shall not apply in the
- -------- -------
event of any merger, consolidation or reorganization in which the Company is not
the surviving corporation if all Stockholders are entitled to receive in
exchange for their Registrable Shares consideration consisting solely of (i)
cash, (ii) securities of the acquiring corporation which may be immediately sold
to the public without registration under the Securities Act, or (iii) securities
of the acquiring corporation which the acquiring corporation has agreed to
register within 180 days of completion of the transaction for resale to the
public pursuant to the Securities Act.
11. Termination. All of the Company's obligations to register Registrable
-----------
Shares under this Agreement shall terminate on the fifth anniversary of this
Agreement.
12. Transfers of Rights. This Agreement, and the rights and obligations of
-------------------
each Purchaser hereunder, may be assigned by such Purchaser to any person or
entity to which Shares are transferred by such Purchaser, and such transferee
shall be deemed a "Purchaser" for purposes of this Agreement; provided that the
transferee provides written notice of such assignment to the Company.
13. General.
-------
(a) Notices. All notices, requests, consents, and other
--------
communications under this Agreement shall be in writing and shall be delivered
by hand or mailed by first class certified or registered mail, return receipt
requested, postage prepaid:
If to the Company, at 115 Flanders Road, Westboro, MA 01581,
Attention: President, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchaser, with a copy to Mark G.
Borden, Esq., Hale and Dorr LLP, 60 State Street, Boston, MA 02109; or
If to the Purchaser, at 800 W. Cummings Park, Suite 4950, Woburn, MA
0801, Attention: President, or at such other address or addresses as may have
been furnished to the Company in writing by such Purchaser, with a copy to
Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, MA 02110, Attention:
Timothy Maguire, Esq.
Notices provided in accordance with this Section 13(a) shall be deemed
delivered upon personal delivery or two business days after deposit in the mail.
(b) Entire Agreement. This Agreement embodies the entire agreement
----------------
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
(c) Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least a majority of the Registrable Shares; provided, that this Agreement may be
--------
amended with the consent of the holders of less than all Registrable Shares only
in a manner
<PAGE>
which affects all Registrable Shares in the same fashion. No waivers of or
exceptions to any term, condition or provision of this Agreement, in any one or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
(d) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
(e) Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity of enforceability of
any other provision of this Agreement.
(f) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
Executed as of the date first written above.
COMPANY:
SWITCHBOARD INCORPORATED
By: /s/ Douglas McIntyre
--------------------
Title: President
------------------
PURCHASER:
CONTINUUM SOFTWARE INC.
By: /s/ Robert E. Millstein
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Title: Vice President
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<PAGE>
Exhibit 10.14
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THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS EXERCISE ARE SUBJECT
TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT AND A
PURCHASE OPTION OF THE COMPANY SET FORTH IN SECTION 11 OF THIS WARRANT.
Warrant No. 3 Number of Shares: 96,250
Date of Issuance: March 31, 1999
SWITCHBOARD INCORPORATED
Common Stock Purchase Warrant
Switchboard Incorporated, a Delaware corporation (the "Company"), for value
received, hereby certifies that U S West Dex, Inc. (the "Initial Holder"), or
its registered assigns (collectively with the Initial Holder the "Registered
Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company, at any time or from time to time on or after the date of issuance
and on or before the later of (a) March 31, 2002 or (b) the date one year
subsequent to the effective date of the termination of that certain Co-Branded
Website and Linking Agreement dated as of March 31, 1999 (the "Agreement") by
and between the Company and the AtHand Members (as defined therein), at not
later than 5:00 p.m., Boston, Massachusetts time, 96,250 shares of Common Stock,
$0.01 par value per share, of the Company (the "Common Stock"), at a per share
purchase price of $8.00. The shares purchasable upon exercise of this Common
Stock Purchase Warrant (this "Warrant"), and the purchase price per share, each
as adjusted from time to time pursuant to the provisions of this Warrant, are
hereinafter referred to as the "Warrant Shares" and the "Purchase Price,"
respectively.
In connection with the issuance of this Warrant, the Initial Holder has
executed an Investment Letter in the form appended hereto as EXHIBIT I. This
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Warrant and all rights of the Registered Holder hereunder shall be null and void
and no Warrant Shares may be issued pursuant to this Warrant until such executed
Investment Letter has been delivered by the Initial Holder to the Company and is
in full force and effect.
1. Exercise.
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(a-A) This Warrant may be exercised by the Registered Holder, in
whole or in part, by surrendering this Warrant, with the purchase form appended
hereto as EXHIBIT II duly executed by such Registered Holder or by such
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Registered Holder's duly authorized attorney, at the principal office of the
Company, or at such other office or agency as the Company may designate,
accompanied by payment in full, in lawful money of the United
<PAGE>
States, of the Purchase Price payable in respect of the number of Warrant Shares
purchased upon such exercise.
(a-B) At any time at which the Company is subject to the reporting
requirements of Section 13 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or at any time subsequent to the delivery of notice by the
Company pursuant to Section 7 of this Warrant of any consolidation or a merger
of the Company with or into another corporation pursuant to which such other
corporation does not agree to assume the obligations of the Company under this
Warrant or a transfer of all or substantially all of the assets of the Company
pursuant to which the transferee does not agree to assume the obligations of the
Company under this Warrant, the Registered Holder may, at its option, elect to
pay some or all of the Purchase Price payable upon an exercise of this Warrant
by cancelling a portion of this Warrant exercisable for such number of Warrant
Shares as is determined by dividing (i) the total Purchase Price payable in
respect of the number of Warrant Shares being purchased upon such exercise by
(ii) the excess of the Fair Market Value (as defined in Section 3 of this
Warrant) per share of Common Stock as of the Exercise Date (as defined in
Section 1(b) of this Warrant) over the Purchase Price per share. If the
Registered Holder wishes to exercise this Warrant pursuant to this method of
payment with respect to the maximum number of Warrant Shares purchasable
pursuant to this method, then the number of Warrant Shares so purchasable shall
be equal to the total number of Warrant Shares, minus the product obtained by
multiplying (x) the total number of Warrant Shares by (y) a fraction, the
numerator of which shall be the Purchase Price per share and the denominator of
which shall be the Fair Market Value per share of Common Stock as of the
Exercise Date. For the purposes of this Warrant, any Warrant Shares cancelled
as payment pursuant to this Section 1(a-B) for some or all of the Purchase Price
upon an exercise of this Warrant shall be referred to as "Purchase Price
Shares."
(a-C) In the event of any consolidation or merger of the Company with
or into another corporation pursuant to which such other corporation does not
agree to assume the obligations of the Company under this Warrant or a transfer
of all or substantially all of the assets of the Company pursuant to which the
transferee does not agree to assume the obligations of the Company under this
Warrant, to the extent this Warrant is not previously exercised, and if the Fair
Market Value per share of Common Stock is greater than the per share Purchase
Price, this Warrant shall be automatically exercised in accordance with the
provisions of Section 1(a-B) of this Warrant as to the maximum number of Warrant
Shares purchasable pursuant to such Section 1(a-B) immediately prior to its
cancellation pursuant to Section 2(b) of this Warrant.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in Section 1(a-A)
of this Warrant (the "Exercise Date"). At such time, the person or persons in
whose name or names any certificates for Warrant Shares shall be issuable upon
such exercise as provided in Section 1(c) of this Warrant shall be deemed to
have become the holder or holders of record of the Warrant Shares represented by
such certificates.
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<PAGE>
(c) As soon as practicable after the exercise of this Warrant in
full or in part, and in any event within 20 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Registered Holder (upon payment by such Registered
Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full
Warrant Shares to which such Registered Holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such Registered Holder
would otherwise be entitled, cash in an amount determined pursuant to Section 3
of this Warrant; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the sum of (A) the number of such shares purchased by
the Registered Holder upon such exercise plus (B) the number of Warrant Shares,
if any, cancelled as payment pursuant to Section 1(a-B) of this Warrant for some
or all of the Purchase Price upon an exercise of this Warrant.
2. Adjustments.
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(a) If outstanding shares of the Common Stock shall be subdivided
into a greater number of shares or a dividend in Common Stock shall be paid in
respect of Common Stock, the Purchase Price in effect immediately prior to such
subdivision or at the record date of such dividend shall simultaneously with the
effectiveness of such subdivision or immediately after the record date of such
dividend be proportionately reduced. If outstanding shares of Common Stock shall
be combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the Purchase Price, the number of Warrant
Shares purchasable upon the exercise of this Warrant shall be changed to the
number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such adjustment,
by (ii) the Purchase Price in effect immediately after such adjustment.
(b) If there shall occur any capital reorganization or
reclassification of the Common Stock (other than a change in par value or a
subdivision or combination as provided for in Section 2(a) of this Warrant), or
any consolidation or merger of the Company with or into another corporation
pursuant to which such other corporation agrees to assume the obligations of the
Company under this Warrant, or a transfer of all or substantially all of the
assets of the Company pursuant to which the transferee agrees to assume the
obligations of the Company under this Warrant, then, as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number
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<PAGE>
of shares of Common Stock which were then purchasable upon the exercise of this
Warrant. In any such case, appropriate adjustment (as reasonably determined in
good faith by the Board) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant. If there shall occur any
consolidation or merger of the Company with or into another corporation pursuant
to which such other corporation does not agree to assume the obligations of the
Company under this Warrant or a transfer of all or substantially all of the
assets of the Company pursuant to which the transferee does not agree to assume
the obligations of the Company under this Warrant, to the extent not then
exercised, this Warrant shall immediately (other than with respect to the
restrictions on transfer set forth in Section 4 of this Warrant, the rights of
the Company pursuant to Section 11 of this Warrant and the lock-up provisions of
Section 12 of this Warrant) be deemed cancelled, all rights of the Registered
Holder hereunder shall be null and void and no Warrant Shares may be issued
hereunder. With respect to any notice provided to the Registered Holder pursuant
to Section 7 of this Warrant in case of such a consolidation or merger of the
Company or of such a sale of all or substantially all of the assets of the
Company, where the surviving corporation or the transferee, respectively, does
not agree to assume the obligations of the Company under this Warrant, such
notice shall so specify that the surviving corporation or the transferee,
respectively, does not agree to assume the obligations of the Company under this
Warrant.
(c) When any adjustment is required to be made in the Purchase
Price, the Company shall promptly mail to the Registered Holder a certificate
setting forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such certificate shall also
set forth the kind and amount of stock or other securities or property into
which this Warrant shall be exercisable following the occurrence of any of the
events specified in Sections 2(a) or 2(b) of this Warrant.
3. Fractional Shares. The Company shall not be required upon the
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exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Fair Market Value (as defined in
this Section 3) per share of Common Stock. For purposes of this Warrant, the
"Fair Market Value" per share of Common Stock shall mean (i) if the Common Stock
is then listed on a national securities exchange or on The Nasdaq Stock Market,
the last reported sale price on such date; or (ii) otherwise, the fair market
value as determined by the Company's Board of Directors (the "Board").
4. Requirements for Transfer.
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(a) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), (ii) at the time of
such sale or transfer, the Company is subject to the reporting requirements of
Section 13 of the Exchange Act and the Company first shall have been furnished
with an opinion of legal counsel, reasonably satisfactory to the Company, to the
effect that such sale or transfer is exempt from the registration requirements
of the
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<PAGE>
Securities Act (a "Transfer Opinion"), (iii) such sale or transfer is (A) of all
of this Warrant and any and all Warrant Shares issued pursuant to any exercise
of this Warrant, (B) to any affiliate (as defined in Rule 12b-2 under the
Exchange Act, an "Affiliate") of the Registered Holder and (C) the Company shall
first have been furnished with a Transfer Opinion, provided, that, in no event
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may more than an aggregate of two sales or transfers be made pursuant to the
terms of this Section 4(a)(iii), or (iv) the Company consents to such sale or
transfer in writing.
(b) Each certificate representing Warrant Shares shall bear a
legend substantially in the following form, in addition to any other legends
that may be required under federal or state laws:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, and may not be offered, sold or otherwise
transferred, pledged or hypothecated unless and until such
securities are registered under such Act or an opinion of
counsel satisfactory to the Corporation is obtained to the
effect that such registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Securities Act and
upon the delivery to the Company of an opinion of legal counsel, reasonably
satisfactory to the Company that such legend may be removed.
5. No Impairment. The Company will not, by amendment of its charter or
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through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
6. Liquidating Dividends. If the Company pays a dividend or makes a
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distribution on the Common Stock payable otherwise than in cash out of earnings
or earned surplus (determined in accordance with generally accepted accounting
principles) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Company will pay or distribute to the
Registered Holder of this Warrant, upon the exercise hereof, in addition to the
Warrant Shares purchased upon such exercise, the Liquidating Dividend which
would have been paid to such Registered Holder if it had been the owner of
record of such Warrant Shares immediately prior to the date on which a record is
taken for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
7. Notices of Record Date, etc. In case:
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(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to
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<PAGE>
receive any right to subscribe for or purchase any shares of stock of any class
or any other securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be delivered at least ten (10) business days
prior to the record date or effective date for the event specified in such
notice.
8. Reservation of Stock. The Company will at all times reserve and keep
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available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
9. Exchange of Warrants. Upon the surrender by the Registered Holder of
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any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
of this Warrant, issue and deliver to or upon the order of such Registered
Holder, at the Company's expense, a new Warrant or Warrants of like tenor, in
the name of such Registered Holder or as such Registered Holder (upon payment by
such Registered Holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so surrendered.
10. Effect of Certain Terminations of the Agreement.
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(a) In the event of the occurrence on or prior to December 31, 1999
of Section 4.4 Event (as defined in the Agreement), the number of Warrant Shares
issuable upon exercise of this Warrant (including any Warrant Shares then
issued, and prior to any adjustments pursuant to Section 2 of this Warrant)
shall be reduced to 100,000.
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<PAGE>
(b) In the event that the Agreement is terminated on December 31,
1999 pursuant to Section 3.2 of the Agreement by the AtHand Members for their
own convenience, the number of Warrant Shares issuable upon exercise of this
Warrant (including any Warrant Shares then issued, and prior to any adjustments
pursuant to Section 2 of this Warrant) shall be reduced to 233,750.
(c) In the event of the occurrence subsequent to December 31, 1999
of a Section 4.4 Event, the number of Warrant Shares issuable upon exercise of
this Warrant (including any Warrant Shares then issued, and prior to any
adjustments pursuant to Section 2 of this Warrant) shall be reduced to 233,750.
11. Purchase Option.
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(a) The Company shall have the right and option (the "Purchase
Option") to purchase from the registered holders thereof, at a per share
purchase price equal to the Purchase Price applicable upon the issuance thereof
(the "Option Price"), some or all of any Warrant Shares then issued upon the
exercise of this Warrant (the "Purchase Shares") in the event of the following:
(i) the occurrence on or prior to December 31, 1999 of a
Section 4.4 Event (as defined in the Agreement), provided, that, the Purchase
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Option may then be exercised only if, and to the extent that, the sum of the
total number of Purchase Price Shares and Warrant Shares then issued is greater
than 100,000 (as adjusted pursuant to Section 2 of this Warrant);
(ii) the Agreement is terminated on December 31, 1999 pursuant
to Section 3.2 of the Agreement by the AtHand Members for their own convenience,
provided, that, the Purchase Option may then be exercised only if, and to the
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extent that, the sum of the total number of Purchase Price Shares and Warrant
Shares then issued is greater than 233,750 (as adjusted pursuant to Section 2 of
this Warrant); or
(iii) the occurrence subsequent to December 31, 1999, but not
subsequent to October 31, 2000, of a Section 4.4 Event, provided, that, the
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Purchase Option may then be exercised only if, and to the extent that, the sum
of the total number of Purchase Price Shares and Warrant Shares then issued is
greater than 233,750 (as adjusted pursuant to Section 2 of this Warrant).
(b) The Company may exercise the Purchase Option by delivering or
mailing to the registered holder(s) of the Purchase Shares a written notice of
exercise of the Purchase Option (the "Purchase Notice") within 60 days of the
commencement of such Purchase Option. Such Purchase Notice shall specify the
number of Purchase Shares to be purchased.
(c) Within 10 days after delivery of the Purchase Notice to the
registered holders of the Purchase Shares, such registered holders shall tender
to the Company at its principal offices the certificate or certificates
representing the Purchase Shares which the Company has elected to purchase in
accordance with the terms of this Section 11, duly
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<PAGE>
endorsed in blank or with duly endorsed stock powers attached thereto, all in
form suitable for the transfer of such Purchase Shares to the Company. Promptly
following its receipt of such certificate or certificates, the Company shall pay
to such registered holders the aggregate Purchase Price for such of the Purchase
Shares held by such registered holders (provided that any delay in making such
payment shall not invalidate the Company's exercise of the Purchase Option with
respect to such Purchase Shares).
(d) After the time at which any Purchase Shares are required to be
delivered to the Company for transfer to the Company pursuant to Section 11(c)
of this Warrant, the Company shall not pay any dividend to the registered
holders of such Purchase Shares on account of such Purchase Shares or permit
such registered holders to exercise any of the privileges or rights of a
stockholder with respect to such Purchase Shares, but shall, in so far as
permitted by law, treat the Company as the owner of such Purchase Shares.
(e) The Option Price may be payable, at the option of the Company,
in cancellation of all or a portion of any past due amounts under the Agreement
of the registered holders of such Purchase Shares to the Company, or in cash (by
check) or both.
(f) The Company may assign its Purchase Option to (i) an Affiliate
of the Company, (ii) a surviving corporation with or into which the Company
consolidates or merges or (iii) a transferee of all or substantially all of the
assets of the Company.
(g) In addition to the legends described in Section 4(b) of this
Warrant, each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The shares of stock represented by this certificate are
subject to restrictions on transfer and an option to
purchase set forth in a certain Warrant issued by the
Corporation to the registered owner of these shares (or its
predecessor in interest), a copy of which Warrant is
available for inspection without charge at the office of the
Secretary of the Corporation.
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, on or after October 31,
2000.
12. Lock-up. In connection with the initial underwritten public offering
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of the Company's securities pursuant to a registration statement under the
Securities Act, the Registered Holder and any registered holder of any Warrant
Shares shall (i) not sell, make short sale of, loan, grant any options for the
purchase of, or otherwise dispose of any shares of Common Stock without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) execute
any agreement substantially reflecting clause (i) above as may be requested by
the Company or the managing underwriters at the time of such initial public
offering.
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13. Replacement of Warrants. Upon receipt of evidence reasonably
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satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
14. Transfers, etc.
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(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
(b) Subject to the provisions of Section 4 of this Warrant, this
Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in the form of
EXHIBIT III appended hereto) at the principal office of the Company.
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(c) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
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Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
15. Mailing of Notices, etc. All notices and other communications from
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the Company to the Registered Holder of this Warrant shall be in writing and
shall be deemed given when sent by first-class certified mail, or via facsimile
or overnight courier, with written confirmation of receipt, to the address
furnished to the Company in writing by the last Registered Holder of this
Warrant who shall have furnished an address to the Company in writing. All
notices and other communications from the Registered Holder of this Warrant or
in connection herewith to the Company shall be in writing and shall be deemed
given when sent by certified mail or via facsimile or overnight courier, with
written confirmation of receipt, to the Company at its principal office set
forth below. If the Company should at any time change the location of its
principal office to a place other than as set forth below, it shall give prompt
written notice to the Registered Holder of this Warrant and thereafter all
references in this Warrant to the location of its principal office at the
particular time shall be as so specified in such notice.
16. No Rights as Stockholder. Until the exercise of this Warrant, the
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Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
17. Change or Waiver. Any term of this Warrant may be changed or waived
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only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
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18. Headings. The headings in this Warrant are for purposes of reference
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only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
19. Governing Law. This Warrant will be governed by and construed in
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accordance with the laws of the State of Delaware, without reference to its
conflicts of law rules.
20. Costs. The prevailing party in any dispute arising out of or relating
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to this Warrant shall be entitled to reasonable attorneys' fees, expenses and
costs incurred in defending or pursuing such dispute.
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
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Name: Dean Polnerow
Title: President
Address of Principal Office:
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115 Flanders Road
Westboro, Massachusetts 01581
[Corporate Seal]
ATTEST:
/s/ John Jewett
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Name: John Jewett
Title: VP and CFO
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<PAGE>
EXHIBIT I
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INVESTMENT LETTER
Switchboard Incorporated
115 Flanders Road
Westboro, Massachusetts 01581
Ladies and Gentlemen:
In order to induce Switchboard Incorporated, a Delaware corporation (the
"Company"), to issue and sell to ____________ (the "Investor"), the Common Stock
Purchase Warrant No. ___ (the "Warrant") and any and all of the shares of Common
Stock, $0.01 par value per share, of the Company (the "Common Stock") issuable
upon any exercise or partial exercise of the Warrant (the "Shares"), the
Investor hereby represents, warrants and covenants as follows:
(a) The Investor is accepting the Warrant and the Shares for its own
account for investment only, and not with a view to, or for sale in connection
with, any distribution of the Warrant and/or Shares in violation for the
Securities Act of 1933, as amended (the "Securities Act"), or any rule or
regulation under the Securities Act.
(b) The Investor has had such opportunity as it has deemed adequate to
obtain from representatives of the Company such information as is necessary to
permit it to evaluate the merits and risks of its investment in the Company.
(c) The Investor has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in the purchase of
the Warrant and/or the Shares and to make an informed investment decision with
respect to such purchase.
(d) The Investor can afford a complete loss of the value of the Warrant
and/or the Shares and is able to bear the economic risk of holding the Warrant
and/or the Shares for an indefinite period.
(e) The Investor understands that (i) neither the Warrant nor the Shares
have been registered under the Securities Act and both the Warrant and the
Shares are "restricted securities" within the meaning of Rule 144 under the
Securities Act, (ii) neither the Warrant nor the Shares can be sold, transferred
or otherwise disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available; (iii) in any
event, the exemption from registration under Rule 144 or otherwise may not be
available for the Warrant, may not be available for at least one year and even
then will not be available unless a public market then exists for the Common
Stock, adequate information concerning the Company is then available to the
public, and other terms and conditions of Rule 144 are complied with; and (iv)
there is now no registration statement on file with the Securities and Exchange
Commission with respect to any security of the Company and the Company has no
obligation or current intention to register the Warrant or the Shares under the
Securities Act.
(f) A legend substantially in the following form will be placed on any
certificate representing the Shares:
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Switchboard Incorporated
Page 2
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged
or hypothecated unless and until such securities are
registered under such Act or an opinion of counsel
satisfactory to the Corporation is obtained to the effect
that such registration is not required."
Very truly yours,
INVESTOR:
US WEST DEX, INC.
Dated: March 31, 1999 By: /s/ James A. Smith
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Name: James A. Smith
Title: President and CEO
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EXHIBIT II
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PURCHASE FORM
To: Switchboard Incorporated Date:____________________
115 Flanders Road
Westboro, Massachusetts 01581
Attention: Treasurer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase _____ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________ in lawful money of the United States, representing the full
purchase price for such shares at the price per share provided for in such
Warrant.
Name of Registered Holder:___________________
By:__________________________________________
Name:
Title:
-13-
<PAGE>
EXHIBIT III
-----------
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant (No. ____) with respect to the number of shares of Common
Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Name of Registered Holder:________________________
By:______________________________ Date:_____________________
Name:
Title:
Witness:_________________________ Date:_____________________
Name:
Title:
-14-
<PAGE>
Exhibit 10.15
-------------
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS EXERCISE ARE SUBJECT
TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT AND A
PURCHASE OPTION OF THE COMPANY SET FORTH IN SECTION 11 OF THIS WARRANT.
Warrant No. 4 Number of Shares: 96,250
Date of Issuance: March 31, 1999
SWITCHBOARD INCORPORATED
Common Stock Purchase Warrant
Switchboard Incorporated, a Delaware corporation (the "Company"), for value
received, hereby certifies that Ameritech Interactive Media, Inc. (the "Initial
Holder"), or its registered assigns (collectively with the Initial Holder the
"Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time or from time to time on or after the date
of issuance and on or before the later of (a) March 31, 2002 or (b) the date one
year subsequent to the effective date of the termination of that certain Co-
Branded Website and Linking Agreement dated as of March 31, 1999 (the
"Agreement") by and between the Company and the AtHand Members (as defined
therein), at not later than 5:00 p.m., Boston, Massachusetts time, 96,250 shares
of Common Stock, $0.01 par value per share, of the Company (the "Common Stock"),
at a per share purchase price of $8.00. The shares purchasable upon exercise of
this Common Stock Purchase Warrant (this "Warrant"), and the purchase price per
share, each as adjusted from time to time pursuant to the provisions of this
Warrant, are hereinafter referred to as the "Warrant Shares" and the "Purchase
Price," respectively.
In connection with the issuance of this Warrant, the Initial Holder has
executed an Investment Letter in the form appended hereto as EXHIBIT I. This
---------
Warrant and all rights of the Registered Holder hereunder shall be null and void
and no Warrant Shares may be issued pursuant to this Warrant until such executed
Investment Letter has been delivered by the Initial Holder to the Company and is
in full force and effect.
1. Exercise.
--------
(a-A) This Warrant may be exercised by the Registered Holder, in
whole or in part, by surrendering this Warrant, with the purchase form appended
hereto as EXHIBIT II duly executed by such Registered Holder or by such
----------
Registered Holder's duly authorized attorney, at the principal office of the
Company, or at such other office or agency as the Company may designate,
accompanied by payment in full, in lawful money of the United
<PAGE>
States, of the Purchase Price payable in respect of the number of Warrant Shares
purchased upon such exercise.
(a-B) At any time at which the Company is subject to the reporting
requirements of Section 13 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or at any time subsequent to the delivery of notice by the
Company pursuant to Section 7 of this Warrant of any consolidation or a merger
of the Company with or into another corporation pursuant to which such other
corporation does not agree to assume the obligations of the Company under this
Warrant or a transfer of all or substantially all of the assets of the Company
pursuant to which the transferee does not agree to assume the obligations of the
Company under this Warrant, the Registered Holder may, at its option, elect to
pay some or all of the Purchase Price payable upon an exercise of this Warrant
by cancelling a portion of this Warrant exercisable for such number of Warrant
Shares as is determined by dividing (i) the total Purchase Price payable in
respect of the number of Warrant Shares being purchased upon such exercise by
(ii) the excess of the Fair Market Value (as defined in Section 3 of this
Warrant) per share of Common Stock as of the Exercise Date (as defined in
Section 1(b) of this Warrant) over the Purchase Price per share. If the
Registered Holder wishes to exercise this Warrant pursuant to this method of
payment with respect to the maximum number of Warrant Shares purchasable
pursuant to this method, then the number of Warrant Shares so purchasable shall
be equal to the total number of Warrant Shares, minus the product obtained by
multiplying (x) the total number of Warrant Shares by (y) a fraction, the
numerator of which shall be the Purchase Price per share and the denominator of
which shall be the Fair Market Value per share of Common Stock as of the
Exercise Date. For the purposes of this Warrant, any Warrant Shares cancelled
as payment pursuant to this Section 1(a-B) for some or all of the Purchase Price
upon an exercise of this Warrant shall be referred to as "Purchase Price
Shares."
(a-C) In the event of any consolidation or merger of the Company with
or into another corporation pursuant to which such other corporation does not
agree to assume the obligations of the Company under this Warrant or a transfer
of all or substantially all of the assets of the Company pursuant to which the
transferee does not agree to assume the obligations of the Company under this
Warrant, to the extent this Warrant is not previously exercised, and if the Fair
Market Value per share of Common Stock is greater than the per share Purchase
Price, this Warrant shall be automatically exercised in accordance with the
provisions of Section 1(a-B) of this Warrant as to the maximum number of Warrant
Shares purchasable pursuant to such Section 1(a-B) immediately prior to its
cancellation pursuant to Section 2(b) of this Warrant.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in Section 1(a-A)
of this Warrant (the "Exercise Date"). At such time, the person or persons in
whose name or names any certificates for Warrant Shares shall be issuable upon
such exercise as provided in Section 1(c) of this Warrant shall be deemed to
have become the holder or holders of record of the Warrant Shares represented by
such certificates.
-2-
<PAGE>
(c) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 20 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Registered Holder (upon payment by such Registered
Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 3 of
this Warrant; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the sum of (A) the number of such shares purchased by
the Registered Holder upon such exercise plus (B) the number of Warrant Shares,
if any, cancelled as payment pursuant to Section 1(a-B) of this Warrant for some
or all of the Purchase Price upon an exercise of this Warrant.
2. Adjustments.
-----------
(a) If outstanding shares of the Common Stock shall be subdivided
into a greater number of shares or a dividend in Common Stock shall be paid in
respect of Common Stock, the Purchase Price in effect immediately prior to such
subdivision or at the record date of such dividend shall simultaneously with the
effectiveness of such subdivision or immediately after the record date of such
dividend be proportionately reduced. If outstanding shares of Common Stock shall
be combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the Purchase Price, the number of Warrant
Shares purchasable upon the exercise of this Warrant shall be changed to the
number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such adjustment,
by (ii) the Purchase Price in effect immediately after such adjustment.
(b) If there shall occur any capital reorganization or
reclassification of the Common Stock (other than a change in par value or a
subdivision or combination as provided for in Section 2(a) of this Warrant), or
any consolidation or merger of the Company with or into another corporation
pursuant to which such other corporation agrees to assume the obligations of the
Company under this Warrant, or a transfer of all or substantially all of the
assets of the Company pursuant to which the transferee agrees to assume the
obligations of the Company under this Warrant, then, as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number
-3-
<PAGE>
of shares of Common Stock which were then purchasable upon the exercise of this
Warrant. In any such case, appropriate adjustment (as reasonably determined in
good faith by the Board) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant. If there shall occur any
consolidation or merger of the Company with or into another corporation pursuant
to which such other corporation does not agree to assume the obligations of the
Company under this Warrant or a transfer of all or substantially all of the
assets of the Company pursuant to which the transferee does not agree to assume
the obligations of the Company under this Warrant, to the extent not then
exercised, this Warrant shall immediately (other than with respect to the
restrictions on transfer set forth in Section 4 of this Warrant, the rights of
the Company pursuant to Section 11 of this Warrant and the lock-up provisions of
Section 12 of this Warrant) be deemed cancelled, all rights of the Registered
Holder hereunder shall be null and void and no Warrant Shares may be issued
hereunder. With respect to any notice provided to the Registered Holder pursuant
to Section 7 of this Warrant in case of such a consolidation or merger of the
Company or of such a sale of all or substantially all of the assets of the
Company, where the surviving corporation or the transferee, respectively, does
not agree to assume the obligations of the Company under this Warrant, such
notice shall so specify that the surviving corporation or the transferee,
respectively, does not agree to assume the obligations of the Company under this
Warrant.
(c) When any adjustment is required to be made in the Purchase Price,
the Company shall promptly mail to the Registered Holder a certificate setting
forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such certificate shall also
set forth the kind and amount of stock or other securities or property into
which this Warrant shall be exercisable following the occurrence of any of the
events specified in Sections 2(a) or 2(b) of this Warrant.
3. Fractional Shares. The Company shall not be required upon the
-----------------
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Fair Market Value (as defined in
this Section 3) per share of Common Stock. For purposes of this Warrant, the
"Fair Market Value" per share of Common Stock shall mean (i) if the Common Stock
is then listed on a national securities exchange or on The Nasdaq Stock Market,
the last reported sale price on such date; or (ii) otherwise, the fair market
value as determined by the Company's Board of Directors (the "Board").
4. Requirements for Transfer.
-------------------------
(a) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), (ii) at the time of
such sale or transfer, the Company is subject to the reporting requirements of
Section 13 of the Exchange Act and the Company first shall have been furnished
with an opinion of legal counsel, reasonably satisfactory to the Company, to the
effect that such sale or transfer is exempt from the registration requirements
of the
-4-
<PAGE>
Securities Act (a "Transfer Opinion"), (iii) such sale or transfer is (A) of all
of this Warrant and any and all Warrant Shares issued pursuant to any exercise
of this Warrant, (B) to any affiliate (as defined in Rule 12b-2 under the
Exchange Act, an "Affiliate") of the Registered Holder and (C) the Company shall
first have been furnished with a Transfer Opinion, provided, that, in no event
-------- ----
may more than an aggregate of two sales or transfers be made pursuant to the
terms of this Section 4(a)(iii), or (iv) the Company consents to such sale or
transfer in writing.
(b) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form, in addition to any other legends that may
be required under federal or state laws:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be
offered, sold or otherwise transferred, pledged or hypothecated unless and
until such securities are registered under such Act or an opinion of
counsel satisfactory to the Corporation is obtained to the effect that such
registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Securities Act and
upon the delivery to the Company of an opinion of legal counsel, reasonably
satisfactory to the Company that such legend may be removed.
5. No Impairment. The Company will not, by amendment of its charter or
-------------
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
6. Liquidating Dividends. If the Company pays a dividend or makes a
---------------------
distribution on the Common Stock payable otherwise than in cash out of earnings
or earned surplus (determined in accordance with generally accepted accounting
principles) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Company will pay or distribute to the
Registered Holder of this Warrant, upon the exercise hereof, in addition to the
Warrant Shares purchased upon such exercise, the Liquidating Dividend which
would have been paid to such Registered Holder if it had been the owner of
record of such Warrant Shares immediately prior to the date on which a record is
taken for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
7. Notices of Record Date, etc. In case:
---------------------------
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to
-5-
<PAGE>
receive any right to subscribe for or purchase any shares of stock of any class
or any other securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be delivered at least ten (10) business days
prior to the record date or effective date for the event specified in such
notice.
8. Reservation of Stock. The Company will at all times reserve and keep
--------------------
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
9. Exchange of Warrants. Upon the surrender by the Registered Holder of
--------------------
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
of this Warrant, issue and deliver to or upon the order of such Registered
Holder, at the Company's expense, a new Warrant or Warrants of like tenor, in
the name of such Registered Holder or as such Registered Holder (upon payment by
such Registered Holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so surrendered.
10. Effect of Certain Terminations of the Agreement.
-----------------------------------------------
(a) In the event of the occurrence on or prior to December 31, 1999
of Section 4.4 Event (as defined in the Agreement), the number of Warrant Shares
issuable upon exercise of this Warrant (including any Warrant Shares then
issued, and prior to any adjustments pursuant to Section 2 of this Warrant)
shall be reduced to 100,000.
-6-
<PAGE>
(b) In the event that the Agreement is terminated on December 31,
1999 pursuant to Section 3.2 of the Agreement by the AtHand Members for their
own convenience, the number of Warrant Shares issuable upon exercise of this
Warrant (including any Warrant Shares then issued, and prior to any adjustments
pursuant to Section 2 of this Warrant) shall be reduced to 233,750.
(c) In the event of the occurrence subsequent to December 31, 1999 of
a Section 4.4 Event, the number of Warrant Shares issuable upon exercise of this
Warrant (including any Warrant Shares then issued, and prior to any adjustments
pursuant to Section 2 of this Warrant) shall be reduced to 233,750.
11. Purchase Option.
---------------
(a) The Company shall have the right and option (the "Purchase
Option") to purchase from the registered holders thereof, at a per share
purchase price equal to the Purchase Price applicable upon the issuance thereof
(the "Option Price"), some or all of any Warrant Shares then issued upon the
exercise of this Warrant (the "Purchase Shares") in the event of the following:
(i) the occurrence on or prior to December 31, 1999 of a
Section 4.4 Event (as defined in the Agreement), provided, that, the Purchase
-------- ----
Option may then be exercised only if, and to the extent that, the sum of the
total number of Purchase Price Shares and Warrant Shares then issued is greater
than 100,000 (as adjusted pursuant to Section 2 of this Warrant);
(ii) the Agreement is terminated on December 31, 1999 pursuant
to Section 3.2 of the Agreement by the AtHand Members for their own convenience,
provided, that, the Purchase Option may then be exercised only if, and to the
- -------- ----
extent that, the sum of the total number of Purchase Price Shares and Warrant
Shares then issued is greater than 233,750 (as adjusted pursuant to Section 2 of
this Warrant); or
(iii) the occurrence subsequent to December 31, 1999, but not
subsequent to October 31, 2000, of a Section 4.4 Event, provided, that, the
-------- ----
Purchase Option may then be exercised only if, and to the extent that, the sum
of the total number of Purchase Price Shares and Warrant Shares then issued is
greater than 233,750 (as adjusted pursuant to Section 2 of this Warrant).
(b) The Company may exercise the Purchase Option by delivering or
mailing to the registered holder(s) of the Purchase Shares a written notice of
exercise of the Purchase Option (the "Purchase Notice") within 60 days of the
commencement of such Purchase Option. Such Purchase Notice shall specify the
number of Purchase Shares to be purchased.
(c) Within 10 days after delivery of the Purchase Notice to the
registered holders of the Purchase Shares, such registered holders shall tender
to the Company at its principal offices the certificate or certificates
representing the Purchase Shares which the Company has elected to purchase in
accordance with the terms of this Section 11, duly
-7-
<PAGE>
endorsed in blank or with duly endorsed stock powers attached thereto, all in
form suitable for the transfer of such Purchase Shares to the Company. Promptly
following its receipt of such certificate or certificates, the Company shall pay
to such registered holders the aggregate Purchase Price for such of the Purchase
Shares held by such registered holders (provided that any delay in making such
payment shall not invalidate the Company's exercise of the Purchase Option with
respect to such Purchase Shares).
(d) After the time at which any Purchase Shares are required to be
delivered to the Company for transfer to the Company pursuant to Section 11(c)
of this Warrant, the Company shall not pay any dividend to the registered
holders of such Purchase Shares on account of such Purchase Shares or permit
such registered holders to exercise any of the privileges or rights of a
stockholder with respect to such Purchase Shares, but shall, in so far as
permitted by law, treat the Company as the owner of such Purchase Shares.
(e) The Option Price may be payable, at the option of the Company, in
cancellation of all or a portion of any past due amounts under the Agreement of
the registered holders of such Purchase Shares to the Company, or in cash (by
check) or both.
(f) The Company may assign its Purchase Option to (i) an Affiliate of
the Company, (ii) a surviving corporation with or into which the Company
consolidates or merges or (iii) a transferee of all or substantially all of the
assets of the Company.
(g) In addition to the legends described in Section 4(b) of this
Warrant, each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The shares of stock represented by this certificate are
subject to restrictions on transfer and an option to
purchase set forth in a certain Warrant issued by the
Corporation to the registered owner of these shares (or its
predecessor in interest), a copy of which Warrant is
available for inspection without charge at the office of the
Secretary of the Corporation.
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, on or after October 31,
2000.
12. Lock-up. In connection with the initial underwritten public offering
-------
of the Company's securities pursuant to a registration statement under the
Securities Act, the Registered Holder and any registered holder of any Warrant
Shares shall (i) not sell, make short sale of, loan, grant any options for the
purchase of, or otherwise dispose of any shares of Common Stock without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) execute
any agreement substantially reflecting clause (i) above as may be requested by
the Company or the managing underwriters at the time of such initial public
offering.
-8-
<PAGE>
13. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
14. Transfers, etc.
--------------
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
(b) Subject to the provisions of Section 4 of this Warrant, this
Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in the form of
EXHIBIT III appended hereto) at the principal office of the Company.
- -----------
(c) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
-------- -------
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
15. Mailing of Notices, etc. All notices and other communications from
-----------------------
the Company to the Registered Holder of this Warrant shall be in writing and
shall be deemed given when sent by first-class certified mail, or via facsimile
or overnight courier, with written confirmation of receipt, to the address
furnished to the Company in writing by the last Registered Holder of this
Warrant who shall have furnished an address to the Company in writing. All
notices and other communications from the Registered Holder of this Warrant or
in connection herewith to the Company shall be in writing and shall be deemed
given when sent by certified mail or via facsimile or overnight courier, with
written confirmation of receipt, to the Company at its principal office set
forth below. If the Company should at any time change the location of its
principal office to a place other than as set forth below, it shall give prompt
written notice to the Registered Holder of this Warrant and thereafter all
references in this Warrant to the location of its principal office at the
particular time shall be as so specified in such notice.
16. No Rights as Stockholder. Until the exercise of this Warrant, the
------------------------
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
17. Change or Waiver. Any term of this Warrant may be changed or waived
----------------
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
-9-
<PAGE>
18. Headings. The headings in this Warrant are for purposes of reference
--------
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
19. Governing Law. This Warrant will be governed by and construed in
-------------
accordance with the laws of the State of Delaware, without reference to its
conflicts of law rules.
20. Costs. The prevailing party in any dispute arising out of or relating
-----
to this Warrant shall be entitled to reasonable attorneys' fees, expenses and
costs incurred in defending or pursuing such dispute.
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
----------------------------------------
Name: Dean Polnerow
Title: President
Address of Principal Office:
---------------------------
115 Flanders Road
Westboro, Massachusetts 01581
[Corporate Seal]
ATTEST:
/s/ John Jewett
- --------------------
Name: John Jewett
Title: VP and CFO
<PAGE>
EXHIBIT I
---------
INVESTMENT LETTER
Switchboard Incorporated
115 Flanders Road
Westboro, Massachusetts 01581
Ladies and Gentlemen:
In order to induce Switchboard Incorporated, a Delaware corporation (the
"Company"), to issue and sell to ____________ (the "Investor"), the Common Stock
Purchase Warrant No. ___ (the "Warrant") and any and all of the shares of Common
Stock, $0.01 par value per share, of the Company (the "Common Stock") issuable
upon any exercise or partial exercise of the Warrant (the "Shares"), the
Investor hereby represents, warrants and covenants as follows:
(a) The Investor is accepting the Warrant and the Shares for its own
account for investment only, and not with a view to, or for sale in connection
with, any distribution of the Warrant and/or Shares in violation for the
Securities Act of 1933, as amended (the "Securities Act"), or any rule or
regulation under the Securities Act.
(b) The Investor has had such opportunity as it has deemed adequate to
obtain from representatives of the Company such information as is necessary to
permit it to evaluate the merits and risks of its investment in the Company.
(c) The Investor has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in the purchase of
the Warrant and/or the Shares and to make an informed investment decision with
respect to such purchase.
(d) The Investor can afford a complete loss of the value of the Warrant
and/or the Shares and is able to bear the economic risk of holding the Warrant
and/or the Shares for an indefinite period.
(e) The Investor understands that (i) neither the Warrant nor the Shares
have been registered under the Securities Act and both the Warrant and the
Shares are "restricted securities" within the meaning of Rule 144 under the
Securities Act, (ii) neither the Warrant nor the Shares can be sold, transferred
or otherwise disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available; (iii) in any
event, the exemption from registration under Rule 144 or otherwise may not be
available for the Warrant, may not be available for at least one year and even
then will not be available unless a public market then exists for the Common
Stock, adequate information concerning the Company is then available to the
public, and other terms and conditions of Rule 144 are complied with; and (iv)
there is now no registration statement on file with the Securities and Exchange
Commission with respect to any security of the Company and the Company has no
obligation or current intention to register the Warrant or the Shares under the
Securities Act.
(f) A legend substantially in the following form will be placed on any
certificate representing the Shares:
<PAGE>
Switchboard Incorporated
Page 2
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged
or hypothecated unless and until such securities are
registered under such Act or an opinion of counsel
satisfactory to the Corporation is obtained to the effect
that such registration is not required."
Very truly yours,
INVESTOR:
AMERITECH INTERACTIVE MEDIA. INC.
Dated: March 31, 1999 By: /s/ Peter J. McDonald
-----------------------
Name:
Title:
<PAGE>
EXHIBIT II
----------
PURCHASE FORM
To: Switchboard Incorporated Date:____________________
115 Flanders Road
Westboro, Massachusetts 01581
Attention: Treasurer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase _____ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________ in lawful money of the United States, representing the full
purchase price for such shares at the price per share provided for in such
Warrant.
Name of Registered Holder:____________________
By:___________________________________________
Name:
Title:
<PAGE>
EXHIBIT III
-----------
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant (No. ____) with respect to the number of shares of Common
Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Name of Registered Holder:________________________
By:______________________________ Date:_____________________
Name:
Title:
Witness:_________________________ Date:_____________________
Name:
Title:
<PAGE>
Exhibit 10.16
-------------
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS EXERCISE ARE SUBJECT
TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT AND A
PURCHASE OPTION OF THE COMPANY SET FORTH IN SECTION 11 OF THIS WARRANT.
Warrant No. 5 Number of Shares: 96,250
Date of Issuance: March 31, 1999
SWITCHBOARD INCORPORATED
Common Stock Purchase Warrant
Switchboard Incorporated, a Delaware corporation (the "Company"), for value
received, hereby certifies that Intelligent Media Ventures, Inc. (the "Initial
Holder"), or its registered assigns (collectively with the Initial Holder the
"Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time or from time to time on or after the date
of issuance and on or before the later of (a) March 31, 2002 or (b) the date one
year subsequent to the effective date of the termination of that certain Co-
Branded Website and Linking Agreement dated as of March 31, 1999 (the
"Agreement") by and between the Company and the AtHand Members (as defined
therein), at not later than 5:00 p.m., Boston, Massachusetts time, 96,250 shares
of Common Stock, $0.01 par value per share, of the Company (the "Common Stock"),
at a per share purchase price of $8.00. The shares purchasable upon exercise of
this Common Stock Purchase Warrant (this "Warrant"), and the purchase price per
share, each as adjusted from time to time pursuant to the provisions of this
Warrant, are hereinafter referred to as the "Warrant Shares" and the "Purchase
Price," respectively.
In connection with the issuance of this Warrant, the Initial Holder has
executed an Investment Letter in the form appended hereto as EXHIBIT I. This
---------
Warrant and all rights of the Registered Holder hereunder shall be null and void
and no Warrant Shares may be issued pursuant to this Warrant until such executed
Investment Letter has been delivered by the Initial Holder to the Company and is
in full force and effect.
1. Exercise.
--------
(a-A) This Warrant may be exercised by the Registered Holder, in
whole or in part, by surrendering this Warrant, with the purchase form appended
hereto as EXHIBIT II duly executed by such Registered Holder or by such
----------
Registered Holder's duly authorized attorney, at the principal office of the
Company, or at such other office or agency as the Company may designate,
accompanied by payment in full, in lawful money of the United
<PAGE>
States, of the Purchase Price payable in respect of the number of Warrant Shares
purchased upon such exercise.
(a-B) At any time at which the Company is subject to the reporting
requirements of Section 13 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or at any time subsequent to the delivery of notice by the
Company pursuant to Section 7 of this Warrant of any consolidation or a merger
of the Company with or into another corporation pursuant to which such other
corporation does not agree to assume the obligations of the Company under this
Warrant or a transfer of all or substantially all of the assets of the Company
pursuant to which the transferee does not agree to assume the obligations of the
Company under this Warrant, the Registered Holder may, at its option, elect to
pay some or all of the Purchase Price payable upon an exercise of this Warrant
by cancelling a portion of this Warrant exercisable for such number of Warrant
Shares as is determined by dividing (i) the total Purchase Price payable in
respect of the number of Warrant Shares being purchased upon such exercise by
(ii) the excess of the Fair Market Value (as defined in Section 3 of this
Warrant) per share of Common Stock as of the Exercise Date (as defined in
Section 1(b) of this Warrant) over the Purchase Price per share. If the
Registered Holder wishes to exercise this Warrant pursuant to this method of
payment with respect to the maximum number of Warrant Shares purchasable
pursuant to this method, then the number of Warrant Shares so purchasable shall
be equal to the total number of Warrant Shares, minus the product obtained by
multiplying (x) the total number of Warrant Shares by (y) a fraction, the
numerator of which shall be the Purchase Price per share and the denominator of
which shall be the Fair Market Value per share of Common Stock as of the
Exercise Date. For the purposes of this Warrant, any Warrant Shares cancelled
as payment pursuant to this Section 1(a-B) for some or all of the Purchase Price
upon an exercise of this Warrant shall be referred to as "Purchase Price
Shares."
(a-C) In the event of any consolidation or merger of the Company with
or into another corporation pursuant to which such other corporation does not
agree to assume the obligations of the Company under this Warrant or a transfer
of all or substantially all of the assets of the Company pursuant to which the
transferee does not agree to assume the obligations of the Company under this
Warrant, to the extent this Warrant is not previously exercised, and if the Fair
Market Value per share of Common Stock is greater than the per share Purchase
Price, this Warrant shall be automatically exercised in accordance with the
provisions of Section 1(a-B) of this Warrant as to the maximum number of Warrant
Shares purchasable pursuant to such Section 1(a-B) immediately prior to its
cancellation pursuant to Section 2(b) of this Warrant.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in Section 1(a-A)
of this Warrant (the "Exercise Date"). At such time, the person or persons in
whose name or names any certificates for Warrant Shares shall be issuable upon
such exercise as provided in Section 1(c) of this Warrant shall be deemed to
have become the holder or holders of record of the Warrant Shares represented by
such certificates.
-2-
<PAGE>
(c) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 20 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Registered Holder (upon payment by such Registered
Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 3 of
this Warrant; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the sum of (A) the number of such shares purchased by
the Registered Holder upon such exercise plus (B) the number of Warrant Shares,
if any, cancelled as payment pursuant to Section 1(a-B) of this Warrant for some
or all of the Purchase Price upon an exercise of this Warrant.
2. Adjustments.
-----------
(a) If outstanding shares of the Common Stock shall be subdivided
into a greater number of shares or a dividend in Common Stock shall be paid in
respect of Common Stock, the Purchase Price in effect immediately prior to such
subdivision or at the record date of such dividend shall simultaneously with the
effectiveness of such subdivision or immediately after the record date of such
dividend be proportionately reduced. If outstanding shares of Common Stock shall
be combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the Purchase Price, the number of Warrant
Shares purchasable upon the exercise of this Warrant shall be changed to the
number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such adjustment,
by (ii) the Purchase Price in effect immediately after such adjustment.
(b) If there shall occur any capital reorganization or
reclassification of the Common Stock (other than a change in par value or a
subdivision or combination as provided for in Section 2(a) of this Warrant), or
any consolidation or merger of the Company with or into another corporation
pursuant to which such other corporation agrees to assume the obligations of the
Company under this Warrant, or a transfer of all or substantially all of the
assets of the Company pursuant to which the transferee agrees to assume the
obligations of the Company under this Warrant, then, as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number
-3-
<PAGE>
of shares of Common Stock which were then purchasable upon the exercise of this
Warrant. In any such case, appropriate adjustment (as reasonably determined in
good faith by the Board) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant. If there shall occur any
consolidation or merger of the Company with or into another corporation pursuant
to which such other corporation does not agree to assume the obligations of the
Company under this Warrant or a transfer of all or substantially all of the
assets of the Company pursuant to which the transferee does not agree to assume
the obligations of the Company under this Warrant, to the extent not then
exercised, this Warrant shall immediately (other than with respect to the
restrictions on transfer set forth in Section 4 of this Warrant, the rights of
the Company pursuant to Section 11 of this Warrant and the lock-up provisions of
Section 12 of this Warrant) be deemed cancelled, all rights of the Registered
Holder hereunder shall be null and void and no Warrant Shares may be issued
hereunder. With respect to any notice provided to the Registered Holder pursuant
to Section 7 of this Warrant in case of such a consolidation or merger of the
Company or of such a sale of all or substantially all of the assets of the
Company, where the surviving corporation or the transferee, respectively, does
not agree to assume the obligations of the Company under this Warrant, such
notice shall so specify that the surviving corporation or the transferee,
respectively, does not agree to assume the obligations of the Company under this
Warrant.
(c) When any adjustment is required to be made in the Purchase Price,
the Company shall promptly mail to the Registered Holder a certificate setting
forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such certificate shall also
set forth the kind and amount of stock or other securities or property into
which this Warrant shall be exercisable following the occurrence of any of the
events specified in Sections 2(a) or 2(b) of this Warrant.
3. Fractional Shares. The Company shall not be required upon the
-----------------
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Fair Market Value (as defined in
this Section 3) per share of Common Stock. For purposes of this Warrant, the
"Fair Market Value" per share of Common Stock shall mean (i) if the Common Stock
is then listed on a national securities exchange or on The Nasdaq Stock Market,
the last reported sale price on such date; or (ii) otherwise, the fair market
value as determined by the Company's Board of Directors (the "Board").
4. Requirements for Transfer.
-------------------------
(a) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), (ii) at the time of
such sale or transfer, the Company is subject to the reporting requirements of
Section 13 of the Exchange Act and the Company first shall have been furnished
with an opinion of legal counsel, reasonably satisfactory to the Company, to the
effect that such sale or transfer is exempt from the registration requirements
of the
-4-
<PAGE>
Securities Act (a "Transfer Opinion"), (iii) such sale or transfer is (A)
of all of this Warrant and any and all Warrant Shares issued pursuant to any
exercise of this Warrant, (B) to any affiliate (as defined in Rule 12b-2 under
the Exchange Act, an "Affiliate") of the Registered Holder and (C) the Company
shall first have been furnished with a Transfer Opinion, provided, that, in no
-------- ----
event may more than an aggregate of two sales or transfers be made pursuant to
the terms of this Section 4(a)(iii), or (iv) the Company consents to such sale
or transfer in writing.
(b) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form, in addition to any other legends that may
be required under federal or state laws:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be
offered, sold or otherwise transferred, pledged or hypothecated unless and
until such securities are registered under such Act or an opinion of
counsel satisfactory to the Corporation is obtained to the effect that such
registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Securities Act and
upon the delivery to the Company of an opinion of legal counsel, reasonably
satisfactory to the Company that such legend may be removed.
5. No Impairment. The Company will not, by amendment of its charter or
-------------
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
6. Liquidating Dividends. If the Company pays a dividend or makes a
---------------------
distribution on the Common Stock payable otherwise than in cash out of earnings
or earned surplus (determined in accordance with generally accepted accounting
principles) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Company will pay or distribute to the
Registered Holder of this Warrant, upon the exercise hereof, in addition to the
Warrant Shares purchased upon such exercise, the Liquidating Dividend which
would have been paid to such Registered Holder if it had been the owner of
record of such Warrant Shares immediately prior to the date on which a record is
taken for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
7. Notices of Record Date, etc. In case:
---------------------------
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to
-5-
<PAGE>
receive any right to subscribe for or purchase any shares of stock of any class
or any other securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be delivered at least ten (10) business days prior
to the record date or effective date for the event specified in such notice.
8. Reservation of Stock. The Company will at all times reserve and keep
--------------------
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
9. Exchange of Warrants. Upon the surrender by the Registered Holder of
--------------------
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
of this Warrant, issue and deliver to or upon the order of such Registered
Holder, at the Company's expense, a new Warrant or Warrants of like tenor, in
the name of such Registered Holder or as such Registered Holder (upon payment by
such Registered Holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so surrendered.
10. Effect of Certain Terminations of the Agreement.
-----------------------------------------------
(a) In the event of the occurrence on or prior to December 31, 1999
of Section 4.4 Event (as defined in the Agreement), the number of Warrant Shares
issuable upon exercise of this Warrant (including any Warrant Shares then
issued, and prior to any adjustments pursuant to Section 2 of this Warrant)
shall be reduced to 100,000.
-6-
<PAGE>
(b) In the event that the Agreement is terminated on December 31,
1999 pursuant to Section 3.2 of the Agreement by the AtHand Members for their
own convenience, the number of Warrant Shares issuable upon exercise of this
Warrant (including any Warrant Shares then issued, and prior to any adjustments
pursuant to Section 2 of this Warrant) shall be reduced to 233,750.
(c) In the event of the occurrence subsequent to December 31, 1999 of
a Section 4.4 Event, the number of Warrant Shares issuable upon exercise of this
Warrant (including any Warrant Shares then issued, and prior to any adjustments
pursuant to Section 2 of this Warrant) shall be reduced to 233,750.
11. Purchase Option.
---------------
(a) The Company shall have the right and option (the "Purchase
Option") to purchase from the registered holders thereof, at a per share
purchase price equal to the Purchase Price applicable upon the issuance thereof
(the "Option Price"), some or all of any Warrant Shares then issued upon the
exercise of this Warrant (the "Purchase Shares") in the event of the following:
(i) the occurrence on or prior to December 31, 1999 of a
Section 4.4 Event (as defined in the Agreement), provided, that, the Purchase
-------- ----
Option may then be exercised only if, and to the extent that, the sum of the
total number of Purchase Price Shares and Warrant Shares then issued is greater
than 100,000 (as adjusted pursuant to Section 2 of this Warrant);
(ii) the Agreement is terminated on December 31, 1999 pursuant
to Section 3.2 of the Agreement by the AtHand Members for their own convenience,
provided, that, the Purchase Option may then be exercised only if, and to the
- -------- ----
extent that, the sum of the total number of Purchase Price Shares and Warrant
Shares then issued is greater than 233,750 (as adjusted pursuant to Section 2 of
this Warrant); or
(iii) the occurrence subsequent to December 31, 1999, but not
subsequent to October 31, 2000, of a Section 4.4 Event, provided, that, the
-------- ----
Purchase Option may then be exercised only if, and to the extent that, the sum
of the total number of Purchase Price Shares and Warrant Shares then issued is
greater than 233,750 (as adjusted pursuant to Section 2 of this Warrant).
(b) The Company may exercise the Purchase Option by delivering or
mailing to the registered holder(s) of the Purchase Shares a written notice of
exercise of the Purchase Option (the "Purchase Notice") within 60 days of the
commencement of such Purchase Option. Such Purchase Notice shall specify the
number of Purchase Shares to be purchased.
(c) Within 10 days after delivery of the Purchase Notice to the
registered holders of the Purchase Shares, such registered holders shall tender
to the Company at its principal offices the certificate or certificates
representing the Purchase Shares which the Company has elected to purchase in
accordance with the terms of this Section 11, duly
-7-
<PAGE>
endorsed in blank or with duly endorsed stock powers attached thereto, all in
form suitable for the transfer of such Purchase Shares to the Company. Promptly
following its receipt of such certificate or certificates, the Company shall pay
to such registered holders the aggregate Purchase Price for such of the Purchase
Shares held by such registered holders (provided that any delay in making such
payment shall not invalidate the Company's exercise of the Purchase Option with
respect to such Purchase Shares).
(d) After the time at which any Purchase Shares are required to be
delivered to the Company for transfer to the Company pursuant to Section 11(c)
of this Warrant, the Company shall not pay any dividend to the registered
holders of such Purchase Shares on account of such Purchase Shares or permit
such registered holders to exercise any of the privileges or rights of a
stockholder with respect to such Purchase Shares, but shall, in so far as
permitted by law, treat the Company as the owner of such Purchase Shares.
(e) The Option Price may be payable, at the option of the Company, in
cancellation of all or a portion of any past due amounts under the Agreement of
the registered holders of such Purchase Shares to the Company, or in cash (by
check) or both.
(f) The Company may assign its Purchase Option to (i) an Affiliate of
the Company, (ii) a surviving corporation with or into which the Company
consolidates or merges or (iii) a transferee of all or substantially all of the
assets of the Company.
(g) In addition to the legends described in Section 4(b) of this
Warrant, each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The shares of stock represented by this certificate
are subject to restrictions on transfer and an option
to purchase set forth in a certain Warrant issued by
the Corporation to the registered owner of these shares
(or its predecessor in interest), a copy of which
Warrant is available for inspection without charge at
the office of the Secretary of the Corporation.
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, on or after October 31,
2000.
12. Lock-up. In connection with the initial underwritten public offering
-------
of the Company's securities pursuant to a registration statement under the
Securities Act, the Registered Holder and any registered holder of any Warrant
Shares shall (i) not sell, make short sale of, loan, grant any options for the
purchase of, or otherwise dispose of any shares of Common Stock without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) execute
any agreement substantially reflecting clause (i) above as may be requested by
the Company or the managing underwriters at the time of such initial public
offering.
-8-
<PAGE>
13. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
14. Transfers, etc.
--------------
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
(b) Subject to the provisions of Section 4 of this Warrant, this
Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in the form of
EXHIBIT III appended hereto) at the principal office of the Company.
- -----------
(c) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
-------- -------
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
15. Mailing of Notices, etc. All notices and other communications from
-----------------------
the Company to the Registered Holder of this Warrant shall be in writing and
shall be deemed given when sent by first-class certified mail, or via facsimile
or overnight courier, with written confirmation of receipt, to the address
furnished to the Company in writing by the last Registered Holder of this
Warrant who shall have furnished an address to the Company in writing. All
notices and other communications from the Registered Holder of this Warrant or
in connection herewith to the Company shall be in writing and shall be deemed
given when sent by certified mail or via facsimile or overnight courier, with
written confirmation of receipt, to the Company at its principal office set
forth below. If the Company should at any time change the location of its
principal office to a place other than as set forth below, it shall give prompt
written notice to the Registered Holder of this Warrant and thereafter all
references in this Warrant to the location of its principal office at the
particular time shall be as so specified in such notice.
16. No Rights as Stockholder. Until the exercise of this Warrant, the
------------------------
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
17. Change or Waiver. Any term of this Warrant may be changed or waived
----------------
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
-9-
<PAGE>
18. Headings. The headings in this Warrant are for purposes of reference
--------
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
19. Governing Law. This Warrant will be governed by and construed in
-------------
accordance with the laws of the State of Delaware, without reference to its
conflicts of law rules.
20. Costs. The prevailing party in any dispute arising out of or relating
-----
to this Warrant shall be entitled to reasonable attorneys' fees, expenses and
costs incurred in defending or pursuing such dispute.
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
---------------------------------
Name: Dean Polnerow
Title: President
Address of Principal Office:
---------------------------
115 Flanders Road
Westboro, Massachusetts 01581
[Corporate Seal]
ATTEST:
/s/ John Jewett
- ------------------------------
Name: John Jewett
Title: VP and CFO
<PAGE>
EXHIBIT I
---------
INVESTMENT LETTER
Switchboard Incorporated
115 Flanders Road
Westboro, Massachusetts 01581
Ladies and Gentlemen:
In order to induce Switchboard Incorporated, a Delaware corporation (the
"Company"), to issue and sell to ____________ (the "Investor"), the Common Stock
Purchase Warrant No. ___ (the "Warrant") and any and all of the shares of Common
Stock, $0.01 par value per share, of the Company (the "Common Stock") issuable
upon any exercise or partial exercise of the Warrant (the "Shares"), the
Investor hereby represents, warrants and covenants as follows:
(a) The Investor is accepting the Warrant and the Shares for its own
account for investment only, and not with a view to, or for sale in connection
with, any distribution of the Warrant and/or Shares in violation for the
Securities Act of 1933, as amended (the "Securities Act"), or any rule or
regulation under the Securities Act.
(b) The Investor has had such opportunity as it has deemed adequate to
obtain from representatives of the Company such information as is necessary to
permit it to evaluate the merits and risks of its investment in the Company.
(c) The Investor has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in the purchase of
the Warrant and/or the Shares and to make an informed investment decision with
respect to such purchase.
(d) The Investor can afford a complete loss of the value of the Warrant
and/or the Shares and is able to bear the economic risk of holding the Warrant
and/or the Shares for an indefinite period.
(e) The Investor understands that (i) neither the Warrant nor the Shares
have been registered under the Securities Act and both the Warrant and the
Shares are "restricted securities" within the meaning of Rule 144 under the
Securities Act, (ii) neither the Warrant nor the Shares can be sold, transferred
or otherwise disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available; (iii) in any
event, the exemption from registration under Rule 144 or otherwise may not be
available for the Warrant, may not be available for at least one year and even
then will not be available unless a public market then exists for the Common
Stock, adequate information concerning the Company is then available to the
public, and other terms and conditions of Rule 144 are complied with; and (iv)
there is now no registration statement on file with the Securities and Exchange
Commission with respect to any security of the Company and the Company has no
obligation or current intention to register the Warrant or the Shares under the
Securities Act.
(f) A legend substantially in the following form will be placed on any
certificate representing the Shares:
<PAGE>
Switchboard Incorporated
Page 2
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered under
such Act or an opinion of counsel satisfactory to the Corporation
is obtained to the effect that such registration is not required."
Very truly yours,
INVESTOR:
INTELLIGENT MEDIA VENTURES, INC.
Dated: March 31, 1999 By: /s/ Daniel Puzz
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT II
----------
PURCHASE FORM
To: Switchboard Incorporated Date:____________________
115 Flanders Road
Westboro, Massachusetts 01581
Attention: Treasurer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase _____ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________ in lawful money of the United States, representing the full
purchase price for such shares at the price per share provided for in such
Warrant.
Name of Registered Holder:________________________
By:_______________________________________________
Name:
Title:
<PAGE>
EXHIBIT III
-----------
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant (No. ____) with respect to the number of shares of Common
Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Name of Registered Holder:________________________
By:______________________________ Date:_____________________
Name:
Title:
Witness:_________________________ Date:_____________________
Name:
Title:
<PAGE>
Exhibit 10.17
-------------
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS EXERCISE ARE SUBJECT
TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT AND A
PURCHASE OPTION OF THE COMPANY SET FORTH IN SECTION 11 OF THIS WARRANT.
Warrant No. 7 Number of Shares: 96,250
Date of Issuance: April 13, 1999
SWITCHBOARD INCORPORATED
Common Stock Purchase Warrant
Switchboard Incorporated, a Delaware corporation (the "Company"), for value
received, hereby certifies that SBC Communications Inc. (the "Initial Holder"),
or its registered assigns (collectively with the Initial Holder the "Registered
Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company, at any time or from time to time on or after the date of issuance
and on or before the later of (a) March 31, 2002 or (b) the date one year
subsequent to the effective date of the termination of that certain Co-Branded
Website and Linking Agreement dated as of March 31, 1999 (the "Agreement") by
and between the Company and the AtHand Members (as defined therein), at not
later than 5:00 p.m., Boston, Massachusetts time, 96,250 shares of Common Stock,
$0.01 par value per share, of the Company (the "Common Stock"), at a per share
purchase price of $8.00. The shares purchasable upon exercise of this Common
Stock Purchase Warrant (this "Warrant"), and the purchase price per share, each
as adjusted from time to time pursuant to the provisions of this Warrant, are
hereinafter referred to as the "Warrant Shares" and the "Purchase Price,"
respectively.
In connection with the issuance of this Warrant, the Initial Holder has
executed an Investment Letter in the form appended hereto as EXHIBIT I. This
---------
Warrant and all rights of the Registered Holder hereunder shall be null and void
and no Warrant Shares may be issued pursuant to this Warrant until such executed
Investment Letter has been delivered by the Initial Holder to the Company and is
in full force and effect.
1. Exercise.
--------
(a-A) This Warrant may be exercised by the Registered Holder, in
whole or in part, by surrendering this Warrant, with the purchase form appended
hereto as EXHIBIT II duly executed by such Registered Holder or by such
----------
Registered Holder's duly authorized attorney, at the principal office of the
Company, or at such other office or agency as the Company may designate,
accompanied by payment in full, in lawful money of the United
<PAGE>
States, of the Purchase Price payable in respect of the number of Warrant Shares
purchased upon such exercise.
(a-B) At any time at which the Company is subject to the reporting
requirements of Section 13 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or at any time subsequent to the delivery of notice by the
Company pursuant to Section 7 of this Warrant of any consolidation or a merger
of the Company with or into another corporation pursuant to which such other
corporation does not agree to assume the obligations of the Company under this
Warrant or a transfer of all or substantially all of the assets of the Company
pursuant to which the transferee does not agree to assume the obligations of the
Company under this Warrant, the Registered Holder may, at its option, elect to
pay some or all of the Purchase Price payable upon an exercise of this Warrant
by cancelling a portion of this Warrant exercisable for such number of Warrant
Shares as is determined by dividing (i) the total Purchase Price payable in
respect of the number of Warrant Shares being purchased upon such exercise by
(ii) the excess of the Fair Market Value (as defined in Section 3 of this
Warrant) per share of Common Stock as of the Exercise Date (as defined in
Section 1(b) of this Warrant) over the Purchase Price per share. If the
Registered Holder wishes to exercise this Warrant pursuant to this method of
payment with respect to the maximum number of Warrant Shares purchasable
pursuant to this method, then the number of Warrant Shares so purchasable shall
be equal to the total number of Warrant Shares, minus the product obtained by
multiplying (x) the total number of Warrant Shares by (y) a fraction, the
numerator of which shall be the Purchase Price per share and the denominator of
which shall be the Fair Market Value per share of Common Stock as of the
Exercise Date. For the purposes of this Warrant, any Warrant Shares cancelled
as payment pursuant to this Section 1(a-B) for some or all of the Purchase Price
upon an exercise of this Warrant shall be referred to as "Purchase Price
Shares."
(a-C) In the event of any consolidation or merger of the Company with
or into another corporation pursuant to which such other corporation does not
agree to assume the obligations of the Company under this Warrant or a transfer
of all or substantially all of the assets of the Company pursuant to which the
transferee does not agree to assume the obligations of the Company under this
Warrant, to the extent this Warrant is not previously exercised, and if the Fair
Market Value per share of Common Stock is greater than the per share Purchase
Price, this Warrant shall be automatically exercised in accordance with the
provisions of Section 1(a-B) of this Warrant as to the maximum number of Warrant
Shares purchasable pursuant to such Section 1(a-B) immediately prior to its
cancellation pursuant to Section 2(b) of this Warrant.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in Section 1(a-A)
of this Warrant (the "Exercise Date"). At such time, the person or persons in
whose name or names any certificates for Warrant Shares shall be issuable upon
such exercise as provided in Section 1(c) of this Warrant shall be deemed to
have become the holder or holders of record of the Warrant Shares represented by
such certificates.
-2-
<PAGE>
(c) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 20 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Registered Holder (upon payment by such Registered
Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 3 of
this Warrant; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the sum of (A) the number of such shares purchased by
the Registered Holder upon such exercise plus (B) the number of Warrant Shares,
if any, cancelled as payment pursuant to Section 1(a-B) of this Warrant for some
or all of the Purchase Price upon an exercise of this Warrant.
2. Adjustments.
-----------
(a) If outstanding shares of the Common Stock shall be subdivided into
a greater number of shares or a dividend in Common Stock shall be paid in
respect of Common Stock, the Purchase Price in effect immediately prior to such
subdivision or at the record date of such dividend shall simultaneously with the
effectiveness of such subdivision or immediately after the record date of such
dividend be proportionately reduced. If outstanding shares of Common Stock
shall be combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the Purchase Price, the number of Warrant
Shares purchasable upon the exercise of this Warrant shall be changed to the
number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such adjustment,
by (ii) the Purchase Price in effect immediately after such adjustment.
(b) If there shall occur any capital reorganization or
reclassification of the Common Stock (other than a change in par value or a
subdivision or combination as provided for in Section 2(a) of this Warrant), or
any consolidation or merger of the Company with or into another corporation
pursuant to which such other corporation agrees to assume the obligations of the
Company under this Warrant, or a transfer of all or substantially all of the
assets of the Company pursuant to which the transferee agrees to assume the
obligations of the Company under this Warrant, then, as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number
-3-
<PAGE>
of shares of Common Stock which were then purchasable upon the exercise of this
Warrant. In any such case, appropriate adjustment (as reasonably determined in
good faith by the Board) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant. If there shall occur any
consolidation or merger of the Company with or into another corporation pursuant
to which such other corporation does not agree to assume the obligations of the
Company under this Warrant or a transfer of all or substantially all of the
assets of the Company pursuant to which the transferee does not agree to assume
the obligations of the Company under this Warrant, to the extent not then
exercised, this Warrant shall immediately (other than with respect to the
restrictions on transfer set forth in Section 4 of this Warrant, the rights of
the Company pursuant to Section 11 of this Warrant and the lock-up provisions of
Section 12 of this Warrant) be deemed cancelled, all rights of the Registered
Holder hereunder shall be null and void and no Warrant Shares may be issued
hereunder. With respect to any notice provided to the Registered Holder pursuant
to Section 7 of this Warrant in case of such a consolidation or merger of the
Company or of such a sale of all or substantially all of the assets of the
Company, where the surviving corporation or the transferee, respectively, does
not agree to assume the obligations of the Company under this Warrant, such
notice shall so specify that the surviving corporation or the transferee,
respectively, does not agree to assume the obligations of the Company under this
Warrant.
(c) When any adjustment is required to be made in the Purchase Price,
the Company shall promptly mail to the Registered Holder a certificate setting
forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such certificate shall also
set forth the kind and amount of stock or other securities or property into
which this Warrant shall be exercisable following the occurrence of any of the
events specified in Sections 2(a) or 2(b) of this Warrant.
3. Fractional Shares. The Company shall not be required upon the
-----------------
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Fair Market Value (as defined in
this Section 3) per share of Common Stock. For purposes of this Warrant, the
"Fair Market Value" per share of Common Stock shall mean (i) if the Common Stock
is then listed on a national securities exchange or on The Nasdaq Stock Market,
the last reported sale price on such date; or (ii) otherwise, the fair market
value as determined by the Company's Board of Directors (the "Board").
4. Requirements for Transfer.
-------------------------
(a) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), (ii) at the time of
such sale or transfer, the Company is subject to the reporting requirements of
Section 13 of the Exchange Act and the Company first shall have been furnished
with an opinion of legal counsel, reasonably satisfactory to the Company, to the
effect that such sale or transfer is exempt from the registration requirements
of the
-4-
<PAGE>
Securities Act (a "Transfer Opinion"), (iii) such sale or transfer is (A) of all
of this Warrant and any and all Warrant Shares issued pursuant to any exercise
of this Warrant, (B) to any affiliate (as defined in Rule 12b-2 under the
Exchange Act, an "Affiliate") of the Registered Holder and (C) the Company shall
first have been furnished with a Transfer Opinion, provided, that, in no
-------- ----
event may more than an aggregate of two sales or transfers be made pursuant to
the terms of this Section 4(a)(iii), or (iv) the Company consents to such sale
or transfer in writing.
(b) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form, in addition to any other legends that may
be required under federal or state laws:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered
under such Act or an opinion of counsel satisfactory to the
Corporation is obtained to the effect that such registration is
not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Securities Act and
upon the delivery to the Company of an opinion of legal counsel, reasonably
satisfactory to the Company that such legend may be removed.
5. No Impairment. The Company will not, by amendment of its charter or
-------------
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
6. Liquidating Dividends. If the Company pays a dividend or makes a
---------------------
distribution on the Common Stock payable otherwise than in cash out of earnings
or earned surplus (determined in accordance with generally accepted accounting
principles) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Company will pay or distribute to the
Registered Holder of this Warrant, upon the exercise hereof, in addition to the
Warrant Shares purchased upon such exercise, the Liquidating Dividend which
would have been paid to such Registered Holder if it had been the owner of
record of such Warrant Shares immediately prior to the date on which a record is
taken for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
7. Notices of Record Date, etc. In case:
---------------------------
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to
-5-
<PAGE>
receive any right to subscribe for or purchase any shares of stock of any class
or any other securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the surviving entity), or any transfer of all or substantially
all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be delivered at least ten (10) business days
prior to the record date or effective date for the event specified in such
notice.
8. Reservation of Stock. The Company will at all times reserve and keep
--------------------
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
9. Exchange of Warrants. Upon the surrender by the Registered Holder of
--------------------
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
of this Warrant, issue and deliver to or upon the order of such Registered
Holder, at the Company's expense, a new Warrant or Warrants of like tenor, in
the name of such Registered Holder or as such Registered Holder (upon payment by
such Registered Holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so surrendered.
10. Effect of Certain Terminations of the Agreement.
-----------------------------------------------
(a) In the event of the occurrence on or prior to December 31, 1999 of
Section 4.4 Event (as defined in the Agreement), the number of Warrant Shares
issuable upon exercise of this Warrant (including any Warrant Shares then
issued, and prior to any adjustments pursuant to Section 2 of this Warrant)
shall be reduced to 100,000.
-6-
<PAGE>
(b) In the event that the Agreement is terminated on December 31, 1999
pursuant to Section 3.2 of the Agreement by the AtHand Members for their own
convenience, the number of Warrant Shares issuable upon exercise of this Warrant
(including any Warrant Shares then issued, and prior to any adjustments pursuant
to Section 2 of this Warrant) shall be reduced to 233,750.
(c) In the event of the occurrence subsequent to December 31, 1999 of
a Section 4.4 Event, the number of Warrant Shares issuable upon exercise of this
Warrant (including any Warrant Shares then issued, and prior to any adjustments
pursuant to Section 2 of this Warrant) shall be reduced to 233,750.
11. Purchase Option.
---------------
(a) The Company shall have the right and option (the "Purchase
Option") to purchase from the registered holders thereof, at a per share
purchase price equal to the Purchase Price applicable upon the issuance thereof
(the "Option Price"), some or all of any Warrant Shares then issued upon the
exercise of this Warrant (the "Purchase Shares") in the event of the following:
(i) the occurrence on or prior to December 31, 1999 of a Section
4.4 Event (as defined in the Agreement), provided, that, the Purchase Option may
-------- ----
then be exercised only if, and to the extent that, the sum of the total number
of Purchase Price Shares and Warrant Shares then issued is greater than 100,000
(as adjusted pursuant to Section 2 of this Warrant);
(ii) the Agreement is terminated on December 31, 1999 pursuant to
Section 3.2 of the Agreement by the AtHand Members for their own convenience,
provided, that, the Purchase Option may then be exercised only if, and to the
- -------- ----
extent that, the sum of the total number of Purchase Price Shares and Warrant
Shares then issued is greater than 233,750 (as adjusted pursuant to Section 2 of
this Warrant); or
(iii) the occurrence subsequent to December 31, 1999, but not
subsequent to October 31, 2000, of a Section 4.4 Event, provided, that, the
-------- ----
Purchase Option may then be exercised only if, and to the extent that, the sum
of the total number of Purchase Price Shares and Warrant Shares then issued is
greater than 233,750 (as adjusted pursuant to Section 2 of this Warrant).
(b) The Company may exercise the Purchase Option by delivering or
mailing to the registered holder(s) of the Purchase Shares a written notice of
exercise of the Purchase Option (the "Purchase Notice") within 60 days of the
commencement of such Purchase Option. Such Purchase Notice shall specify the
number of Purchase Shares to be purchased.
(c) Within 10 days after delivery of the Purchase Notice to the
registered holders of the Purchase Shares, such registered holders shall tender
to the Company at its principal offices the certificate or certificates
representing the Purchase Shares which the Company has elected to purchase in
accordance with the terms of this Section 11, duly
-7-
<PAGE>
endorsed in blank or with duly endorsed stock powers attached thereto, all in
form suitable for the transfer of such Purchase Shares to the Company. Promptly
following its receipt of such certificate or certificates, the Company shall pay
to such registered holders the aggregate Purchase Price for such of the Purchase
Shares held by such registered holders (provided that any delay in making such
payment shall not invalidate the Company's exercise of the Purchase Option with
respect to such Purchase Shares).
(d) After the time at which any Purchase Shares are required to be
delivered to the Company for transfer to the Company pursuant to Section 11(c)
of this Warrant, the Company shall not pay any dividend to the registered
holders of such Purchase Shares on account of such Purchase Shares or permit
such registered holders to exercise any of the privileges or rights of a
stockholder with respect to such Purchase Shares, but shall, in so far as
permitted by law, treat the Company as the owner of such Purchase Shares.
(e) The Option Price may be payable, at the option of the Company, in
cancellation of all or a portion of any past due amounts under the Agreement of
the registered holders of such Purchase Shares to the Company, or in cash (by
check) or both.
(f) The Company may assign its Purchase Option to (i) an Affiliate of
the Company, (ii) a surviving corporation with or into which the Company
consolidates or merges or (iii) a transferee of all or substantially all of the
assets of the Company.
(g) In addition to the legends described in Section 4(b) of this
Warrant, each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The shares of stock represented by this certificate are
subject to restrictions on transfer and an option to
purchase set forth in a certain Warrant issued by the
Corporation to the registered owner of these shares (or its
predecessor in interest), a copy of which Warrant is
available for inspection without charge at the office of the
Secretary of the Corporation.
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, on or after October 31,
2000.
12. Lock-up. In connection with the initial underwritten public offering
-------
of the Company's securities pursuant to a registration statement under the
Securities Act, the Registered Holder and any registered holder of any Warrant
Shares shall (i) not sell, make short sale of, loan, grant any options for the
purchase of, or otherwise dispose of any shares of Common Stock without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) execute
any agreement substantially reflecting clause (i) above as may be requested by
the Company or the managing underwriters at the time of such initial public
offering.
-8-
<PAGE>
13. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
14. Transfers, etc.
--------------
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
(b) Subject to the provisions of Section 4 of this Warrant, this
Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in the form of
EXHIBIT III appended hereto) at the principal office of the Company.
- -----------
(c) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
-------- -------
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
15. Mailing of Notices, etc. All notices and other communications from
-----------------------
the Company to the Registered Holder of this Warrant shall be in writing and
shall be deemed given when sent by first-class certified mail, or via facsimile
or overnight courier, with written confirmation of receipt, to the address
furnished to the Company in writing by the last Registered Holder of this
Warrant who shall have furnished an address to the Company in writing. All
notices and other communications from the Registered Holder of this Warrant or
in connection herewith to the Company shall be in writing and shall be deemed
given when sent by certified mail or via facsimile or overnight courier, with
written confirmation of receipt, to the Company at its principal office set
forth below. If the Company should at any time change the location of its
principal office to a place other than as set forth below, it shall give prompt
written notice to the Registered Holder of this Warrant and thereafter all
references in this Warrant to the location of its principal office at the
particular time shall be as so specified in such notice.
16. No Rights as Stockholder. Until the exercise of this Warrant, the
------------------------
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
17. Change or Waiver. Any term of this Warrant may be changed or waived
----------------
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
-9-
<PAGE>
18. Headings. The headings in this Warrant are for purposes of reference
--------
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
19. Governing Law. This Warrant will be governed by and construed in
-------------
accordance with the laws of the State of Delaware, without reference to its
conflicts of law rules.
20. Costs. The prevailing party in any dispute arising out of or relating
-----
to this Warrant shall be entitled to reasonable attorneys' fees, expenses and
costs incurred in defending or pursuing such dispute.
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
------------------------
Name: Dean Polnerow
Title: President
Address of Principal Office:
---------------------------
115 Flanders Road
Westboro, Massachusetts 01581
[Corporate Seal]
ATTEST:
/s/ John Jewett
- -----------------------------
Name: John Jewett
Title: Vice President and CFO
<PAGE>
EXHIBIT I
---------
INVESTMENT LETTER
Switchboard Incorporated
115 Flanders Road
Westboro, Massachusetts 01581
Ladies and Gentlemen:
In order to induce Switchboard Incorporated, a Delaware corporation (the
"Company"), to issue and sell to ____________ (the "Investor"), the Common Stock
Purchase Warrant No. ___ (the "Warrant") and any and all of the shares of Common
Stock, $0.01 par value per share, of the Company (the "Common Stock") issuable
upon any exercise or partial exercise of the Warrant (the "Shares"), the
Investor hereby represents, warrants and covenants as follows:
(a) The Investor is accepting the Warrant and the Shares for its own
account for investment only, and not with a view to, or for sale in connection
with, any distribution of the Warrant and/or Shares in violation for the
Securities Act of 1933, as amended (the "Securities Act"), or any rule or
regulation under the Securities Act.
(b) The Investor has had such opportunity as it has deemed adequate to
obtain from representatives of the Company such information as is necessary to
permit it to evaluate the merits and risks of its investment in the Company.
(c) The Investor has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in the purchase of
the Warrant and/or the Shares and to make an informed investment decision with
respect to such purchase.
(d) The Investor can afford a complete loss of the value of the Warrant
and/or the Shares and is able to bear the economic risk of holding the Warrant
and/or the Shares for an indefinite period.
(e) The Investor understands that (i) neither the Warrant nor the Shares
have been registered under the Securities Act and both the Warrant and the
Shares are "restricted securities" within the meaning of Rule 144 under the
Securities Act, (ii) neither the Warrant nor the Shares can be sold, transferred
or otherwise disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available; (iii) in any
event, the exemption from registration under Rule 144 or otherwise may not be
available for the Warrant, may not be available for at least one year and even
then will not be available unless a public market then exists for the Common
Stock, adequate information concerning the Company is then available to the
public, and other terms and conditions of Rule 144 are complied with; and (iv)
there is now no registration statement on file with the Securities and Exchange
Commission with respect to any security of the Company and the Company has no
obligation or current intention to register the Warrant or the Shares under the
Securities Act.
(f) A legend substantially in the following form will be placed on any
certificate representing the Shares:
<PAGE>
Switchboard Incorporated
Page 2
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged
or hypothecated unless and until such securities are
registered under such Act or an opinion of counsel
satisfactory to the Corporation is obtained to the effect
that such registration is not required."
Very truly yours,
INVESTOR:
SBC INTERACTIVE
Dated: March 31, 1999 By: /s/ Daniel Finnigan
---------------------------
Name: Daniel Finnigan
Title: President
<PAGE>
EXHIBIT II
----------
PURCHASE FORM
To: Switchboard Incorporated Date:____________________
115 Flanders Road
Westboro, Massachusetts 01581
Attention: Treasurer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase _____ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________ in lawful money of the United States, representing the full
purchase price for such shares at the price per share provided for in such
Warrant.
Name of Registered Holder:__________________________
By: ________________________________________________
Name:
Title:
<PAGE>
EXHIBIT III
-----------
ASSIGNMENT FORM
FOR VALUE RECEIVED, _________________________________________
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant (No. ____) with respect to the number of shares of Common
Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Name of Registered Holder: _______________________
By: _________________________ Date: ______________________
Name:
Title:
Witness: _________________________ Date: ______________________
Name:
Title:
<PAGE>
Exhibit 10.18
-------------
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Agreement dated as of February 20, 1998 is entered into by and among
Switchboard Incorporated, a Delaware corporation (the "Company"), and America
Online, Inc., a Delaware corporation, Digital City Inc., a Delaware corporation,
and Banyan Systems Incorporated, a Massachusetts corporation (individually, a
"Purchaser," and collectively, the "Purchasers").
WHEREAS, the Company and the Purchasers entered into a Series A Preferred
Stock Purchase Agreement dated as of November 5, 1996 (the "Purchase
Agreement"), and the Company and the Purchasers (other than Banyan Systems
Incorporated) entered into a Registration Rights Agreement dated as of November
5, 1996 (the "Original Registration Rights Agreement"); and
WHEREAS, the Company and Banyan Systems Incorporated have entered into a
Convertible Secured Note Purchase Agreement as of August 29, 1997, as amended
(the "Note Purchase Agreement"); and
WHEREAS, the Company and the Purchasers wish to amend and restate the
Original Registration Rights Agreement in its entirety to make Banyan Systems
Incorporated a party thereto and to make certain changes to the terms thereof;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission, or any
----------
other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.01 par value per share, of
------------
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Registrable Shares" means (i) the shares of Common Stock issued or
------------------
issuable upon conversion of the Shares, (ii) any shares of Common Stock, and any
<PAGE>
shares of Common Stock issued or issuable upon the conversion or exercise of any
other securities, acquired by a Purchaser pursuant to the Company Right of First
Refusal Agreement of even date herewith between the Company and the Purchasers
(other than Banyan Systems Incorporated) or the Right of First Refusal and Co-
Sale Agreement of even date herewith among the Company and the Purchasers, (iii)
any shares of Common Stock acquired by a Purchaser pursuant to the exercise of,
or the conversion of shares of Series B Preferred Stock, $.01 par value per
share, of the Company acquired upon the exercise of, Series B Preferred Stock
Purchase Warrant Nos. 1 or 2 of the Company dated as of November 5, 1996 and
(iv) any other shares of Common Stock issued in respect of such shares (because
of stock splits, stock dividends, reclassifications, recapitalizations, or
similar events); provided, however, that shares of Common Stock which are
-------- -------
Registrable Shares shall cease to be Registrable Shares (i) upon any sale
pursuant to a Registration Statement or Rule 144 under the Securities Act, (ii)
upon any sale in any manner to a person or entity which, by virtue of Section 12
of this Agreement, is not entitled to the rights provided by this Agreement, or
(iii) at such time as they are eligible for sale under Rule 144(k) under the
Securities Act. Wherever reference is made in this Agreement to a request or
consent of holders of a certain percentage of Registrable Shares, the
determination of such percentage shall include shares of Common Stock issuable
upon conversion of the Shares even if such conversion has not yet been effected.
"Registration Expenses" means the expenses described in Section 5.
---------------------
"Registration Statement" means a registration statement filed by the
----------------------
Company with the Commission for a public offering and sale of Common Stock or
other securities of the Company substantially similar to Common Stock (other
than a registration statement on Form S-8 or Form S-4, or their successors, or
any other form for a similar limited purpose, any registration statement
covering only securities proposed to be issued in exchange for securities or
assets of another corporation or any registration statement covering only
securities to be sold for the account of stockholders of the Company other than
the Stockholders).
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
"Shares" means (i) "Shares" as defined in Subsection 1.2 of the
------
Purchase Agreement and (ii) any shares of Common Stock acquired by a Purchaser
pursuant to the exercise of, or the conversion of shares of Series C Preferred
Stock, $.01 par value per share, of the Company acquired upon exercise of, the
note(s) issued pursuant to the Note Purchase Agreement.
-2-
<PAGE>
"Stockholders" means the Purchasers and any persons or entities to
------------
whom the rights granted under this Agreement are transferred by any Purchaser,
their successors or assigns pursuant to Section 12 hereof.
2. Required Registrations.
----------------------
(a) At any time after the closing of the Company's first underwritten
public offering of shares of Common Stock pursuant to a Registration Statement
but prior to the time at which the Company becomes eligible to file a
Registration Statement on Form S-3 (or any successor form relating to secondary
offerings), the Stockholder or Stockholders (other than Banyan Systems
Incorporated, unless it is transferred rights under this Agreement pursuant to
Section 12 hereof) may request, in writing, that the Company effect the
registration on Form S-1 (or any successor form) of Registrable Shares owned by
such Stockholder or Stockholders. If the holders initiating the registration
intend to distribute the Registrable Shares by means of an underwriting, they
shall so advise the Company in their request, and the Company shall, if
practicable, select a nationally recognized underwriter. In the event such
registration is underwritten, the right of other Stockholders to participate
shall be conditioned on such Stockholders' participation in such underwriting.
Upon receipt of any such request, the Company shall promptly, but in no event
later than 10 days following such receipt, give written notice of such proposed
registration to all Stockholders (including Banyan Systems Incorporated). Such
Stockholders shall have the right, by giving written notice to the Company
within 30 days after the Company provides its notice, to elect to have included
in such registration such of their Registrable Shares as such Stockholders may
request in such notice of election; provided that if the underwriter (if any)
managing the offering determines that, because of marketing factors, all of the
Registrable Shares requested to be registered by all Stockholders may not be
included in the offering, then all Stockholders who have requested registration
shall participate in the registration pro rata based upon the number of
Registrable Shares which they have requested to be so registered. Thereupon, the
Company shall, as expeditiously as possible, use its best efforts to effect the
registration on Form S-1 (or any successor form) of all Registrable Shares which
the Company has been requested to so register, and shall file such Registration
Statement no later than 60 days after receiving the Stockholder's request.
(b) At any time after the Company becomes eligible to file a
Registration Statement on Form S-3 (or any successor form relating to secondary
offerings), a Stockholder or Stockholders (other than Banyan Systems
Incorporated, unless it is transferred rights under this Agreement pursuant to
Section 12 hereof) may request the Company, in writing, to effect the
registration on Form S-3 (or such successor form), of Registrable Shares. Upon
receipt of any such request, the Company shall promptly give written notice of
such proposed registration to all Stockholders (including Banyan Systems
Incorporated). Such Stockholders shall have the right, by
-3-
<PAGE>
giving written notice to the Company within 30 days after the Company provides
its notice, to elect to have included in such registration such of their
Registrable Shares as such Stockholders may request in such notice of election;
provided that if the underwriter (if any) managing the offering determines that,
because of marketing factors, all of the Registrable Shares requested to be
registered by all Stockholders may not be included in the offering, then all
Stockholders who have requested registration shall participate in the
registration pro rata based upon the number of Registrable Shares which they
have requested to be so registered. Thereupon, the Company shall, as
expeditiously as possible, use its best efforts to effect the registration on
Form S-3 (or such successor form) of all Registrable Shares which the Company
has been requested to so register, and shall file such Registration Statement no
later than 30 days after receiving the Stockholders' request.
(c) The Company shall not be required to effect more than one (1)
registration pursuant to paragraph (a) above and in the aggregate not more than
two (2) registrations pursuant to paragraphs (a) and (b) above. In addition,
the Company shall not be required to effect any registration within six (6)
months after the effective date of any other Registration Statement of the
Company. If a Registration Statement filed by the Company pursuant to this
Section 2 is withdrawn and such withdrawal is effected at the request of the
Company, then the filing thereof shall be excluded in determining the number of
requests to which the Stockholders are entitled pursuant to Section 2(c) hereof.
(d) If at the time of any request to register Registrable Shares
pursuant to this Section 2, the Company is engaged or has fixed plans to engage
within 60 days of the time of the request in a registered public offering as to
which the Stockholders may include Registrable Shares pursuant to Section 3 or
is engaged in any other activity which, in the good faith determination of the
Company's Board of Directors, would be adversely affected by the requested
registration to the material detriment of the Company, then the Company may at
its option direct that such request be delayed for a period not in excess of
four months (or two months in the case of a request to register 100,000 or fewer
Registrable Shares that is delayed other than because the Company is engaged or
has fixed plans to engage within 60 days of the time of the request in a
registered public offering as to which the Stockholders may include Registrable
Shares pursuant to Section 3) from the earlier of (i) the effective date of such
offering or the date of commencement of such other material activity, as the
case may be, or (ii) 60 days after the request to register the Registrable
Shares, such right to delay a request to be exercised by the Company not more
than once in any two-year period. If the Company elects to delay such a
registration and the Stockholders elect not to proceed with the registration
after the applicable period has expired, then the request shall not count for
purposes of the number of requests to which the Stockholders are entitled
pursuant to Section 2(c).
-4-
<PAGE>
3. Incidental Registration.
-----------------------
(a) Whenever the Company proposes to file a Registration Statement
(other than pursuant to Section 2) at any time and from time to time, it will,
not later than 30 days prior to such filing, give written notice to all
Stockholders of its intention to do so which notice shall describe the proposed
registration and distribution, and upon the written request of a Stockholder or
Stockholders given within 20 days after the Company provides such notice (which
request shall state the intended method of disposition of such Registrable
Shares), the Company shall use its best efforts to cause all Registrable Shares
which the Company has been requested by such Stockholder or Stockholders to
register to be registered under the Securities Act to the extent necessary to
permit their sale or other disposition in accordance with the intended methods
of distribution specified in the request of such Stockholder or Stockholders;
provided that the Company shall have the right to postpone or withdraw any
registration effected pursuant to this Section 3 before it has become effective
without obligation to any Stockholder. The Stockholders shall have the right to
exercise their registration rights pursuant to this Section 3 on any number of
occasions that the Company shall determine to file a registration statement.
(b) In connection with any registration under this Section 3
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such registration unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (provided that such terms must be consistent with
this Agreement). If in the opinion of the managing underwriter it is appropriate
because of marketing factors to limit the number of Registrable Shares to be
included in the offering, then the Company shall be required to include in the
registration only that number of Registrable Shares, if any, which the managing
underwriter believes should be included therein; provided that no persons or
entities other than the Company and the Stockholders shall be permitted to
include securities in the offering. If the number of Registrable Shares to be
included in the offering in accordance with the foregoing is less than the total
number of shares which the holders of Registrable Shares have requested to be
included, then the holders of Registrable Shares who have requested registration
and other holders of securities entitled to include them in such registration
shall participate in the registration pro rata based upon their total ownership
of Registrable Shares. If any holder would thus be entitled to include more
securities than such holder requested to be registered, the excess shall be
allocated among other requesting holders pro rata in the manner described in the
preceding sentence.
4. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall:
-5-
<PAGE>
(a) file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective;
(b) as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective, in the case of a firm commitment underwritten
public offering, until each underwriter has completed the distribution of all
securities purchased by it and, in the case of any other offering, until the
earlier of the sale of all Registrable Shares covered thereby or 180 days after
the effective date thereof;
(c) as expeditiously as possible furnish to each selling Stockholder
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus and any amendments or supplements to the prospectus, in conformity
with the requirements of the Securities Act, and such other documents as the
selling Stockholder may reasonably request in order to facilitate the public
sale or other disposition of the Registrable Shares owned by the selling
Stockholder; and
(d) as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the selling Stockholders shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the Registrable Shares owned
by the selling Stockholder; provided, however, that the Company shall not be
-------- -------
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
(e) as expeditiously as possible use its best efforts to cause the
Registrable Shares covered by the Registration Statement to be listed on any
exchange, or admitted to trading on The Nasdaq Stock Market, where the Common
Stock is then listed or traded.
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
-6-
<PAGE>
5. Allocation of Expenses. The Company will pay all Registration
----------------------
Expenses of all registrations under this Agreement; provided, however, that if a
-------- -------
registration under Section 2 is withdrawn at the request of the Stockholders
requesting such registration (other than as a result of information concerning
the business or financial condition of the Company which is made known to the
Stockholders after the date on which such registration was requested or an
underwriter's cut-back) and if the requesting Stockholders elect not to have
such registration counted as a registration requested under Section 2, the
requesting Stockholders shall pay the Registration Expenses of such registration
pro rata in accordance with the number of their Registrable Shares included in
such registration. For purposes of this Section 5, the term "Registration
Expenses" shall mean all expenses incurred by the Company in complying with this
Agreement, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees and expenses of counsel for the
Company and the fees and expenses (up to $15,000) of one counsel selected by the
selling Stockholders to represent the selling Stockholders, state Blue Sky fees
and expenses, and the expense of any special audits incident to or required by
any such registration, but excluding underwriting discounts, selling commissions
and the fees and expenses of selling Stockholders' own counsel (other than the
counsel selected to represent all selling Stockholders).
6. Indemnification and Contribution.
--------------------------------
(a) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement, or
arise out of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Company will reimburse such seller, underwriter
and each such controlling person for any legal or any other expenses reasonably
incurred by such seller, underwriter or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
- -------- -------
extent that any such loss, claim, damage or
-7-
<PAGE>
liability arises out of or is based upon any untrue statement or omission made
in such Registration Statement, preliminary prospectus or final prospectus, or
any such amendment or supplement, in reliance upon and in conformity with
information furnished to the Company, in writing, by or on behalf of such
seller, underwriter or controlling person specifically for use in the
preparation thereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if any such untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
information relating to such seller furnished in writing to the Company by or on
behalf of such seller specifically for use in connection with the preparation of
such Registration Statement, prospectus, amendment or supplement; provided,
--------
however, that the obligations of such Stockholders hereunder shall be limited to
- -------
an amount equal to the proceeds to each Stockholder of Registrable Shares sold
in connection with such registration.
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
--------
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
-------- -------
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 6. The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
-------- -------
shall pay such expense if representation of such Indemnified Party
-8-
<PAGE>
by the counsel retained by the Indemnifying Party would be inappropriate due to
actual or potential differing interests between the Indemnified Party and any
other party represented by such counsel in such proceeding. No Indemnifying
Party, in the defense of any such claim or litigation shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation, and no Indemnified Party
shall consent to entry of any judgment or settle such claim or litigation
without the prior written consent of the Indemnifying Party.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 6 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 6 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Stockholder or any such controlling
person in circumstances for which indemnification is provided under this Section
6; then, in each such case, the Company and such Stockholder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportions so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Shares offered by the Registration Statement
bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
-------- -------
required to contribute any amount in excess of the proceeds to it of all
Registrable Shares sold by it pursuant to such Registration Statement, and (B)
no person or entity guilty of fraudulent misrepresentation, within the meaning
of Section 11(f) of the Securities Act, shall be entitled to contribution from
any person or entity who is not guilty of such fraudulent misrepresentation.
7. Indemnification with Respect to Underwritten Offering. In the event
-----------------------------------------------------
that Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to Section 2, the Company agrees to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of the securities being
registered and customary covenants and agreements to be performed by such
issuer, including without limitation customary provisions with respect to
indemnification by the Company of the underwriters of such offering.
-9-
<PAGE>
8. Information by Holder. Each Stockholder including Registrable Shares
---------------------
in any registration shall furnish to the Company such information regarding such
Stockholder and the distribution proposed by such Stockholder as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
9. "Lock-Up" Agreement. Each Stockholder, if requested by the Company
-------------------
and the managing underwriter of an offering by the Company of Common Stock or
other securities of the Company pursuant to a Registration Statement, shall
agree not to sell publicly or otherwise transfer or dispose of any Registrable
Shares or other securities of the Company held by such Stockholder for a
specified period of time (not to exceed 180 days) following the effective date
of such Registration Statement; provided, that all officers and directors of the
--------
Company enter into similar agreements; and provided, further, that a Stockholder
-------- -------
shall not be required by the terms of this Agreement to enter into such a "lock-
up" agreement if both of the following conditions are met: (i) such Stockholder
holds at the time of such request and at all times prior to the effectiveness of
such Registration Statement less than 1% of the outstanding securities of the
Company (assuming the conversion of any shares that are held by such Stockholder
convertible into Common Stock into shares of Common Stock) and (ii) the offering
is not the Company's initial public offering.
10. Rule 144 Requirements. After the earliest of (i) the closing of the
---------------------
sale of securities of the Company pursuant to a Registration Statement, (ii) the
registration by the Company of a class of securities under Section 12 of the
Exchange Act, or (iii) the issuance by the Company of an offering circular
pursuant to Regulation A under the Securities Act, the Company agrees to:
(a) comply with the requirements of Rule 144(c) under the Securities
Act with respect to current public information about the Company;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
(c) furnish to any holder of Registrable Shares upon request (i) a
written statement by the Company as to its compliance with the requirements of
said Rule 144(c), and the reporting requirements of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents of the Company as such
holder may reasonably request to avail itself of
-10-
<PAGE>
any similar rule or regulation of the Commission allowing it to sell any such
securities without registration.
11. Termination. All of the Company's obligations to register Registrable
-----------
Shares pursuant to Section 2 of this Agreement shall terminate on the date five
(5) years after the Company's initial public offering pursuant to a Registration
Statement in which the Company, prior to giving effect to the proceeds of the
offering, is valued at least $135,000,000 (determined by multiplying the
number of outstanding shares of capital stock of the Company on a fully diluted
basis by the initial public offering price) and resulting in at least
$15,000,000 of net proceeds to the Company (determined by subtracting
underwriters' discounts and commissions from gross proceeds). The Company's
obligations to register Registrable Shares pursuant to Section 3 of this
Agreement shall continue until all such Registrable Shares are registered.
12. Transfers of Rights. This Agreement, and the rights and obligations
-------------------
of each Purchaser hereunder, may be assigned by such Purchaser to any person or
entity to which Shares are transferred by such Purchaser, and such transferee
shall be deemed a "Purchaser" for purposes of this Agreement; provided, that the
--------
transferee provides written notice of such assignment to the Company.
13. General.
-------
(a) Notices. All notices, requests, consents, and other
-------
communications under this Agreement shall be in writing and shall be delivered
by hand or mailed by overnight courier using a nationally recognized courier
service or first class certified or registered mail, return receipt requested,
postage prepaid:
If to the Company, at 115 Flanders Road, Westboro, MA 01581, Attention:
President, or at such other address or addresses as may have been furnished in
writing by the Company to the Purchasers, with a copy to Hale an Dorr LLP, 60
State Street, Boston, MA 02109 Attention: Mark G. Borden, Esq.; or
If to a Purchaser, at the address of such Purchaser set forth on the
signature page of this Agreement, or at such other address or addresses as may
have been furnished to the Company in writing by the Purchaser,
Notices provided in accordance with this Section 13(a) shall be deemed
delivered upon personal delivery, one business day after being sent by overnight
courier or two business days after deposit in the mail.
-11-
<PAGE>
(b) Entire Agreement. This Agreement embodies the entire agreement
----------------
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
(c) Amendments and Waivers. Any term of this Agreement may be amended
----------------------
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the holders of a majority of the Registrable
Shares; provided, that this Agreement may be amended with the consent of the
--------
holders of less than all Registrable Shares only in a manner which affects all
Registrable Shares in the same fashion. No waivers of or exceptions to any
term, condition or provision of this Agreement, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
(d) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
(e) Severability. The invalidity or unenforceability of any provision
------------
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(f) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
(g) Costs. The prevailing party in any dispute arising out of or
-----
relating to this Agreement shall be entitled to reasonable attorneys' fees and
costs incurred in defending or pursuing such dispute.
(h) Facsimile Signatures. This Agreement may be executed by facsimile
--------------------
signature.
Executed as of the date first written above.
COMPANY:
SWITCHBOARD INCORPORATED
By: /s/ Douglas McIntyre
-------------------------------
Title: President
----------------------------
-12-
<PAGE>
PURCHASERS:
AMERICA ONLINE, INC.
By: /s/ David M. Colburn
-------------------------------
Title: Sr. Vice President
-----------------------------
Address:---------------------------
----------------------------
DIGITAL CITY INC.
By: Signature not legible
--------------------------------
Title:-----------------------------
Address:---------------------------
----------------------------
BANYAN SYSTEMS INCORPORATED
By: /s/ William P. Ferry
--------------------------------
Title: Chief Executive Officer
-----------------------------
Address: 120 Flanders Road
Westboro, MA 01581
-13-
<PAGE>
AMENDMENT
TO
REGISTRATION RIGHTS AGREEMENT
This Amendment dated March 29, 1999 (this "Amendment") to that certain
Registration Rights Agreement dated as of November 5, 1996, as amended and
restated on February 20, 1998 (the "Agreement"), by and among Switchboard
Incorporated, a Delaware corporation (the "Company"), and America Online, Inc.,
a Delaware corporation, Digital City Inc., a Delaware corporation, and Banyan
Systems Incorporated, a Massachusetts corporation (individually, a "Purchaser,"
and collectively, the "Purchasers"), is entered into among the Company and the
Purchasers pursuant to Section 13(c) thereof.
Preliminary Statement
---------------------
A. On November 5, 1996, the Company and the Purchasers (other than Banyan
Systems Incorporated) entered into the Agreement, and on February 20, 1998, the
Company and the Purchasers entered into an amendment and restatement to the
Agreement.
B. Switchboard and the Purchasers (other than Banyan Systems
Incorporated) are entering into a Settlement Agreement the terms of which
require the execution of this Amendment.
C. Section 13(c) of the Agreement authorizes the amendment of the
Agreement with the written consent of the Company and the holders of a majority
of the Registrable Shares; provided that the Agreement may be amended with the
consent of the holders of less than all Registrable Shares only in a manner
which affects all Registrable Shares in the same fashion.
D. Each of the Company and the undersigned Purchasers, representing in
the aggregate all of the Registrable Shares, desire to amend certain of the
provisions of the Agreement.
14
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Company and each of the Purchasers hereby
further consent and agree as follows:
1. The text appearing in Section 2(a) of the Agreement is hereby (i)
deleted in its entirety, and as of the date hereof, shall be of no effect,
retrospectively or prospectively, and (ii) replaced by the text set forth below.
(a) At any time after the date six months after the closing
of the Company's first underwritten public offering of shares of
Common Stock pursuant to a Registration Statement but prior to the
time at which the Company becomes eligible to file a Registration
Statement on Form S-3 (or any successor form relating to secondary
offerings), the Stockholder or Stockholders (other than Banyan Systems
Incorporated, unless it is transferred rights under this Agreement
pursuant to Section 12 hereof) may request, in writing, that the
Company effect the registration on Form S-1 (or any successor form) of
Registrable Shares owned by such Stockholder or Stockholders. If the
holders initiating the registration intend to distribute the
Registrable Shares by means of an underwriting, they shall so advise
the Company in their request, and the Company shall, if practicable,
select a nationally recognized underwriter. In the event such
registration is underwritten, the right of other Stockholders to
participate shall be conditioned on such Stockholders' participation
in such underwriting. Upon receipt of any such request, the Company
shall promptly, but in no event later than 10 days following such
receipt, give written notice of such proposed registration to all
Stockholders (including Banyan Systems Incorporated). Such
Stockholders shall have the right, by giving written notice to the
Company within 30 days after the Company provides its notice, to elect
to have included in such registration such of their Registrable Shares
as such Stockholders may request in such notice of election; provided
that if the underwriter (if any) managing the offering determines
that, because of marketing factors, all of the Registrable Shares
requested to be registered by all Stockholders may not be included in
the offering, then all Stockholders who have requested registration
shall participate in the registration pro rata based upon the number
of Registrable Shares which they have requested to be so registered.
Thereupon, the Company shall, as expeditiously as possible, use its
best efforts to effect the registration on Form S-1 (or any successor
form) of all Registrable Shares which the Company has been requested
to so register, and shall file such Registration Statement no later
than 60 days after receiving the Stockholder's request.
15
<PAGE>
2. Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to them in the Agreement.
3. Except to the extent amended by this Amendment, the Agreement is, in
all respects, hereby ratified and confirmed and shall continue in full force and
effect.
16
<PAGE>
IN WITNESS WHEREOF, the Company and each of the undersigned Purchasers,
representing in the aggregate all of the Registrable Shares, have executed this
Amendment as of the date first above written.
COMPANY:
SWITCHBOARD INCORPORATED
By: /s/ John Jewett
---------------------------------
Name: John Jewett
Title: Vice President and CFO
PURCHASERS:
AMERICA ONLINE, INC.
By: /s/ David M. Colburn
---------------------------------
Name: David M. Colburn
Title: Senior Vice President,
Business Affairs
DIGITAL CITY INC.
By: /s/ Paul DeBenedictis
---------------------------------
Name: Paul DeBenedictis
Title: President and Chief
Executive Officer
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
---------------------------------
Name: Richard M. Spaulding
Title: Vice President and CFO
17
<PAGE>
Exhibit 10.19
-------------
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Agreement dated as of May 3, 1999 is entered into by and between
Switchboard Incorporated, a Delaware corporation (the "Company"), and Banyan
Systems Incorporated, a Massachusetts corporation (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a Convertible
Secured Note Purchase Agreement as of August 29, 1997, as amended on February
20, 1998 and as of the date hereof (the "Note Purchase Agreement"); and
WHEREAS, the Company, the Purchaser and certain other stockholders of the
Company entered into an Amended and Restated Registration Rights Agreement dated
as of February 20, 1998 (the "Original Registration Rights Agreement"); and
WHEREAS, the Company and the Purchaser wish to grant to the Purchaser
registration rights with respect to certain securities it may acquire under the
amendment as of the date hereof to the Note Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission, or any
----------
other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.01 par value per share, of
------------
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Registrable Shares" means (i) the shares of Common Stock issued or
------------------
issuable upon conversion of the Shares, and (ii) any other shares of Common
Stock issued in respect of such shares (because of stock splits, stock
dividends, reclassifications, recapitalizations, or similar events); provided,
--------
however, that shares of Common Stock which are Registrable Shares shall cease to
- -------
be Registrable Shares (i) upon any sale pursuant to a Registration Statement or
Rule 144 under the Securities
<PAGE>
Act, (ii) upon any sale in any manner to a person or entity which, by virtue of
Section 12 of this Agreement, is not entitled to the rights provided by this
Agreement, or (iii) at such time as they are eligible for sale under Rule 144(k)
under the Securities Act. [Wherever reference is made in this Agreement to a
request or consent of holders of a certain percentage of Registrable Shares, the
determination of such percentage shall include shares of Common Stock issuable
upon conversion of the Shares even if such conversion has not yet been
effected.]
"Registration Expenses" means the expenses described in Section 5.
---------------------
"Registration Statement" means a registration statement filed by the
----------------------
Company with the Commission for a public offering and sale of Common Stock or
other securities of the Company substantially similar to Common Stock (other
than a registration statement on Form S-8 or Form S-4, or their successors, or
any other form for a similar limited purpose, any registration statement
covering only securities proposed to be issued in exchange for securities or
assets of another corporation or any registration statement covering only
securities to be sold for the account of stockholders of the Company other than
the Stockholders).
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
"Shares" means any shares of Common Stock acquired by the Purchaser
------
pursuant to the exercise of, or the conversion of shares of Series C and D
Convertible Preferred Stock, $.01 par value per share, of the Company acquired
upon exercise of, the note(s) issued pursuant to the Note Purchase Agreement.
"Stockholders" means the Purchaser and any persons or entities to whom
------------
the rights granted under this Agreement are transferred by the Purchaser, its
successors or assigns pursuant to Section 12 hereof.
2. [reserved]
3. Incidental Registration.
-----------------------
(a) Whenever the Company proposes to file a Registration Statement
(other than pursuant to Section 2) at any time and from time to time, it will,
not later than 30 days prior to such filing, give written notice to all
Stockholders of its intention to do so which notice shall describe the proposed
registration and distribution, and upon the written request of a Stockholder or
Stockholders given within 20 days after the Company provides such notice (which
request shall state the intended method of
-2-
<PAGE>
disposition of such Registrable Shares), the Company shall use its best efforts
to cause all Registrable Shares which the Company has been requested by such
Stockholder or Stockholders to register to be registered under the Securities
Act to the extent necessary to permit their sale or other disposition in
accordance with the intended methods of distribution specified in the request of
such Stockholder or Stockholders; provided that the Company shall have the right
to postpone or withdraw any registration effected pursuant to this Section 3
before it has become effective without obligation to any Stockholder. The
Stockholders shall have the right to exercise their registration rights pursuant
to this Section 3 on any number of occasions that the Company shall determine to
file a registration statement.
(b) In connection with any registration under this Section 3
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such registration unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (provided that such terms must be consistent with
this Agreement). If in the opinion of the managing underwriter it is appropriate
because of marketing factors to limit the number of Registrable Shares to be
included in the offering, then the Company shall be required to include in the
registration only that number of Registrable Shares, if any, which the managing
underwriter believes should be included therein. If the number of Registrable
Shares to be included in the offering in accordance with the foregoing is less
than the total number of shares which the holders of Registrable Shares have
requested to be included, then the holders of Registrable Shares who have
requested registration and other holders of securities entitled to include them
in such registration shall participate in the registration as follows:
(i) first, there shall be included any shares proposed to be
sold by the Company and any shares permitted to be included in the registration
pursuant to Section 2 or 3 of the Original Registration Rights Agreement in
accordance with the terms thereof;
(ii) second, there shall be included in the registration any
Registrable Shares proposed to be sold in accordance with this Agreement, pro
rata based upon the total ownership of shares of Common Stock by the holders of
Registrable Shares requested to be included therein; and
(iii) third, there shall be included in the registration any
shares held by other holders of securities entitled to include them in such
registration.
If any holder would thus be entitled to include more securities than such holder
requested to be registered, the excess shall be allocated among other requesting
holders pro rata in the manner described in the preceding sentence.
-3-
<PAGE>
4. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall:
(a) file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective;
(b) as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective, in the case of a firm commitment underwritten
public offering, until each underwriter has completed the distribution of all
securities purchased by it and, in the case of any other offering, until the
earlier of the sale of all Registrable Shares covered thereby or 180 days after
the effective date thereof;
(c) as expeditiously as possible furnish to each selling Stockholder
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus and any amendments or supplements to the prospectus, in conformity
with the requirements of the Securities Act, and such other documents as the
selling Stockholder may reasonably request in order to facilitate the public
sale or other disposition of the Registrable Shares owned by the selling
Stockholder; and
(d) as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the selling Stockholders shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the Registrable Shares owned
by the selling Stockholder; provided, however, that the Company shall not be
-------- -------
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
(e) as expeditiously as possible use its best efforts to cause the
Registrable Shares covered by the Registration Statement to be listed on any
exchange, or admitted to trading on The Nasdaq Stock Market, where the Common
Stock is then listed or traded.
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making
-4-
<PAGE>
offers of Registrable Shares and return all prospectuses to the Company. The
Company shall promptly provide the selling Stockholders with revised
prospectuses and, following receipt of the revised prospectuses, the selling
Stockholders shall be free to resume making offers of the Registrable Shares.
5. Allocation of Expenses. The Company will pay all Registration
----------------------
Expenses of all registrations under this Agreement. For purposes of this
Section 5, the term "Registration Expenses" shall mean all expenses incurred by
the Company in complying with this Agreement, including, without limitation, all
registration and filing fees, exchange listing fees, printing expenses, fees and
expenses of counsel for the Company and the fees and expenses (up to $15,000) of
one counsel selected by the selling Stockholders to represent the selling
Stockholders, state Blue Sky fees and expenses, and the expense of any special
audits incident to or required by any such registration, but excluding
underwriting discounts, selling commissions and the fees and expenses of selling
Stockholders' own counsel (other than the counsel selected to represent all
selling Stockholders).
6. Indemnification and Contribution.
--------------------------------
(a) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement, or
arise out of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Company will reimburse such seller, underwriter
and each such controlling person for any legal or any other expenses reasonably
incurred by such seller, underwriter or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
- -------- -------
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission made in such Registration Statement,
preliminary prospectus or final prospectus, or any such amendment or supplement,
in reliance upon and in conformity with information
-5-
<PAGE>
furnished to the Company, in writing, by or on behalf of such seller,
underwriter or controlling person specifically for use in the preparation
thereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if any such untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
information relating to such seller furnished in writing to the Company by or on
behalf of such seller specifically for use in connection with the preparation of
such Registration Statement, prospectus, amendment or supplement; provided,
--------
however, that the obligations of such Stockholders hereunder shall be limited to
- -------
an amount equal to the proceeds to each Stockholder of Registrable Shares sold
in connection with such registration.
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
--------
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
-------- -------
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 6. The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
-------- -------
shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the
-6-
<PAGE>
defense of any such claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect of such claim or litigation, and no Indemnified Party shall consent
to entry of any judgment or settle such claim or litigation without the prior
written consent of the Indemnifying Party.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 6 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 6 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Stockholder or any such controlling
person in circumstances for which indemnification is provided under this Section
6; then, in each such case, the Company and such Stockholder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportions so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Shares offered by the Registration Statement
bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
-------- -------
required to contribute any amount in excess of the proceeds to it of all
Registrable Shares sold by it pursuant to such Registration Statement, and (B)
no person or entity guilty of fraudulent misrepresentation, within the meaning
of Section 11(f) of the Securities Act, shall be entitled to contribution from
any person or entity who is not guilty of such fraudulent misrepresentation.
7. [reserved]
8. Information by Holder. Each Stockholder including Registrable Shares
---------------------
in any registration shall furnish to the Company such information regarding such
Stockholder and the distribution proposed by such Stockholder as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
9. "Lock-Up" Agreement. Each Stockholder, if requested by the Company
-------------------
and the managing underwriter of an offering by the Company of Common Stock or
other securities of the Company pursuant to a Registration Statement, shall
agree not to sell publicly or otherwise transfer or dispose of any Registrable
Shares or other
-7-
<PAGE>
securities of the Company held by such Stockholder for a specified period of
time (not to exceed 180 days) following the effective date of such Registration
Statement; provided, that all officers and directors of the Company enter into
--------
similar agreements; and provided, further, that a Stockholder shall not be
-------- -------
required by the terms of this Agreement to enter into such a "lock-up" agreement
if both of the following conditions are met: (i) such Stockholder holds at the
time of such request and at all times prior to the effectiveness of such
Registration Statement less than 1% of the outstanding securities of the Company
(assuming the conversion of any shares that are held by such Stockholder
convertible into Common Stock into shares of Common Stock) and (ii) the offering
is not the Company's initial public offering.
10. Rule 144 Requirements. After the earliest of (i) the closing of the
---------------------
sale of securities of the Company pursuant to a Registration Statement, (ii) the
registration by the Company of a class of securities under Section 12 of the
Exchange Act, or (iii) the issuance by the Company of an offering circular
pursuant to Regulation A under the Securities Act, the Company agrees to:
(a) comply with the requirements of Rule 144(c) under the Securities
Act with respect to current public information about the Company;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
(c) furnish to any holder of Registrable Shares upon request (i) a
written statement by the Company as to its compliance with the requirements of
said Rule 144(c), and the reporting requirements of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents of the Company as such
holder may reasonably request to avail itself of any similar rule or regulation
of the Commission allowing it to sell any such securities without registration.
11. Termination. The Company's obligations to register Registrable Shares
-----------
pursuant to Section 3 of this Agreement shall continue until all such
Registrable Shares are registered.
12. Transfers of Rights. This Agreement, and the rights and obligations
-------------------
of the Purchaser hereunder, may be assigned by the Purchaser to any person or
entity to which Shares are transferred by the Purchaser, and such transferee
shall be deemed a
-8-
<PAGE>
"Purchaser" for purposes of this Agreement; provided, that the transferee
--------
provides written notice of such assignment to the Company.
13. General.
-------
(a) Notices. All notices, requests, consents, and other
-------
communications under this Agreement shall be in writing and shall be delivered
by hand or mailed by overnight courier using a nationally recognized courier
service or first class certified or registered mail, return receipt requested,
postage prepaid:
If to the Company, at 115 Flanders Road, Westboro, MA 01581, Attention:
President, or at such other address or addresses as may have been furnished in
writing by the Company to the Purchaser, with a copy to Hale an Dorr LLP, 60
State Street, Boston, MA 02109 Attention: Mark G. Borden, Esq.; or
If to the Purchaser, at the address of the Purchaser set forth on the
signature page of this Agreement, or at such other address or addresses as may
have been furnished to the Company in writing by the Purchaser,
Notices provided in accordance with this Section 13(a) shall be deemed
delivered upon personal delivery, one business day after being sent by overnight
courier or two business days after deposit in the mail.
(b) Entire Agreement. This Agreement embodies the entire agreement
----------------
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
(c) Amendments and Waivers. Any term of this Agreement may be amended
----------------------
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the holders of a majority of the Registrable
Shares; provided, that this Agreement may be amended with the consent of the
--------
holders of less than all Registrable Shares only in a manner which affects all
Registrable Shares in the same fashion. No waivers of or exceptions to any
term, condition or provision of this Agreement, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
(d) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
-9-
<PAGE>
(e) Severability. The invalidity or unenforceability of any provision
------------
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(f) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
(g) Costs. The prevailing party in any dispute arising out of or
-----
relating to this Agreement shall be entitled to reasonable attorneys' fees and
costs incurred in defending or pursuing such dispute.
(h) Facsimile Signatures. This Agreement may be executed by facsimile
--------------------
signature.
Executed as of the date first written above.
COMPANY:
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
-----------------------------------------------
Title: President
--------------------------------------------
PURCHASER:
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
-----------------------------------------------
Title: Vice President and CFO
--------------------------------------------
Address: 120 Flanders Road
Westboro, MA 01581
Attn: Chief Financial Officer
Copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Mark G. Borden, Esq.
-10-
<PAGE>
Exhibit 10.20
-------------
SERVICES AGREEMENT
------------------
THIS SERVICES AGREEMENT dated as of November 1, 1996 is made between
Banyan Systems Incorporated ("Banyan"), a Massachusetts corporation, and
Switchboard Incorporated ("Switchboard"), a Delaware corporation.
RECITALS
WHEREAS, Banyan has caused the formation of Switchboard and transferred certain
business assets to Switchboard; and,
WHEREAS, Banyan wishes to provide Switchboard with certain services and
Switchboard wishes to purchase certain services from Banyan; and,
WHEREAS, Banyan and Switchboard desire to make provisions for certain ongoing
relationships between them.
NOW, THEREFORE, in consideration of the foregoing premises, and the mutual
promises of the parties hereinafter set forth, Banyan and Switchboard agree as
follows:
SECTION 1. CERTAIN MANAGEMENT-RELATED SERVICES
Commencing on (the "Commencement Date" of this agreement) and until
termination of this agreement in accordance within section 4 hereof, Banyan
agrees to make available to Switchboard, subject to the terms hereof, the
following services:
1.1 Basic Services. In exchange for a fixed monthly charge (see
attached), Banyan shall provide the following routine, basic, regularly
recurring services ("Basic Services").
1.1.1 Banyan's finance/accounting staff for accounting and bookkeeping
advice and routine monthly or periodic services, including without limitation,
bookkeeping, disbursements and general ledger processing, preparation of monthly
management financial statements and quarterly and annual external financial
statements, and preparation for the annual audit by independent accounts;
1.1.2 Banyan's Human Resources staff for advice and routine services
regarding recruitment and retention of personnel, and administration of employee
benefit programs;
1.1.3 Banyan's payroll staff for advice and routine services concerning
payroll processing and distribution;
1.1.4 Banyan's treasury staff of advice and routine services concerning
treasury fund management, cash transfers, investing, insurance services, and tax
services.
1.1.5 Banyan's IS staff and facilities for routine monthly data processing
services including program and file maintenance and back-ups, user training, and
support and equipment maintenance, telephones, but not including program,
systems development or data communications related to operating
Switchboard(R)(C)(TM); and
<PAGE>
1.1.6 Other members of Banyan's staff to provide routine services in such
areas as reception and security, facility services, purchasing of supplies and
materials and any other routine support services. Facilities charges include
depreciation of furniture and fixtures, rent, utilities and maintenance.
Any one or more Basic Service may be terminated by Switchboard on sixty
(60) days written notice to Banyan. Upon such termination an adjustment shall
be made in the fixed monthly charge payable to Banyan in an amount mutually
agreeable to the parties.
1.2 Charged Services. Banyan shall provide, upon request from
Switchboard, certain services (other than Basic services) for which Switchboard
shall pay Banyan a fixed rate based on the hours spent by the Banyan employee on
such task ("Charged Services"). The fixed rate shall be based on Banyan's
direct labor costs with regard to such employee, including all fringe benefits,
and shall be increased by such employee's pro-rata share of related overhead
costs, facility costs and data processing, and other support costs. Charged
services shall include, but shall not be limited to, (1) services provided
regarding the development of data processing systems and programs, (2) services
regarding legal matters and patent filings and prosecution, (3) support for
raising additional capital and for acquisitions, (4) general and executive
management services, and (5) support for Contract bidding and other proposals.
1.3 Requisitioned Purchases. In the course of Banyan's provision of the
Basic Services or Charged Services or otherwise. Switchboard may requisition
and Banyan may arrange for the purchase of services or products from third
parties, which are billed directly to Banyan ("Requisitioned Purchases").
Switchboard shall reimburse Banyan for the full billed cost to Banyan of any
such Requisitioned Purchases.
1.4 Pooled Purchases. Switchboard may utilize services or products which
are purchased by Banyan from third parties ("Pooled Purchases"). Switchboard
acknowledges its responsibility to reimburse Banyan for Switchboard's pro rata
share of such Pooled Purchases. Switchboard and Banyan will, with regard to
each type of Pooled Purchase, agree to a reasonable basis of allocation between
Banyan and Switchboard of the costs of such Pooled Purchase. Pooled Purchases
may include, but shall not be limited to, (1) telephone service, (2) copier
machines and supplies, and (3) postage usage.
1.5 Limitations on Banyan's Obligations
1.5.1 Banyan need not make available any Basic services, Charged Services,
Requisitioned Purchases, or Pooled Purchases (collectively "Services") to the
extent that doing so would, in Banyan's sole judgment, unreasonably, (1)
interfere with the performance by any Banyan employee of services for Banyan or
otherwise cause unreasonable burden to Banyan, or (2) interfere with the use of
or access to by Banyan of any equipment, office space or facility or otherwise
cause unreasonable burden to Banyan.
1.5.2 Banyan shall have no obligation to provide services other than those
related to or arising out of or in connection with matters which Banyan is in a
position to provide by reason of past participation, involvement or familiarity
with such matters and, in addition, which Switchboard has a reasonable
requirement to obtain.
1.5.3 Banyan shall not be required to hire any person that Banyan would
not otherwise hire to provide any of the services.
SECTION 2 BILLING
<PAGE>
2.1 Basic Services. Switchboard shall be billed for the Basic Service on a
monthly basis and such amount billed shall be payable to Banyan within 60 days
after the date of the invoice for such services.
2.2 Other Services. All other services shall be billed on either a
monthly basis, or at such other times to reasonably reflect the time at which
Banyan incurs expense in providing such services.
2.3 Out of Pocket Expenses. Expect to the extent otherwise included in
the cost of Services, Banyan shall be entitled to receive from Switchboard upon
the presentation of invoices therefore, payment for its reasonable out-of-pocket
expenses incurred in providing such services, including fees and costs incurred
by outside parties or affiliates in the provision of services.
SECTION 3 SCOPE OF AGREEMENT
This Agreement is not intended to cover any agreements regarding research and
development for which separate arrangements or agreements will be or have been
entered into.
SECTION 4 TERM AND TERMINATION
This agreement shall continue in effect for a period of three years
following the Commencement Date (the "Initial Term") and, thereafter on a year-
to-year basis unless terminated upon the occurrence of any of the following:
4.1 Upon ninety (90) day's written notice from Switchboard to Banyan at
any time during the Initial Term; or
4.2 Upon ninety (90) day's written notice by either party to the other
party following the initial term.
SECTION 5 LIMITATION ON LIABILITY
The liability of Banyan to Switchboard for any loss or damage, whether
direct or indirect, arising in connection with providing the services to
Switchboard shall not exceed the total amount billed or billable to switchboard
for the particular Service or part thereof which gave rise to the loss or
damage, excluding from such limitation liability for any loss or damage caused
by the gross negligence or willful or wanton misconduct of Banyan. In no event
will Banyan be liable to Switchboard for indirect, consequential or incidental
damages, including without limitation loss of profits or damage to or loss or
use of any property.
SECTION 6 FORCE MAJEURE
Banyan shall be excused for failure to provide the Services hereunder to
the extent that such failure is directly or indirectly caused by an occurrence
commonly known as force majeure, including, without limitation, delays arising
out of acts of God, acts or orders of a government, agency or instrumentality
thereof (whether of fact or law), acts of public enemy, riots, embargoes,
strikes or other concerted acts of workers (whether of Banyan or other persons),
casualties or accidents, delivery of materials, transportation or shortage of
cars, trucks, fuel, power, labor, or materials, or any other causes,
circumstances or contingencies within or without the United States of America,
which are beyond the control of Banyan. Notwithstanding any events operating to
excuse the performance by Banyan, this Agreement shall continue in full force
for the remainder of its term and any renewals thereof.
<PAGE>
SECTION 7 CONFIDENTIALITY
Except as otherwise required under applicable law, Banyan and Switchboard
agree to maintain as confidential and not to disclose to any third party any and
all information provided by one party to the other or otherwise obtained by one
party from the other party in the performance of this Agreement.
SECTION 8 NOTICE
Any notice, request, instruction, consent, approval or other communication
provided for herein shall be in writing and shall be delivered personally, sent
by certified or registered mail, postage prepaid, telegraphed, sent by facsimile
transmission or by telex, and shall be deemed given when so delivered
personally, telegraphed, telexed, sent by facsimile transmission or, if mailed,
four days after the date of deposit in the United States mails, as follows:
To Banyan
Address: 120 Flanders Road
Westboro, MA 01581
Attention: V.P. Finance
To Switchboard
Address: 120 Flanders Road
Westboro, MA 01581
Attention: Finance Manager
SECTION 9 CHOICE OF LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts.
SECTION 10 AMENDMENTS
This Agreement constitutes the entire agreement between the parties and
supersedes all prior negotiations, undertakings, representation and agreements,
if any, of the parties hereto. This Agreement may not be amended orally but may
be amended only by a written instrument signed by all the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Commencement Date above.
BANYAN SYSTEMS INCORPORATED SWITCHBOARD INCORPORATED
By: /s/ Richard M. Spaulding By: /s/ Jeffrey D. Glidden
------------------------------ -----------------------------
Title: VP Finance and Treasurer Title: President
---------------------------- --------------------------
<PAGE>
Exhibit 21
----------
SUBSIDIARIES OF THE REGISTRANT
NONE.
<PAGE>
Exhibit 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated September 22, 1999, except for Note O for which the date is October
22, 1999, relating to the financial statements of Switchboard Incorporated,
which appear in such Registration Statement. We also consent to the references
to us under the headings "Experts" and "Selected Financial Data" in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 29, 1999
<TABLE> <S> <C>
<PAGE>
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<PERIOD-START> FEB-19-1996
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<NET-INCOME> (1,574)
<EPS-BASIC> (0.22)
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