<PAGE>
As filed with the Securities and Exchange Commission on February 8, 2000
Registration No. 333-90013
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
AMENDMENT NO. 3
TO
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(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
-----------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of each Class of
Securities to be Amount to be Proposed Maximum Proposed Maximum Amount of
Registered Registered(1) Offering Price per Share(2) Aggregate Offering Price(2) Registration Fee(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value per share ....... 6,325,000 $12.00 $75,900,000 $20,878
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes 825,000 shares which the underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of
1933, as amended.
(3) A registration fee of $16,680 was previously paid in connection with the
initial filing of the Registration Statement, based on a maximum
aggregate offering price of $60,000,000 and a registration fee rate of
$278 per $1,000,000. An additional registration fee of $4,198 is being
paid in connection with this filing based on an increase in the maximum
aggregate offering price of $15,900,000 and a registration fee rate of
$264 per $1,000,000. The total registration fee is $20,878.
-----------------
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 FEBRUARY 8, 2000
[SWITCHBOARD/(R)/ LOGO APPEARS HERE]
5,500,000 Shares
Common Stock
Switchboard Incorporated is offering 5,500,000 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 $10.00 and $12.00 per
share.
--------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 8.
--------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price......................................... $ $
Underwriting Discounts and Commissions........................ $ $
Proceeds to 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 825,000 shares of common stock to cover over-allotments. FleetBoston
Robertson Stephens Inc. expects to deliver the shares of common stock to
purchasers on , 2000.
--------------
Robertson Stephens J.P. Morgan & Co.
--------------
The Robinson-Humphrey Company
Wit SoundView
The date of this prospectus is , 2000.
<PAGE>
[Narrative description of graphic material omitted in electronically filed
document:
Description of inside front cover:
Set in the middle of the page against a purple background is the phrase, "Think
outside the bookSM ". On the right side of the page is a silhouette of a person
holding out its right hand.
Description of two page graphical foldout:
This two page layout is broken into three vertical sections, with headings at
the top of each section set against a purple background. The headings are, from
left to right, "Promotion and Distribution", "Features and Content" and "Local
Merchant Network".
The "Promotion and Distribution" section is separated into three vignettes,
from top to bottom of the page. The first and largest vignette is a snapshot of
the Switchboard.com Web page. The second vignette is preceded by the heading,
"Some of our Syndicated Sites:". The remainder of the second vignette displays
four overlapping snapshot pictures of some of Switchboard's syndicated Web
sites. The syndicated Web sites are with, from left to right, cbs2ny.com,
athand.com, askjeeves.com and discovercard.com. The third vignette includes
three pictures beside each other, from left to right, one of a television, one
of a radio and one of a billboard. The words "Television," "Radio" and "Outdoor
Advertising" appear beneath their respective pictures. Centered below the
pictures and words is the CBS logo and eye design.
The "Features and Content" section is separated into four vignettes, from top
to bottom of the page. The first vignette at the top of the page portrays two
snapshot pictures of Switchboard's Find a Business and Switchboard's What's
Nearby? Services. Centered to the left of the pictures is the caption "Find a
Business & What's Nearby?" The second vignette portrays a snapshot picture of
Switchboard's Find a Person and What's Nearby? services. Centered to the left
of the picture is the caption "Find a Person & What's Nearby?". The third
vignette portrays a snapshot picture of a map provided by Switchboard's Maps on
Us service. Centered to the left of the picture is the caption "Maps and
Directions". The fourth vignette portrays a snapshot picture of a Web search
results page from Switchboard's "Search the Web" service. Centered to the left
of the picture is the caption "Search the Web".
Two red arrows point from the first vignette to the third section, "Local
Merchant Network". One red arrow points from each of the other three vignettes
to the third section, "Local Merchant Network".
The "Local Merchant Network" section includes a single vignette of four
overlapping Web pages portraying restaurants participating in the local
merchant network. Centered above the pictures of the Web pages is the caption,
"Our online network gives merchants a fast, easy, cost-effective way to get
their business represented online and facilitates commerce by connecting them
with consumers".]
<PAGE>
Until , 2000 (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............................................................. 8
Forward-Looking Statements............................................... 21
Use of Proceeds.......................................................... 22
Dividend Policy.......................................................... 22
Capitalization........................................................... 23
Dilution................................................................. 25
Selected Financial Data.................................................. 26
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 27
Business................................................................. 36
Management............................................................... 47
Certain Transactions..................................................... 57
Principal Stockholders................................................... 65
Description of Capital Stock............................................. 67
Shares Eligible for Future Sale.......................................... 71
Underwriting............................................................. 73
Validity of Common Stock................................................. 75
Experts.................................................................. 75
Where You Can Find More Information...................................... 76
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 local
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 under which
CBS became a minority stockholder of Switchboard in exchange for $95.0 million
in advertising and promotion to be provided to us through June 2006 across all
CBS media properties, including television, radio and outdoor advertising, and
$5.0 million in cash. We also received a license from CBS to use the "CBS" and
CBS "eye" device trademarks. Our relationship 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 add new merchants to our network and increase
the number of consumers using our Web site.
Our Market Opportunity
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. IDC projects total business-to-consumer online
commerce will increase to $178 billion in 2003 from approximately $31 billion
in 1999. Forrester Research estimates that online advertising in the United
States will increase to $17.2 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 some 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.
At the same time, local merchants are increasingly recognizing the need to
establish an online presence to remain competitive. According to Forrester
Research, the aggregate number of businesses with 100 or fewer employees with a
Web presence is projected to increase to approximately 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.
4
<PAGE>
Our Solution
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 2.5 million unique visitors in December 1999 according
to Media Metrix. Our Web sites have over 2.4 million registered users, and our
users viewed over 50 million pages in December 1999.
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 consumers
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.
Our Strategy
We intend to be the leading Internet-based local merchant network by:
. building our brand;
. expanding our merchant aggregation programs;
. creating specialized directories for targeted groups of consumers who
share a common interest;
. extending our technology leadership; and
. expanding our operations internationally.
Our Operating History
We were incorporated in Delaware in April 1996 as a subsidiary of Banyan
Systems Incorporated, or Banyan Worldwide. Prior to this offering, we were a
majority owned subsidiary of Banyan Worldwide. We have incurred significant net
losses in each fiscal quarter since our inception and expect to continue to
incur net losses and negative cash flows during 2000.
5
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by Switchboard................. 5,500,000 shares
Common stock to be outstanding after this offering.. 23,716,355 shares
Use of proceeds..................................... For 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 18,216,355 shares outstanding on December 31, 1999.
This number includes 3,552,421 shares issuable upon the conversion of our
series A, series C and series D convertible preferred stock, which will convert
automatically into 3,552,421 shares of our common stock upon the closing of
this offering.
The number of shares outstanding excludes:
. an aggregate of 2,951,600 shares subject to outstanding options as of
December 31, 1999 at a weighted average exercise price of $6.23 per
share;
. an aggregate of 1,751,937 shares subject to outstanding warrants as of
December 31, 1999 at a weighted average exercise price of $2.71 per
share, assuming these warrants are all exercised in full;
. an aggregate of 1,793,026 shares reserved for issuance under our 1996
stock incentive plan, our 1999 stock incentive plan and our 1999
employee stock purchase plan as of December 31, 1999; and
. 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.
Our Offices
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.
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 on a one-for-one basis,
with the exception of the one outstanding share of series E special
voting preferred stock, which will remain outstanding; and
. reflects, as of the closing of this offering, the filing of our amended
and restated certificate of incorporation and the adoption of our
amended and restated by-laws.
"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.
6
<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>
Year Ended
December 31,
----------------------------------------
1997 1998 1999
------------ ------------ ------------
(in thousands, except per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Revenue.............................. $ 650 $ 6,536 $ 8,304
Gross profit......................... (143) 5,229 6,334
Loss from operations................. (5,334) (4,961) (8,656)
Net loss............................. $ (5,329) $ (5,365) $ (8,805)
============ ============ ============
Basic and diluted net loss per
share.............................. $ (0.81) $ (0.81) $ (0.89)
============ ============ ============
Shares used in computing basic and
diluted net loss per share......... 7,000 7,011 10,915
Unaudited pro forma basic and diluted
net loss per share................. $ (0.67)
============
Shares used in computing unaudited
pro forma basic and diluted net
loss per share..................... 13,078
</TABLE>
The following table is a summary of our balance sheet at December 31, 1999.
The pro forma 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; and
. the conversion of 146,505 shares of our series D convertible preferred
stock into 146,505 shares of common stock.
The pro forma as adjusted data give effect to the sale of 5,500,000 shares
of common stock at an assumed initial public offering price of $11.00 per
share, after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by Switchboard.
<TABLE>
<CAPTION>
As of December 31, 1999
-------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents....................... $ 3,605 $3,605 $57,870
Working capital................................. 2,454 2,454 56,719
Total assets.................................... 9,565 9,565 63,830
Total current liabilities....................... 4,689 4,689 4,689
Redeemable convertible preferred stock.......... 16,320 -- --
Total stockholders' equity (deficit)............ (11,444) 4,875 59,140
</TABLE>
7
<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 limited operating history and our lack of any operating history as a stand-
alone company makes it difficult to evaluate our business and our ability to
address the risks and uncertainties that we face
We have only a limited operating history on which you can evaluate our
business and prospects. In addition, since commencing operations in 1996, we
have been a subsidiary of Banyan Worldwide. Consequently, we have no operating
history as a stand-alone company and no experience in addressing various
business challenges without the support of a corporate parent. We may not
successfully address the risks and uncertainties which confront stand-alone
companies, particularly companies in new and rapidly evolving markets like
ours.
We have a history of incurring net losses, we expect our net losses to continue
as a result of planned increases in operating expenses and we may never
achieve profitability
We have incurred significant net losses in each fiscal quarter since our
inception. From inception to December 31, 1999, we have incurred net losses
totaling $21.0 million. We expect to continue to incur net losses and negative
cash flows throughout 2000 because we intend to increase operating expenses to
develop the Switchboard brand through marketing, promotion and enhancement and
to expand 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, we will be unable to continue our operations.
Our quarterly results of operations are likely to fluctuate, and as a result,
we may fail to meet the expectations of our investors and securities analysts,
which may cause the price of our common stock to decline
Our quarterly revenue and results of operations are volatile and are
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. 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.
Factors that may cause our results of operations to fluctuate include:
. the addition or loss of relationships with third parties that are our
source of new merchants or that license our services for use on their
own Web sites;
. our ability to attract and retain consumers, local merchants and
national advertisers to our Web site;
. the amount and timing of expenditures for expansion of our operations,
including the hiring of new employees, capital expenditures and related
costs;
. technical difficulties or failures affecting our systems or the
Internet in general;
. the cost of acquiring, and the availability of, content, including
directory information and maps; and
. the fact that 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 of these factors, results in any future quarter may be below the
expectations of securities analysts or investors. If so, the market price of
our common stock may decline significantly.
8
<PAGE>
Our business model will fail if our operations are unable to generate
sufficient revenue to cover the cost of the content and services we provide to
consumers at no charge
Our model for conducting business is unproven and may not succeed. Because
we provide our services to consumers at no charge, our business model depends
upon our ability to generate revenue from:
. Internet advertising and sponsorships fees;
. Web site design, construction, hosting and enhancement services
provided to local merchants; and
. licensing of our services to third parties for use on their Web sites.
We may not be able to generate sufficient revenue to cover the cost of the
content and services that we provide to consumers at no charge.
We need to develop the Switchboard brand to attract users to our Web site,
which will be costly and may not generate revenue
Building recognition of our brand is critical to attracting and expanding
our user base. We are pursuing an aggressive brand-building strategy and, if
this strategy is unsuccessful, we may never cover our costs. In addition to the
advertising and promotion available to us from CBS, we intend to incur
significant additional expenditures for 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. In addition,
even if awareness of our brand increases, the number of new users of our Web
site may not increase or result in increased revenue.
If our relationship with CBS does not for any reason result in positive
association with the Switchboard brand, our brand could be damaged
We use the "CBS" trademark and "eye" device under a license agreement with
CBS, which we entered into in June 1999. Therefore, we have limited experience
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 increase awareness of or preference for 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, the
Switchboard brand could be damaged.
If we do not enter into and maintain relationships with merchant aggregators,
our ability to attract new local merchant customers and to deliver services to
current local merchant customers would 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 local merchant base is highly
fragmented. 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. The
termination of our strategic relationship with Discover or other merchant
aggregators would significantly impair our ability to attract potential local
merchant customers and deliver our local merchant services to our current
customers. Furthermore, 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.
If we cannot demonstrate the value of our local merchant services, local
merchant customers may stop using our services, which could reduce our revenue
We may be unable to demonstrate to our local merchant customers the value
of our local merchant services. If local merchants cancel our services, which
are generally provided on a month-to-month basis, our
9
<PAGE>
revenue could decline and we may need to incur additional expenditures to
obtain new local merchant customers. 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.
We depend on strategic alliances with third parties to grow our business and
our business may not grow if the strategic alliances upon which we depend fail
to produce the expected benefits or are terminated
Our business depends upon our ability to maintain and benefit from our
existing strategic alliances and to establish additional strategic alliances.
In addition to our relationship with CBS and our existing relationships with
merchant aggregators, we have entered into relationships with syndication
customers and third-party content providers. These parties 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 relationships may be terminated by
either party on short notice.
Our strategic relationships are in early stages of development. These
relationships may not provide us benefits that outweigh the costs of the
relationships. If any strategic ally demands a greater portion of revenue or
requires us to make payments for access to its Web site, we may need to
terminate or refuse to renew that relationship, even if it had been previously
profitable or otherwise beneficial. In addition, if we lose a significant
strategic ally, we may be unable to replace that relationship with other
strategic relationships with comparable revenue potential, content or user
demographics.
The attractiveness of our services would diminish if we are not able to license
accurate database information from third-party 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 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. Other sources of data may not be offered on
terms acceptable to us. Moreover, the rapid consolidation being experienced by
Internet-related businesses could reduce the number of content providers with
which we could form relationships.
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 existing or substitute content
providers, we may be unable to continue to provide our services.
The success of our business depends on the quality of our services and the
quality is substantially dependent on the accuracy of data we license from
third parties. Any failure to maintain accurate data could impair the
reputation of our brand and our services, reduce the volume of users attracted
to our Web site and diminish the attractiveness of our service offerings to our
strategic partners, advertisers and content providers.
If we do not attract a large number of users to our Web site who have
demographic characteristics that are attractive to advertisers, the advertising
revenue on which we rely will substantially decline
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 revenue will substantially decline. Our ability to
remain an attractive medium for advertising will depend upon a number of
factors, including, the acceptance of our services by a large number of users
who have demographic characteristics that are attractive to advertisers.
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Our agreements to sell advertisements expose us to competitive pricing
pressures and may require us to provide advertising at no charge if we do not
meet minimum guarantees
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 charge until the guarantees are met.
We rely on a small number of advertising and syndication customers, the loss of
whom may substantially reduce our revenue
We derive a substantial portion of our revenue from a small number of
advertising and syndication customers. For the year ended December 31, 1999,
revenue derived from our top ten customers accounted for approximately 64.3% of
our total revenue. Consequently, our revenue may substantially decline 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.
The growth of our revenue will suffer if we do not increase the number and
productivity of our sales personnel, many of whom have only recently joined us
Our ability to generate revenue through the sale of advertising would be
adversely affected if we do not develop and maintain a productive sales force.
Our sales group consisted of only seven members as of December 31, 1999. We
need to increase the size of our sales force to accelerate our revenue growth.
Our Director of National Ad Sales joined us in April 1999, and four other
members of our sales group joined us since October 1999. Typically new sales
personnel require six to twelve months to become productive. If our sales force
does not increase its productivity, the growth of our revenue may be impeded.
If we do not introduce new or enhanced services for our Web site, we may be
unable to attract and retain consumers and local merchants, which would
significantly impede our ability to generate revenue
We need to introduce new or enhanced services to attract and retain local
merchants to our services, attract more consumers to our Web site and respond
to competition. If we are not able to introduce new or enhanced services, we
may lose existing local merchants and consumers or fail to attract new ones,
which would significantly impede our revenue growth. 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.
Our senior management has limited experience working together as a team and any
difficulties they encounter in integrating successfully may interfere with the
operation of our business
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 founder and 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 integrate Mr. Greenlaw
successfully into our current senior management team.
If we are not able to attract and retain highly skilled managerial and
technical personnel with Internet experience, we may not be able to implement
successfully our business model
We believe that our management must be able to act decisively to apply and
adapt our business model in the rapidly changing Internet markets in which we
compete. In addition, we rely upon our technical employees to develop and
maintain much of the technology used to provide our services. Consequently, we
believe that our success depends largely on our ability to attract and retain
highly skilled managerial and technical
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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
skills we require, particularly with Internet experience, are in very short
supply. Competition to hire from this limited pool is intense.
If we do not improve our management, financial and information systems and
controls, we may fail to properly manage our growth, which would strain our
resources and could impede further growth
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.
The markets for Internet content, services and advertising 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, services and
advertising. These 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 content, information services and
products, as well as with traditional media, for audience attention and
advertising and sponsorship expenditures. We license much of our database
content under nonexclusive agreements with third-party providers which are in
the business of licensing their content to many businesses, including our
current and potential competitors. 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, we may
not be able to develop alternative content in a timely, cost-effective manner,
or at all, and we may lose market share.
We may not be able to dedicate the substantial resources required to expand,
monitor and maintain our internally developed systems without contracting with
an outside supplier at substantial expense
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 syndication partners' 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
not be able to project accurately 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. Our inability to upgrade and
expand as required could impair the reputation of our brand and our services,
reduce the volume of users able to access our Web site and diminish the
attractiveness of our service offerings to our strategic partners, advertisers
and content providers. Because we developed these systems internally, we must
either dedicate substantial internal resources to monitor, maintain and upgrade
these systems or contract with an outside supplier for these services at
substantial expense.
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Our internally developed software may contain undetected errors, which could
limit our ability to provide our services and diminish the attractiveness of
our service offerings
We use internally developed, 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. For
example, while we have not experienced any operational difficulties relating to
the transition from December 31, 1999 to January 1, 2000, it is possible that
we may in the future experience unexpected date-related processing errors. Our
inability to fix any of those errors could limit our ability to provide our
services, impair the reputation of our brand and our services, reduce the
volume of users who visit our Web site and diminish the attractiveness of our
service offerings to our strategic partners, advertisers and content providers.
We do not have a formal disaster recovery plan, and a disaster that results in
the inability of consumers to visit our site would severely damage our
operations.
Our ability to generate revenue depends in large part on the number of
users that access our Web site. Our computer and communications hardware is
located at 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. Any system interruptions
resulting in the complete or partial unavailability or slow or delayed delivery
of our Web site could impair the reputation of our brand and our services,
diminish the attractiveness of our service offerings to our strategic partners,
advertisers and content providers and reduce the volume of users able to access
our Web site. Any volume reductions could harm our ability to satisfy minimum
advertising commitments. In addition, a system interruption may give CBS the
right to suspend or terminate our advertising and promotion agreements and our
license to use the "CBS" trademark and "eye" device.
Our inexperience in doing business in international markets exposes us further
to various risks and may limit the success of any expansion of our business
into international markets
In September 1999, we entered into an agreement to provide directory
services in Canada. As opportunities arise, we intend to pursue strategic
initiatives internationally. We will face additional risks related to doing
business in international markets, such as changes in regulatory requirements,
difficulties in protecting and enforcing our intellectual property, tariffs and
other trade barriers, fluctuations in currency exchange rates and adverse tax
consequences. Our inexperience in doing business in international markets
exposes us further to these risks and may make it more difficult for us to
staff and manage any foreign operations. In addition our services may not be
perceived to be valuable because of different consumer preferences and
requirements in specific international markets. The effects of one or more of
these factors may limit the success of any expansion of our business into
international markets.
We may need additional capital, which may not be available to us and which, if
available, 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 to increase their
productivity;
. develop new technology and upgrade current technology and data network
infrastructure to comply with rapidly evolving industry standards;
. develop new and expand current content and services to attract and
retain consumers and local merchants;
. pursue acquisitions or expansion opportunities in our consolidating
markets; or
. address additional general corporate needs.
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If we cannot obtain any needed financing on acceptable terms, 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 have no experience acquiring companies, and any acquisitions we undertake
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 our management's 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, product, technologies and
information systems of the acquired business with our business; and
. inability to retain the acquired company's customers, affiliates,
content providers and advertisers.
If we are unable to adequately protect our intellectual property rights, our
technology and information may be used by others to compete against us
We depend upon our internally developed and other proprietary technology.
If we do not effectively protect our proprietary technology, others may become
able to use it to compete against us. 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.
If our services infringe on intellectual property rights of others, we may be
required to expend substantial resources to reengineer our services and to
incur substantial costs and damages related to infringement claims
We are subject to the risk of claims alleging infringement of third-party
proprietary rights. If we are subject to claims of infringement of, 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.
Risks Related to Our Relationships with CBS and Banyan Worldwide
Termination of our agreements with CBS would negatively affect our financial
results
If our agreements with CBS terminate, our business, particularly our
branding and advertising initiatives, would suffer, which would impede our
revenue growth. If our license agreement terminates, we would lose the right to
use the "CBS" trademark and "eye" device which are very important to our
marketing and brand building activities. Our license agreement with CBS will
expire on June 30, 2009 and CBS is not obligated to
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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
which CBS has agreed to provide us through June 2006. 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's contractual right to require us to remove content from our Web site and
to approve all of our uses of its trademarks may restrict our marketing
activities and business opportunities
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 CBS trademarks.
Because of these restrictions we may not be able to perform our desired
marketing activities or include some types of content on our Web site which we
would otherwise decide to include.
CBS does not guarantee the availability of the particular advertising
placements that we desire or access to the type of audiences at which we target
our ads, and therefore our ads may not be effective
CBS 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 may be targeting similar audiences for their ads
as we target for ours. We cannot be certain that we will receive 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.
Therefore, the CBS advertising available to us may not be effective.
The combined ownership of Banyan and CBS after the offering will, if Banyan and
CBS act together, permit Banyan and CBS to control matters submitted for
approval of our stockholders which could delay or prevent a change of control
or depress our stock price
After this offering, Banyan Worldwide will beneficially own approximately
41.3% of our common stock and CBS will beneficially own approximately 34.4% 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 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 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.
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So long as Banyan Worldwide and CBS maintain their significant ownership
interest in Switchboard, you will not be able to elect a majority of our board
of directors
We are a party to a voting agreement with Banyan Worldwide and CBS. Under
that 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
Three 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 Senior Vice President and Chief
Financial Officer
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 than for Banyan Worldwide. These decisions
may relate, for example, to:
. potential acquisitions of businesses;
. intercompany agreements, such as our services agreement;
. 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.
If Banyan Worldwide ceases to provide us with the services and facilities that
it currently provides, we may experience increased costs and disruption of our
operations to replace those services and facilities
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 may cause us to incur
additional costs and experience disruption of our operations. 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.
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Risks Related to the Internet
If the acceptance and effectiveness of Internet advertising does not become
fully established, the growth of our advertising revenue will suffer
Our future success depends, in part, on an increase in the use of the
Internet as an advertising medium. We generated 45.1% of our revenue from the
sale of advertisements and sponsorships during the year ended December 31, 1999
and 61.5% in the year ended December 31, 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 local 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 advertising revenue 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.
If we are unable to adapt as Internet technologies and customer demands evolve,
our services may not be attractive to consumers, local merchants and
advertisers
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. These changes could render our Web site, technology
and systems obsolete. If we do not periodically 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, our services may not be attractive to consumers,
local merchants and advertisers.
If we are sued for content distributed through, or linked to by, our Web site,
we may be required to spend substantial resources to defend ourselves and could
be required to pay monetary damages
We aggregate and distribute third party data over the Internet. In
addition, third-party Web sites are accessible through our Web site. As a
result, we could be subject to legal claims for defamation, negligence,
intellectual property infringement and product or service liability. 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. We may need to expend
substantial resources to investigate and defend these claims, regardless of
whether we successfully defend against them. While we carry general business
insurance, the amount of coverage we maintain may not be adequate. In addition,
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.
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We may need to expend significant resources to protect against online security
risks that could result in misappropriation of our proprietary information or
cause interruption in our operations
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.
We may be sued for disclosing to third parties personal identifying information
without consent
Individuals whose names, addresses and telephone numbers appear in our
yellow pages and white pages directories have occasionally contacted us because
their phone numbers and addresses were unlisted with the telephone company.
While we have not received any formal legal claims from these individuals, we
may receive claims in the future for which we may be liable. In addition, if we
begin disclosing to third parties personal identifying information about our
users without consent or in violation of our privacy policy, we may face
potential liability for invasion of privacy.
We may become subject to burdensome government regulation and legal
uncertainties which could limit our growth
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.
If we cannot protect our domain names, our ability to successfully brand
Switchboard will be impaired
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. This problem may be exacerbated by the length of
time required to expand into any other country and the corresponding
opportunity for others to acquire rights in relevant domain names. Furthermore,
it is unclear whether laws protecting trademarks and similar proprietary rights
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 be able to 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.
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Risks Related to 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.
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.
Immediately after this offering, the disputed warrant, if in effect, would
entitle America Online to purchase 1,085,751 shares of our common stock at
$2.07 per share. Under our common stock and warrant purchase agreement with
CBS, in the event of a warrant exercise by America Online, we would be required
to issue to CBS for no additional consideration 466,785 additional shares of
our common stock and warrants to purchase 66,683 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, at an assumed initial public offering price of $11.00 per
share, would be increased from $8.54 to $8.98. The amount of dilution could be
greater depending on the number of fully diluted shares of our capital 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 online commerce and 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 the growth of our
business. 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 and expose us to costly securities
class action litigation
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. 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 which could result in substantial costs and divert
management's attention and resources. 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,
the failure or success of our branding initiatives and investors' perceptions
of us.
19
<PAGE>
Our stock price could be adversely affected by future sales of our common
stock, which could limit our ability to raise capital and undertake
acquisitions
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 and undertake acquisitions
through the issuance of additional equity securities. See "Shares Eligible for
Future Sale."
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, our by-laws and 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 board of directors is classified into three classes, and
stockholders do not have the right to call special meetings of stockholders. In
addition, 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 and may dilute your
ownership interest in us. Please refer to "Description of Capital Stock" for a
more detailed discussion of these provisions.
20
<PAGE>
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.
21
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from our sale of 5,500,000 shares of
common stock will be approximately $54,265,000, assuming an initial public
offering price of $11.00 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 approximately $62,705,000.
We expect to use the net proceeds of this offering for general corporate
purposes. As of the date of this prospectus, we have not made any specific
expenditure plans with respect to the proceeds 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. 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.
22
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 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 5,500,000 shares of common stock in this offering at an assumed
initial public offering price of $11.00 per share and after deducting
the estimated underwriting discounts and estimated offering expenses
payable by Switchboard.
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------------
Pro Forma
Actual Pro Forma As Adjusted
---------- ---------- ------------
(unaudited)
(in thousands, except share and
per share data)
<S> <C> <C> <C>
Redeemable convertible preferred stock,
$0.01 par value; 7,750,000 shares
designated actual; none designated pro
forma and pro forma as adjusted.........
Series A--750,000 shares designated,
issued and outstanding actual; none
designated, issued and outstanding
pro forma and pro forma as adjusted... $ 3,973 -- --
Series B--1,500,000 shares designated,
none issued and outstanding actual;
none designated, issued and
outstanding pro forma and pro forma
as adjusted........................... -- -- --
Series C--4,000,000 shares designated,
2,655,916 shares issued and
outstanding actual; none designated,
issued and outstanding pro forma and
pro forma as adjusted................. 11,189 -- --
Series D--1,500,000 shares designated,
146,505 shares issued and outstanding
actual; none issued and outstanding
pro forma and pro forma as adjusted... 1,157 -- --
---------- ---------- ----------
Total redeemable convertible
preferred stock.................... 16,319 -- --
Stockholders' equity (deficit):
Preferred stock, $0.01 par value;
2,249,999 shares authorized and
undesignated actual; none issued and
outstanding actual; 4,999,999 shares
authorized and undesignated pro forma
and pro forma as adjusted; none
issued and outstanding pro forma and
pro forma as adjusted................. -- -- --
Series E special voting preferred
stock, $0.01 par value; one share
designated, issued and outstanding
actual, pro forma and pro forma as
adjusted.............................. -- -- --
Common stock, $0.01 par value;
30,000,000 shares authorized actual;
85,000,000 shares authorized pro
forma and pro forma as adjusted;
14,663,934 shares issued and
outstanding actual; 18,216,355 shares
issued and outstanding pro forma;
23,716,355 shares issued and
outstanding pro forma as adjusted..... 147 $ 182 $ 237
Additional paid-in capital.............. 75,667 91,951 146,161
Contribution receivable................. (66,243) (66,243) (66,243)
Accumulated deficit..................... (21,015) (21,015) (21,015)
---------- ---------- ----------
Total stockholders' equity
(deficit).......................... (11,444) 4,875 59,140
---------- ---------- ----------
Total capitalization................. $ 4,875 $ 4,875 $ 59,140
========== ========== ==========
</TABLE>
23
<PAGE>
The number of shares of common stock outstanding is based on the number of
shares of our common stock outstanding on December 31, 1999 and does not
include:
. an aggregate of 2,951,600 shares subject to outstanding options as of
December 31, 1999, at a weighted average exercise price of $6.23;
. an aggregate of 1,751,937 shares subject to outstanding warrants as of
December 31, 1999 at a weighted average exercise price of $2.71 per
share, assuming these warrants are all exercised in full; and
. an aggregate of 1,793,026 shares reserved for issuance under our 1996
stock incentive plan, our 1999 stock incentive plan and our 1999
employee stock purchase plan as of December 31, 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.
24
<PAGE>
DILUTION
Our pro forma net tangible book value at December 31, 1999 was
approximately $4,098,000, or $0.22 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 5,500,000 shares of common stock in this
offering at an assumed initial public offering price of $11.00 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 December 31, 1999 would have been approximately $58,364,000, or
$2.46 per share. This represents an immediate increase in pro forma net
tangible book value of $2.24 per share to existing stockholders and an
immediate dilution in pro forma net tangible book value of $8.54 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................ $11.00
Pro forma net tangible book value per share as of December
31, 1999................................................... $0.22
Increase per share attributable to this offering............. 2.24
-----
Pro forma net tangible book value per share after this
offering..................................................... 2.46
------
Dilution per share to new investors............................ $ 8.54
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
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 $11.00 per share for shares purchased in this
offering, before deducting estimated 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......... 18,216,356 76.8% $20,496,731 25.3% $ 1.13
New investors................. 5,500,000 23.2 60,500,000 74.7% 11.00
---------- ----- ----------- -----
Total....................... 23,716,356 100.0% $80,996,731 100.0%
========== ===== =========== =====
</TABLE>
The foregoing table and calculation assumes no exercise of outstanding
stock options and warrants exercisable as of December 31, 1999. As of December
31, 1999, there were:
. outstanding stock options to purchase 2,951,600 shares of common stock
at a weighted average exercise price of $6.23 per share; and
. outstanding warrants to purchase 1,751,937 shares of common stock at a
weighted average exercise price of $2.71 per share.
To the extent that all of these options and warrants are exercised, pro
forma net tangible book value per share after this offering would be $2.87 and
total dilution per share to new investors would be $8.13.
If the underwriters' over-allotment option is exercised in full, pro forma
net tangible book value per share after this offering would be $2.72 and total
dilution per share to new investors would be $8.28.
25
<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, 1998 and
1999 and for the years ended December 31, 1997, 1998 and 1999 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, 1997 and the statement of operations
data for the period from inception (February 19, 1996) through December 31,
1996 are derived from audited financial statements of Switchboard not included
in this prospectus. The balance sheet data as of December 31, 1996 is derived
from unaudited financial statements not included in this prospectus. The
historical results are not necessarily indicative of the results of operations
to be expected in the future.
<TABLE>
<CAPTION>
Period from Year Ended-
Inception to December 31,
December 31, ---------------------------
1996 1997 1998 1999
------------ ------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue............................. $ 170 $ 650 $ 6,536 $ 8,304
Cost of revenue..................... 29 793 1,307 1,970
------- ------- -------- --------
Gross profit........................ 141 (143) 5,229 6,334
Operating expenses:
Sales and marketing................ 342 2,307 5,872 11,237
Product development................ 1,329 2,107 3,188 1,923
General and administrative......... -- 776 1,130 1,830
------- ------- -------- --------
Total operating expenses.......... 1,671 5,190 10,190 14,990
------- ------- -------- --------
Loss from operations................ (1,530) (5,333) (4,961) (8,656)
Interest income (expense), net...... 15 4 (404) (149)
------- ------- -------- --------
Net loss............................ $(1,515) $(5,329) $ (5,365) $ (8,805)
------- ------- -------- --------
Accrued dividends for preferred
stockholders...................... 58 308 293 939
------- ------- -------- --------
Net loss attributable to common
stockholders...................... $(1,573) $(5,637) $ (5,658) $ (9,744)
======= ======= ======== ========
Basic and diluted net loss per
share............................. $ (0.22) $ (0.81) $ (0.81) $ (0.89)
Shares used in computing basic and
diluted net loss per share........ 7,000 7,000 7,011 10,915
Unaudited pro forma basic and
diluted net loss per share........ $ (0.67)
Shares used in computing unaudited
pro forma basic and diluted net
loss per share.................... 13,078
<CAPTION>
December 31,
----------------------------------------
1996 1997 1998 1999
------------ ------- -------- --------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........... $ 3,115 $ 404 $ 387 $ 3,605
Working capital..................... 3,152 (6) 449 2,454
Total assets........................ 3,792 1,491 3,565 9,565
Note payable........................ -- -- 600 --
Convertible promissory notes--
related party..................... 960 2,984 7,000 --
Redeemable convertible preferred
stock............................. 3,058 3,366 3,658 16,320
Total stockholders' deficit......... (330) (5,774) (11,419) (11,444)
</TABLE>
26
<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
Since commencing operations in February 1996, we have derived our revenue
principally from the sale of national advertising. We have also derived revenue
from the licensing of our directory technology content and related services to
third party Web sites, which we refer to as syndication, and from 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 America Online's termination of its marketing
agreements with us 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. Page views decreased approximately 33% from a pre-
termination high in the third quarter of 1998 to the first quarter of 1999.
Revenue in the first quarter of 1999 was approximately 43% lower than revenue
in the fourth quarter of 1998. Approximately 52% of our total revenue in 1997
and approximately 45% of our total revenue in 1998 was derived from our
agreements with America Online. 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. During
1999, approximately 45% of our total revenue was derived from the sale of
national advertising.
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 ratably over the term of the contract.
During 1999, approximately 34% of our total revenue was derived from
syndication.
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 refer to as 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.
During 1999, approximately 21% of our total revenue was derived from our
merchant aggregation program.
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 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
27
<PAGE>
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. We expect product
development expense to 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
December 31, 1999, we had an accumulated deficit of $21.0 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.
Results of Operations
The following table sets forth for the periods indicated our results of
operations expressed as a percentage of revenue:
<TABLE>
<CAPTION>
Year Ended
December 31,
-----------------------
1997 1998 1999
------ ----- ------
<S> <C> <C> <C>
Revenue.............................................. 100.0% 100.0% 100.0%
Cost of revenue...................................... 122.0 20.0 23.7
------ ----- ------
Gross profit....................................... (22.0) 80.0 76.3
Operating expenses:
Sales and marketing................................ 354.8 89.8 135.3
Product development................................ 324.2 48.8 23.2
General and administrative......................... 119.4 17.3 22.0
------ ----- ------
Total operating expenses.......................... 798.4 155.9 180.5
Loss from operations................................. (820.4) (75.9) (104.2)
Interest income (expense), net....................... 0.6 (6.2) (1.8)
------ ----- ------
Net loss............................................. (819.8)% (82.1)% (106.0)%
====== ===== ======
</TABLE>
Years ended December 31, 1999 and 1998
Revenue. Revenue increased to $8.3 million for the year ended December 31,
1999 from $6.5 million for the year ended December 31, 1998. This $1.8 million
increase consisted primarily of an increase of $309,000 in syndication and
license revenue, primarily due to new customer agreements and an increase of
$1.7 million due to the launch of our merchant aggregation program and the
commencement of our strategic
28
<PAGE>
alliance with Discover Financial Services in February 1999, offset in part by a
$275,000 decrease in advertising revenue due primarily to the termination of
the America Online agreements. In 1999, one customer, Discover Financial
Services, accounted for 22.7% of our revenue. In 1998, QuikPage, Inc. accounted
for 10.2% of our revenue and two other customers accounted for 11.9% and 10.5%
of our revenue.
Cost of revenue. Cost of revenue increased to $2.0 million, or 23.7% of
revenue, for the year ended December 31, 1999 from $1.3 million, or 20.0% of
revenue, for the year ended December 31, 1998. The dollar increase and
resulting percentage increase were primarily due to amortization expense
related to a software license of $306,000 and Web site maintenance expenses of
$330,000 incurred in connection with our merchant aggregation program.
Gross profit increased to $6.3 million for the year ended December 31, 1999
from $5.2 million for the year ended December 31, 1998. Gross profit dollars
increased primarily due to higher revenue. Due to the increased costs, as a
percentage of revenue, gross profit percentage for the year ended December 31,
1999 decreased to 76.3% from 80.0% for the year ended December 31, 1998.
Sales and marketing. Sales and marketing expense increased to $11.2
million, or 135.3% of revenue, for the year ended December 31, 1999 from $5.9
million, or 89.8% of revenue, for the year ended December 31, 1998. The
increase in 1999 of $5.3 million was primarily related to the CBS non-cash
advertising expense of $4.0 million, along with increased telemarketing fees of
$1.0 million, other advertising expenses of $897,000, and program expenses of
$616,000 related to our merchant aggregation program, offset by decreased
carriage fees of $1.4 million resulting from the termination of the America
Online agreements in 1998.
Product development. Product development expense decreased to $1.9 million,
or 23.2% of revenue, for the year ended December 31, 1999 from $3.2 million, or
48.8% of revenue, for the year ended December 31, 1998. This decrease was
primarily due to the fact that product development expense for the year ended
December 31, 1998 included $1.4 million we expensed as incomplete technology
related to the Maps On Us technology acquisition.
General and administrative. General and administrative expense increased to
$1.8 million, or 22.0% of revenue, for the year ended December 31, 1999 from
$1.1 million or 17.3% of revenue, for the year ended December 31, 1998. The
increase was primarily due to salaries associated with newly hired personnel
and related costs of $575,000 required to manage our growth and facilities
expansion, as well as increased legal, accounting, and consulting fees of
$215,000.
Interest income (expense), net. Interest expense decreased to $149,000, or
1.8% of revenue, for the year ended December 31, 1999 from $404,000, or 6.2% of
revenue, for the year ended December 31, 1998. The dollar decrease in expense
was primarily due to increased interest income of $129,000 earned on the funds
available from the CBS investment in June 1999.
Years ended December 31, 1998 and 1997
Revenue. Revenue increased to $6.5 million for the year ended December 31,
1998 from $650,000 for the year ended December 31, 1997. The $5.9 million
increase in 1998 was primarily due to increased advertising revenue of $3.6
million due to the growth in traffic primarily related to our agreements with
America Online and increased syndication and license revenue of $2.3 million
due to 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.
29
<PAGE>
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. The dollar increase was
primarily due to increases in depreciation and amortization and data licensing
fees.
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.
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. The increase of $3.6
million in 1998 was primarily attributable to increased America Online-related
carriage fees of $2.5 million, as well as revenue sharing expenses relating to
our strategic alliances of $907,000.
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. The increase in 1998
of $1.1 million primarily resulted from expenses related to our purchase of the
Maps On Us technology in May 1998.
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. The
increase in 1998 of $354,000 was primarily due to an increase in the allowance
for doubtful accounts of $263,000 related to the increase in revenue and
accounts receivable, as well as increased personnel expenses of $206,000,
offset in part by decreases in outside services of $151,000.
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. The increase in 1998 in expense was primarily due to
increased interest expense of $350,000 in 1998 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.
30
<PAGE>
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 December
31, 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 the 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
----------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Revenue................. $ 1,081 $ 1,680 $ 1,783 $1,992 $1,128 $1,850 $ 2,286 $ 3,040
Cost of revenue......... 241 381 354 331 77 329 614 950
------- ------- ------- ------ ------ ------ ------- -------
Gross profit........... 840 1,299 1,429 1,661 1,051 1,521 1,672 2,090
Operating expenses:
Sales and marketing.... 1,826 1,208 1,612 1,226 690 1,414 2,403 6,730
Product development.... 459 1,880 489 360 435 441 471 576
General and
administrative....... 218 285 227 400 394 303 509 624
------- ------- ------- ------ ------ ------ ------- -------
Total operating
expenses: 2,503 3,373 2,328 1,986 1,519 2,158 3,383 7,930
Loss from operations.... (1,663) (2,074) (899) (325) (468) (637) (1,711) (5,840)
Interest income
(expense), net........ (69) (93) (124) (118) (118) (96) 28 37
------- ------- ------- ------ ------ ------ ------- -------
Net loss................ $(1,732) $(2,167) $(1,023) $ (443) $ (586) $ (733) $(1,683) $(5,803)
======= ======= ======= ====== ====== ====== ======= =======
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......... 22.3 22.7 19.9 16.6 6.8 17.8 26.9 31.3
------- ------- ------- ------ ------ ------ ------- -------
Gross profit........... 77.7 77.3 80.1 83.4 93.2 82.2 73.1 68.7
Operating expenses:
Sales and marketing.... 168.9 71.9 90.4 61.5 61.2 76.4 105.1 221.4
Product development.... 42.4 111.9 27.4 18.1 38.5 23.8 20.6 18.9
General and
administrative....... 20.2 17.0 12.7 20.1 34.9 16.4 22.2 20.5
------- ------- ------- ------ ------ ------ ------- -------
Total operating
expenses........... 231.5 200.8 130.5 99.7 134.6 116.6 147.9 260.8
Loss from operations.... (153.8) (123.5) (50.4) (16.3) (41.4) (34.4) (74.8) (192.1)
Interest income
(expense), net........ (6.4) (5.5) (7.0) (5.9) (10.5) (5.2) 1.2 1.2
------- ------- ------- ------ ------ ------ ------- -------
Net loss................ (160.2)% (129.0)% (57.4)% (22.2)% (51.9)% (39.6)% (73.6)% (190.9)%
======= ======= ======= ====== ====== ====== ======= =======
</TABLE>
We have experienced significant fluctuations in revenue, expenses and
results of operations from quarter to quarter. Although we do not believe our
business is seasonal, we do experience fluctuations in the traffic to our Web
site during various times during the year, most notably around certain holiday
periods, which may impact our revenue. 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.
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
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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 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. In 1999, Banyan Worldwide converted approximately $11.7 million of the
outstanding principal and interest under our convertible preferred note
facilities into preferred stock. 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 $11.00 per share.
The interest rate in effect at December 31, 1999 was 5.74%. As of December 31,
1999, we had approximately $3.9 million available and there was no outstanding
balance under this facility. Upon completion of this offering, this facility
will automatically terminate in full and any outstanding principal and interest
will be
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converted into shares of our series D preferred stock at the then-applicable
conversion rate. Any shares of our Series D preferred stock which are issued
will convert automatically into shares of common stock upon completion of this
offering.
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 December 31, 1999, we had cash and cash equivalents totaling $3.6
million.
Net cash used for operating activities for the year ended December 31, 1999
was $2.8 million, primarily due to a net loss of $8.8 million and increases in
accounts receivable and other current assets, offset in part by the increases
in accounts payable and accrued expenses.
Net cash used for investing activities for the year ended December 31, 1999
was $942,000. Investing activities for the periods were primarily purchases of
equipment, consisting largely of computer equipment.
Net cash provided by financing activities for the year ended December 31,
1999 was $6.9 million, primarily due to the CBS transaction and 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 December 31, 1999.
As of December 31, 1999, we had net operating loss carryforwards of
approximately $14.2 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, some 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 through at least 2001, and that our
operating expenses and capital expenditures will constitute a material use of
our cash resources. We expect to incur significant expense increases as we
attempt to brand our name and increase the traffic to our Web site. These
increases are expected to result from substantial advertising expenses and
increased marketing expenses associated with our merchant aggregation program.
Additionally, we expect to add personnel in all departments, which will
increase salaries and benefits and other personnel-related expenses. 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 at least the next 12 months. Including
the proceeds of this offering, we expect to have sufficient funds to meet our
anticipated cash requirements for at least the next 24 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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Market Risk
To date we have not utilized derivative financial instruments or derivative
commodity instruments. 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. 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 upgraded the hardware and software which require modifications
to be year 2000 ready;
. 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; and
. we have completed an assessment of the potential effects and costs of
remediating the year 2000 problem on our office and facilities
equipment.
In general, we have not contacted third parties regarding year 2000 readiness
other than to obtain publicly available year 2000 readiness statements
described above.
Our employees performed all significant work related to our year 2000
project. We did not hire any additional employees or incur significant
consulting expenses to perform this work. We purchased approximately $1,000 of
software upgrades and expended $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 replaced non-year 2000 ready
software and hardware. We do not expect to incur significant additional
expenses in connection with our year 2000 readiness project.
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.
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.
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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. Banyan Worldwide supplies
some of our office and facilities equipment. Because we did not purchase that
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.
In December 1999, we completed the transition of our primary hosting
facility for our Web site from our corporate headquarters to a third-party
hosting facility. Although this transition was not undertaken specifically to
address year 2000 compliance problems, we believe that this transition
mitigates our risk of facility- or Internet-related failures caused by the year
2000 problem.
At this time, we have not developed and do not expect to develop a
contingency plan to address situations that may result if we, or any third
parties on which we rely, experience problems relating to our or their failure
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.
We believe our most reasonably likely worst case scenarios related to year
2000 risks are:
. 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.
As of the date of this prospectus, we have not experienced any material
year 2000 problems relating to our software, computer technology or services
nor are we aware of any material year 2000 problems relating to the software,
computer technology or services of any third parties on which we rely.
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 some 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. Through our Web site,
Switchboard.com, 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 Web
site provides a broad range of functions, content and services designed to
connect consumers and businesses on the Internet.
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. IDC projects
total business-to-consumer online commerce will increase to $178 billion in
2003 from approximately $31 billion in 1999. Forrester Research estimates that
online advertising in the United States will increase to $17.2 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 some 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 aggregate number of
businesses with 100 or fewer employees with a Web presence is projected to
increase to approximately 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 convenient and cost-effective 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 also 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
Our local merchant network is 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:
. provides consumers with detailed local information about people and
businesses across the United States;
. gives local merchants a fast, easy, cost-effective way to get their
businesses represented online;
. facilitates commerce by connecting them with consumers; and
. provides 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, 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 few 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.
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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 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 provide 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 e-mail, 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 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 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 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 plan to 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
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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.
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 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 yellow and white pages directory information under a non-
exclusive agreement with infoUSA. Based upon infoUSA's extensive listings and
verification procedures and our management's understanding of available
alternatives, we believe its database is the most comprehensive and accurate
available database of business and residential information in the United
States. infoUSA is obligated to provide us with updated data monthly. Under
this agreement, we pay infoUSA annual royalties. We recently extended our
agreement with infoUSA to December 30, 2002.
To increase our coverage to include Canada, we entered into a relationship
with Bell ActiMedia in September 1999. Under the terms of our three-year non-
exclusive agreement with Bell ActiMedia, we agreed to develop, customize, host
and license versions of our white pages, our yellow pages and other of our
services for use by Bell ActiMedia on its own Web sites and Web sites owned by
affiliates of Bell Canada Enterprises, the parent company of Bell Canada. Bell
ActiMedia pays us development and engineering fees, annual license fees and a
share of their revenue. We also agreed with Bell ActiMedia to include links to
each other's Web sites on our Web sites and to limited licenses of each other's
trademarks.
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.
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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.
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 with 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.
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. 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.
. Shopping area. From our shopping area, users can purchase gifts and
merchandise, as well as electronic photos, greeting cards, flowers and
other items, and have them sent to relatives, friends and business
associates located through our directories.
Other Services
In December 1999, we announced plans to offer long distance calling over
the Internet to consumers using our Web site through a relationship with
Net2Phone, Inc. and plans to offer Web-based file delivery, handling and
storage services designed to make it easier for consumers using our Web site to
send and receive large files directly from their Web browsers through a
relationship with click2send.com, Inc.
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 consumers. Current
services provided to local merchants include:
. construction and hosting of multi-page Web sites with detailed
business information;
. developing contact pages designed to connect potential consumers 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 are advertisements consistently and
prominently displayed on our Web site.
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 allow for each advertiser's display ad to be periodically
visible near the top of the page.
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;
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. 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.
E-Commerce Advertising
We offer advertisements on various pages on our Web site for advertisers
engaged in e-commerce. These advertisements can be placed under specific
headings near a white pages search result. We also provide links to our
shopping area near our white pages search results. In our shopping area, we
offer e-commerce advertisers the opportunity to promote product specials, as
well as link to their Web sites.
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 December 31, 1999, we syndicated our
directories or maps on a variety of Web sites, including Ask Jeeves, the AtHand
Network, CBS.com and USATODAY.com.
We recently announced plans to expand the scope of our syndication
relationships to include distribution of Switchboard content to users of mobile
telephones, through relationships with Phone.com, Inc. and Roku Technologies,
and to users of interactive television, through a relationship with WorldGate
Communications, Inc.
Strategic Alliances
We have formed strategic alliances to:
. build our brand;
. increase the number of visitors to our Web site;
. support our expanding sales and marketing efforts; and
. 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 under which CBS became a stockholder of Switchboard in exchange for
$95.0 million in advertising and promotion through June 2006 across the full
range of CBS media properties, including its majority-owned radio and outdoor
advertising subsidiary, Infinity Broadcasting Corporation, and $5.0 million in
cash. We also received a license from CBS to use the "CBS" and CBS "eye" device
trademarks. 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 February 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.
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Technology
We have developed sophisticated technologies that enable rapid
dissemination of information requested by consumers using our Web site. These
technologies were conceived and developed by a staff of senior engineers
experienced in designing large-scale, distributed computer systems, a form of
computer architecture that divides system functionality over numerous
computers, each known as a server, to enhance overall system performance. We
also have particular strengths in the areas of 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
large-scale, multiple-site distributed systems deployed by Banyan Worldwide
since 1983. Our founder, Dean Polnerow, designed and originally developed
StreetTalk, Banyan Worldwide's directory service. Building on this experience
to create our own proprietary directory technology, we created what we believe
to be the first national directory of U.S. residential information available on
the Internet, as well as our innovative and proprietary yellow pages business
directory.
Site Design
The Switchboard.com Web site was designed to provide high levels of
performance, scalability and reliability. The site is implemented as a set of
Windows NT servers which are organized into groups. Each group of servers
provides different parts of the overall site's functionality and each type of
functionality is provided by more than one group of servers. Individual servers
in a group can be added or removed without affecting the functional
capabilities of the site, and most changes required are managed automatically
by proprietary software that we developed. This distributed architecture is
designed to be highly scalable, which means that system capacity and
functionality can be easily and inexpensively increased, typically with minimal
or no time consuming software changes required. It is also designed to be
reliable, which means it is resistant to service interruptions and that the
unavailability of one or more servers does not necessarily affect the operation
of other servers or the site as a whole.
Database Technologies
We have developed technology designed to quickly exchange information
between the groups of servers that provide the interface consumers use to input
their requests for information with the groups of servers that store the
databases of information we use to respond to these requests. This technology
allows data from multiple databases to be accessed and combined, regardless of
its structure or content. This simplifies the development of new user
interfaces and facilitates database updates. Our database technology helps to
maximize our Web site performance through caching capabilities, which seek to
reduce response time by storing frequently requested information and predicting
which information will next be requested, and by automatically balancing the
tasks being performed by individual servers.
Our database technology includes sophisticated query management techniques,
which enable requests for large amounts of data to be retrieved in segments
while reducing the computer processing time typically associated with these
operations using conventional design techniques. 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 placement technology is used primarily to control the frequency and
positioning of advertisements displayed on our Web site. This technology
rotates merchant ad displays in and out of prime locations on our yellow pages
screens according to priorities specifically purchased by our merchant
customers. We use an automated chain of software programs to securely
facilitate the addition and removal of both individual ads and large,
aggregated volumes of merchant advertising into the Switchboard.com yellow
pages.
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We have also developed a proprietary ad placement methodology which
provides a simple way for us to allow a merchant to focus its advertisement to
the surrounding communities it desires to target. This technology uses the
physical location of a business and a distance measurement selected by the
merchant 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 the content we deliver in response to
customer inquiries so that it is consistent with the look and feel of our
syndication customers' own Web sites. This customization process is based on
the modular organization of functional elements of our content, such as white
pages, yellow pages, e-mail search and user registration. These modules
separate 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
The production, computer and communications equipment used to operate the
Switchboard Web site and the Maps On Us Web site is located at Exodus
Communications, Inc.'s data center in Waltham, Massachusetts. The Exodus
facility offers physical security, full power failure protection and redundant
communications links. We operate a back-up of the Switchboard Web site in
Westboro, Massachusetts with automatic fail-over in the event of a catastrophic
facilities 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 is $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;
. outdoor advertising; and
. the CBS television network.
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
To attract new merchants to our network, we have established strategic
affiliations with a number of organizations which have existing relationships
with, or databases of, local merchants. These relationships are designed to
help us cost-effectively reach the highly fragmented small business market.
Most of these relationships are with merchant aggregators. The merchant
aggregators contribute to the growth of our local merchant network by offering,
or allowing us to offer, our services to their merchant customers. In many
cases,
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we market our services on a co-branded basis and generate sales through
outsourced telesales agents, or through our merchant aggregators' direct sales
forces. The other relationships are with companies that have compiled databases
of information about local merchants. These relationships provide us with
information enabling us to supplement basic listing information with links to
merchant Web sites.
We currently have relationships with Bell ActiMedia, Discover Financial
Services, QuikPage, Inc., and several other companies. Under these
arrangements, we typically receive payments from these parties for yellow pages
advertisements on our Web site they sell to their customers, development fees
and/or license fees. In some cases, we receive payment directly from merchants
for services and then share this revenue with the merchant aggregator. Discover
is currently our primary merchant aggregator. Under our arrangement with
Discover, we co-market our local merchant services to Discover merchant
customers and share the resulting revenue and marketing expenses.
Sales
Our internal sales force coordinates our national sales efforts. They are
dedicated to selling advertisements and sponsorships across our Web site. As of
December 31, 1999, our sales organization was comprised of six 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 services market.
We compete in the markets for Internet content, 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.
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 a 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.
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As of December 31, 1999, we had 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 our Web site. 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
services are made available online. Our patents, trademarks, or other
intellectual property rights may 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 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 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 December 31, 1999, we had 52 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 December 31, 1999 we have incurred expenses of $552,121
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 2000
and renews on a year-to-year basis each November unless we or Banyan Worldwide
terminate the agreement upon 90 days' written notice. Upon the completion of
this offering, we intend to enter into a new sublease with Banyan Worldwide
which, together with a new services agreement we intend to enter into with
Banyan Worldwide, will replace our existing agreement with Banyan Worldwide.
The new sublease will terminate on December 31, 2002, but we will have the
option to extend the term to September 30, 2005. Our monthly rent under the new
sublease will be $25,551. 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 subject to any material legal proceedings. From time
to time, we are involved in various legal proceedings incidental to the conduct
of our business.
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MANAGEMENT
Executive Officers and Directors
Our executive officers and directors as of January 31, 2000, are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Douglas J. Greenlaw............ 55 Chief Executive Officer and Director
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
Russell I. Pillar.............. 34 Director
Richard M. Spaulding (2)....... 40 Director
David N. Strohm (1)(2)......... 51 Director
Robert M. Wadsworth (2)........ 39 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
There is currently one vacancy on our board of directors. Following this
offering, it is expected that our board of directors will fill this vacancy
with a new director who is not an officer or employee of Switchboard, Banyan
Worldwide or CBS or any of our or their affiliates. As of the date of this
prospectus, the identity of this new director has not been determined.
Douglas J. Greenlaw has served as our Chief Executive Officer since October
1999 and as a director since January 2000. 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 content provider.
From 1991 to December 1994, 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
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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 is
Executive Vice President of Infinity Broadcasting Corporation, a majority-owned
subsidiary of CBS, and has served as President of the Infinity Radio Group, an
operator of radio stations, since November 1995. From 1992 to November 1995,
Mr. Mason served as President of Group W. Radio, a division 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.
Russell I. Pillar has served as a director since January 2000. Mr. Pillar
has served as President and Chief Executive Officer of CBS Internet Group, a
division of CBS, since January 2000. Prior to joining CBS, from November 1998
to December 1999, Mr. Pillar served as President and Chief Executive Officer of
Virgin Entertainment Group, Inc., an operator of retail music stores throughout
North America. Since October 1996, Mr. Pillar has served as a director, and
from September 1997 to August 1998 he served as President and Chief Executive
Officer, of Prodigy Communications Corporation, an Internet service provider.
From 1993 to September 1996, Mr. Pillar served as President and Chief Executive
Officer of Precision Systems, Inc., an international telecommunications
software provider. In addition, since October 1991, he also has served as
Managing Partner of Critical Mass Ventures LLC, an Internet-focused technology
incubator/venture capital firm. In addition to his service on the boards of
directors of Switchboard and Prodigy, Mr. Pillar is also a director of Virgin
Entertainment Group Ltd., Telescan, Inc. and uBid, Inc.
Richard M. Spaulding has served as a director since April 1996. Mr.
Spaulding is Senior 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. Mr. Strohm served as a director of Banyan Worldwide
from 1983 until November 1999. 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. After this offering, CBS will be
entitled to designate two of our nine directors. 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". CBS elected
Messrs. Mason and Pillar to our board of directors pursuant to its special
voting rights.
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Other directors. The remainder of our board of directors is divided into
three classes. At each annual meeting of stockholders, beginning in 2001, the
terms of the directors serving in one of the three classes will expire and
directors will be elected for a three-year term to succeed the directors of the
same class whose terms are expiring. Mr. Ferry and Mr. Wadsworth are Class I
Directors, with terms expiring at the 2001 annual meeting of stockholders. Mr.
Strohm and Mr. Spaulding are Class II Directors, with terms expiring at the
2002 annual meeting of stockholders. Mr. Greenlaw and Mr. Polnerow are Class
III Directors, with terms expiring at the 2003 annual meeting of stockholders.
The director expected to be named after this offering will be assigned to a
class by the board of directors upon his or her election.
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.
Spaulding, Strohm 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. In addition, the
compensation committee reviews stock compensation arrangements for all of our
other employees. The current members of the compensation committee are Messrs.
Ferry, Mason and Strohm.
Compensation Committee Interlocks and Insider Participation
In September 1999, our board of directors established a compensation
committee. Messrs. Ferry, Mason and Strohm served as members of the
compensation committee during the fiscal year ended December 31, 1999. From
January 1999 to September 1999, compensation decisions with respect to our
executive officers were made by our full board of directors, which included Mr.
Ferry, our Chairman of the Board, and Mr. Polnerow, our President. Mr. Ferry is
also Chairman of the Board of Directors, President and Chief Executive Officer
of Banyan Worldwide.
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,
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.
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Executive Compensation
The following table sets forth the total compensation paid or accrued for
the years ended December 31, 1998 and 1999 to our:
. Chief Executive Officer;
. President; and
. two other executive officers who were serving as executive officers on
December 31, 1999 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 Year Salary Bonus(1) Underlying Options Compensation(2)
- --------------------------- ---- -------- -------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Douglas J. Greenlaw(3).... 1999 $ 43,569 $18,750 900,000 $ --
Chief Executive Officer
Dean Polnerow............. 1999 $164,769 $76,388 185,000 $3,851(4)
President 1998 155,769 57,003 70,000 2,978
John P. Jewett(5)......... 1999 $124,997 $62,353 50,000 $2,493
Vice President and Chief 1998 20,673 -- 100,000 --
Financial Officer,
Treasurer and
Secretary
James M. Canon............ 1999 $113,154 $25,624 70,000 $ --
Vice President, Business 1998 103,846 20,969 30,000 --
Development
</TABLE>
- --------
(1)Represents amounts awarded as annual incentive bonuses.
(2)Unless otherwise specified, represents matching 401(k) plan contributions.
(3)Mr. Greenlaw joined Switchboard in October 1999.
(4)Includes $683 of insurance premiums for term life insurance.
(5)Mr. Jewett joined Switchboard in October 1998.
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<PAGE>
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 1999. Unless otherwise noted,
each stock option grant vests in four equal installments beginning one year
after the date of grant and has a term of ten years. 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 to 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>
Individual Grants
---------------------------------------------------
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>
Douglas J. Greenlaw..... 900,000 47.92% $9.00 10/13/09 $ 5,094,046 $ 12,909,314
Dean Polnerow........... 40,000 2.13% $7.50 4/22/09 $ 188,668 $ 478,123
145,000 7.72% $9.00 10/13/09 $ 820,707 $ 2,079,834
John P. Jewett.......... 50,000 2.66% $9.00 10/13/09 $ 283,003 $ 717,184
James M. Canon.......... 20,000 1.07% $7.50 4/22/09 $ 94,334 $ 239,061
50,000 2.66% $9.00 10/13/09 $ 283,003 $ 717,184
</TABLE>
For information relating to the acceleration of options granted to the
Named Executive Officers, see "Employment Arrangements."
Fiscal Year-End Option Values
None of our Named Executive Officers exercised stock options in the fiscal
year ended December 31, 1999. The following table sets forth information
concerning the number and value of unexercised options held by each of our
Named Executive Officers on December 31, 1999. There was no public market for
our common stock as of December 31, 1999. Accordingly, the fair market value on
December 31, 1999 is based on an assumed initial public offering price of
$11.00 per share.
<TABLE>
<CAPTION>
Number of Shares of
Common Stock Value of Unexercised
Underlying Unexercised In-the-Money
Options at Year End Options at Year End
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Douglas J. Greenlaw......... 0 900,000 $ 0 $1,800,000
Dean Polnerow............... 152,500 282,500 $1,507,500 $1,352,500
John P. Jewett.............. 45,000 105,000 $ 382,500 $ 567,500
James M. Canon.............. 120,000 130,000 $1,192,500 $ 747,500
</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 December 31,
1999, options to purchase an aggregate of 2,944,600 shares of our common stock
at a weighted average exercise price of $6.22 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.
51
<PAGE>
1999 Stock Incentive Plan
Up to 1,875,000 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 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. As of
December 31, 1999, options to purchase an aggregate of 7,000 shares of our
common stock at a weighted average exercise price of $9.00 per share were
outstanding under the 1999 plan.
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 December 31, 1999, approximately 59 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 other terms and
conditions 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 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 the 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 the award, unless and until the
amendment is approved by our stockholders.
52
<PAGE>
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 December 31, 1999, approximately 43 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 that stock, 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.
Employment Agreements
Douglas J. Greenlaw
In October 1999, we entered into an employment agreement with 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 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; and
. 300,000 will vest after the fifth 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 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 remaining
100,000 shares to vest after the fifth year of Mr. Greenlaw's employment
accelerates upon the completion of this offering.
53
<PAGE>
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's employment
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,
the vesting of 100% of the then unvested portion of his options accelerates. If
we terminate Mr. Greenlaw's employment 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 December 1999, we entered into an employment agreement with Dean
Polnerow, our President, under which 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. The term of Mr.
Polnerow's agreement is for one year and renews automatically for successive
one year periods unless either party provides 60 days' written notice of its
intent not to renew.
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 five-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.
If Mr. Polnerow remains employed by us for six months after a change in
control, or if within six months after a change in control Mr. Polnerow resigns
because we have relocated him to an office more than 35 miles from Westboro,
Massachusetts or because we have materially reduced his compensation or
responsibilities from those in effect immediately prior to the change in
control, 50% of any unvested portion of his options accelerates. If we
terminate Mr. Polnerow's employment within one year of a change in control of
Switchboard other than for cause, the vesting of 100% of the then unvested
portion of his options accelerates. If we terminate Mr. Polnerow's employment
for any reason, except for cause, or if Mr. Polnerow resigns within 90 days
after we relocate Mr. Polnerow to an office more than 35 miles from Westboro,
Massachusetts or after we materially reduce his job title and/or overall
targeted cash compensation from those in effect at the beginning of his
employment agreement, 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.
54
<PAGE>
John P. Jewett
In January 2000, we entered into an employment agreement with
John P. Jewett, our Vice President, Finance and Administration and Chief
Financial Officer, under which Mr. Jewett will receive 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. The term of Mr. Jewett's agreement is for one year and
renews automatically for successive one year periods unless either party
provides 60 days' written notice of its intent not to renew.
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 after each year of employment. 20,000 of these
options vested on an accelerated basis in June 1999 upon the achievement of
specified objectives. The remaining 50,000 of Mr. Jewett's 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 Mr. Jewett remains employed by us for six months after a change in
control, or if within six months after a change in control Mr. Jewett resigns
because we have materially reduced his job title and/or overall targeted cash
compensation from those in effect immediately prior to the change in control,
50% of any unvested portion of his options accelerate. If we terminate Mr.
Jewett's employment for any reason, except for cause, or if Mr. Jewett resigns
within 90 days after we materially reduce his job title and/or overall targeted
cash compensation from those in effect at the beginning of his employment
agreement, 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 December 1999, we entered into an employment agreement with 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. The term of Mr. Canon's agreement is for one year
and renews automatically for successive one year periods unless either party
provides 60 days' written notice of its intent not to renew.
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. These options vest according to the following
schedule:
. 180,000 vest over a four-year period of continuous employment, with 25%
vesting after 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
55
<PAGE>
. 50,000 of these options vest over a five-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 Mr. Canon remains employed by us for six months after a change in
control, or if within six months after a change in control Mr. Canon resigns
because we have relocated him to an office more than 35 miles from Westboro,
Massachusetts or because we have materially reduced his compensation or
responsibilities from those in effect immediately prior to the change in
control, 50% of any unvested portion of his options accelerates. If we
terminate Mr. Canon's employment for any reason, except for cause, or if Mr.
Canon resigns within 90 days after we relocate Mr. Canon to an office more than
35 miles from Westboro, Massachusetts or after we materially reduce his job
title and/or overall targeted cash compensation from those in effect at the
beginning of his employment agreement, 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.
56
<PAGE>
CERTAIN TRANSACTIONS
Banyan Worldwide
Formation and Initial Issuances of Securities
We were incorporated in April 1996 as a wholly owned subsidiary of Banyan
Worldwide. 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, our sole
stockholder at the time, in consideration for the transfer by Banyan Worldwide
to us of our core technologies and net assets valued at approximately $546,000
and in settlement of advances from Banyan Worldwide of approximately $697,000.
Secured Convertible Note Facilities
1997 Note Facility. 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 the applicable federal rate under Section 1274 of the Internal Revenue Code
for short-term loans with annual compounding of interest for the month in which
a loan was made. The outstanding amount of principal and interest was
convertible at the option of Banyan Worldwide into shares of our series C
preferred stock at a rate of $4.00 per share at any time. On June 30, 1999, we
issued 2,655,916 shares of our series C convertible preferred stock to Banyan
Worldwide upon the conversion of principal and interest of $10,623,664 under
this note. The dollar amount converted represented all of the principal and
interest outstanding as of June 30, 1999, the date on which we first issued our
securities to CBS. This conversion was made by Banyan Worldwide to satisfy a
condition to completing the transactions with CBS that required Banyan
Worldwide to convert all outstanding indebtedness under convertible secured
notes. After this conversion, we are no longer able to borrow any amounts under
this facility.
1999 Note Facility. On May 3, 1999, we entered into a second secured
convertible note facility with Banyan Worldwide. This facility was subsequently
amended and restated in its entirety on January 26, 2000. This facility was
originally for $5.0 million. Outstanding amounts bear interest at the
applicable federal rate under Section 1274 of the Internal Revenue Code 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 is
convertible at the option of Banyan Worldwide into shares of our series D
preferred stock at any time prior to this offering. Outstanding amounts are
convertible at a rate of $11.00 per share. That conversion rate is subject to
adjustment in the event Switchboard sells equity securities or engages in a
capital raising transaction, including this offering, or any other transaction
material to the Company, based upon the per share fair market value of the
series D preferred stock immediately following that transaction, as determined
in good faith by Switchboard and Banyan Worldwide. The conversion rate is also
subject to adjustment in the event of stock dividends, reclassifications, stock
splits and other similar transactions on the series D preferred stock.
On June 30, 1999, we issued 87,345 shares of our series D preferred stock
to Banyan Worldwide upon the conversion by Banyan Worldwide of principal and
interest of $655,089 under this note. The dollar amount converted represented
an estimate of all of the principal and interest outstanding as of June 30,
1999. As of July 1, 1999, we issued 59,160 additional shares of our series D
preferred stock to Banyan Worldwide upon the conversion by Banyan Worldwide of
principal and interest of $443,699 under this note. The dollar amount converted
represented the actual amount of all of the principal and interest outstanding
as of June 30, 1999, after giving effect to the estimate we made on June 30,
1999. This conversion was made by Banyan Worldwide to put Banyan Worldwide and
CBS in the equity ownership position they would have been in had the actual
amount of outstanding principal and interest at June 30, 1999 been known on
June 30, 1999. The conversion rate at the time of these conversions was $7.50
per share.
This facility remains in place and the maximum remaining amount we may
borrow under the facility was approximately $3.9 million, as of December 31,
1999. As of December 31, 1999 there were no amounts
57
<PAGE>
outstanding under the facility. Upon the completion of this offering, this
facility will automatically terminate in full and any outstanding principal and
interest will be converted into shares of our series D preferred stock at the
then-applicable conversion rate. Any shares of our Series D preferred stock
which are issued will convert automatically into shares of common stock upon
completion of this offering.
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 director Robert M. Wadsworth is also a director of Banyan
Worldwide. David N. Strohm, another of our directors, served as a director of
Banyan Worldwide from 1983 until November 1999. Our director Richard M.
Spaulding is Vice President and Chief Financial Officer of Banyan Worldwide.
Corporate Services Agreements
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 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.
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 December 31, 1999 was approximately $1,382,990.
Upon the completion of this offering, we intend to enter into a new
services agreement with Banyan Worldwide which will replace our current
services agreement. Under the new services agreement, we will pay Banyan
Worldwide an aggregate annual fee of $200,000 in 12 monthly installments, and
Banyan Worldwide will provide us with information technology services,
including physical infrastructure, workstation and applications support,
communications and other consulting services. The agreement will have an
initial term of one year.
In connection with the new services agreement, and also upon completion of
this offering, we intend to enter into a new sublease with Banyan Worldwide of
our facilities in Westboro, Massachusetts. Under the new sublease, we will pay
monthly rent to Banyan Worldwide in the amount of $25,551. The sublease will
terminate on December 31, 2002 and we will have the option to extend the term
of the sublease to September 30, 2005.
58
<PAGE>
Indemnification
Banyan Worldwide is a party to our advertising and promotion agreement with
CBS. As part of the advertising and promotion agreement, Banyan Worldwide
agreed to indemnify 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 amounts that Banyan
Worldwide may be required to pay to CBS pursuant to Banyan Worldwide's
indemnification obligations to CBS.
CBS Corporation
Issuances of Securities
We have issued the following securities to CBS:
. 7,468,560 shares of our common stock;
. one share of our series E special voting preferred stock; and
. warrants to purchase 1,066,937 shares of our common stock.
The warrants are exercisable from the date of the closing of this offering
until the second anniversary of that date at an exercise price of $1.00 per
share. The exercise price and number of shares for which the warrants may be
exercised are subject to adjustment if we issue shares of our common stock at
less than $16.00 per share other than pursuant to the following:
. the conversion, exchange or exercise of securities that were
outstanding on June 30, 1999;
. a dividend, stock split, split-up or other distribution on shares of
common stock which results in an adjustment of the exercise price under
the provisions of the warrant addressing recapitalizations, mergers or
other such events;
. this offering; and
. any lending or line of credit arrangement with Banyan Worldwide that
existed on June 30, 1999.
In addition, we are permitted to issue at less than $16.00 per share up to
4,000,000 shares of our common stock to our employees, directors, consultants
or advisors and up to 100,000 shares of our common stock in connection with
future borrowings or financings, or for any other purpose, in each case without
adjusting the exercise price of the warrant. The exercise price and the number
of shares for which the warrants may be exercised and the $16.00 per share
amount referred to in the two prior sentences are also subject to adjustment in
the event of a stock split, stock dividend, reverse stock split, capital
reorganization or reclassification, consolidation or merger of Switchboard into
another corporation or a transfer of our assets.
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 those assumptions turn out to be incorrect. 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 are required to issue to CBS, within ten business days and for no
additional consideration, the additional number of shares of common stock and
warrants to purchase common stock that would have been issued to CBS on
June 30, 1999 had we included the series B convertible preferred stock warrant
in our calculations.
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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 this 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. Currently, this means that CBS can designate two of our nine
director positions. 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 other 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:
. the date on which 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, Daniel Mason, Executive Vice President of Infinity
Broadcasting Corporation, a majority-owned subsidiary of CBS, and Russell I.
Pillar, President and Chief Executive Officer of CBS Internet Group, a
division of CBS, were elected to our board of directors under the rights of
the series E preferred stock described above.
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 license agreement also places restrictions on our rights to accept
advertising from competitors of CBS.
During the term of the license 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.
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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,
the right of first refusal agreement, the stockholders' voting
agreement, or the registration rights agreement that we entered into
with CBS;
. 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.
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.
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 Web pages displayed through those links
which include both CBS and Switchboard trademarks. 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:
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. we or Banyan Worldwide breach any material term of the advertising and
promotion agreement, the license agreement, the common stock and
warrant purchase agreement, the right of first refusal agreement, the
stockholders' voting agreement, or the registration rights agreement
that we entered into with CBS;
. 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 expires; or
. our Web site ceases to operate for specified periods of time.
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 advertising and promotion
agreement. If we so terminate the advertising and promotion agreement, CBS's
obligation to provide advertising and promotion would continue unless CBS
elects to pay us, over the remaining scheduled 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.
The advertising and promotion agreement also provides that, 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.
Common Stock and Warrant Purchase Agreement and Other Equity Agreements
The common stock, series E preferred stock and warrants described above
were issued to CBS pursuant to a purchase agreement dated June 1, 1999. We and
Banyan Worldwide indemnify CBS for breaches of representations and warranties
under the purchase agreement.
On June 30, 1999, we 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.
In December 1999, we entered into an agreement with Banyan Worldwide
and CBS terminating this agreement.
. 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. Under this agreement, we granted demand
and incidental registration rights to CBS. The demand registration
rights, which allow CBS to require us to file a registration statement
on their behalf, may be exercised beginning after the first anniversary
of the closing of this offering. The incidental registration rights,
which allow CBS to include shares in registration statements we file on
our own initiative or at the request of other stockholders, are
effective following the closing of this offering.
Financial Reporting Agreement
On January 28, 2000, we entered into a financial reporting agreement with
Banyan Worldwide and CBS pursuant to which we agreed to provide Banyan
Worldwide and CBS with financial information to enable them to comply with
financial reporting requirements relating to their investments in Switchboard.
We also agreed to provide Banyan Worldwide and CBS projections of our financial
information, if requested in order to estimate consolidated financial
information or for tax planning or other similar planning purposes.
Other Transactions and Relationships
Issuances of Securities
In 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 appropriate adjustment upon the occurrence of any
stock split, stock dividend, reorganization, recapitalization,
reclassification, merger or other similar event. 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 prior to the exercise of the warrant to purchase any shares. See
"Risk Factors--Risks Relating to this Offering--We
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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."
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.
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 December 1998, we agreed to resolve 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 in March 1999 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 America Online properties
over a two year term. If we do not receive the full $200,000 in advertising
during that term, America Online agreed to 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 Software, Inc. 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.
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 incidental 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 December 31, 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 voting
and/or investment power with his or her spouse, with respect to all shares of
capital stock listed as owned by that 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 December 31, 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
Banyan Worldwide (1).... 9,802,421 53.8% 9,802,421 41.3%
120 Flanders Road
Westboro, MA 01581
CBS Corporation (2)..... 7,468,561 41.0% 8,535,498 34.4%
51 West 52nd Street
New York, NY 10019
Directors and Named
Executive Officers
Douglas J. Greenlaw
(3)..................... 0 * 100,000 *
Dean Polnerow (4)....... 152,500 * 177,500 *
John P. Jewett (5)...... 45,000 * 55,000 *
James M. Canon (6)...... 120,000 * 130,000 *
William P. Ferry........ 0 * 0 *
Daniel R. Mason......... 0 * 0 *
Russell I. Pillar....... 0 * 0 *
Richard M. Spaulding
(7)................... 3,750 * 3,750 *
David N. Strohm......... 0 * 0 *
Robert M. Wadsworth..... 0 * 0 *
All directors and
executive officers as
a group
(10 persons) (8)...... 321,250 1.7% 466,250 1.9%
</TABLE>
- --------
* Less than 1%
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(1) The number of shares Banyan Worldwide beneficially owns prior to this
offering includes 2,655,916 and 146,505 shares of common stock issuable
upon the conversion of 2,655,916 shares of series C preferred stock and
146,505 shares of series D preferred stock. All shares of our capital stock
owned by Banyan Worldwide 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.
(2) 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 1,066,937 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.
(3) The number of shares Douglas J. Greenlaw beneficially owns after this
offering consists of 100,000 shares of common stock issuable upon the
exercise of stock options which vest upon the completion of this offering.
(4) The number of shares Dean Polnerow beneficially owns prior to and after
this offering includes 152,500 shares of common stock issuable upon the
exercise of stock options which were exercisable as of December 31, 1999.
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.
(5) The number of shares John P. Jewett beneficially owns prior to and after
this offering includes 45,000 shares of common stock issuable upon the
exercise of stock options which were exercisable as of December 31, 1999.
The number of shares Mr. Jewett 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.
(6) The number of shares James M. Canon beneficially owns prior to and after
this offering includes 120,000 shares of common stock issuable upon the
exercise of stock options which were exercisable as of December 31, 1999.
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.
(7) The number of shares Richard M. Spaulding beneficially owns prior to and
after this offering consists of 2,500 shares of common stock issuable upon
the exercise of stock options which were exercisable as of December 31,
1999 and 1,250 shares which will vest within 60 days after December 31,
1999.
(8) The number of shares beneficially owned prior to this offering consists of
320,000 shares of common stock issuable upon the exercise of stock options
which were exercisable as of December 31, 1999 and 1,250 shares which will
vest within 60 days after December 31, 1999. The number of shares
beneficially owned after this offering includes a total of 145,000 shares
of common stock issuable upon the exercise of stock options 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 December 31, 1999, we had outstanding 18,216,355 shares of common
stock held by 21 stockholders of record, options to purchase an aggregate of
2,951,600 shares of our common stock, warrants to purchase 1,751,937 shares of
our common stock and one share of series E special voting preferred stock.
The following summary of 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 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, other than
those directors who may be elected by the holder of our series E special voting
preferred stock. 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. This exercise price is
subject to appropriate adjustment upon the occurrence of any stock split, stock
dividend, reorganization, recapitalization, reclassification, merger or other
similar event.
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. This exercise price is subject to appropriate
adjustment upon the occurrence of any stock split, stock dividend,
reorganization, recapitalization, reclassification, merger or other similar
event.
We have issued to CBS warrants to purchase 1,066,937 shares of our common
stock. A description of these warrants appears above under the heading "Certain
Transactions--CBS Corporation--Issuances of Securities."
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.
On June 30, 1999 that share was issued to CBS.
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Other than the special voting rights described in the next paragraph, 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.
The series E share entitles CBS to elect that number of directors to our
board of directors, rounded down, 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 zero, it may still elect one director, 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 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 series E share is owned by a person other than
CBS or an entity controlling, controlled by or under common control
with 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 of this voting right, CBS may convert its
series E share to one share of common stock.
Blank Check Preferred Stock
Under our 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 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 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 divides our board of directors, other than
directors elected by the holder of the series E share, into three classes
serving staggered three-year terms. In addition, our certificate of
incorporation provides that, after July 2, 2001, or, if earlier, the expiration
or termination of the stockholders' voting agreement among CBS, Banyan
Worldwide and Switchboard, directors may be removed only for cause by the
affirmative vote of at least 75% of our shares of capital stock entitled to
vote. Except for series E
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directors, any vacancy on 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.
The classification of our board of directors and 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 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 the
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, chief executive
officer 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
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 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 some 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 19,387,918 shares of
common stock, including shares which the holders have rights to acquire, have
the right to cause us to register their shares of common stock for public sale
pursuant to various registration rights agreements as follows:
Demand Registration Rights
. CBS holds 8,535,497 shares of our common stock, including shares which
CBS has rights to acquire, 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 these 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 by filing a registration statement on Form S-
1. Banyan Worldwide may include in this registration up to 2,802,421
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
2,802,421 shares of our common stock. Our obligation to register these
shares terminates five years after the closing of this offering.
69
<PAGE>
. Upon the completion of this offering, we intend to enter into an
agreement with Banyan Worldwide under which Banyan Worldwide may, with
respect solely to its 7,000,000 shares of our common stock originally
issued as common stock and not upon conversion of preferred stock,
request on one occasion per year beginning one year after the date of
this prospectus, that we register shares having an aggregate value of
at least $10.0 million by filing a registration statement on Form S-3.
Our obligation to register shares under this proposed agreement would
terminate 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 19,387,918
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 7,468,560 registrable shares of our common stock and the
right to purchase 1,066,937 registrable shares pursuant to a warrant;
. America Online and Digital City Inc. together hold 750,000 registrable
shares of our common stock;
. Banyan Worldwide holds 9,802,421 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 Equiserve.
70
<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 December 31, 1999, there will be 23,716,355 shares of our common stock
outstanding (assuming no exercise of the underwriters' over-allotment option
and no exercise of outstanding options or warrants to purchase common stock).
Of these outstanding shares, the 5,500,000 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 18,216,355 shares of common stock outstanding after this
offering are deemed "restricted securities" under Rule 144.
All of these shares are subject to lock-up arrangements which expire 180
days after the date of this prospectus. Upon expiration of the 180-day lock-up
period, all of these shares will be eligible for sale in the public market
subject to the provisions of Rule 144 or Rule 701 under the Securities Act.
Holders of our securities, including all of our directors and executive
officers, who in the aggregate hold:
. 18,216,355 shares of our common stock of record;
. options to purchase 2,951,600 shares of our common stock;
. warrants to purchase 1,751,937 shares of our common stock; and
. one share of our series E preferred stock which is convertible into one
share of our common stock
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, contract 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 them or
with respect to which they have the power of disposition, without the prior
written consent of FleetBoston Robertson Stephens Inc., 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 237,164 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 the sale was filed under Rule 144,
provided 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 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 5,175,000 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.
71
<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.
72
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., J.P. Morgan Securities Inc., The Robinson-
Humphrey Company, LLC and SoundView Technology Group, Inc., have severally
agreed with us, subject to the terms and conditions of the underwriting
agreement, to purchase from us the number of shares of common stock set forth
below opposite their respective names. The underwriters are committed to
purchase and pay for all shares if any are purchased.
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc. ..............................
J.P. Morgan Securities Inc. ......................................
The Robinson-Humphrey Company, LLC................................
SoundView Technology Group, Inc. .................................
---------
Total........................................................... 5,500,000
=========
</TABLE>
The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price located
on the cover page of this prospectus and to certain dealers at that price less
a concession of not in excess of $ per share, of which $ may be reallowed to
other dealers. After this offering, the public offering price, concession and
reallowance to dealers may be reduced by the representatives. No reduction in
this price will change the amount of proceeds to be received by us as indicated
on the cover page of this prospectus. The common stock is offered by the
underwriters as stated in this prospectus, subject to receipt and acceptance by
them of the common stock and subject to their right to reject any order in
whole or in part.
Prior to this offering, there has been no public market for the common
stock. Consequently, the public offering price for the common stock offered by
this prospectus will be determined through negotiations among the
representatives and us. Among the factors considered in those negotiations will
be prevailing market conditions, our financial information, market valuations
of other companies that we and the representatives believe to be comparable to
us, estimates of our business potential, the present state of our development
and other factors deemed relevant.
The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.
Over-Allotment Option
We have granted to the underwriters an option, exercisable during the 30-
day period after the date of this prospectus, to purchase up to 825,000
additional shares of common stock, to cover over-allotments, if any, at the
public offering price less the underwriting discount located on the cover page
of this prospectus. If the underwriters exercise their over-allotment option to
purchase any of the 825,000 additional shares of common stock, the underwriters
have severally agreed, subject to certain conditions, to purchase approximately
the same percentage of these additional shares as the number of shares to be
purchased by each of them bears to the total number of shares of common stock
offered in this offering. If purchased, these additional shares will be sold by
the underwriters on the same terms as those on which the shares offered by this
prospectus are being sold. We will be obligated, pursuant to the over-allotment
option, to sell shares to the underwriters to the extent the over-allotment
option is exercised. The underwriters may exercise the over-allotment option
only to cover over-allotments made in connection with the sale of the shares of
common stock offered in this offering.
73
<PAGE>
The following table summarizes the compensation to be paid to the
underwriters by us:
<TABLE>
<CAPTION>
Total
-------------------
Without With
Over- Over-
Per allotment allotment
Share Option Option
----- --------- ---------
<S> <C> <C> <C>
Underwriting Discounts and Commissions payable
by Switchboard................................
</TABLE>
We estimate expenses payable by us in connection with this offering, other
than the underwriting discounts and commissions referred to above, will be
approximately $2,000,000.
Indemnity
The underwriting agreement contains covenants of indemnity among the
underwriters and us against some civil liabilities, including liabilities under
the Securities Act, and liabilities arising from breaches of representations
and warranties contained in the underwriting agreement.
Lock-Up Agreements
Each executive officer and director of Switchboard and substantially all
other holders of our securities have agreed during the period of 180 days after
the effective date of this prospectus, subject to specified exceptions, not to
offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or
grant any rights with respect to any shares of common stock or any options or
warrants to purchase any shares of common stock, or any securities convertible
into or exchangeable for shares of common stock owned as of the date of this
prospectus or thereafter acquired directly by those holders or with respect to
which they have the power of disposition, without the prior written consent of
FleetBoston Robertson Stephens Inc. However, FleetBoston Robertson Stephens
Inc. may, in its sole discretion and at any time or from time to time, without
notice, release all or any portion of the securities subject to lock-up
agreements. There are no existing agreements between the representatives and
any of our stockholders who have executed a lock-up agreement providing consent
to the sale of shares prior to the expiration of the lock-up period.
In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of FleetBoston Robertson Stephens Inc.,
subject to limited exceptions, consent to the disposition of any shares held by
stockholders subject to lock-up agreements prior to the expiration of the lock-
up period, or issue, sell, contract to sell, or otherwise dispose of, any
shares of common stock, any options or warrants to purchase any shares of
common stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock other than our sale of shares in this
offering, the issuance of our common stock upon the exercise of outstanding
options or warrants, and the issuance of options under existing stock option
and incentive plans provided that those options do not vest prior to the
expiration of the lock-up period. See "Shares Eligible for Future Sale."
Listing
We have applied to have our common stock approved for quotation on the
Nasdaq National Market under the symbol "SWBD."
Stabilization
The representatives have advised us that, pursuant to Regulation M under
the Securities Act of 1933, some persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, that may have the effect of
stabilizing or maintaining
74
<PAGE>
the market price of the shares of common stock at a level above that which
might otherwise prevail in the open market. A "stabilizing bid" is a bid for or
the purchase of shares of common stock on behalf of the underwriters for the
purpose of fixing or maintaining the price of the common stock. A "syndicate
covering transaction" is the bid for or purchase of common stock on behalf of
the underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by that underwriter or syndicate member is purchased by
the representatives in a syndicate covering transaction and has therefore not
been effectively placed by that underwriter or syndicate member. The
representatives have advised us that these transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
Directed Share Program
The underwriters have reserved up to ten percent of the common stock to be
issued by us and offered for sale in this offering, at the initial public
offering price, to directors, officers, employees, business associates and
persons otherwise connected to Switchboard. The number of shares of common
stock available for sale to the general public will be reduced to the extent
these individuals purchase reserved shares. Any reserved shares which are not
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered in this offering.
Other
A prospectus in electronic format is being made available on an Internet
Web site maintained by Wit Capital Corporation, an affiliate of SoundView
Technology Group, Inc. In addition, other dealers purchasing shares from
SoundView Technology Group, Inc. in this offering have agreed to make a
prospectus in electronic format available on Web sites maintained by each of
these dealers. Other than the prospectus in electronic format, the information
on Wit Capital Corporation's Web site and any information contained on any
other Web site maintained by any dealer is not part of this prospectus or the
registration statement of which this prospectus forms a part, has not been
approved and/or endorsed by us or any underwriter in its capacity as
underwriter and should not be relied upon by investors.
VALIDITY OF COMMON STOCK
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 legal matters in
connection with this offering for the underwriters.
EXPERTS
The financial statements as of December 31, 1998 and 1999 and for the years
ended December 31, 1997, 1998 and 1999 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.
75
<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. You should refer to the exhibits
attached to the registration statement for copies of material contracts,
agreements or other documents referred to in this prospectus. 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.
76
<PAGE>
SWITCHBOARD INCORPORATED
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2
Balance Sheets as of December 31, 1998 and 1999.......................... F-3
Statements of Operations for the years ended December 31, 1997, 1998 and
1999................................................................... F-4
Statements of Stockholders' Deficit for the years ended December 31,
1997, 1998 and 1999.................................................... F-5
Statements of Cash Flows for the years ended December 31, 1997, 1998 and
1999................................................................... 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, 1998 and 1999 and the results of its operations and its cash flows
for the years ended December 31, 1997, 1998 and 1999, in conformity with
accounting principles generally accepted in the United States. 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
auditing standards generally accepted in the United States, 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
January 14, 2000 except
for paragraph 2 of
Note F and Note O
for which the date is
February 4, 2000
F-2
<PAGE>
SWITCHBOARD INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, Pro Forma
------------------------ December 31,
1998 1999 1999
----------- ----------- ------------
(Note B)
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............. $ 386,590 $ 3,604,551 $ 3,604,551
Accounts receivable, net of allowance
for doubtful accounts of $300,000 at
December 31, 1998, and $162,183 at
December 31, 1999 actual and pro
forma (unaudited).................... 2,390,045 3,060,249 3,060,249
Other current assets................... 10,360 477,876 477,876
----------- ----------- -----------
Total current assets............... 2,786,995 7,142,676 7,142,676
Property and equipment, net............. 638,301 1,202,578 1,202,578
Other assets, net....................... 139,779 1,219,274 1,219,274
----------- ----------- -----------
Total assets....................... $ 3,565,075 $ 9,564,528 $ 9,564,528
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable....................... 25,007 775,202 775,202
Accrued expenses....................... 1,363,960 1,964,765 1,964,765
Deferred revenue....................... 449,236 1,349,145 1,349,145
Note payable, current portion.......... 500,000 600,000 600,000
----------- ----------- -----------
Total current liabilities.......... 2,338,203 4,689,112 4,689,112
Note payable............................ 600,000 -- --
Convertible promissory notes -- related
party................................. 7,000,000 -- --
Commitments and contingencies (Notes J
and M)
Redeemable convertible preferred stock,
$0.01 par value; 7,750,000 shares
designated; 750,000 shares issued and
outstanding at December 31, 1998, and
3,552,421 and no shares issued and
outstanding at December 31, 1999
actual and pro forma (unaudited),
respectively (liquidation value
$16,319,570 at December 31, 1999)..... 3,658,386 16,319,570 --
Due to parent........................... 1,387,145 -- --
Stockholders' equity (deficit):
Preferred Stock, $0.01 par value;
2,249,999 shares authorized and
undesignated at December 31, 1999
actual, none issued and outstanding
actual; 4,999,999 shares authorized
and undesignated at December 31, 1999
pro forma, none issued and
outstanding pro forma (unaudited).... -- -- --
Series E Special Voting Preferred
Stock; one share authorized and
designated; one share issued and
outstanding at December 31, 1999
actual and pro forma (unaudited)..... -- -- --
Common stock, $0.01 par value;
30,000,000 shares authorized actual
and 85,000,000 shares authorized pro
forma (unaudited); 7,013,250 shares
issued and outstanding at December
31, 1998, and 14,663,934 and
18,216,355 shares issued and
outstanding at December 31, 1999
actual and pro forma (unaudited),
respectively......................... 70,133 146,640 182,163
Additional paid-in capital............. 720,902 75,666,634 91,950,681
Contribution receivable................ -- (66,242,838) (66,242,838)
Accumulated deficit.................... (12,209,694) (21,014,590) (21,014,590)
----------- ----------- -----------
Total stockholders' equity
(deficit)........................ (11,418,659) (11,444,154) 4,875,416
----------- ----------- -----------
Total liabilities and
stockholders' equity (deficit).. $ 3,565,075 $ 9,564,528 $ 9,564,528
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
SWITCHBOARD INCORPORATED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended
December 31,
----------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenue.............................. $ 650,037 $ 6,536,024 $ 8,303,610
Cost of revenue...................... 793,157 1,307,208 1,969,823
------------ ------------ ------------
Gross profit.................... (143,120) 5,228,816 6,333,787
Operating expenses:
Sales and marketing................. 2,306,603 5,871,561 11,236,756
Product development................. 2,107,589 3,188,215 1,922,915
General and administrative.......... 776,272 1,129,829 1,829,999
------------ ------------ ------------
Total operating expenses........ 5,190,464 10,189,605 14,989,670
------------ ------------ ------------
Loss from operations................. (5,333,584) (4,960,789) (8,655,883)
Interest income (expense), net....... 4,172 (404,273) (149,013)
------------ ------------ ------------
Net loss............................. (5,329,412) (5,365,062) (8,804,896)
------------ ------------ ------------
Accrued dividends for preferred
stockholders....................... 307,500 292,500 938,732
------------ ------------ ------------
Net loss attributable to common
stockholders....................... $ (5,636,912) $ (5,657,562) $ (9,743,628)
============ ============ ============
Basic and diluted net loss per
share.............................. $ (0.81) $ (0.81) $ (0.89)
============ ============ ============
Shares used in computing basic and
diluted net loss per share......... 7,000,000 7,011,471 10,914,944
Unaudited pro forma basic and diluted
net loss per share................. $ (0.67)
============
Shares used in computing unaudited
pro forma basic and diluted net
loss per share..................... 13,077,911
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
SWITCHBOARD INCORPORATED
STATEMENTS OF STOCKHOLDERS' DEFICIT
for the years ended December 31, 1997, 1998 and 1999
<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>
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... -- -- 42,124 421 78,515 -- -- 78,936
Issuance of
common stock
and common
stock warrants
to CBS
Corporation,
net of issuance
costs of
$977,120....... -- -- 7,468,560 74,686 74,260,278 $ (70,312,084) -- 4,022,880
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...... -- -- -- -- 497,071 -- -- 497,071
Accrued dividends
for preferred
stockholders... -- -- -- -- (938,732) -- -- (938,732)
Issuance of
preferred stock
to CBS
Corporation.... 1 -- -- -- -- -- -- --
Non-cash
advertising and
promotion
expenses....... -- -- -- -- -- 4,069,246 -- 4,069,246
Net loss......... -- -- -- -- -- -- (8,804,896) (8,804,896)
----------- ----------- ---------- --------- ------------ ------------- ------------- -------------
Balance, December
31, 1999 ...... 1 -- 14,663,934 $ 146,640 $ 75,666,634 $ (66,242,838) $ (21,014,590) $ (11,444,154)
=========== =========== ========== ========= ============ ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
SWITCHBOARD INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................ $ (5,329,412) $ (5,365,062) $ (8,804,896)
Adjustments to reconcile net loss to
net cash used in operating
activities:.......................
Depreciation and amortization...... 259,144 464,434 790,574
Loss on disposal of property and
equipment........................ 3,450 2,936 --
Provision for doubtful accounts.... 18,619 281,381 117,702
Expense related to warrant grants.. 192,600 -- 497,071
Write-off of technology............ -- 1,400,000 --
Non-cash advertising and promotion
expenses......................... -- -- 4,069,246
Changes in operating assets and
liabilities:
Accounts receivable............... (369,077) (2,180,336) (787,906)
Other current assets.............. (14,658) 4,298 (467,516)
Other assets...................... -- -- (442,191)
Accounts payable.................. 128,379 (103,372) 750,195
Accrued expenses.................. 352,824 907,325 600,805
Deferred revenue.................. 330,902 118,334 899,909
------------ ------------ ------------
Net cash used in operating
activities.................... (4,427,229) (4,470,062) (2,777,007)
Cash flows from investing activities:
Purchase of property and equipment.. (295,953) (464,430) (942,155)
Purchase of technology.............. -- (500,000) --
Capitalized software costs.......... (10,764) -- --
------------ ------------ ------------
Net cash used in investing
activities.................... (306,717) (964,430) (942,155)
Cash flows from financing activities:
Due to parent....................... -- 1,387,145 --
Proceeds from convertible promissory
notes--related party.............. 4,603,543 6,646,900 3,335,307
Proceeds from issuance of common
stock, net........................ -- 13,250 4,101,816
Payments on convertible promissory
notes--related party.............. (2,580,054) (2,630,546) --
Payments on notes payable........... -- -- (500,000)
------------ ------------ ------------
Net cash provided by financing
activities.................... 2,023,489 5,416,749 6,937,123
Net increase (decrease) in cash and
cash equivalents................... (2,710,457) (17,743) 3,217,961
------------ ------------ ------------
Cash and cash equivalents at
beginning of period................ 3,114,790 404,333 386,590
------------ ------------ ------------
Cash and cash equivalents at end of
period............................. $ 404,333 $ 386,590 $ 3,604,551
============ ============ ============
Supplemental schedule of cash flow
information:
Interest paid....................... $ 48,948 $ 399,142 $ 117,084
============ ============ ============
Supplemental schedule of noncash
financing activity:
Issuance of note payable for
technology........................ $ 1,100,000
Settlement of convertible promissory
notes through issuance of
preferred stock................... $ 11,722,452
Issuance of common stock for
technology........................ $ 1,050,000
Non-cash issuance cost.............. $ 375,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS
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 local
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. Switchboard operates in one business segment.
From Switchboard's inception (February 19, 1996) until December 31, 1999,
Switchboard has been a unit and later a 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, and limited operating history.
Switchboard has also experienced substantial net losses since its inception
and, as of December 31, 1999, had an accumulated deficit of $21.0 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. 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, together with the collateralized
convertible note facility from Banyan Worldwide (Note F), 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 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.
F-7
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
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, 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.
In 1999, the Company adopted SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The adoption of SOP
98-1 did not have a material impact on Switchboard's financial position or
results of operations.
Advertising Expense
Advertising costs are expensed as incurred and totaled $202,195,
$3,296,431, and $6,611,694 in the years ended December 31, 1997, 1998 and 1999,
respectively. In 1999, the cost included $4,069,246 of non-cash advertising
related to the CBS relationship (Note I).
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
F-8
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
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.
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
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, 1998, one customer accounted for 16.8% of accounts receivable
while three customers accounted for 16.7%, 12.0%, and 10.7% of accounts
receivable as of December 31, 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. One customer accounted for 22.7% of revenue for the year ended December
31, 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)
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.
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 3,552,421 shares of common stock. These
conversions have been reflected in the pro forma balance sheet as of December
31, 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).
In October 1999, the Board of Directors approved the amendment and
restatement of Switchboard's 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 has been reflected in the pro forma balance sheet as of December
31, 1999.
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 years ended December 31,
1997, 1998 and 1999, options to purchase 1,007,000, 1,162,875 and 2,951,600
shares of common stock, respectively, preferred stock convertible into
750,000, 750,000 and 3,552,422 shares of common stock, respectively, and
warrants for 300,000, 300,000 and 1,751,937 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.
Other Comprehensive Income
Comprehensive income is equal to net income for the years ended December
31, 1997, 1998 and 1999.
F-10
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
C. Property and Equipment:
Property and equipment consist of the following at:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Equipment............................................ $ 252,275 $ 246,199
Computers, peripherals and servers................... 1,144,050 1,436,605
Software............................................. 16,223 480,837
---------- ----------
1,412,548 2,163,641
Accumulated depreciation............................. (774,247) (961,063)
---------- ----------
Total........................................... $ 638,301 $1,202,578
========== ==========
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1998 and 1999
was $218,348, $346,206 and $377,878, respectively.
D. Other Assets:
Other assets consist of the following at:
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1999
--------- ----------
<S> <C> <C>
Capitalized software costs........................... $ 133,153 $ 122,389
Purchased technology................................. 200,000 200,000
Deferred project costs............................... -- 442,191
Software licenses.................................... -- 1,050,000
--------- ----------
333,153 1,814,580
Accumulated amortization............................. (193,374) (595,306)
--------- ----------
Total........................................... $ 139,779 $1,219,274
========= ==========
</TABLE>
During 1997, Switchboard capitalized $10,764 of software costs. There were
no costs eligible for capitalization in 1998 or 1999. Amortization expense for
other assets was $40,796, $118,228, and $412,696 for the years ended December
31, 1997, 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 December 31,
1999, $600,000 of principal is outstanding under the note.
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.
In August 1999, in connection with a Development, Access and License
agreement with a third party, Switchboard was issued a warrant for 150,000
shares of common stock, with an exercise price of $9.19 per share. Switchboard
attributed no value to the warrant. The underlying common stock of the third
party is publicly traded and can be registered at the demand of Switchboard any
time after June 16, 2000. The warrant expires on June 30, 2002.
F-11
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
E. Accrued Expenses:
Accrued expenses consist of the following at:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
----------- -----------
<S> <C> <C>
Payroll............................................. $ 7,695 $ 83,970
Commissions, bonus and other incentives............. 81,878 275,171
Vacation............................................ 79,124 111,180
Royalties........................................... 847,778 540,526
Professional services............................... 46,933 156,962
Accrued interest.................................... 48,125 27,958
Telemarketing....................................... -- 472,412
Other............................................... 252,427 296,586
----------- -----------
Total............................................... $ 1,363,960 $ 1,964,765
=========== ===========
</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
equal to the applicable federal rate under Section 1274 of the Internal Revenue
Code of 1986, as amended, for short-term loans with annual compounding interest
for the month in which such loan was made and were due and payable on June 30,
2000. At December 31, 1997, 1998 and 1999 the interest rate in effect was
5.68%, 4.33%, and 5.74%, 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 was subsequently
amended and restated in its entirety on January 26, 2000. The facility was
originally for $5,000,000. Outstanding amounts bear interest at a rate equal to
the applicable federal rate under Section 1274 of the Internal Revenue Code of
1986, as amended, for short-term loans with annual compounding interest for the
month in which such loan was made and are due and payable on January 1, 2001.
At December 31, 1999, the interest rate in effect was 5.74%. The outstanding
amount of principal and interest is convertible at the option of Banyan
Worldwide into shares of Series D Convertible Preferred Stock at $11.00 per
share, subject to adjustment, at any time. The entire amount of principal and
interest shall automatically be converted immediately prior to the consummation
of an underwritten public offering in which Switchboard, prior to giving effect
to the proceeds of the offering, is valued at at least $135,000,000 and
resulting in at least $15,000,000 in net proceeds. Upon consummation of such a
qualified offering, this facility shall be deemed cancelled in full and no
further advances shall be made thereunder.
On June 30, 1999, Switchboard issued 87,345 shares of Series D Convertible
Preferred Stock to Banyan Worldwide upon the conversion by Banyan Worldwide of
principal and interest of $655,089 under this facility. The dollar amount
converted represented an estimate of all of the principal and interest
outstanding as of June 30, 1999. As of July 1, 1999, Switchboard issued 59,160
additional shares of Series D Convertible Preferred Stock to Banyan Worldwide
upon the conversion by Banyan Worldwide of principal and interest of $443,699
under this facility. The additional dollar amount converted represented the
actual amount of all of the principal and interest outstanding as of June 30,
1999, after giving effect to the estimate Switchboard made on
F-12
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1999. This conversion was made by Banyan Worldwide to put Banyan
Worldwide and CBS in the equity ownership position they would have been in had
the actual amount of outstanding principal and interest at June 30, 1999 been
known on June 30, 1999. The facility remains in place and the maximum remaining
amount available under the facility is $3,904,328.
Borrowings from Banyan Worldwide in excess of the amounts available under
the Convertible Promissory Notes are classified as due to parent on the balance
sheet. This amount bears interest at the same rate as the borrowings under the
Convertible Promissory Notes.
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 and the level of services provided by Banyan Worldwide.
The fee is reviewed and adjusted periodically by mutual agreement of the
parties. For these services, Switchboard was charged $335,229, $199,852 and
$295,788 in 1997, 1998 and 1999, respectively. 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 renews annually unless either party terminates the agreement with 90
days' notice to the other.
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 $195,156 in 1997, 1998 and 1999, respectively.
Certain directors of Switchboard hold positions as officers or directors of
Banyan Worldwide. The Chairman of the Board of Directors of Switchboard is also
Chairman of the Board of Directors, President and Chief Executive Officer of
Banyan Worldwide. One director of Switchboard is Vice President and Chief
Financial Officer of Banyan Worldwide.
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.
F-13
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
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.
Under 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 December
31, 1999, the $200,000 has not yet been paid.
I. CBS Advertising, Promotion and License Agreement:
In 1999, Switchboard and CBS Corporation ("CBS") consummated a number of
agreements under which CBS acquired a 35% equity stake in Switchboard, through
the issuance of 7,468,560 shares of Switchboard common stock and one share of
Series E Special Voting Preferred Stock (Notes L and M). In 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 transactions, CBS was also
issued warrants to purchase up to an additional 1,066,937 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 adjustment in the event
of certain future issuances of securities by Switchboard.
The Advertising and Promotion Agreement dated as of June 30, 1999 and among
Switchboard, Banyan Worldwide and CBS 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
F-14
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
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.
Banyan Worldwide has agreed to indemnify CBS for breaches by Switchboard of
representations, warranties and covenants in the Advertising and Promotion
Agreement. The indemnification obligations with respect to the covenants will
expire upon the first to occur of: (i) the first business day after June 30,
2001 when Banyan Worldwide owns or controls less than a majority of
Switchboard's voting power; and (ii) the first business day after any person
owns or controls more of Switchboard's voting power than Banyan Worldwide does.
Switchboard has 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 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.
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).
Under a licensing agreement, Switchboard is obligated to pay minimum
royalties of $400,000, $450,000, and $500,000 in the years 2000, 2001, and
2002, respectively.
K. Income Taxes:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1997 1998 1999
----------- --------- -----------
<S> <C> <C> <C>
Deferred tax benefit.................... $(2,087,000) $(772,000) $(2,926,000)
Valuation allowance..................... 2,087,000 772,000 2,926,000
----------- --------- -----------
-- -- --
=========== ========= ===========
</TABLE>
F-15
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Switchboard's effective tax rate varied from the statutory rate as follows:
<TABLE>
<CAPTION>
Years Ended
December 31,
---------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Federal income tax
rate.................. (34.0)% (34.0)% (34.0)%
State taxes............. (6.1)% (2.2)% (5.0)%
Use of net operating
losses by Banyan
Worldwide............. 0.9 % 21.9 % 5.8 %
Valuation allowance..... 39.2 % 14.3 % 33.2 %
----- ----- -----
0.0 % 0.0 % 0.0 %
===== ===== =====
</TABLE>
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,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.................. $ 2,935,000 $ 5,718,000
Writeoff of technology............................ 562,000 668,000
Allowance for doubtful accounts................... 121,000 65,000
Accrued compensation.............................. 60,000 82,000
Deferred revenue.................................. -- 66,000
Other............................................. -- 3,000
----------- -----------
3,678,000 6,602,000
Deferred tax liability:
Capitalized software.............................. (3,000) --
----------- -----------
(3,000) --
Less valuation allowance........................... (3,675,000) (6,602,000)
----------- -----------
Net deferred tax assets.......................... -- --
=========== ===========
</TABLE>
Of the $6,602,000 valuation allowance at December 31, 1999, $226,000
relating to deductions for nonqualified stock options will be credited to paid-
in capital, if realized.
As of December 31, 1999, Switchboard has federal and state net operating
loss carryforwards of approximately $14,200,000, which begin to expire in 2011
and 2001, respectively. Switchboard's available net operating loss
carryforwards have been reduced by approximately $5,137,000 due to the
utilization of the net operating losses in Banyan Worldwide's consolidated 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.
F-16
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
L. Common Stock and Common Stock Warrants:
In 1996, Banyan Worldwide assigned all of its right, title 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 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. No notification of dissolution was received by Switchboard. 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")
vested on December 31, 1999. 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 was 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 December 31, 1999, the
total value of the Additional Warrants was $848,815.
In 1999, Switchboard issued 7,468,560 shares of common stock and a warrant
to purchase up to 1,066,937 shares of common stock to CBS Corporation (Note I).
F-17
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
M. Preferred Stock and Preferred Stock Warrants:
A summary of redeemable convertible preferred stock activity for the years
ended December 31, 1997, 1998 and 1999 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>
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 $10,623,664 146,505 $1,098,788 $11,722,452
Accrued dividends for
preferred
stockholders.......... 315,000 565,383 58,349 938,732
------- ---------- --------- ----------- ------- ---------- -----------
Balance at December 31,
1999.................. 750,000 $3,973,386 2,655,916 $11,189,047 146,505 $1,157,137 $16,319,570
======= ========== ========= =========== ======= ========== ===========
</TABLE>
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 December 31, 1999, Switchboard had 3,552,422 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 public offering, which is
defined as an offering in which Switchboard is valued at at least $135,000,000
(determined by multiplying the number of outstanding shares of capital stock of
Switchboard on a fully diluted basis by the initial offering price) and
resulting in at least $15,000,000 of net proceeds (determined by subtracting
underwriters' discounts and commissions from gross proceeds).
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.
F-18
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
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% (10.50% on December 31, 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. If the warrants were deemed outstanding
at December 31, 1999, the exercise price would be $2.56 per share. Assuming
consummation of this offering, the exercise price would be $2.07, based on
fully diluted shares at December 31, 1999, including the assumed issuance of
5,500,000 shares in this offering. For the purposes of these calculations fully
diluted shares includes 18,216,355 shares of common stock on a pro forma basis,
options to purchase 2,951,600 shares of common stock, warrants for 1,751,937
shares of common stock, and 466,785 shares of common stock and warrants to
purchase 66,683 additional shares of common stock that would be issued in
accordance with anti-dilution provisions of the CBS agreement.
No shares of Series B Preferred Stock have been issued to date.
In 1999, Switchboard issued 2,655,916 shares of Series C Preferred Stock
and 146,505 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 and 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.
F-19
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
N. Stock Option Plans:
In October 1999, Switchboard adopted the 1999 Stock Incentive Plan (the
"1999 Option Plan"). A total of 1,500,000 shares of common stock have been
reserved for issuance under the 1999 Option Plan. As of December 31, 1999,
options to purchase 7,000 shares have been granted under the 1999 Option Plan.
Switchboard also has the 1996 Stock Incentive Plan (the "1996 Option Plan")
which provides for the issuance of options to purchase 3,000,000 shares of
Switchboard's common stock. As of December 31, 1999, options to purchase
2,999,974 have been issued under the 1996 Option Plan.
Generally, options under the 1996 and 1999 Option Plans vest over four
years.
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
--------- --------
<S> <C> <C>
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................................................. (353,750) 1.53
--------- -----
Outstanding at December 31, 1998......................... 1,162,875 1.49
Granted.................................................. 1,972,950 8.67
Exercised................................................ (42,124) 1.87
Canceled................................................. (142,101) 2.66
--------- -----
Outstanding at December 31, 1999......................... 2,951,600 $6.23
========= =====
</TABLE>
As of December 31, 1999, 1,493,026 shares were available for grant under
the 1996 and 1999 Option Plans.
The following table summarizes information about the stock options at
December 31, 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--1.50............. 638,000 7.0 $1.00 475,000 $1.00
$2.00--2.50............. 361,000 8.4 $2.19 112,124 $2.25
$7.50--9.00............. 1,952,600 9.7 $8.68 31,250 $7.54
</TABLE>
Had compensation cost for Switchboard's stock option plan been determined
based on the fair value at the grant date for awards in 1997, 1998 and 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>
Year Ended December 31,
---------------------------------------------------------------------------------
1997 1998 1999
-------------------------- ------------------------- --------------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
------------ ------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net loss attributed to
common stockholders.... $ (5,636,912) $ (5,779,334) $(5,657,562) $ (5,944,629) $(9,743,628) $ (11,775,751)
Basic and diluted loss
per share.............. $ (0.81) $ (0.83) $ (0.81) $ (0.85) $ (0.89) $ (1.08)
</TABLE>
F-20
<PAGE>
SWITCHBOARD INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
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>
Year Ended
December 31,
-----------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Dividend yield....................................... 0% 0% 0%
Expected volatility.................................. 90% 90% 90%
Risk free interest rate.............................. 6.16% 5.48% 5.72%
Expected lives....................................... 7 years 6 years 5 years
</TABLE>
The weighted average grant date fair values using the Black-Scholes option
pricing model were $1.17, $1.66 and $6.87 during the years ended December 31,
1997, 1998, and 1999, respectively. The effects of applying SFAS 123 in this
disclosure were not indicative of future amounts. Additional grants in future
years are anticipated.
In 1999, the Board of Directors adopted the 1999 Employee Stock Purchase
Plan (the "Purchase Plan"). The Purchase Plan allows for the issuance of
300,000 shares of Switchboard's common stock to eligible employees. Under the
Purchase Plan, Switchboard is authorized to make a series of offerings during
which employees may purchase shares of common stock through payroll deductions
made over the term of the offering. The per-share purchase price at the end of
each offering is equal to 85% of the fair market value of the common stock at
the beginning or end of the offering period (as defined by the Purchase Plan),
whichever is lower.
O. Subsequent Event
On January 28, 2000, the stockholders of Switchboard approved an amendment
to the 1999 Option Plan whereby the shares reserved for issuance were increased
by 375,000 to 1,875,000.
On February 4, 2000, Switchboard filed a Certificate of Amendment to
Switchboard's Certificate of Incorporation to authorize an increase in the
capitalization of Switchboard from 30,000,000 to 85,000,000 shares of common
stock.
F-21
<PAGE>
[Narrative description of graphic material omitted in electronically filed
document:
Description of inside back cover:
At the top of the page is the heading "Advertising on Switchboard" set
against a purple background. The page is separated into three separate
vignettes, from top to bottom of the page. The caption, "Switchboard offers
customers a wide range of advertising options.", is centered above the
vignettes.
The first vignette displays a snapshot of a yellow pages search query Web
page on the Switchboard Web site centered between two sets of captions and
text. To the left of the snapshot is the caption "Banner Advertising" which
serves as the heading for the text directly below it, "We offer site-wide,
category-specific and location-targeted banner programs." Two red arrows point
from that text to banner advertisements on the Web page snapshot. To the right
of the snapshot is the caption "Sponsor Advertising" which serves as the
heading for the text directly below it, "Our site-wide and category-specific
sponsorship consistently and prominently display ads on our Web site." A red
arrow points from the caption to sponsor advertisements on the Web page
snapshot.
The second vignette displays a snapshot of a yellow pages search results
Web page on the Switchboard Web site. To the right of the snapshot is the
caption "Yellow Page Display Advertising" which serves as the heading for the
text directly below it, "We provide yellow pages-style display advertisements
which give advertisers a range of location, category and size options at the
local and national levels. Our display ads rotate to ensure that each
advertiser is periodically visible near the top of the page.". A red arrow
points from the text to the display advertisements on the Web page.
The third vignette displays two snapshots of Web pages on the Switchboard
Web site. On the left is a snapshot of Switchboard's shopping area service.
Centered underneath that snapshot is the caption, "Switchboard Shopping Area".
On the right is a snapshot of a white pages search results Web page. Centered
underneath that snapshot is the caption, "Switchboard White Pages". Between the
two snapshots is the caption "E-Commerce Advertising" which serves as the
heading for the text directly below it, "We offer advertising options placed
near white pages search results and in our shopping area to e-commerce Web
sites.". Beneath that text are two red arrows, one pointing to each of the
snapshots.
Description of outside back cover:
Centered in the top half of the page is a large yellow circle with a black
border. Inside the circle is the logo "Think outside the bookSM". Beneath that
logo within the circle in blue type with the CBS eye device in red is the logo
"CBS Switchboard.com". These logos are superimposed over the silhouette of a
person opening a door into a building. Beneath the circle centered slightly
below the middle of the page is the text "Switchboard has won numerous awards
since its launch:". A vignette appears below this text which includes four
pictures, from left to right across the page. The first picture is of the front
cover of Windows Magazine. Below that picture is the caption, ```101 Best
Business Sites', June 1, 1999 by Windows Magazine". The second picture is of a
logo for PC Magazine's top 100 Web sites in January 1999. Below that picture is
the caption, ```Top 100 Websites for People Finders', January 18, 1999 by PC
Magazine". The third picture is of a logo for Yahoo! Internet Life. Below that
picture is the caption, "Switchboard and Maps On Us -- "10 Supremely Useful
Sites on the Web', November 18, 1999 by Yahoo! Internet Life Magazine". The
fourth picture is of a Web page on the Newsweek.com Web site. Below that
picture is the caption, ```Favorite' site on the Web for finding people and
businesses, September 12, 1999 by Newsweek Magazine."]
<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.......................................... $ 20,878
NASD filing fee............................................... 8,090
Nasdaq National Market listing fee............................ 95,000
Blue Sky fees and expenses.................................... 15,000
Transfer Agent and Registrar fees............................. 10,000
Accounting fees and expenses.................................. 500,000
Indemnity insurance expenses ................................. 290,000
Legal fees and expenses....................................... 600,000
Printing and mailing expenses................................. 200,000
Miscellaneous................................................. 261,032
----------
Total....................................................... $2,000,000
==========
</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, warrants and convertible notes.
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 the Registrant's core technologies and net assets valued
at approximately $546,000 and in settlement of advances from Banyan
Worldwide of approximately $697,000.
3. On November 5, 1996, the Registrant issued and sold an aggregate of
750,000 shares of the Registrant's 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) and warrants to purchase
shares of the Registrant's Series B Convertible Preferred Stock, $0.01
par value per share, to Digital City, Inc. and America Online, Inc.,
in each case equal to 3.75% of the Registrant's capital stock on the
date of exercise, for an aggregate purchase price of $3,000,000,
pursuant to a Series A Preferred Stock Purchase Agreement.
4. 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 in connection
with a Technology Development and Marketing Agreement.
II-2
<PAGE>
5. 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 in connection with a Web-site Development Agreement.
6. 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 in connection with a Web-site Development
Agreement.
7. 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 in connection with a Web-site Development
Agreement.
8. 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 in connection with a Web-site Development Agreement.
9. 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 under a Technology Development and
Marketing Agreement.
10. On June 30 and July 1, 1999, the Registrant issued and sold an
aggregate of 7,468,560 shares of its common stock, one share of its
Series E Special Voting Preferred Stock, $0.01 par value per share,
and warrants to purchase an aggregate of 1,066,937 shares of common
stock to CBS Corporation for consideration of $5.0 million in cash
and $95.0 million in advertising and promotion through June 2006
across CBS media properties, including television, radio and outdoor
advertising.
11. On June 30, 1999, the Registrant issued 2,655,916 shares of its
Series C Convertible Preferred Stock, $0.01 par value per share, 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.
12. On June 30 and July 1, 1999, the Registrant issued an aggregate of
146,505 shares of its Series D Convertible Preferred Stock, $0.01 par
value per share, 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 $1,098,788 on
the date of conversion.
13. On July 21, 1999, the Registrant issued 1,875 shares of its common
stock to an executive search firm in exchange for services rendered.
14. From January 1998 through January 1999, the Registrant has issued and
sold an aggregate of 57,999 shares of common stock to employees of
the Registrant pursuant to stock option exercises, for an aggregate
purchase price of $83,186.
(b) Stock option grants.
From the adoption of the 1996 Stock Incentive Plan through January 31,
1999, the Registrant has granted options to purchase an aggregate of 3,689,325
shares of its common stock, net of cancellations of 701,851 options and
exercises of 59,874 options at a per share weighted average exercise price of
$1.64.
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 Certificate of Amendment to Certificate of Incorporation of the
Registrant, as amended, effective as of February 4, 2000.
3.3 Amended and Restated Certificate of Incorporation of the Registrant,
to be effective upon the closing of this offering.
3.4 By-Laws of the Registrant.
3.5 Amended and Restated By-Laws of the Registrant, to be effective upon
the closing of this offering.
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, as amended, 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
the Registrant, 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")).
10.4A** Amendment No. 2 to Common Stock and Warrant Purchase Agreement,
effective as of July 1, 1999.
10.5** Advertising and Promotion Agreement by and among the Registrant,
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 the Registrant 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 the Registrant 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 the Registrant and CBS
Corporation, dated June 30, 1999.
10.9** Right of First Refusal Agreement by and among the Registrant, Banyan
Worldwide and CBS Corporation, dated June 30, 1999.
10.10 Financial Reporting Agreement among the Registrant, Banyan Worldwide
and CBS Corporation, dated as of January 28, 2000.
10.11** Stockholders' Voting Agreement by and among the Registrant, Banyan
Worldwide and CBS Corporation, dated June 30, 1999.
10.12** Common Stock Purchase Warrant issued by the Registrant to Continuum
Software Inc., dated December 31, 1997.
10.13** Registration Rights Agreement by and between the Registrant and
Continuum Software Inc., dated December 31, 1997.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.14** Common Stock Purchase Warrant issued by the Registrant to US WEST
Dex, Inc., dated March 31, 1999.
10.15** Common Stock Purchase Warrant issued by the Registrant to Ameritech
Interactive Media, Inc., dated March 31, 1999.
10.16** Common Stock Purchase Warrant issued by the Registrant to
Intelligent Media Ventures, Inc., dated March 31, 1999.
10.17** Common Stock Purchase Warrant issued by the Registrant to SBC
Communications Inc., dated April 13, 1999.
10.18** Amended and Restated Registration Rights Agreement, as amended, by
and among the Registrant, America Online, Inc., Digital City Inc.
and Banyan Worldwide, dated February 20, 1998.
10.19** Amended and Restated Registration Rights Agreement by and between
the Registrant and Banyan Worldwide, dated May 3, 1999.
10.20** Services Agreement between the Registrant and Banyan Worldwide,
dated November 1, 1996.
10.21***+ Database License Agreement, as amended, by and between the
Registrant and infoUSA Inc., dated December 31, 1997.
10.22***+ Internet Provider Agreement, as amended, by and between the
Registrant and Etak, Inc., dated November 25, 1996.
10.23 Convertible Secured Note Purchase Agreement between the Registrant
and Banyan Worldwide, dated August 29, 1997, as amended.
10.24 Amended and Restated Convertible Note issued by the Registrant to
Banyan Worldwide on January 26, 2000.
10.25 Form of Registration Rights Agreement between the Registrant and
Banyan Worldwide.
10.26* Form of Services Agreement between the Registrant and Banyan
Worldwide.
10.27 Form of Sublease between the Registrant and Banyan Worldwide.
10.28 Employment Agreement between the Registrant and Douglas J. Greenlaw,
dated October 8, 1999.
10.29 Employment Agreement between the Registrant and Dean Polnerow, dated
December 1, 1999.
10.30* Employment Agreement between the Registrant and John P. Jewett,
dated January 2000.
10.31 Employment Agreement between the Registrant and James M. Canon,
dated December 31, 1999.
10.32+ Internet Data Center Services Agreement between the Registrant and
Exodus Communications, Inc., effective June 30, 1998.
10.33 Nonstatutory Stock Option Agreement Granted Under 1999 Stock
Incentive Plan between the Registrant and Douglas J. Greenlaw, dated
October 13, 1999.
10.34 Nonstatutory Stock Option Agreement between the Registrant and
Douglas J. Greenlaw, dated October 13, 1999.
10.35 Incentive Stock Option Agreement between the Registrant and Dean
Polnerow, dated October 13, 1999.
10.36 Incentive Stock Option Agreement between the Registrant and John P.
Jewett, dated October 13, 1999.
10.37 Incentive Stock Option Agreement between the Registrant and James M.
Canon, dated October 13, 1999.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.38 Non-Statutory Stock Option Agreement between the Registrant and
William P. Ferry, dated September 14, 1999.
10.39 Non-Statutory Stock Option Agreement between the Registrant and
William P. Ferry, dated October 18, 1999.
10.40* Non-Statutory Stock Option Agreement between the Registrant and Daniel
R. Mason, dated September 14, 1999.
10.41 Non-Statutory Stock Option Agreement between the Registrant and
Richard M. Spaulding, dated September 14, 1999.
10.42 Non-Statutory Stock Option Agreement between the Registrant and David
N. Strohm, dated September 14, 1999.
10.43 Non-Statutory Stock Option Agreement between the Registrant and Robert
M. Wadsworth, dated September 14, 1999.
21** Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Hale and Dorr LLP (included in Exhibit 5).
24.1** Power of Attorney for Douglas J. Greenlaw, Dean Polnerow, John P.
Jewett, William P. Ferry, Daniel R. Mason, Richard M. Spaulding, David
N. Strohm and Robert M. Wadsworth.
24.2 Power of Attorney for Russell I. Pillar.
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
*** Superseding exhibit.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Securities and Exchange Commission
pursuant to a Confidential Treatment Request.
(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.
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.
II-6
<PAGE>
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-7
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Boston, Massachusetts, on this 8th day of February, 2000.
Switchboard Incorporated
/s/ John P. Jewett
By:
-----------------------------------
John P. Jewett
Vice President and Chief
Financial Officer
II-8
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the 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>
* Chief Executive Officer February 8, 2000
______________________________________ and Director (Principal
Douglas J. Greenlaw Executive Officer)
* President and Director February 8, 2000
______________________________________
Dean Polnerow
/s/ John P. Jewett Vice President, Chief February 8, 2000
______________________________________ Financial Officer,
John P. Jewett Treasurer and Secretary
(Principal Financial
Officer and Principal
Accounting Officer)
* Chairman of the Board of February 8, 2000
______________________________________ Directors
William P. Ferry
* Director February 8, 2000
______________________________________
Daniel R. Mason
* Director February 8, 2000
______________________________________
Russell I. Pillar
* Director February 8, 2000
______________________________________
Richard M. Spaulding
* Director February 8, 2000
______________________________________
David N. Strohm
* Director February 8, 2000
______________________________________
Robert M. Wadsworth
*By: _________________________________ February 8, 2000
/s/ John P. Jewett
John P. Jewett
Attorney-in-Fact
</TABLE>
II-9
<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 Certificate of Amendment to Certificate of Incorporation of the
Registrant, as amended, effective as of February 4, 2000.
3.3 Amended and Restated Certificate of Incorporation of the Registrant,
to be effective upon the closing of this offering.
3.4 By-Laws of the Registrant.
3.5 Amended and Restated By-Laws of the Registrant, to be effective upon
the closing of this offering.
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, as amended, 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
the Registrant, 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")).
10.4A** Amendment No. 2 to Common Stock and Warrant Purchase Agreement,
effective as of July 1, 1999.
10.5** Advertising and Promotion Agreement by and among the Registrant,
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 the Registrant 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 the Registrant 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 the Registrant and CBS
Corporation, dated June 30, 1999.
10.9** Right of First Refusal Agreement by and among the Registrant, Banyan
Worldwide and CBS Corporation, dated June 30, 1999.
10.10 Financial Reporting Agreement among the Registrant, Banyan Worldwide
and CBS Corporation, dated as of January 28, 2000.
10.11** Stockholders' Voting Agreement by and among the Registrant, Banyan
Worldwide and CBS Corporation, dated June 30, 1999.
10.12** Common Stock Purchase Warrant issued by the Registrant to Continuum
Software Inc., dated December 31, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.13** Registration Rights Agreement by and between the Registrant and
Continuum Software Inc., dated December 31, 1997.
10.14** Common Stock Purchase Warrant issued by the Registrant to US WEST
Dex, Inc., dated March 31, 1999.
10.15** Common Stock Purchase Warrant issued by the Registrant to Ameritech
Interactive Media, Inc., dated March 31, 1999.
10.16** Common Stock Purchase Warrant issued by the Registrant to
Intelligent Media Ventures, Inc., dated March 31, 1999.
10.17** Common Stock Purchase Warrant issued by the Registrant to SBC
Communications Inc., dated April 13, 1999.
10.18** Amended and Restated Registration Rights Agreement, as amended, by
and among the Registrant, America Online, Inc., Digital City Inc.
and Banyan Worldwide, dated February 20, 1998.
10.19** Amended and Restated Registration Rights Agreement by and between
the Registrant and Banyan Worldwide, dated May 3, 1999.
10.20** Services Agreement between the Registrant and Banyan Worldwide,
dated November 1, 1996.
10.21***+ Database License Agreement, as amended, by and between the
Registrant and infoUSA Inc., dated December 31, 1997.
10.22***+ Internet Provider Agreement, as amended, by and between the
Registrant and Etak, Inc., dated November 25, 1996.
10.23 Convertible Secured Note Purchase Agreement between the Registrant
and Banyan Worldwide, dated August 29, 1997, as amended.
10.24 Amended and Restated Convertible Note issued by the Registrant to
Banyan Worldwide on January 26, 2000.
10.25 Form of Registration Rights Agreement between the Registrant and
Banyan Worldwide.
10.26* Form of Services Agreement between the Registrant and Banyan
Worldwide.
10.27 Form of Sublease between the Registrant and Banyan Worldwide.
10.28 Employment Agreement between the Registrant and Douglas J. Greenlaw,
dated October 8, 1999.
10.29 Employment Agreement between the Registrant and Dean Polnerow, dated
December 1, 1999.
10.30* Employment Agreement between the Registrant and John P. Jewett,
dated January 2000.
10.31 Employment Agreement between the Registrant and James M. Canon,
dated December 31, 1999.
10.32+ Internet Data Center Services Agreement between the Registrant and
Exodus Communications, Inc., effective June 30, 1998.
10.33 Nonstatutory Stock Option Agreement Granted Under 1999 Stock
Incentive Plan between the Registrant and Douglas J. Greenlaw, dated
October 13, 1999.
10.34 Nonstatutory Stock Option Agreement between the Registrant and
Douglas J. Greenlaw, dated October 13, 1999.
10.35 Incentive Stock Option Agreement between the Registrant and Dean
Polnerow, dated
October 13, 1999.
10.36 Incentive Stock Option Agreement between the Registrant and John P.
Jewett, dated
October 13, 1999.
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.37 Incentive Stock Option Agreement between the Registrant and James M.
Canon, dated
October 13, 1999.
10.38 Non-Statutory Stock Option Agreement between the Registrant and
William P. Ferry, dated September 14, 1999.
10.39 Non-Statutory Stock Option Agreement between the Registrant and
William P. Ferry, dated October 18, 1999.
10.40* Non-Statutory Stock Option Agreement between the Registrant and Daniel
R. Mason, dated September 14, 1999.
10.41 Non-Statutory Stock Option Agreement between the Registrant and
Richard M. Spaulding, dated September 14, 1999.
10.42 Non-Statutory Stock Option Agreement between the Registrant and David
N. Strohm, dated September 14, 1999.
10.43 Non-Statutory Stock Option Agreement between the Registrant and Robert
M. Wadsworth, dated September 14, 1999.
21** Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Hale and Dorr LLP (included in Exhibit 5).
24.1** Power of Attorney for Douglas J. Greenlaw, Dean Polnerow, John P.
Jewett, William P. Ferry, Daniel R. Mason, Richard M. Spaulding, David
N. Strohm and Robert M. Wadsworth.
24.2 Power of Attorney for Russell I. Pillar.
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
*** Superseding exhibit.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Securities and Exchange Commission
pursuant to a Confidential Treatment Request.
<PAGE>
Exhibit 1
UNDERWRITING AGREEMENT
______________ __, 2000
FleetBoston Robertson Stephens Inc.
J.P. Morgan Securities Inc.
The Robinson-Humphrey Company, LLC
Soundview Technology Group, Inc.
As Representatives of the several Underwriters
c/o FleetBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, CA 94104
Ladies and Gentlemen:
INTRODUCTORY. Switchboard Incorporated, a Delaware corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of [5,500,000] shares (the "Firm
Shares") of its Common Stock, par value $0.01 per share (the "Common Shares").
In addition, the Company has granted to the Underwriters an option to purchase
up to an additional [825,000] Common Shares (the "Option Shares") as provided in
Section 2. The Firm Shares and, if and to the extent such option is exercised,
the Option Shares are collectively called the "Shares". FleetBoston Robertson
Stephens Inc. ("Robertson Stephens"), J.P. Morgan Securities Inc., The Robinson-
Humphrey Company, LLC, and Soundview Technology Group, Inc have agreed to act as
representatives of the several Underwriters (in such capacity, the
"Representatives") in connection with the offering and sale of the Shares. As a
part of the offering contemplated by this Agreement, Robertson Stephens has
agreed to reserve out of the Shares set forth opposite its name on Schedule A to
this Agreement, up to [550,000] Shares, for sale to the Company's employees,
officers, and directors and other parties associated with the Company
(collectively, "Participants"), as set forth in the Prospectus under the heading
"Underwriting" (the "Directed Share Program"). The Shares to be sold by
Robertson Stephens pursuant to the Directed Share Program (the "Directed
Shares") will be sold by Robertson Stephens pursuant to this Agreement at the
public offering price. Any Directed Shares not orally confirmed for purchase by
any Participants as of 7:00 a.m., San Francisco time, on the first day trading
of the Shares commences will be offered to the public by Robertson Stephens as
set forth in the Prospectus.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-90013), which contains a form of prospectus, subject to completion, to be
used
1
<PAGE>
in connection with the public offering and sale of the Shares. The prospectus,
subject to completion, dated as of February __, 2000 to be used in connection
with such public offering is called the "Preliminary Prospectus." Such
registration statement, as amended, including the financial statements, exhibits
and schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933, and the rules and regulations
promulgated thereunder (collectively, the "Securities Act"), including any
information deemed to be a part thereof at the time of effectiveness pursuant to
Rule 430A under the Securities Act, is called the "Registration Statement". Any
registration statement filed by the Company pursuant to Rule 462(b) under the
Securities Act is called the "Rule 462(b) Registration Statement", and from and
after the date and time of filing of the Rule 462(b) Registration Statement the
term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form first used by the Underwriters to
confirm sales of the Shares, is called the "Prospectus". All references in this
Agreement to the Registration Statement, the Rule 462(b) Registration Statement,
the Preliminary Prospectus, the Prospectus, or any amendments or supplements to
any of the foregoing, shall include any copy thereof filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval System
("EDGAR").
The Company hereby confirms its agreements with the Underwriters as
follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents, warrants and covenants to each Underwriter
as follows:
(a) Compliance with Registration Requirements. The Registration Statement
and any Rule 462(b) Registration Statement have been declared effective by the
Commission under the Securities Act. The staff of the Commission has indicated
to the Company that all of its outstanding comments on the Registration
Statement have been resolved. No stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement is in effect
and no proceedings for such purpose have been instituted or are pending or, to
the best knowledge of the Company, are contemplated or threatened by the
Commission.
The Preliminary Prospectus, as of its date, and the Prospectus when filed
complied in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to EDGAR (except as may be permitted by
Regulation S-T under the Securities Act), was identical to the copy thereof
delivered to the Underwriters for use in connection with the offer and sale of
the Shares. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all
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subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Preliminary
Prospectus, as of its date, and the Prospectus, as amended or supplemented, as
of its date and at all subsequent times, did not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The representations and warranties set forth in
the two immediately preceding sentences do not apply to statements in or
omissions from the Registration Statement, any Rule 462(b) Registration
Statement, or any post-effective amendment thereto, or the Prospectus, or any
amendments or supplements thereto, made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
the Representatives expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as exhibits
to the Registration Statement which have not been described or filed as
required.
(b) Offering Materials Furnished to Underwriters . The Company has
delivered to the Representatives four complete conformed copies of the
Registration Statement and of each consent and certificate of experts filed as a
part thereof, and conformed copies of the Registration Statement (without
exhibits) and preliminary prospectuses and the Prospectus, as amended or
supplemented to date, in such quantities and at such places as the
Representatives have reasonably requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company . The Company has not
distributed and will not distribute, prior to the later of the Second Closing
Date (as defined below) and the completion of the Underwriters' distribution of
the Shares, any offering material in connection with the offering and sale of
the Shares other than a preliminary prospectus, the Prospectus or the
Registration Statement.
(d) The Underwriting Agreement . This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) Authorization of the Shares . The Shares to be purchased by the
Underwriters from the Company have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights . There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived or have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement.
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(g) No Material Adverse Change . Subsequent to the respective dates as of
which information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company (any such change
or effect, where the context so requires, is called a "Material Adverse Change"
or a "Material Adverse Effect"); (ii) the Company has not incurred any material
liability or obligation, indirect, direct or contingent, not in the ordinary
course of business nor entered into any material transaction or agreement not in
the ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company.
(h) Independent Accountants . PricewaterhouseCoopers LLP, who have
expressed their opinion with respect to the financial statements (which term as
used in this Agreement includes the related notes thereto) and supporting
schedules filed with the Commission as a part of the Registration Statement and
included in the Prospectus, are independent public or certified public
accountants as required by the Securities Act.
(i) Preparation of the Financial Statements . The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the financial position of the Company as of and
at the dates indicated and the results of their operations and cash flows for
the periods specified. The supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. Such
financial statements and supporting schedules have been prepared in conformity
with generally accepted accounting principles as applied in the United States
applied on a consistent basis throughout the periods involved, except as may be
expressly stated in the related notes thereto. No other financial statements or
supporting schedules are required to be included in the Registration Statement.
The financial data set forth in the Prospectus under the captions "Summary--
Summary Financial Data", "Selected Financial Data" and "Capitalization" fairly
present the information set forth therein on a basis consistent with that of the
audited financial statements contained in the Registration Statement.
(j) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(k) Subsidiaries of the Company. The Company has no subsidiaries.
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(l) Incorporation and Good Standing of the Company . The Company has been
duly organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction in which it is organized with full corporate power
and authority to own its properties and conduct its business as described in the
Prospectus, and is duly qualified to do business as a foreign corporation and is
in good standing under the laws of each jurisdiction which requires such
qualification, except where failure or failures to qualify, individually or in
the aggregate, would not have a Material Adverse Effect.
(m) Capitalization and Other Capital Stock Matters . The authorized, issued
and outstanding capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" (other than for subsequent issuances, if any,
pursuant to employee benefit plans described in the Prospectus or upon exercise
of outstanding options, warrants or convertible securities described in the
Prospectus). The Common Shares (including the Shares) conform in all material
respects to the description thereof contained in the Prospectus. All of the
issued and outstanding Common Shares have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance with
federal and state securities laws. None of the outstanding Common Shares was
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company. There are
no authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of the
Company issued or granted by the Company, as the case may be, other than those
described in the Prospectus. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted thereunder, set forth in the Prospectus accurately and fairly
presents the information required to be shown with respect to such plans,
arrangements, options and rights.
(n) Stock Exchange Listing . The Shares have been approved for inclusion on
the Nasdaq National Market, subject only to official notice of issuance.
(o) No Consents, Approvals or Authorizations Required . No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters in the manner contemplated herein and in the Prospectus, (ii)
by the National Association of Securities Dealers, LLC and (iii) by the federal
and provincial laws of Canada.
(p) Non-Contravention of Existing Instruments and Agreements . Neither the
issue and sale of the Shares nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company pursuant to, (i) the
charter or by-laws of the Company, (ii) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or
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<PAGE>
other agreement, obligation, condition, covenant or instrument to which the
Company is a party or bound or to which its property is subject, except in any
case or cases where such conflicts, breaches, violations or impositions would
not, individually or in the aggregate, result in a Material Adverse Effect or
(iii) any statute, law, rule, regulation, judgment, order or decree applicable
to the Company of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over the
Company or any of its properties.
(q) No Defaults or Violations . The Company is not in violation or default
of (i) any provision of its charter or by-laws, (ii) the terms of any indenture,
contract, lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument to which it is a
party or bound or to which its property is subject or (iii) any statute, law,
rule, regulation, judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or any of its properties, as applicable, except
any such violations or defaults which would not, singly or in the aggregate,
result in a Material Adverse Change except as otherwise disclosed in the
Prospectus.
(r) No Actions, Suits or Proceedings . No action, suit or proceeding by or
before any court or governmental agency, authority or body or any arbitrator
involving the Company or its property is pending or, to the best knowledge of
the Company, threatened that (i) could reasonably be expected to have a Material
Adverse Effect on the performance of this Agreement or the consummation of any
of the transactions contemplated hereby or (ii) could reasonably be expected to
result in a Material Adverse Effect.
(s) All Necessary Permits, Etc . The Company possesses such valid and
current certificates, authorizations or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct its
businesses except where any failure or failures to possess such certificate,
authorization or permit, singly or in the aggregate, would not result in a
Material Adverse Effect, and the Company has not received any notice of
proceedings relating to the revocation or modification of, or non-compliance
with, any such certificates, authorizations or permits which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, could
result in a Material Adverse Change.
(t) Title to Properties . The Company has good and marketable title to all
the properties and assets reflected as owned in the financial statements
referred to in Section 1(i) above (or elsewhere in the Prospectus), in each case
free and clear of any security interests, mortgages, liens, encumbrances,
equities, claims and other defects, except such as do not materially and
adversely affect the value of such property and do not materially interfere with
the use made or proposed to be made of such property by the Company. The real
property, improvements, equipment and personal property held under lease by the
Company are held under valid and enforceable leases, with such exceptions as are
not material and do not materially interfere with the use made or proposed to be
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<PAGE>
made of such real property, improvements, equipment or personal property by the
Company.
(u) Tax Law Compliance . The Company has filed all necessary federal, state
and foreign income and franchise tax returns or has properly requested
extensions thereof and has paid all taxes required to be paid by it and, if due
and payable, any related or similar assessment, fine or penalty levied against
it, except where any failure or failures to file or pay, individually or in the
aggregate, would not have a Material Adverse Effect. The Company has made
adequate charges, accruals and reserves in the applicable financial statements
referred to in Section 1(i) above in respect of all federal, state and foreign
income and franchise taxes for all periods as to which the tax liability of the
Company has not been finally determined. The Company is not aware of any tax
deficiency that has been or might be asserted or threatened against the Company
that could result in a Material Adverse Change.
(v) Intellectual Property Rights . The Company owns or possesses adequate
rights to use all patents, patent rights or licenses, inventions, collaborative
research agreements, trade secrets, know-how, trademarks, service marks, trade
names and copyrights which are necessary to conduct its businesses as described
in the Registration Statement and Prospectus. None of the Company's software
that it owns includes or incorporates any code obtained from the public domain
or from open source software. The expiration of any patents, patent rights,
trade secrets, trademarks, service marks, trade names or copyrights owned,
possessed or licensed by the Company would not reasonably be expected to result
in a Material Adverse Change that is not otherwise disclosed in the Prospectus;
the Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights; and the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a Material Adverse Effect. There is no
claim being made against the Company regarding patents, patent rights or
licenses, inventions, collaborative research, trade secrets, know-how,
trademarks, service marks, trade names or copyrights. The Company does not in
the conduct of its business as described in the Prospectus infringe or conflict
with any right or patent of any third party, or any discovery, invention,
product or process which is the subject of a patent application filed by any
third party, known to the Company, which such infringement or conflict is
reasonably likely to result in a Material Adverse Change.
(w) Year 2000 Preparedness . There are no issues related to the Company's
readiness for the "Year 2000 Problem," as described in the Prospectus, that (i)
are of a character required to be described or referred to in the Registration
Statement or Prospectus by the Securities Act which have not been accurately
described in the Registration Statement or Prospectus or (ii) might reasonably
be expected to result in any Material Adverse Change. All internal computer
systems and each Constituent
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Component (as defined below) of those systems of the Company fully comply with
Year 2000 Qualification Requirements (as defined below). "Year 2000
Qualifications Requirements" means that the internal computer systems and each
Constituent Component of those systems s of the Company (i) have been designed
to ensure date and time entry recognition and calculations, and date data
interface values that reflect the century, (ii) accurately manage and manipulate
data involving dates and times, including single century formulas and
multi-century formulas, and will not cause an abnormal ending scenario within
the application or generate incorrect values or invalid results involving such
dates, (iii) accurately process any date rollover, and (iv) accept and respond
to two-digit year date input in a manner that resolves any ambiguities as to the
century. "Constituent Component" means all software (including operating
systems, programs, packages and utilities), firmware, hardware, networking
components, and peripherals provided as part of the configuration. The Company
has inquired of material vendors as to their preparedness for the Year 2000 and
has disclosed in the Registration Statement or Prospectus any issues that might
reasonably be expected to result in any Material Adverse Change.
(x) No Transfer Taxes or Other Fees . There are no transfer taxes or other
similar fees or charges under federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the Shares.
(y) Company Not an "Investment Company" {. The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and after receipt of payment
for the Shares will not be, an "investment company" or an entity "controlled" by
an "investment company" within the meaning of the Investment Company Act and
will conduct its business in a manner so that it will not become subject to the
Investment Company Act.
(z) Insurance . The Company is insured by nationally recognized
institutions with policies held by the Company and in the Company's name in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for its business including, but not limited to,
policies covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and earthquakes, general
liability and Directors and Officers liability; and none of such policies will
terminate as a result of the issuance of the Shares. The Company has no reason
to believe that it will not be able (i) to renew its existing insurance coverage
as and when such policies expire or (ii) to obtain comparable coverage from
similar institutions as may be necessary or appropriate to conduct its
businesses as now conducted and at a cost that would not result in a Material
Adverse Change. The Company has not been denied any insurance coverage which it
has sought or for which it has applied.
(aa) Labor Matters . To the best of Company's knowledge, no labor
disturbance by the employees of the Company exists or is imminent; and the
Company is
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not aware of any existing or imminent labor disturbance by the employees of
Banyan Systems Incorporated ("Banyan Worldwide") or any other of the Company's
material suppliers that could reasonably be expected to result in a Material
Adverse Change.
(bb) No Price Stabilization or Manipulation . The Company has not taken and
will not take, directly or indirectly, any action designed to or that might be
reasonably expected to cause or result in stabilization or manipulation of the
price of the Common Shares to facilitate the sale or resale of the Shares.
(cc) Lock-Up Agreements . Each officer and director of the Company and each
securityholder of the Company has agreed to sign an agreement substantially in
the form attached hereto as Exhibit A or is party to an agreement with the
---------
Company that such holder will not sell Common Shares within 180 days of the date
hereof without the consent of the Company (the "Lock-up Agreements"). The
Company has provided to counsel for the Underwriters a complete and accurate
list of all securityholders of the Company and the number and type of securities
held by each securityholder. The Company has provided to counsel for the
Underwriters true, accurate and complete copies of all of the Lock-up Agreements
presently in effect or effected hereby. The Company hereby represents and
warrants that it will not release any of its officers, directors or other
securityholders from any Lock-up Agreements currently existing or hereafter
effected without the prior written consent of Robertson Stephens.
(dd) Related Party Transactions . There are no business relationships or
related-party transactions involving the Company or any other person required to
be described in the Prospectus which have not been described as required.
(ee) No Unlawful Contributions or Other Payments . Neither the Company nor,
to the best of the Company's knowledge, any employee or agent of the Company,
has made any contribution or other payment to any official of, or candidate for,
any federal, state or foreign office in violation of any law or that is required
to be disclosed in the Prospectus.
(ff) Environmental Laws . (i) the Company is in compliance with all rules,
laws and regulations relating to the use, treatment, storage and disposal of
toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Change, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) the Company is not currently aware that it
will be required to make future material capital expenditures to comply with
Environmental Laws and (iv) no property which is owned, leased or occupied by
the Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. (S) 9601, et seq.), or otherwise designated as a contaminated site under
-- ---
applicable state or local law.
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(gg) ERISA Compliance . The Company and any "employee benefit plan" (as
defined under the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder (collectively,
"ERISA")) established or maintained by the Company or its "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA. "ERISA
Affiliate" means, with respect to the Company, any member of any group of
organizations described in Sections 414(b),(c),(m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company is a member. No
"reportable event" (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any "employee benefit plan" established or
maintained by the Company or any of its ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company or any of its ERISA Affiliates,
if such "employee benefit plan" were terminated, would have any "amount of
unfunded benefit liabilities" (as defined under ERISA). Neither the Company nor
any of its ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or
4980B of the Code. Each "employee benefit plan" established or maintained by the
Company or any of ERISA Affiliates that is intended to be qualified under
Section 401(a) of the Code is so qualified and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualification.
(hh) Consents Required in Connection with the Directed Share Program. No
consent, approval, authorization or order of, or qualification with, any
governmental body or agency, other than those obtained, is required in
connection with the offering of the Directed Shares in any jurisdiction where
the Directed Shares are being offered.
(ii) No Improper Influence in Connection with the Directed Share Program.
The Company has not offered, or caused Robertson Stephens to offer, Shares to
any person pursuant to the Directed Share Program with the specific intent to
unlawfully influence (i) a customer or supplier of the Company to alter the
customer's or supplier's level or type of business with the Company or (ii) a
trade journalist or publication to write or publish favorable information about
the Company or its products.
Any certificate signed by an officer of the Company and delivered to the
Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) The Firm Shares . The Company agrees to issue and sell to the several
Underwriters the Firm Shares upon the terms herein set forth. On the basis of
the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company the respective number of
Firm Shares set forth opposite their names on Schedule A. The purchase price per
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Firm Share to be paid by the several Underwriters to the Company shall be $___
per share.
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(b) The First Closing Date . Delivery of the Firm Shares to be purchased by
the Underwriters and payment therefor shall be made by the Company and the
Representatives at 6:00 a.m., San Francisco time, at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109 (or at such other place
or time as may be agreed upon among the Representatives and the Company), (i) on
the third (3rd) full business day following the first day that Shares are
traded, (ii) if this Agreement is executed and delivered after 1:30 p.m., San
Francisco time, the fourth (4th) full business day following the day that this
Agreement is executed and delivered or (iii) at such other time and date not
later that seven (7) full business days following the first day that Shares are
traded as the Representatives and the Company may determine (or at such time and
date to which payment and delivery shall have been postponed pursuant to Section
8 hereof), such time and date of payment and delivery being herein called the
"Closing Date;" provided, however, that if the Company has not made available to
the Representatives copies of the Prospectus within the time provided in
Sections 2(g) and 3(e) hereof, the Representatives may, in their sole
discretion, postpone the Closing Date until no later that two (2) full business
days following delivery of copies of the Prospectus to the Representatives.
(c) The Option Shares; the Second Closing Date . In addition, on the basis
of the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Company hereby grants
an option to the several Underwriters to purchase, severally and not jointly, up
to an aggregate of [825,000] Option Shares from the Company at the purchase
price per share to be paid by the Underwriters for the Firm Shares. The option
granted hereunder is for use by the Underwriters solely in covering any
over-allotments in connection with the sale and distribution of the Firm Shares.
The option granted hereunder may be exercised at any time upon notice by the
Representatives to the Company, which notice may be given at any time within 30
days from the date of this Agreement. The time and date of delivery of the
Option Shares, if subsequent to the First Closing Date, is called the "Second
Closing Date" and shall be determined by the Representatives and shall not be
earlier than three nor later than five full business days after delivery of such
notice of exercise. If any Option Shares are to be purchased, each Underwriter
agrees, severally and not jointly, to purchase the number of Option Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Option Shares to be purchased as the number of Firm Shares set forth
on Schedule A opposite the name of such Underwriter bears to the total number of
----------
Firm Shares. The Representatives may cancel the option at any time prior to its
expiration by giving written notice of such cancellation to the Company.
(d) Public Offering of the Shares . The Representatives hereby advise the
Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in their sole judgment, have
determined is advisable and practicable.
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(e) Payment for the Shares . Payment for the Shares shall be made at the
First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer in immediately available-funds to an account designated by the Company.
It is understood that the Representatives have been authorized, for their
own respective accounts and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Option Shares the Underwriters have agreed to purchase.
Robertson Stephens, individually and not as a Representative of the
Underwriters, may (but shall not be obligated to) make payment for any Shares to
be purchased by any Underwriter whose funds shall not have been received by the
Representatives by the First Closing Date or the Second Closing Date, as the
case may be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any of its obligations under this Agreement.
(f) Delivery of the Shares . The Company shall deliver, or cause to be
delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representatives for the
accounts of the Representatives and the several Underwriters at the First
Closing Date, against the irrevocable release of a wire transfer to an account
designated by the Company of immediately available funds for the amount of the
purchase price therefor. The Company shall also deliver, or cause to be
delivered a credit representing the Option Shares the Underwriters have agreed
to purchase at the First Closing Date (or the Second Closing Date, as the case
may be), to an account or accounts at The Depository Trust Company as designated
by the Representatives for the accounts of the Representatives and the several
Underwriters, against the irrevocable release of a wire transfer to an account
designated by the Company of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
(g) Delivery of Prospectus to the Underwriters . Not later than 12:00 noon
on the second business day following the date the Shares are released by the
Underwriters for sale to the public, the Company shall deliver or cause to be
delivered copies of the Prospectus in such quantities and at such places as the
Representatives shall request.
SECTION 3. COVENANTS OF THE COMPANY.
The Company further covenants and agrees with each Underwriter as follows:
(a) Registration Statement Matters . The Company will (i) use its best
efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934 (the
"Exchange Act") to become effective simultaneously with the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective or, if the procedure in Rule 430A of the Securities Act is
followed, to prepare and timely file with the Commission under Rule 424(b) under
the Securities Act a Prospectus in a form approved by the Representatives
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containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Securities Act and (iii)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which the Representatives shall not previously have been advised
and furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Securities Act. If
the Company elects to rely on Rule 462(b) under the Securities Act, the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) under the Securities Act prior to the time
confirmations are sent or given, as specified by Rule 462(b)(2) under the
Securities Act, and shall pay the applicable fees in accordance with Rule 111
under the Securities Act.
(b) Securities Act Compliance . The Company will advise the Representatives
promptly (i) when the Registration Statement or any post- effective amendment
thereto shall have become effective, (ii) of receipt of any comments from the
Commission, (iii) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any additional
information and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of the
Prospectus or of the institution of any proceedings for that purpose. The
Company will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) Blue Sky Compliance . The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(d) Amendments and Supplements to the Prospectus and Other Securities Act
Matters . The Company will comply with the Securities Act and the Exchange Act,
and the rules and regulations of the Commission thereunder, so as to permit the
completion of the distribution of the Shares as contemplated in this Agreement
and the Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment of the Company or in the reasonable opinion of
the Representatives or counsel for the Underwriters, it becomes necessary to
amend or supplement the Prospectus in order to make the statements therein, in
the light of the circumstances existing at the time the Prospectus is delivered
to a purchaser, not misleading, or, if it is necessary at any time to amend or
supplement the Prospectus to comply with any law, the Company promptly will
prepare and file with the Commission, and furnish at its own expense to the
Underwriters
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and to dealers, an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.
(e) Copies of any Amendments and Supplements to the Prospectus . The
Company agrees to furnish the Representatives, without charge, during the period
beginning on the date hereof and ending on the later of the First Closing Date
or such date, as in the opinion of counsel for the Underwriters, the Prospectus
is no longer required by law to be delivered in connection with sales by an
Underwriter or dealer (the "Prospectus Delivery Period"), as many copies of the
Prospectus and any amendments and supplements thereto as the Representatives may
request.
(f) Insurance. The Company shall obtain Directors and Officers liability
insurance in the minimum amount of $10 million which shall apply to the offering
contemplated hereby.
(g) Notice of Subsequent Events . If at any time during the ninety (90) day
period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Company Shares has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(h) Use of Proceeds . The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
(i) Transfer Agent . The Company shall engage and maintain, at its expense,
a registrar and transfer agent for the Common Shares.
(j) Earnings Statement . As soon as practicable, but no later than [May 15,
2001], the Company will make generally available to its security holders and to
the Representatives an earnings statement (which need not be audited) covering
the twelve-month period ending [March 31, 2001] that satisfies the provisions of
Section 11(a) of the Securities Act.
(k) Periodic Reporting Obligations . During the Prospectus Delivery Period,
the Company shall file, on a timely basis, with the Commission and the Nasdaq
National Market all reports and documents required to be filed under the
Exchange Act.
(l) Agreement Not to Offer or Sell Additional Securities . The Company will
not, without the prior written consent of Robertson Stephens, for a period of
180 days
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following the date of the Prospectus, offer, sell or contract to sell, or
otherwise dispose of or enter into any transaction which is designed to, or
could be expected to, result in the disposition (whether by actual disposition
or effective economic disposition due to cash settlement or otherwise by the
Company, any affiliate of the Company or any person in privity with the Company
or any affiliate of the Company) directly or indirectly, or announce the
offering of, any other Common Shares or any securities convertible into, or
exchangeable for, Common Shares; provided, however, that the Company may (i)
issue and sell Common Shares pursuant to any director or employee stock option
plan, stock ownership plan or dividend reinvestment plan of the Company in
effect at the date of the Prospectus and described in the Prospectus so long as
none of those shares may be transferred during the period of 180 days from the
date that the Registration Statement is declared effective (the "Lock-Up
Period") and the Company shall enter stop transfer instructions with its
transfer agent and registrar against the transfer of any such Common Shares,
(ii) issue Common Shares issuable upon the conversion of securities or the
exercise of warrants outstanding at the date of the Prospectus and described in
the Prospectus and the Company shall enter stop transfer instructions with its
transfer agent and registrar against the transfer of any such Common Shares
issued to a party to a Lock-Up Agreement and (iii) issue and sell the Shares
pursuant to the terms of this Agreement.
(m) Future Reports to the Representatives . During the period of three
years hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the National Association of Securities Dealers, LLC
or any securities exchange; and (iii) as soon as available, copies of any report
or communication of the Company mailed generally to holders of its capital
stock.
(n) Directed Share Program. The Company (i) will indemnify Robertson
Stephens for any losses incurred in connection with the Directed Share Program,
(ii) will comply with all applicable securities and other applicable laws, rules
and regulations in each jurisdiction in which the Directed Shares are offered in
connection with the Directed Share Program and (iii) will pay all reasonable
fees and disbursements of counsel incurred by the Underwriters in connection
with the Directed Share Program and any stamp duties, similar taxes or duties or
other taxes, if any, incurred by the underwriters in connection with the
Directed Share Program.
SECTION 4. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Option
Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Option Shares, as of the Second Closing
15
<PAGE>
Date as though then made, to the timely performance by the Company of its
covenants and other obligations hereunder, and to each of the following
additional conditions:
(a) Compliance with Registration Requirements; No Stop Order; No Objection
from the National Association of Securities Dealers, LLC. The Registration
Statement shall have become effective prior to the execution of this Agreement,
or at such later date as shall be consented to in writing by you; and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
satisfaction of Underwriters' counsel; and the National Association of
Securities Dealers, LLC shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(b) Corporate Proceedings . All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(c) No Material Adverse Change. Subsequent to the execution and delivery of
this Agreement and prior to the First Closing Date, or the Second Closing Date,
as the case may be, there shall not have been any Material Adverse Change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and that makes
it, in your sole judgment, impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus.
(d) Opinion of Counsel for the Company . You shall have received on the
First Closing Date, or the Second Closing Date, as the case may be, an opinion
of Hale and Dorr LLP, counsel for the Company, as to the matters identified on
Exhibit B attached hereto, dated the First Closing Date, or the Second Closing
- ---------
Date, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters.
Counsel rendering the opinion contained in Exhibit B may rely as to
---------
questions of law not involving the laws of the United States or the Commonwealth
of Massachusetts and the State of Delaware upon opinions of local counsel, and
as to questions of fact upon representations or certificates of officers of the
Company, and of government officials, in which case their opinion is to state
that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such opinion, representation or certificate.
Copies of any opinion, representation or certificate so relied upon shall be
delivered to you, as Representatives of the Underwriters, and to Underwriters'
Counsel.
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(e) Opinion of Counsel for the Underwriters . You shall have received on the
First Closing Date or the Second Closing Date, as the case may be, an opinion of
Testa, Hurwitz & Thibeault, LLP, as to the matters identified on Exhibit C
---------
hereto. The Company shall have furnished to such counsel such documents as they
may have requested for the purpose of enabling them to pass upon such matters.
(f) Accountants' Comfort Letter '. You shall have received on the First
Closing Date and on the Second Closing Date, as the case may be, a letter from
PricewaterhouseCoopers LLP addressed to the Underwriters, dated the First
Closing Date or the Second Closing Date, as the case may be, confirming that
they are independent certified public accountants with respect to the Company
within the meaning of the Securities Act and the applicable published Rules and
Regulations and based upon the procedures described in such letter delivered to
you concurrently with the execution of this Agreement (herein called the
"Original Letter"), but carried out to a date not more than four (4) business
days prior to the First Closing Date or the Second Closing Date, as the case may
be, (i) confirming, to the extent true, that the statements and conclusions set
forth in the Original Letter are accurate as of the First Closing Date or the
Second Closing Date, as the case may be, and (ii) setting forth any revisions
and additions to the statements and conclusions set forth in the Original Letter
which are necessary to reflect any changes in the facts described in the
Original Letter since the date of such letter, or to reflect the availability of
more recent financial statements, data or information. The letter shall not
disclose any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company from that set forth in
the Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. The Original Letter from PricewaterhouseCoopers LLP shall be
addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to the
Company within the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their examination of
the balance sheet of the Company as of December 31, 1999 and related statements
of operations, shareholders' equity, and cash flows for the twelve (12) months
ended December 31, 1999, (iii) state that PricewaterhouseCoopers LLP has
performed the procedures set out in Statement on Auditing Standards No. 71 ("SAS
71") for a review of interim financial information and providing the report of
PricewaterhouseCoopers LLP as described in SAS 71 on the financial statements
for each of the quarters in the eight-quarter period ended December 31, 1999
(the "Quarterly Financial Statements"), (iv) state that in the course of such
review, nothing came to their attention that leads them to believe that any
material modifications need to be made to any of the Quarterly Financial
Statements in order for them to be in compliance with generally accepted
accounting principles consistently applied across the periods presented, and
address other matters agreed upon by PricewaterhouseCoopers LLP and you. In
addition, you shall have received from PricewaterhouseCoopers LLP a letter
addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
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accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's financial statements as of December
31, 1999, did not disclose any weaknesses in internal controls that they
considered to be material weaknesses.
(g) Officers' Certificate '. You shall have received on the First Closing
Date and the Second Closing Date, as the case may be, a certificate of the
Company, dated the First Closing Date or the Second Closing Date, as the case
may be, signed by the Chief Executive Officer or President and the Chief
Financial Officer of the Company, to the effect that, and you shall be satisfied
that:
(i) The representations and warranties of the Company in this Agreement are
true and correct, as if made on and as of the First Closing Date or the
Second Closing Date, as the case may be, and the Company has complied with
all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the First Closing Date or the Second
Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or, to the Company's knowledge, threatened under
the Securities Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the Registration
Statement and the Prospectus, and any amendments or supplements thereto
contained all material information required to be included therein by the
Securities Act and in all material respects conformed to the requirements of
the Securities Act; the Registration Statement and the Prospectus, and any
amendments or supplements thereto, did not and do not include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
and, since the effective date of the Registration Statement, there has
occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus, there has not been (a) any
Material Adverse Change (b) any transaction that is material to the Company,
except transactions entered into in the ordinary course of business, (c) any
obligation, direct or contingent, that is material to the Company, incurred
by the Company, except obligations incurred in the ordinary course of
business, (d) any change in the capital stock or outstanding indebtedness of
the Company that is material to the Company, except for the issuance of
Common Shares pursuant to the exercise of options or warrants described in
the Prospectus, or conversion of convertible securities, described in the
Prospectus and the issuance of Shares to the Underwriters pursuant to the
terms of this Agreement, (e) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company, or (f) any loss
or damage (whether or not insured) to the property of the Company which has
been sustained or will have
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been sustained which has a Material Adverse Effect on the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company.
(h) Lock-up Agreement from Certain Stockholders of the Company . The Company
shall have obtained and delivered to you an agreement substantially in the form
of Exhibit A attached hereto from each officer, director and securityholder of
---------
the Company except for holders of options (other than officers and directors) to
purchase Common Shares pursuant to agreements with the Company that provide that
such holders will not dispose of Common Shares purchased upon exercise of such
options without the Company's Consent during the Lock-Up Period.
(i) Stock Exchange Listing . The Shares shall have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
(j) Compliance with Prospectus Delivery Requirements. The Company shall have
complied up to and as of the First Closing Date or Second Closing Date, as the
case may be, with the provisions of Sections 2(g) and 3(e) hereof with respect
to the furnishing of Prospectuses.
(k) Additional Documents . On or before each of the First Closing Date and
the Second Closing Date, as the case may be, the Representatives and counsel for
the Underwriters shall have received such information, documents and opinions as
they may reasonably require for the purposes of enabling them to pass upon the
issuance and sale of the Shares as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.
SECTION 5. PAYMENT OF EXPENSES. The Company agrees to pay all costs, fees
and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Shares (including all printing and engraving costs), (ii) all fees and expenses
of the registrar and transfer agent of the Common Shares, (iii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Shares to the Underwriters, (iv) all fees and expenses of the Company's
counsel, independent public or certified public accountants and other advisors,
(v) all costs and expenses incurred in connection with the preparation,
printing, filing, shipping and distribution of the Registration Statement
(including financial
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statements, exhibits, schedules, consents and certificates of experts), the
Preliminary Prospectus and the Prospectus, and all amendments and supplements
thereto, and this Agreement (other than fees and expenses of Underwriters
counsel), (vi) all costs and expenses incurred by Underwriters counsel in
connection with the Directed Share Program, (vii) all filing fees, attorneys'
fees and expenses incurred by the Company or the Underwriters in connection with
qualifying or registering (or obtaining exemptions from the qualification or
registration of) all or any part of the Shares for offer and sale under the
state securities or blue sky laws or the provincial securities laws of Canada or
any other country, and, if requested by the Representatives, preparing and
printing a "Blue Sky Survey", an "International Blue Sky Survey" or other
memorandum, and any supplements thereto, advising the Underwriters of such
qualifications, registrations and exemptions, (viii) the filing fees incident
to, and the reasonable fees and expenses of counsel for the Underwriters in
connection with, the National Association of Securities Dealers, LLC review and
approval of the Underwriters' participation in the offering and distribution of
the Shares, (ix) the fees and expenses associated with including the Common
Shares on the Nasdaq National Market, (x) all costs and expenses incident to the
preparation and undertaking of "road show" presentations to be made to
prospective investors, and (xi) all other fees, costs and expenses referred to
in Item 13 of Part II of the Registration Statement. Except as provided in this
Section 5, Section 6, and Section 7 hereof, the Underwriters shall pay their own
expenses, including the fees and disbursements of their counsel.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES'. If this Agreement is
terminated by the Representatives pursuant to Section 4, Section 8, Section 9,
or if the sale to the Underwriters of the Shares on the First Closing Date is
not consummated because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or to comply with any provision hereof,
the Company agrees to reimburse the Representatives and the other Underwriters
(or such Underwriters as have terminated this Agreement with respect to
themselves), severally, upon demand for all out-of-pocket expenses that shall
have been reasonably incurred by the Representatives and the Underwriters in
connection with the proposed purchase and the offering and sale of the Shares,
including but not limited to fees and disbursements of counsel, printing
expenses, travel and accommodation expenses, postage, facsimile and telephone
charges.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification of the Underwriters . The Company agrees to indemnify
and hold harmless each Underwriter, its officers and employees, and each person,
if any, who controls any Underwriter within the meaning of the Securities Act
and the Exchange Act against any loss, claim, damage, liability or expense, as
incurred, to which such Underwriter or such controlling person may become
subject, under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company, which consent shall not be unreasonably withheld),
insofar as such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based (i) upon any untrue
statement or alleged
20
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untrue statement of a material fact contained in the Registration Statement, or
any amendment thereto, including any information deemed to be a part thereof
pursuant to Rule 430A under the Securities Act, or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading; or (ii) upon any untrue statement
or alleged untrue statement of a material fact contained in any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; or (iii) in whole or in part upon any inaccuracy in
the representations and warranties of the Company contained herein; or (iv) in
whole or in part upon any failure of the Company to perform its obligations
hereunder or under law; or (v) any untrue statement or alleged untrue statement
of any material fact contained in any audio or visual materials provided by the
Company or based upon written information furnished by or on behalf of the
Company including, without limitation, slides, videos, films or tape recordings,
used in connection with the marketing of the Shares, including without
limitation, statements communicated to securities analysts employed by the
Underwriters; or (vi) any act or failure to act or any alleged act or failure to
act by any Underwriter in connection with, or relating in any manner to, the
Shares or the offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or action arising out of or
based upon any matter covered by clause (i), (ii), (iii), (iv) or (v) above,
provided that the Company shall not be liable under this clause (vi) to the
extent that a court of competent jurisdiction shall have determined by a final
judgment that such loss, claim, damage, liability or action resulted directly
from any such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its bad faith or willful misconduct; and to reimburse each
Underwriter and each such controlling person for any and all expenses (including
the fees and disbursements of counsel chosen by Robertson Stephens) as such
expenses are reasonably incurred by such Underwriter or such controlling person
in connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; provided, however,
that the foregoing indemnity agreement shall not apply to any loss, claim,
damage, liability or expense to the extent, but only to the extent, arising out
of or based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Representatives expressly for use in
the Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto); and provided, further, that with respect to
any preliminary prospectus, the foregoing indemnity agreement shall not inure to
the benefit of any Underwriter from whom the person asserting any loss, claim,
damage, liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim,
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damage, liability or expense. The indemnity agreement set forth in this Section
7(a) shall be in addition to any liabilities that the Company may otherwise
have.
(b) Indemnification of the Company, its Directors and Officers . Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by the
Representatives expressly for use therein; and to reimburse the Company, or any
such director, officer or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The indemnity
agreement set forth in this Section 7(b) shall be in addition to any liabilities
that each Underwriter may otherwise have.
(c) Information Provided by the Underwriters. The Company hereby
acknowledges that the only information that the Underwriters have furnished to
the Company expressly for use in the Registration Statement, the Preliminary
Prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth in the table in the first paragraph, the second, fourth and
twelfth paragraphs under the caption "Underwriting" in the Prospectus; and the
Underwriters confirm that such statements are correct.
(d) Notifications and Other Indemnification Procedures . Promptly after
receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to
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seek indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it shall elect, jointly with
all other indemnifying parties similarly notified, by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that a conflict may
arise between the positions of the indemnifying party and the indemnified party
in conducting the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 7 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with local counsel), approved by the indemnifying
party (Robertson Stephens in the case of Section 7(b) and Section 8),
representing the indemnified parties who are parties to such action), (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party, in each of which cases the fees and expenses of counsel
shall be at the expense of the indemnifying party.
(e) Settlements . The indemnifying party under this Section 7 shall not be
liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 60 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless
23
<PAGE>
such settlement, compromise or consent includes (i) an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(f) Contribution . If the indemnification provided for in this Section 7 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then each indemnifying party shall contribute to such amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bears to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 7(f) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7(f). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 7(f) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (f), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this Section 7(f)
to contribute are several in proportion to their respective underwriting
obligations and not joint.
24
<PAGE>
(g) Timing of Any Payments of Indemnification . Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than forty-five
(45) days of invoice to the indemnifying party.
(h) Survival . The indemnity and contribution agreements contained in this
Section 7 and the representation and warranties of the Company set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor to
any Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 7.
(i) Acknowledgements of Parties . The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Securities Act and the Exchange Act.
(j) Indemnification for Directed Share Program. The Company agrees to
indemnify and hold harmless Robertston Stephens and its affiliates and each
person, if any, who controls Robertson Stephens or its affiliates within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act ("Robertson Stephens Entities"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending or investigating
any such action or claim) (i) caused by any untrue statement or alleged untrue
statement of a material fact contained in any material prepared by or with the
consent of the Company for distribution to participants in connection with the
Directed Share Program, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; (ii) the failure of any participant to pay
for and accept delivery of Directed Shares that the participant has agreed to
purchase; or (iii) related to, arising out of, or in connection with the
Directed Share Program other than losses, claims, damages or liabilities (or
expenses relating thereto) that are finally judicially determined to have
resulted from the bad faith or gross negligence of Robertson Stephens Entities.
SECTION 8. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of
25
<PAGE>
the several Underwriters shall fail or refuse to purchase Shares that it or they
have agreed to purchase hereunder on such date, and the aggregate number of
Common Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase does not exceed 10% of the aggregate number of the
Shares to be purchased on such date, the other Underwriters shall be obligated,
severally, in the proportions that the number of Firm Shares set forth opposite
their respective names on Schedule A bears to the aggregate number of Firm
----------
Shares set forth opposite the names of all such non-defaulting Underwriters, or
in such other proportions as may be specified by the Representatives with the
consent of the non-defaulting Underwriters, to purchase the Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
on such date. If, on the First Closing Date or the Second Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares and the aggregate number of Shares with respect to which such
default occurs exceeds 10% of the aggregate number of Shares to be purchased on
such date, and arrangements satisfactory to the Representatives and the Company
for the purchase of such Shares are not made within 48 hours after such default,
this Agreement shall terminate without liability of any party to any other party
except that the provisions of Section 4, and Section 7 shall at all times be
effective and shall survive such termination. In any such case either the
Representatives or the Company shall have the right to postpone the First
Closing Date or the Second Closing Date, as the case may be, but in no event for
longer than seven days in order that the required changes, if any, to the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
8. Any action taken under this Section 8 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
SECTION 9. TERMINATION OF THIS AGREEMENT. Prior to the First Closing Date,
this Agreement may be terminated by the Representatives by notice given to the
Company if (a) at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq Stock Market, or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the National Association of
Securities Dealers, LLC; (ii) a general banking moratorium shall have been
declared by any of federal, New York, Delaware or California authorities; (iii)
there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective change in United States' or international
political, financial or economic conditions, as in the judgment of the
Representatives is material and adverse and makes it impracticable or
inadvisable to market the Common Shares in the manner and on the terms
contemplated in the Prospectus or to enforce contracts for the sale of
securities; (iv) in the judgment of the Representatives there shall have
occurred any Material Adverse Change; or (v) the Company shall have sustained a
loss by strike, fire, flood, earthquake, accident or other
26
<PAGE>
calamity of such character as in the judgment of the Representatives may
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured or (b) in
the case of any of the events specified in 9(a)(i)-(v), such event singly or
together with any other event, makes it, in your judgment, impractical or
unadvisable to market the Common Shares in the manner and on the terms in the
Prospectus. Any termination pursuant to this Section 9 shall be without
liability on the part of (x) the Company to any Underwriter, except that the
Company shall be obligated to reimburse the expenses of the Representatives and
the Underwriters pursuant to Sections 5 and 6 hereof, (y) any Underwriter to the
Company, or (z) of any party hereto to any other party except that the
provisions of Section 7 shall at all times be effective and shall survive such
termination.
SECTION 10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Shares sold hereunder and any termination of this Agreement.
SECTION 11. NOTICES. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
FLEETBOSTON ROBERTSON STEPHENS INC.
555 California Street
San Francisco, California 94104
Facsimile: (415) 676-2675
Attention: General Counsel
If to the Company:
SWITCHBOARD INCORPORATED
115 Flanders Road
Westboro, MA 01581
Facsimile: (508) 870-2000
Attention: President
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
27
<PAGE>
SECTION 12. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto, including any substitute Underwriters pursuant
to Section 8 hereof, and to the benefit of the employees, officers and directors
and controlling persons referred to in Section 7, and to their respective
successors, and no other person will have any right or obligation hereunder. The
term "successors" shall not include any purchaser of the Shares as such from any
of the Underwriters merely by reason of such purchase.
SECTION 13. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 14. GOVERNING LAW PROVISIONS.
(a) Governing Law . This agreement shall be governed by and construed in
accordance with the internal laws of the state of New York applicable to
agreements made and to be performed in such state.
(b) Consent to Jurisdiction . Any legal suit, action or proceeding arising
out of or based upon this Agreement or the transactions contemplated hereby
("Related Proceedings") may be instituted in the federal courts of the United
States of America located in the City of Boston or the courts of the
Commonwealth of Massachusetts in each case located in the City of Boston
(collectively, the "Specified Courts"), and each party irrevocably submits to
the exclusive jurisdiction (except for proceedings instituted in regard to the
enforcement of a judgment of any such court (a "Related Judgment"), as to which
such jurisdiction is non-exclusive) of such courts in any such suit, action or
proceeding. Service of any process, summons, notice or document by mail to such
party's address set forth above shall be effective service of process for any
suit, action or other proceeding brought in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or other proceeding in the Specified Courts and irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such suit, action or other proceeding brought in any such court has been brought
in an inconvenient forum. Each party not located in the United States
irrevocably appoints CT Corporation System, which currently maintains a Boston
office at 2 Oliver Street, Boston, Massachusetts 02109, United States of
America, as its agent to receive service of process or other legal summons for
purposes of any such suit, action or proceeding that may be instituted in any
state or federal court in the City of Boston.
SECTION 15. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts,
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<PAGE>
each one of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement may
not be amended or modified unless in writing by all of the parties hereto, and
no condition herein (express or implied) may be waived unless waived in writing
by each party whom the condition is meant to benefit. The Section headings
herein are for the convenience of the parties only and shall not affect the
construction or interpretation of this Agreement.
[The remainder of this page has been intentionally left blank.]
29
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.
Very truly yours,
SWITCHBOARD INCORPORATED
By:
--------------------------
Name:
--------------------
Title:
--------------------
The foregoing Underwriting Agreement is hereby confirmed and accepted by the
Representatives as of the date first above written.
FLEETBOSTON ROBERTSON STEPHENS INC. [AND FLEETBOSTON ROBERTSON STEPHENS
INTERNATIONAL LIMITED]
J.P. MORGAN SECURITIES INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
SOUNDVIEW TECHNOLOGY GROUP, INC.
On their behalf and on behalf of each of the several underwriters named in
Schedule A hereto.
- ----------
By: FLEETBOSTON ROBERTSON STEPHENS INC.
By:
---------------------------------
Mitch Whiteford
30
<PAGE>
SCHEDULE A
Number of Firm Shares
To be Purchased
Underwriters ---------------
------------
FleetBoston Robertson Stephens Inc. [and FleetBoston
Robertson Stephens International Limited]...............
J.P. Morgan Securities Inc...............................
The Robinson-Humphrey Company, LLC.......................
Soundview Technology Group, Inc..........................
________________ ........................................
________________ ........................................
________________ ........................................
________________ ........................................
________________ ........................................
Total...............................................
31
<PAGE>
Exhibit 3.1
-----------
CERTIFICATE OF INCORPORATION
OF
SWITCHBOARD.COM INCORPORATED
FIRST. The name of the Corporation is: Switchboard.com Incorporated.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address in The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or
promoted by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which the Corporation shall
have authority to issue is 3,000 shares of Common Stock, $.01 par value per
share.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b) (2) of the
General Corporation Law of Delaware.
FIFTH. The name and mailing address of the sole incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
Richard M. Spaulding c/o Banyan Systems Incorporated
120 Flanders Road
Westboro, MA 01581
SIXTH. In furtherance of and not in limitation or powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation.
SEVENTH. Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
<PAGE>
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
EIGHTH. Except to the extent that the General Corporation Law of
Delaware prohibits the elimination or limitation of liability of directors for
breaches of fiduciary duty, no director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary damages for any
breach of fiduciary duty as a director, notwithstanding any provision of law
imposing such liability. No amendment to or repeal of this provision shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
NINTH. 1. Actions, Suits and Proceedings Other than by or in the
------------------------------------------------------
Right of the Corporation. The Corporation shall indemnify each person who was
- ------------------------
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, 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 Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 7
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation. Notwithstanding anything to the contrary in this Article, the
Corporation shall not indemnify an Indemnitee to the extent such Indemnitee is
reimbursed from the proceeds of insurance, and in the event the Corporation
makes any indemnification payments to an
2
<PAGE>
Indemnitee and such Indemnitee is subsequently reimbursed from the proceeds of
insurance, such Indemnitee shall promptly refund such indemnification payments
to the Corporation to the extent of such insurance reimbursement.
2. Actions or Suits by or in the Right of the Corporation. The
-------------------------------------------------------
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, 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 Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery of Delaware shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding
------------------------------------------------
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
---- ----------
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
4. Notification and Defense of Claim. As a condition precedent to his
---------------------------------
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as
3
<PAGE>
provided below in this Section 4. The Indemnitee shall have the right to employ
his own counsel in connection with such claim, but the fees and expenses of such
counsel incurred after notice from the Corporation of its assumption of the
defense thereof shall be at the expense of the Indemnitee unless (i) the
employment of counsel by the Indemnitee has been authorized by the Corporation,
(ii) counsel to the Indemnitee shall have reasonably concluded that there may be
a conflict of interest or position on any significant issue between the
Corporation and the Indemnitee in the conduct of the defense of such action or
(iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
for the Indemnitee shall be at the expense of the Corporation, except as
otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6
-------------------
below, in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter;
provided, however, that the payment of such expenses incurred by an Indemnitee
- -------- -------
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Corporation as authorized in
this Article. Such undertaking shall be accepted without reference to the
financial ability of the Indemnitee to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification
-----------------------------
or advancement of expenses pursuant to Section 1, 2, 3, or 5 of this Article,
the Indemnitee shall submit to the Corporation a written request, including in
such request such documentation and information as is reasonably available to
the Indemnitee and is reasonably necessary to determine whether and to what
extent the Indemnitee is entitled to indemnification or advancement of expenses.
Any such indemnification or advancement of expenses shall be made promptly, and
in any event within 60 days after receipt by the Corporation of the written
request of the Indemnitee, unless with respect to requests under Section 1, 2 or
5 the Corporation determines within such 60-day period that the Indemnitee did
not meet the applicable standard of conduct set forth in Section 1 or 2, as the
case may be. Such determination shall be made in each instance by (a) a
majority vote of the directors of the Corporation consisting of persons who are
not at that time parties to the action, suit or proceeding in question
("disinterested directors"), whether or not a quorum, (b) a majority vote of a
quorum of the outstanding shares of stock of all classes entitled to vote for
directors, voting as a single class, which quorum shall consist of stockholders
who are not at that time parties to the action, suit or proceeding in question,
(c) independent legal counsel (who may, to the extent permitted by law, be
regular legal counsel to the Corporation), or (d) a court of competent
jurisdiction.
7. Remedies. The right to indemnification or advances as granted by
--------
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation
4
<PAGE>
denies such request, in whole or in part, or if no disposition thereof is made
within the 60-day period referred to above in Section 6. Unless otherwise
required by law, the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Article shall be on the
Corporation. Neither the failure of the Corporation to have made a determination
prior to the commencement of such action that indemnification is proper in the
circumstances because the Indemnitee has met the applicable standard of conduct,
nor an actual determination by the Corporation pursuant to Section 6 that the
Indemnitee has not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the Indemnitee has not met the
applicable standard of conduct. The Indemnitee's expenses (including attorneys'
fees) incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
--------------------
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses
------------
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time
to time by its Board of Directors, grant indemnification rights to other
employees or agents of the Corporation or other persons serving the Corporation
and such rights may be equivalent to, or greater or less than, those set forth
in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
-----------------------
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance,
---------
at its expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of
5
<PAGE>
his status as such, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the General
Corporation Law of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
-----------------------
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
-----------
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of
----------------------
Delaware is amended after adoption of this Article to expand further the
indemnification permitted to Indemnitees, then the Corporation shall indemnify
such persons to the fullest extent permitted by the General Corporation Law of
Delaware, as so amended.
TENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statue and this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
EXECUTED at Westboro, Massachusetts, on April 16, 1996.
/s/ Richard M. Spaulding
----------------------------------
Incorporator
6
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SWITCHBOARD.COM INCORPORATED
Pursuant to Section 242
of the General Corporation Law
of the State of Delaware
__________________________
SWITCHBOARD.COM INCORPORATED (hereinafter called the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify:
Pursuant to a Written Consent of Directors of the Corporation dated July
11, 1996, a resolution was duly adopted, pursuant to Sections 141(f) and 242 of
the General Corporation Law of the State of Delaware, setting forth an amendment
to the Certificate of Incorporation of the Corporation, declaring said amendment
to be advisable and submitting said amendment to the sole stockholder of the
Corporation for consideration thereof. The sole stockholder of the Corporation
approved said proposed amendment, pursuant to a written consent of sole
stockholder, in accordance with Sections 228 and 242 of the General Corporation
Law of the State of Delaware. The resolution setting forth the amendment is as
follows:
RESOLVED: That Article FIRST of the Corporation's Certificate of
--------
Incorporation be and hereby is deleted in its entirety and the
following is inserted in lieu thereof:
"FIRST: The name of the Corporation is: Switchboard
Incorporated."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment of Certificate of Incorporation to be signed by its President this
11/th/ day of July, 1996.
7
<PAGE>
SWITCHBOARD.COM INCORPORATED
By: /s/ David C. Mahoney
--------------------------
David C. Mahoney
President
8
<PAGE>
CERTIFICATE OF INCORPORATION
OF
SWITCHBOARD INCORPORATED
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
---------------------
Switchboard Incorporated (hereinafter called the "Corporation"), organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a resolution was
duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amendment to the Certificate of
Incorporation of the Corporation and declaring said amendment to be advisable.
The sole stockholder of the Corporation duly approved said proposed amendment by
written consent in accordance with sections 228 and 242 of the General
Corporation Law of the State of Delaware. The resolution setting forth the
amendment is as follows:
RESOLVED: That Article FOURTH of the Certificate of Incorporation of the
--------
Corporation be and hereby is deleted in its entirety and the following Article
FOURTH is inserted in lieu thereof:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is (i) 17,500,000 shares of Common
Stock, $.01 par value per share ("Common Stock") and (ii) 4,000,000 shares of
Preferred Stock, $.01 par value per share "Preferred Stock"), 750,000 of which
are designated as Series A Convertible Preferred Stock and 1,500,000 of which
are designated as Series B Convertible Preferred Stock, as set forth below.
The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.
A. COMMON STOCK
------------
9
<PAGE>
1. General. The voting dividend and liquidation rights of the holders of
-------
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
------
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of section 242(b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
---------
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
-----------
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
---------------
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law or except as otherwise set
forth herein. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purposes of voting by classes
unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
special voting rights, conversion rights, redemption privileges and liquidation
preferences, as shall be stated and expressed in such resolutions, all to the
full extent now or hereafter permitted by the General Corporation Law of
Delaware. Without limiting the generality of the foregoing, except as otherwise
specifically provided in this Certificate of Incorporation, the resolutions
providing for issuance of any series of Preferred Stock may provide that such
series shall be superior or rank equally or be junior to the Preferred Stock of
any other series to the extent permitted by law. Except as otherwise
specifically provided in this Certificate of Incorporation, no vote of the
holders of the Preferred Stock or Common Stock shall be a prerequisite to the
issuance of any
10
<PAGE>
shares of any series of the Preferred Stock authorized by and complying with the
conditions of this Certificate of incorporation, the right to have such vote
being expressly waived by all present and future holders of the capital stock of
the Corporation.
C. SERIES A AND B CONVERTIBLE PREFERRED STOCK.
-------------------------------------------
Seven hundred fifty thousand (750,000) shares of the authorized and
unissued Preferred Stock of the Corporation are hereby designated "Series A
Convertible Preferred Stock" (the "Series A Preferred Stock") and one million
five hundred thousand (1,500,000) shares of the authorized and unissued
Preferred Stock of the Corporation are hereby designated "Series B Convertible
Preferred Stock" (the "Series B Preferred Stock"), each with the following
rights, preferences, powers, privileges and restrictions, qualifications and
limitations.
1. Dividends.
---------
Dividends may be declared and paid on the Series A Preferred Stock and
Series B Preferred Stock from funds lawfully available therefor as and when
determined by the Board of Directors and subject to any preferential dividend
rights of any other class or series of then outstanding preferred stock.
2. Liquidation, Dissolution or Winding Up; Certain Mergers,
--------------------------------------------------------
Consolidations and Asset Sales.
------------------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock and Series B Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Corporation available for distribution to
its stockholders, after and subject to the payment in full of all amounts
required to be distributed to the holders of any other class or series of stock
of the corporation ranking on liquidation prior and in preference to the Series
A Preferred Stock and Series B Preferred Stock (collectively referred to as
"Senior Preferred Stock"), but before any payment shall be made to the holders
of Common Stock or any other class or series of stock ranking on liquidation
junior to the Series A Preferred Stock and Series B Preferred Stock (such Common
Stock and other stock being collectively referred to as "Junior Stock") by
reason of their ownership thereof, an amount equal to $4.00 per share in the
case of the Series A Preferred Stock and $6.00 per share in the case of the
Series B Preferred Stock (in each case subject to appropriate adjustment in the
event of any stock dividend, stock split, combination or other similar
recapitalization affecting such shares of Series A Preferred Stock or Series B
Preferred Stock), plus declared but unpaid dividends. If upon any such
liquidation, dissolution or winding up of the Corporation the remaining assets
of the Corporation available for distribution to its stockholders shall be
insufficient to pay the holders of shares of Series A Preferred Stock and Series
B Preferred stock the full amount to which they shall be entitled, the holders
of shares of Series A Preferred Stock and Series B Preferred Stock and any class
or series of stock ranking on liquidation on a parity with the Series A
Preferred Stock and Series B Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts which would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
11
<PAGE>
(b) After the payment of all preferential amounts required to be paid
to the holders of Senior Preferred Stock, Series A Preferred Stock, Series B
Preferred Stock and any other class or series of stock of the Corporation
ranking on liquidation on a parity with the Series A Preferred stock and Series
B Preferred Stock, upon any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, the holders of shares of Common Stock, then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
(c) A consolidation or merger of the Corporation with or into another
corporation or entity (where the Corporation is not the surviving entity and
where the stockholders of the Corporation do not hold a majority of the voting
securities of the surviving corporation), or a sale of all or substantially all
of the assets of the Corporation, shall be deemed a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 2; provided,
--------
however, that each holder of Series A Preferred Stock and Series B Preferred
- -------
Stock shall have the right to elect the benefits of the provisions of Section
4(i) hereof in lieu of receiving payment in liquidation, dissolution or winding
up of the Corporation pursuant to this Section 2(c).
3. Voting.
------
(a) Each holder of outstanding shares of Series A Preferred Stock and
Series B Preferred Stock shall be entitled to the number of votes equal to the
number of whole shares of Common Stock into which the shares of Series A
Preferred Stock and Series B Preferred Stock held by such holder are then
convertible (as adjusted from time to time pursuant to Section 4 hereof), at
each meeting of stockholders of the Corporation (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration.
Except as provided by law, by the provisions of Subsection 3(b) or 3(c) below or
by the provisions establishing any other series of Preferred Stock, holders of
Series A Preferred Stock and Series B Preferred Stock and of any other
outstanding series of Series Preferred Stock shall vote together with the
holders of Common Stock as a single class.
(b) The holders of record of the shares of Series A Preferred Stock
and Series B Preferred Stock, exclusively and as a separate class, shall be
entitled to elect one director of the Corporation ("Series A and B Director"),
and the holders of record of the shares of Common Stock and of any other class
or series of voting stock (including the Series A Preferred Stock and Series B
Preferred Stock), exclusively and as a separate class, shall be entitled to
elect the balance of the total number of directors of the Corporation. At any
meeting held for the purpose of electing directors, the presence in person or by
proxy of the holders of a majority of the shares of Series A Preferred Stock and
Series B Preferred Stock then outstanding shall constitute a quorum of the
Series A Preferred Stock and Series B Preferred Stock for the purpose of
electing the Series A and B Director by holders of the Series A Preferred Stock
and Series B Preferred Stock. A vacancy in the Series A and B Director
directorship shall be filled only by vote or written consent in lieu of a
meeting of the holders of the Series A Preferred Stock and Series B Preferred
Stock. The rights of the holders of the Series A Preferred Stock and Series B
Preferred Stock under this Subsection 3(b) shall terminate on the earlier of (i)
the date on which the outstanding shares of Series A Preferred Stock and Series
B Preferred Stock represent less than
12
<PAGE>
5% of the outstanding shares of Common Stock, after giving effect to the
conversion into Common Stock of all outstanding shares of convertible Preferred
Stock, and (ii) the first anniversary of the closing of the sale by the
corporation of shares of Common Stock in a public offering, underwritten by a
nationally recognized underwriter, pursuant to an effective registration
statement under the Securities Act of 1933, as amended, in which the
Corporation, 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 Corporation on a fully diluted basis by the
initial public offering price) and resulting in at least $15,000,000 of net
proceeds (determined by subtracting underwriters' discounts and commissions from
gross proceeds) to the Corporation.
(c) The Corporation shall not amend alter or repeal the preferences,
special rights or other powers of the Series A Preferred Stock or Series B
Preferred Stock so as to affect adversely the Series A Preferred Stock or Series
B Preferred Stock, without the written consent or affirmative vote of the
holders of a majority of the then outstanding shares of Series A Preferred Stock
or Series B Preferred Stock, respectively, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a class. For
this purpose, without limiting the generality of the foregoing, the
authorization of any shares of capital stock with preference or priority over
the Series A Preferred Stock or Series B Preferred Stock as to redemption
rights, voting rights, the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation, or
otherwise, shall be deemed to affect adversely the Series A Preferred Stock or
Series B Preferred Stock, and the authorization of any shares of capital stock
on a parity with Series A Preferred Stock or Series B Preferred Stock as to the
right to receive either dividends or amounts distributable upon liquidation,
dissolution or winding up of the Corporation shall not be deemed to affect
adversely the Series A Preferred Stock or Series B Preferred Stock,
respectively. The number of authorized shares of Series A Preferred Stock and
Series B Preferred Stock may be increased or decreased (but not below the number
of shares then outstanding) by the directors of the corporation pursuant to
Section 151 of the General corporation Law of Delaware or by the affirmative
vote of the holders of a majority of the then outstanding shares of the Common
Stock, Series A Preferred Stock, Series B Preferred Stock and all other classes
or series of stock of the Corporation entitled to vote thereon, voting as a
single class, irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of Delaware.
4. Optional Conversion. The holders of the Series A Preferred Stock and
-------------------
Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock and
----------------
Series B Preferred Stock shall be convertible, at the option of the holder
thereof, at any time and from time to time, and without the payment of
additional consideration by the holder thereof, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing $4.00 by
the Conversion Price (as defined below) in effect at the time of conversion.
The Conversion Price, shall initially be $4.00. Such initial Conversion Price,
and the rate at which shares of Series A Preferred Stock and Series B Preferred
Stock way be converted into shares of Common Stock, shall be subject to
adjustment as provided below.
13
<PAGE>
In the event of a notice of redemption of any shares of Series A Preferred
Stock or Series B Preferred Stock pursuant to Section 6 hereof, the Conversion
Rights of the shares of Series A Preferred Stock or Series B Preferred Stock,
respectively, designated for redemption shall terminate at the close of business
on the fifth full day preceding the date fixed for redemption, unless the
redemption price is not paid when due, in which case the Conversion Rights of
Series A Preferred Stock or Series B Preferred Stock for such shares shall
continue until such price is paid in full. In the event of a liquidation of the
corporation, the Conversion Rights shall terminate at the close of business on
the first full day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of Series A Preferred Stock or
Series B Preferred Stock, respectively.
(b) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued upon conversion of the Series A Preferred Stock or Series B Preferred
Stock, in lieu of any fractional shares to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction multiplied by
the then effective Conversion Price.
(c) Mechanics of Conversion.
-----------------------
(i) In order for a holder of Series A Preferred Stock or Series
B Preferred Stock to convert shares of Series A Preferred Stock or Series B
Preferred Stock into shares of Common Stock, such holder shall surrender the
certificate or certificates for such shares of Series A Preferred Stock or
Series B Preferred Stock, at the office of the transfer agent for the Series A
Preferred Stock or Series B Preferred Stock, respectively (or at the principal
office of the Corporation if the corporation serves as its own transfer agent),
together with written notice that such holder elects to convert all or any
number of the shares of the Series A Preferred Stock or Series B Preferred stock
represented by such certificate or certificates. Such notice shall state such
holder's name or the names of the nominees in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. If required
by the Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or his
or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date") and such holder shall be treated as a record holder of
Common Stock on such date. The Corporation shall, as soon as practicable after
the Conversion Date, issue and deliver at such office to such holder of Series A
Preferred Stock or Series B Preferred Stock, or to his or its nominees, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled, together with cash in lieu of any fraction of a
share, and a certificate or certificates for the number of shares of Series A
Preferred Stock or Series B Preferred Stock represented by the surrendered
certificate but not converted.
(ii) The Corporation shall at all times when the Series A
Preferred Stock or Series B Preferred Stock shall be outstanding, reserve and
keep available out of its authorized but unissued stock, for the purpose of
effecting the conversion of the Series A Preferred Stock or Series B Preferred
Stock, such number of its duly authorized shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding Series A
Preferred Stock or Series B Preferred Stock. Before taking any action which
would
14
<PAGE>
cause an adjustment reducing the Conversion Price below the then par value of
the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock or Series B Preferred Stock, the Corporation will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue fully paid and nonassessable shares of
Common Stock at such adjusted Conversion Price.
(iii) Upon any such conversion, adjustment to the Conversion
Price of Series A Preferred Stock or Series B Preferred Stock, shall be made for
any declared but unpaid dividends on the Series A Preferred Stock or Series B
Preferred Stock, respectively, surrendered for conversion or on the Common Stock
delivered upon conversion.
(iv) All shares of Series A Preferred Stock and Series B
Preferred Stock which shall have been surrendered for conversion as herein
provided shall no longer be deemed to be outstanding and all rights with respect
to such shares, including the rights, if any, to receive notices and to vote,
shall immediately cease and terminate on the Conversion Date, except only the
right of the holders thereof to receive shares of Common Stock in exchange
therefor and payment of any dividends declared but unpaid thereon. Any shares of
Series A Preferred Stock or Series B Preferred Stock so converted shall be
retired and cancelled and shall not be reissued, and the Corporation (without
the need for stockholder action) may from time to time take such appropriate
action as may be necessary to reduce the authorized Series A Preferred Stock and
Series B Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and other taxes
that may be payable in respect of any issuance or delivery of shares of Common
Stock upon conversion of shares of Series A Preferred Stock or Series B
Preferred Stock pursuant to this Section 4. The Corporation shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of shares of Common Stock in a name other
than that in which the shares of Series A Preferred Stock or Series B Preferred
Stock so converted were registered, and, to the extent the Company would be
required to pay such a tax, no such issuance or delivery shall be made unless
and until the person or entity requesting such issuance has paid to the
Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid.
(d) Adjustments to Conversion Price for Diluting Issues:
---------------------------------------------------
(i) Special Definitions. For purposes of this Subsection 4(d),
-------------------
the following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
------
subscribe for, purchase or otherwise acquire common Stock or Convertible
Securities, excluding options described in subsection 4(d)(i)(D)(IV) below.
(B) "Original Issue Date" shall mean the date on which a
-------------------
share of Series A Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
15
<PAGE>
(D) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued (or, pursuant to Subsection 4(d)(iii) below,
deemed to be issued by the Corporation after the Original issue Date, other than
shares of Common Stock issued or issuable:
(I) upon conversion of any Convertible Securities
outstanding on the Original Issue Date, or upon
exercise of any Options outstanding on the
original Issue Date;
(II) as a dividend or distribution on Series A
Preferred Stock or Series B Preferred Stock;
(III) by reason of a dividend, stock split, split-up
or other distribution on shares of Common Stock
that is covered by Subsection 4(e) or 4(f) below;
or
(IV) to employees, officers or directors of, or
consultants or advisors to, the Corporation
pursuant to a plan adopted by the Board of
Directors of the Corporation (which, together
with all other such plans, provides for the
issuance of no more than an aggregate of
1,500,000 shares of Common Stock (subject to
appropriate adjustment in the event of any stock
dividend, stock split, combination or other
similar recapitalization affecting the Common
Stock).
(ii) No Adjustment of Conversion Price. No adjustment in the number
---------------------------------
of shares of Common Stock into which the Series A Preferred Stock or Series B
Preferred Stock is convertible shall be made, by adjustment in the applicable
Conversion Price thereof, unless the consideration per share (determined
pursuant to subsection 4(d)(v)) for an Additional Share of Common Stock issued
or deemed to be issued by the Corporation is less than the applicable Conversion
Price in effect on the date of, and immediately prior to, the issue of such
Additional Shares.
(iii) Issue of Securities Deemed Issue of Additional Shares of
--------------------------------------------------------
Common Stock.
------------
If the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a
16
<PAGE>
record date shall have been fixed, as of the close of business on such record
date, provided that Additional Shares of Common Stock shall not be deemed to
have been issued unless the consideration per share (determined pursuant to
Subsection 4(d)(v) hereof) of such Additional Shares of Common Stock would be
less than the applicable Conversion Price in effect on the date of and
immediately prior to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
(A) No further adjustment in the Conversion Price shall be
made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) If such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, upon the exercise, conversion or
exchange thereof, the Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase becoming
effective, be recomputed to reflect such increase insofar as it affects such
options or the rights of conversion or exchange under such Convertible
Securities;
(C) Upon the expiration or termination of any unexercised
option, the Conversion Price shall be readjusted, and the Additional Shares of
Common Stock deemed issued as the result of the original issue of such option
shall not be deemed issued for the purposes of any subsequent adjustment of the
Conversion Price;
(D) In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Conversion Price then in effect shall
forthwith be readjusted to such Conversion Price as would have obtained had the
adjustment which was made upon the issuance of such Option or Convertible
Security prior to such change been made upon the basis of such change; and
(E) No readjustment pursuant to clause (B), (C) or (D)
above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of W the Conversion Price on the original adjustment
date, or (ii) the Conversion Price that would have resulted from any issuances
of Additional Shares of Common Stock between the original adjustment date and
such readjustment date.
In the event the Corporation, after the Original Issue Date, amends the
terms of any Options or Convertible Securities (whether such options or
Convertible Securities were outstanding on the Original Issue Date or were
issued after the Original Issue Date), then such options or Convertible
Securities, as so amended, shall be deemed to have been issued after the
Original Issue Date and the provisions of this Subsection 4(d)(iii) shall apply.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock.
----------------------
17
<PAGE>
In the event the Corporation shall at any time after the Original Issue
Date issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Subsection 4(d)(iii), but excluding
shares issued as a stock split or combination as provided in Subsection 4(e) or
upon a dividend or distribution as provided in Subsection 4(f)), without
consideration or for a consideration per share less than the applicable
Conversion Price in effect on the date of and immediately prior to such
issuance, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction, (A) the numerator
of which shall be (1) the number of shares of Common Stock outstanding
immediately prior to such issue plus (2) the number of shares of Common Stock
which the aggregate consideration received or to be received by the Corporation
for the total number of Additional Shares of Common Stock so issued would
purchase at such Conversion Price; and (B) the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued; provided
--------
that, (i) for the purpose of this Subsection 4(d)(iv), all shares of Common
- ----
Stock issuable upon exercise or conversion of Options (including the conversion
into Common Stock of Convertible Securities issuable upon the exercise of such
Options) or Convertible Securities outstanding immediately prior to such issue
shall be deemed to be outstanding, (ii) the number of shares of Common Stock
deemed issuable upon exercise or conversion of such outstanding Options and
convertible Securities shall not give effect to any adjustments to the
conversion price or conversion rate of such Options or Convertible Securities
resulting from the issuance of Additional Shares of Common Stock that is the
subject of this calculation, and (iii) immediately after any Additional Shares
of Common Stock are deemed issued pursuant to Section 4(d)(iii), such Additional
Shares of Common Stock shall be deemed to be outstanding.
(v) Determination of Consideration. For purposes of this
------------------------------
Subsection 4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
-----------------
(I) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the corporation, excluding amounts paid
or payable for accrued interest or accrued dividends;
(II) insofar as it consists of property other than
cash, be computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (I) and (II) above,
as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration
----------------------------------
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been
18
<PAGE>
issued pursuant to Subsection 4(d)(iii), relating to Options and Convertible
Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of options for Convertible
Securities, the exercise of such Options for Convertible securities and the
conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(vi) Multiple Closing Dates. In the event the Corporation shall issue
----------------------
on more than one date Additional Shares of Common Stock which are comprised of
shares of the same series or class of Preferred Stock, and such issuance dates
occur within a period of no more than 120 days, then the Conversion Price shall
be adjusted only once on account of such issuances, with such adjustment to
occur upon the final such issuance and to give effect to all such issuances as
if they occurred on the date of the final such issuance.
(e) Adjustment for Stock Splits and Combination. If the Corporation
-------------------------------------------
shall at any time or from time to time after the Original Issue Date effect a
subdivision of the outstanding Common Stock into a greater number of shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in
Common Stock), the Conversion Price then in effect immediately before that
subdivision shall be proportionately decreased. If the Corporation shall at any
time or from time to time after the Original Issue Date combine the outstanding
shares of Common Stock into a lesser number of shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the event
--------------------------------------------------
the Corporation at any time, or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price for the Series A Preferred Stock and Series B Preferred stock then in
effect shall be decreased as of the time of such issuance or, in the event such
a record date shall have been fixed, as of the close of business on such record
date, by multiplying the Conversion Price for the Series A Preferred Stock or
Series B Preferred Stock, as applicable, then in effect by a fraction:
19
<PAGE>
(1) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of shares
of Common Stock issuable in payment of such dividend or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for the Series A Preferred Stock and Series B
Preferred Stock shall be recomputed accordingly as of the close of business on
such record date and thereafter the Conversion Price for the Series A Preferred
Stock and Series B Preferred Stock shall be adjusted pursuant to this paragraph
as of the time of actual payment of such dividends or distributions; and
provided further, however, that no such adjustment shall be made to Series A
Preferred Stock or Series B Preferred Stock if the holders of Series A Preferred
Stock or Series B Preferred Stock, respectively, simultaneously receive a
dividend or other distribution of shares of Common Stock in a number equal to
the number of shares of Common Stock as they would have received it all
outstanding shares of Series A Preferred Stock or Series B Preferred Stock,
respectively, had been converted into Common Stock on the date of such event.
(g) Adjustments for other Dividends and Distributions. In the event
-------------------------------------------------
the Corporation at any time or from time to time after the Original Issue Date
for the Series A Preferred Stock or Series B Preferred Stock shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, then and in each such event
provision shall be made so that the holders of the Series A Preferred Stock or
Series B Preferred Stock, respectively, shall receive upon conversion thereof in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation that they would have received had the
Series A Preferred Stock or Series B Preferred Stock, respectively, been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period, giving application to all adjustments called for during such period
under this paragraph with respect to the rights of the holders of the Series A
Preferred Stock or Series B Preferred Stock; and provided further, however, that
no such adjustment to the Series A Preferred Stock or Series B Preferred Stock
shall be made if the holders of Series A Preferred Stock or Series B Preferred
Stock, respectively, simultaneously receive a dividend or other distribution of
such securities in an amount equal to the amount of such securities as they
would have received if all outstanding shares of Series A Preferred Stock or
Series B Preferred Stock, respectively, had been converted into Common Stock on
the date of such event.
(h) Adjustment for Reclassification, Exchange, or Substitution. If
----------------------------------------------------------
the Common Stock issuable upon the conversion of the Series A Preferred Stock or
Series B Preferred Stock shall be changed into the same or a different number of
shares of any class or classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a
20
<PAGE>
subdivision or combination of shares or stock dividend provided for above, or a
reorganization, merger, consolidation, or sale of assets provided for below),
then and in each such event the holder of each such share of Series A Preferred
Stock or series B Preferred Stock, respectively, shall have the right thereafter
to convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization. reclassification,
or other change, by holders of the number of shares of Common Stock into which
such shares of Series A ' Preferred Stock or Series B Preferred Stock,
respectively, might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further adjustment
as provided herein.
(i) Adjustment for merger or-Reorganization, etc. In case of any
--------------------------------------------
consolidation or merger of the Corporation with or into another corporation or
the sale or transfer of all or substantially all of the assets of the
Corporation to another corporation, each share of Series A Preferred Stock and
Series B Preferred Stock shall thereafter be convertible into the kind and
amount of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock of the Corporation deliverable upon
conversion of such Series A Preferred Stock and Series B Preferred Stock,
respectively, would have been entitled upon such consolidation, merger, sale or
transfer; and, in such case, appropriate adjustment (as determined in good faith
by the Board of Directors) shall be made in the application of the provisions in
this Section 4 set forth with respect to the rights and interest thereafter of
the holders of the Series A Preferred Stock or Series B Preferred Stock, to the
end that the provisions set forth in this Section 4 (including provisions with
respect to changes in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the Series A Preferred Stock or Series B Preferred Stock, respectively. Each
holder of Series A Preferred Stock or Series B Preferred Stock, upon the
occurrence of a merger or consolidation of the Corporation into or with another
corporation (where the Corporation is not the surviving entity and where the
stockholders of the Corporation fail to hold a majority of the voting securities
of the surviving corporation) or the sale or all or substantially all of the
assets of the Corporation, shall have the option of electing treatment of his
shares of Series A Preferred Stock and Series B Preferred Stock under either
this Section 4(i) or Section 2(c) hereof.
(j) No Impairment. The Corporation will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as my be necessary or appropriate
in order to protect the Conversion Rights of the holders of the Series A
Preferred Stock and Series B Preferred Stock against impairment.
(k) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock and Series B Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time
21
<PAGE>
of any holder of Series A Preferred Stock or Series B Preferred Stock, furnish
or cause to be furnished to such holder a similar certificate setting forth W
such adjustments and readjustments, (ii) the Conversion Price then in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which then would be received upon the conversion of Series A Preferred
Stock or Series B Preferred Stock.
(l) Notice of Record Date. In the event:
---------------------
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock, whether in cash,
property, stock or other securities;
(ii) that the Corporation offers for subscription pro rata to
the holders of any class or series of its capital stock any
additional shares of stock of any class or series or other
rights;
(iii) that the Corporation subdivides or combines its outstanding
shares of Common Stock;
(iv) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock or a stock dividend or
stock distribution thereon), or of any consolidation or
merger of the Corporation into or with another corporation,
or of the sale of all or substantially all of the assets of
the Corporation; or
(v) of the involuntary or voluntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock and Series B
Preferred Stock, and shall cause to be mailed by first class mail postage
prepaid to the holders of the Series A Preferred Stock and Series B Preferred
stock at their last addresses as shown on the records of the Corporation or such
transfer agent, at least twenty (20) days prior to the date specified in (A)
below or twenty days before the date specified in (B) below, a notice stating
(A) the record date of such dividend, distribution,
subscription right, subdivision or combination, or, if
a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to
such dividend, distribution, subdivision or
combination are to be determined, or
(B) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation
or winding up is expected to become effective, and the
date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their
shares of Common Stock for securities or other
property deliverable upon such
22
<PAGE>
reclassification, consolidation, merger, sale,
dissolution or winding up.
5. Mandatory Conversion.
-----------------------
(a) Upon the closing of the sale of shares of Common Stock in a
public offering, underwritten by a nationally recognized underwriter, pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, in which the Corporation, 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 Corporation on a fully diluted
basis by the initial public offering price) and resulting in at least
$15,000,000 of net proceeds (determined by subtracting underwriters, discounts
and commissions from gross proceeds) to the Corporation (the "Mandatory
Conversion Date"), (i) all outstanding shares of Series A Preferred Stock and
Series B Preferred Stock shall automatically be converted into shares of Common
Stock, at the then effective conversion rate and (ii) the number of authorized
shares of Preferred Stock shall be automatically reduced by the number of shares
of Preferred Stock that had been designated as Series A Preferred Stock and
Series B Preferred Stock, and all provisions included under the caption "Series
A Convertible Preferred Stock" and Series B Preferred Stock and all references
to the' Series A Preferred Stock, shall be deleted and shall be of no further
force or effect.
(b) All holders of record of shares of series A Preferred Stock or
Series B Preferred Stock shall be given written notice of the Mandatory
Conversion Date and the place designated for mandatory conversion of all such
shares of Series A Preferred Stock or Series B Preferred Stock, respectively,
pursuant to this Section 5. Such notice need not be given in advance of the
occurrence of the Mandatory Conversion Date. All holders of record of shares of
Series A Preferred Stock and Series B Preferred Stock shall be given written
notice of the filing by the Corporation of a registration statement under the
Securities Act of 1933, as amended, in connection with which the Corporation is
proposing to undertake a public offering, the closing date of which would be the
"Mandatory Conversion Date" as defined in paragraph (a) above. Such notice
shall be given within ten days following the filing of such registration
statement. Any notice required pursuant to this paragraph (b) shall be sent by
first class or registered mail, postage prepaid, to each record holder of Series
A Preferred Stock or Series B Preferred Stock at such holder's address last
shown on the records of the transfer agent for the Series A Preferred Stock or
Series B Preferred Stock (or the records of the Corporation, if it serves as its
own transfer agent). Upon receipt of such notice, each holder of shares of
Series A Preferred Stock or Series B Preferred Stock shall surrender his or its
certificate or certificates for all such shares to the Corporation at the place
designated in such notice, and shall thereafter receive certificates for the
number of shares of Common Stock to which such holder is entitled pursuant to
this Section 5. On the Mandatory Conversion Date, all rights with respect to
the Series A Preferred Stock and Series B Preferred Stock so converted,
including the rights, if any, to receive notices and vote (other than as a
holder of Common Stock) will terminate, except only the rights of the holders
thereof, upon surrender of their certificate or certificates therefor, to
receive certificates for the number of shares of Common Stock into which such
Series A Preferred Stock and Series B Preferred Stock has been converted, and
payment of any declared but unpaid dividends thereon. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to
23
<PAGE>
the corporation, duly executed by the registered holder or by his or its
attorney duly authorized in writing. As soon as practicable after the Mandatory
Conversion Date and the surrender of the certificate or certificates for Series
A Preferred Stock or Series B Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection 4(b) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series A Preferred Stock
and Series B Preferred Stock which are required to be surrendered for conversion
in accordance with the provisions hereof shall, from and after the Mandatory
Conversion Date, be deemed to have been retired and cancelled and the shares of
Series A Preferred Stock and Series B Preferred Stock represented thereby
converted into Common Stock for all purposes, notwithstanding the failure of the
holder or holders thereof to surrender such certificates on or prior to such
date. The Corporation may thereafter take such appropriate action (without the
need for stockholder action) as may be necessary to reduce the authorized Series
A Preferred Stock and Series B Preferred Stock accordingly.
6. Mandatory Redemption.
-----------------------
(a) The Corporation will, subject to the conditions set forth in
Subsection 6(b) below, upon the request of any holder of the Series A Preferred
Stock or Series B Preferred Stock delivered in writing to the Company at least
six (6) months prior to the applicable Mandatory Redemption Date (as defined
below) in accordance with Section 6(c) below, on June 30, 2000 and on each of
the first and second anniversaries thereof (each such date being referred to
hereinafter as a "Mandatory Redemption Date"), redeem from such holder of shares
of Series A Preferred Stock and Series B Preferred Stock, at a price equal to
(i) in the case of Series A Preferred Stock, $4.00 per share, and in the case of
Series B Preferred Stock, $6.00 per share, plus accrued interest at a rate equal
to the "prime rate" of Citibank, NA, as announced from time to time, plus 2% per
annum, plus (ii) any dividends declared but unpaid thereon, subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares (the
"Mandatory Redemption Price"), the following respective portions of the
aggregate number of shares of Series A Preferred Stock and Series B Preferred
stock held by such holder for which Corporation received cash in payment for the
issuance and sale thereof, on the applicable Mandatory Redemption Date:
Portion of Shares of Series A
Redemption Date Preferred Stock and Series B
--------------- Preferred Stock To Be Redeemed
---------------------------------------
June 30, 2000 33%
June 30, 2001 Any shares of Series A Preferred Stock
and Series B Preferred Stock entitled
to be redeemed on the first Mandatory
Redemption Date that were not redeemed
plus 50% of all
24
<PAGE>
remaining shares of Series A Preferred
Stock
June 30, 2002 100% (or all remaining shares of Series A
Preferred Stock and Series B Preferred
Stock)
(b) If the funds of the Corporation legally available for redemption
of Series A Preferred Stock and Series B Preferred Stock on any Mandatory
Redemption Date are insufficient to redeem the number of shares of Series A
Preferred Stock and Series B Preferred Stock required under this Section 6 to be
redeemed on such date, those funds which are legally available will be used to
redeem the maximum possible number of such shares of Series A Preferred Stock
and Series B Preferred Stock ratably on the basis of the number of shares of
Series A Preferred Stock and Series B Preferred Stock which would be redeemed on
such date if the funds of the Corporation legally available therefor had been
sufficient to redeem all shares of Series A Preferred Stock and Series B
Preferred Stock required to be redeemed on such date. At any time thereafter
when additional funds of the Corporation become legally available for the
redemption of Series A Preferred Stock and Series B Preferred Stock, such funds
will be used, at the end of the next succeeding fiscal quarter, to redeem the
balance of the shares which the Corporation was theretofore obligated to redeem,
or such portion thereof for which funds are available, ratably on the basis set
forth in the preceding sentence.
(c) The holder of Series A Preferred Stock or Series B Preferred
Stock requesting redemption shall provide notice of any redemption of Series A
Preferred Stock or Series B Preferred Stock pursuant to this Section 6, by
registered mail, postage prepaid, to the Corporation not less than six (6)
months prior to the date on which such redemption is to be made. The notice will
specify the number of shares which are to be redeemed. Upon receipt of any such
notice of redemption, the Corporation will become obligated to redeem on the
applicable Mandatory Redemption Date all Series A Preferred Stock and Series B
Preferred Stock specified therein (other than such shares of Series A Preferred
Stock and Series B Preferred Stock as are duly converted pursuant to Section 4
prior to the close of business on the fifth full day preceding the Mandatory
Redemption Date). In case less than all Series A Preferred Stock or Series B
Preferred Stock represented by any certificate is redeemed in any redemption
pursuant to this Section 6, a new certificate will be issued representing the
unredeemed Series A Preferred Stock or Series B Preferred Stock without cost to
the holder thereof.
(d) Unless there shall have been a default in payment of the
Mandatory Redemption Price, no share of Series A Preferred Stock that is
redeemed shall be entitled to any dividends declared after its Mandatory
Redemption Date, and on such Mandatory Redemption Date all rights of the holder
of such share as a stockholder of the Corporation by reason of the ownership of
such share will cease, except the right to receive the Mandatory Redemption
Price of such share, without interest, upon presentation and surrender of the
certificate representing such share, and such share will not from and after such
Mandatory Redemption Date be deemed to be outstanding.
25
<PAGE>
(e) Any Series A Preferred Stock or Series B Preferred Stock redeemed
pursuant to this Section 6 will be cancelled and will not under any
circumstances be reissued, sold or transferred and the Corporation may from time
to time take such appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock and Series B Preferred Stock accordingly.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
this 1/st/ day of November, 1996.
SWITCHBOARD INCORPORATED
/s/ Jeffrey D. Glidden
----------------------------
President Jeffrey D. Glidden
26
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SWITCHBOARD INCORPORATED
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
---------------------
Switchboard Incorporated (hereinafter called the "Corporation"), organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a resolution was
duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amendment to the Certificate of
Incorporation of the Corporation and declaring said amendment to be advisable.
The stockholders of the Corporation duly approved said proposed amendment by
written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware and written notice of such consent has
been given to all stockholders who have not consented in writing to such
amendment. The resolution setting forth the amendment is as follows:
RESOLVED: That Article FOURTH of the Certificate of Incorporation of the
--------
Corporation be and hereby is deleted in its entirety and the following Article
FOURTH is inserted in lieu thereof:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is (i) 17,500,000 shares of Common
Stock, $.01 par value per share ("Common Stock") and (ii) 4,500,000 shares of
Preferred Stock, $.01 par value per share ("Preferred Stock"), 750,000 of which
are designated as Series A Convertible Preferred Stock, 1,500,000 of which are
designated as Series B Convertible Preferred Stock and 2,250,000 of which are
designated as Series C Convertible Preferred Stock, as set forth below.
The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.
27
<PAGE>
A. COMMON STOCK.
------------
1. General. The voting, dividend and liquidation rights of the holders
-------
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
------
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
---------
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
-----------
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
---------------
Preferred Stock may be issued from time to time in one or more series each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law or except as otherwise set
forth herein. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purposes of voting by classes
unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
special voting rights, conversion rights, redemption privileges and liquidation
preferences, as shall be stated and expressed in such resolutions, all to the
full extent now or hereafter permitted by the General Corporation Law of
Delaware. Without limiting the generality of the foregoing, except as otherwise
specifically provided in this Certificate of Incorporation, the resolutions
providing for issuance of any series of Preferred Stock may provide that such
series shall be superior or rank equally or be junior to the Preferred Stock of
any other series to the extent permitted by law. Except as otherwise
specifically provided in this Certificate of Incorporation, no vote of the
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<PAGE>
holders of the Preferred Stock or Common Stock shall be a prerequisite to the
issuance of any shares of any series of the Preferred Stock authorized by and
complying with the conditions of this Certificate of Incorporation, the right to
have such vote being expressly waived by all present and future holders of the
capital stock of the Corporation.
C. SERIES A, B AND C CONVERTIBLE PREFERRED STOCK.
---------------------------------------------
Seven hundred fifty thousand (750,000) shares of the authorized and
unissued Preferred Stock of the Corporation are hereby designated "Series A
Convertible Preferred Stock" (the "Series A Preferred Stock"), one million five
hundred thousand (1,500,000) shares of the authorized and unissued Preferred
Stock of the Corporation are hereby designated "Series B Convertible Preferred
Stock" (the "Series B Preferred Stock"), and two million two hundred fifty
thousand (2,250,000) shares of the authorized and unissued Preferred Stock of
the Corporation are hereby designated "Series C Convertible Preferred Stock"
(the "Series C Preferred Stock") each with the following rights, preferences,
powers, privileges and restrictions, qualifications and limitations.
1. Dividends.
---------
Dividends may be declared and paid on the Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock from funds lawfully available
therefor as and when determined by the Board of Directors and subject to any
preferential dividend rights of any other class or series of then outstanding
preferred stock.
2. Liquidation, Dissolution or Winding Up; Certain Mergers,
--------------------------------------------------------
Consolidations and Asset Sales.
------------------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, after and subject to the payment
in full of all amounts required to be distributed to the holders of any other
class or series of stock of the Corporation ranking on liquidation prior and in
preference to the Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock (collectively referred to as "Senior Preferred Stock"), but
before any payment shall be made to the holders of Common Stock or any other
class or series of stock ranking on liquidation junior to the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock (such Common Stock
and other stock being collectively referred to as "Junior Stock") by reason of
their ownership thereof, an amount equal to $4.00 per share in the case of the
Series A Preferred Stock and Series C Preferred Stock and $6.00 per share in the
case of the Series B Preferred Stock (in each case subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock), plus declared but unpaid
dividends. If upon any such liquidation, dissolution, or winding up of the
Corporation the remaining assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders of shares of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock the
full amount to which they shall be entitled, the holders of shares of Series A
Preferred Stock,
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<PAGE>
Series B Preferred Stock and Series C Preferred Stock and any class or series of
stock ranking on liquidation on a parity with the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts which would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
(b) After the payment of all preferential amounts required to be paid
to the holders of Senior Preferred Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and any other class or series of stock
of the Corporation ranking on liquidation on a parity with the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, upon any
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, the holders of shares of Common Stock then outstanding shall be
entitled to receive the remaining assets and funds of the Corporation available
for distribution to its stockholders.
(c) A consolidation or merger of the Corporation with or into another
corporation or entity (where the Corporation is not the surviving entity and
where the stockholders of the Corporation do not hold a majority of the voting
securities of the surviving corporation), or a sale of all or substantially all
of the assets of the Corporation, shall be deemed a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 2; provided,
--------
however that each holder of Series A Preferred Stock and Series B Preferred
- -------
Stock shall have the right to elect the benefits of the provisions of Section
4(i) hereof in lieu of receiving payment in liquidation, dissolution or winding
up of the Corporation pursuant to this Section 2(c).
3. Voting.
------
(a) Each holder of outstanding shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be entitled to the
number of votes equal to the number of whole shares of Common Stock into which
the shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock held by such holder are then convertible (as adjusted from time
to time pursuant to Section 4 hereof), at each meeting of stockholders of the
Corporation (and written actions of stockholders in lieu of meetings) with
respect to any and all matters presented to the stockholders of the Corporation
for their action or consideration. Except as provided by law, by the provisions
of Subsection 3(b) or 3(c) below or by the provisions establishing any other
series of Preferred Stock, holders of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock and of any other outstanding series
of Series Preferred Stock, shall vote together with the holders of Common Stock
as a single class.
(b) (1) The holders of record of the shares of Series A Preferred
Stock and Series B Preferred Stock, exclusively and as a separate class, shall
be entitled to elect one director of the Corporation ("Series A and B
Director"), and, except as set forth in (2) below, the holders of record of the
shares of Common Stock and of any other class or series of voting stock
(including the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock), exclusively and as a separate class, shall be entitled to
elect the balance of the total number of directors of the Corporation. At any
meeting held for the purpose of electing directors, the presence in person or by
proxy of the holders of a majority of the shares of Series A Preferred
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<PAGE>
Stock and Series B Preferred Stock then outstanding shall constitute a quorum of
the Series A Preferred Stock and Series B Preferred Stock for the purpose of
electing the Series A and B Director by holders of the Series A Preferred Stock
and Series B Preferred Stock. A vacancy in the Series A and B Director
directorship shall be filled only by vote or written consent in lieu of a
meeting of the holders of the Series A Preferred Stock and Series B Preferred
Stock. The rights of the holders of the Series A Preferred Stock and Series B
Preferred Stock under this Subsection 3(b)(1) shall terminate on the earlier of
(i) the date on which the outstanding shares of Series A Preferred Stock and
Series B Preferred Stock represent less than 5% of the outstanding shares of
Common Stock, after giving effect to the conversion into Common Stock of all
outstanding shares of convertible Preferred Stock, and (ii) the first
anniversary of the closing of the sale by the Corporation of shares of Common
Stock in a public offering, underwritten by a nationally recognized underwriter,
pursuant to an effective registration statement under the Securities Act of
1933, as amended, in which the Corporation, 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 Corporation
on a fully diluted basis by the initial public offering price) and resulting in
at least $15,000,000 of net proceeds (determined by subtracting underwriters'
discounts and commissions from gross proceeds) to the Corporation.
(2) The holders of record of the shares of Series C Preferred
Stock, exclusively and as a separate class, shall be entitled to elect one
director of the Corporation ("Series C Director"), and, except as set forth in
(1) above, the holders of record of the shares of Common Stock and of any other
class or series of voting stock (including the Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock), exclusively and as a separate
class, shall be entitled to elect the balance of the total number of directors
of the Corporation- At any meeting held for the purpose of electing directors,
the presence in person or by proxy of the holders of a majority of the shares of
Series C Preferred Stock then outstanding shall constitute a quorum of the
Series C Preferred Stock for the purpose of electing the Series C Director by
holders of the Series C Preferred Stock. A vacancy in the Series C Director
directorship shall be filled only by vote or written consent in lieu of a
meeting of the holders of the Series C Preferred Stock. The rights of the
holders of the Series C Preferred Stock under this Subsection 3(b)(2) shall
commence on the date that the outstanding shares of Series C Preferred Stock
represent at least 5% of the outstanding shares of Common Stock, after giving
effect to the conversion into Common Stock of all outstanding shares of
convertible Preferred Stock, and shall terminate on the earlier of (i) the date
on which the outstanding shares of Series C Preferred Stock represent less than
5% of the outstanding shares of Common Stock, after giving effect to the
conversion into Common Stock of all outstanding shares of convertible Preferred
Stock, and (ii) the first anniversary of the closing of the sale by the
Corporation of shares of Common Stock in a public offering, underwritten by a
nationally recognized underwriter, pursuant to an effective registration
statement under the Securities Act of 1933, as amended, in which the
Corporation, prior to giving effect to the proceeds of the Offering, is valued
at at least $135,000,000 (determined by multiplying the number of outstanding
shares of capital stock of the Corporation on a fully diluted basis by the
initial public offering price) and resulting in at least $15,000,000 of net
proceeds (determined by subtracting underwriters' discounts and commissions from
gross proceeds) to the Corporation.
(c) The Corporation shall not amend, alter or repeal the preferences,
special rights or other powers of the Series A Preferred Stock, Series B
Preferred Stock or Series C
31
<PAGE>
Preferred Stock so as to affect adversely the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, without the written consent or
affirmative vote of the holders of a majority of the then outstanding shares of
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
respectively, given in writing or by vote at a meeting, consenting or voting (as
the case may be) separately as a class. For this purpose, without limiting the
generality of the foregoing, the authorization of any shares of capital stock
with preference or priority over the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock as to redemption rights, voting
rights, the right to receive either dividends or amounts distributable upon
liquidation, dissolution or winding up of the Corporation, or otherwise, shall
be deemed to affect adversely the Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock, and the authorization of any shares of
capital stock on a parity with Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock as to the right to receive either dividends or
amounts distributable upon liquidation, dissolution or winding up of the
Corporation shall not be deemed to affect adversely the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, respectively. The
number of authorized shares of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock may be increased or decreased (but not below
the number of shares dim outstanding) by the directors of the Corporation
pursuant to Section 151 of the General Corporation Law of Delaware or by the
affirmative vote of the holders of a majority of the then outstanding shares of
the Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and all other classes or series of stock of the Corporation
entitled to vote thereon, voting as a single class, irrespective of the
provisions of Section 242(b)(2) of the General Corporation Law of Delaware.
4. Optional Conversion. The holders of the Series A Preferred Stock,
-------------------
Series B Preferred Stock and Series C Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock, Series
----------------
B Preferred Stock and Series C Preferred Stock shall be convertible, at the
option of the holder thereof, at any time and from time to time, and without the
payment of additional consideration by the holder thereof, into such number of
fully paid and nonassessable shares of Common Stock as is determined by dividing
$4.00 by the Conversion Price (as defined below) in effect at the time of
conversion. The "Conversion Price" shall initially be $4.00. Such initial
Conversion Price, and the rate at which shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock may be converted into
shares of Common Stock, shall be subject to adjustment as provided below.
In the event of a notice of redemption of any shares of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock pursuant to Section
6 hereof, the Conversion Rights of the shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, respectively, designated
for redemption shall terminate at the close of business on the fifth full day
preceding the date fixed for redemption, unless the redemption price is not paid
when due, in which case the Conversion Rights of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock for such shares shall
continue until such price is paid in full- In the event of a liquidation of the
Corporation, the Conversion Rights shall terminate at the close of business on
the first full day preceding the date fixed for the payment of any amounts
distributable on
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<PAGE>
liquidation to the holders of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock, respectively.
(b) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued upon conversion of the Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock. In lieu of any fractional shares to which the
holder would otherwise be entitled, the Corporation shall pay cash equal to such
fraction multiplied by the then effective Conversion Price.
(c) Mechanics of Conversion.
-----------------------
(i) In order for a holder of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock to convert shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock into
shares of Common Stock, such holder shall surrender the certificate or
certificates for such shares of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock, at the office of the transfer agent for the
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
respectively (or at the principal office of the Corporation if the Corporation
serves as its own transfer agent), together with written notice that such holder
elects to convert all or any number of the shares of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock represented by such
certificate or certificates. Such notice shall state such holders name or the
names of the nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or his
or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date") and such holder shall be treated as a record holder of
Common Stock on such date. The Corporation shall, as soon as practicable after
the Conversion Date, issue and deliver at such office to such holder of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, or to his
or its nominees, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled, together with cash in lieu
of any fraction of a share, and a certificate or certificates for the number of
shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock represented by the surrendered certificate but not converted.
(ii) The Corporation shall at all times when the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock shall be
outstanding, reserve and keep available out of its authorized but unissued
stock, for the purpose of effecting the conversion of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, such number of its
duly authorized shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock. Before taking any action which
would cause an adjustment reducing the Conversion Price below the then par value
of the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, the Corporation
will take any corporate action which may, in the opinion of its counsel, be
33
<PAGE>
necessary in order that the Corporation may validly and legally issue fully paid
and nonassessable shares of Common Stock at such adjusted Conversion Price.
(iii) Upon any such conversion, adjustment to the Conversion
Price of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, shall be made for any declared but unpaid dividends on the
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
respectively, surrendered for conversion or on the Common Stock delivered upon
conversion.
(iv) All shares of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock which shall have been surrendered for
conversion as herein provided shall no longer be deemed to be outstanding and
all rights with respect to such shares, including the rights, if any, to receive
notices and to vote, shall immediately cease and terminate on the Conversion
Date, except only the right of the holders thereof to receive shares of Common
Stock in exchange therefor and payment of any dividends declared but unpaid
thereon. Any shares of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock so converted shall be retired and cancelled and shall
not be reissued, and the Corporation (without the need for stockholder action)
may from time to time take such appropriate action as may be necessary to reduce
the authorized Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and other taxes
that may be payable in respect of any issuance or delivery of shares of Common
Stock upon conversion of shares of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock pursuant to this Section 4. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of shares of Common Stock
in a name other than that in which the shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock so converted were
registered, and, to the extent the Company would be required to pay such a tax,
no such issuance or delivery shall be made unless and until the person or entity
requesting such issuance has paid to the Corporation the amount of any such tax
or has established, to the satisfaction of the Corporation, that such tax has
been paid.
(d) Adjustments to Conversion Price for Diluting Issues:
---------------------------------------------------
(i) Special Definitions. For purposes of this Subsection 4(d),
-------------------
the following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
------
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities, excluding options described in subsection 4(d)(i)(D)(IV) below.
(B) "Original Issue Date" shall mean the date on which a
-------------------
share of Series A Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
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<PAGE>
(D) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued (or, pursuant to Subsection 4(d)(iii) below,
deemed to be issued) by the Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable:
(I) upon conversion of any Convertible Securities
outstanding on the Original Issue Date, or upon exercise of any Options
outstanding on the Original Issue Date;
(II) as a dividend or distribution on Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock;
(III) by reason of a dividend, stock split, split-up
or other distribution on shares of Common Stock that is covered by Subsection
4(e) or 4(f) below; or
(IV) to employees, officers or directors of, or
consultants or advisors to, the Corporation pursuant to a plan adopted by the
Board of Directors of the Corporation (which, together with all other such
plans, provides for the issuance of no more than an aggregate of 1,500,000
shares of Common Stock (subject to appropriate adjustment in the event of any
stock dividend, stock split, combination or other similar recapitalization
affecting the Common Stock)).
(ii) No Adjustment of Conversion Price. No adjustment in the
---------------------------------
number of shares of Common Stock into which the Series A Preferred Stock, Series
B Preferred Stock, or Series C Preferred Stock is convertible shall be made, by
adjustment in the applicable Conversion Price thereof, unless the consideration
per share (determined pursuant to Subsection 4(d)(v)) for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is less than the
applicable Conversion Price in effect on the date of, and immediately prior to,
the issue of such Additional Shares.
(iii) Issue of Securities Deemed Issue of Additional Shares of
--------------------------------------------------------
Common Stock.
------------
If the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the dose of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Subsection 4(d)(v) hereof)
of such Additional Shares of Common Stock would be less than the applicable
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and
35
<PAGE>
provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
(A) No further adjustment in the Conversion Price shall be
made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) If such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, upon the exercise, conversion or
exchange thereof, the Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase becoming
effective, be recomputed to reflect such increase insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities;
(C) Upon the expiration or termination of any unexercised
Option, the Conversion Price shall be readjusted, and the Additional Shares of
Common Stock deemed issued as the result of the original issue of such Option
shall not be deemed issued for the purposes of any subsequent adjustment of the
Conversion Price;
(D) In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Conversion Price then in effect shall
forthwith be readjusted to such Conversion Price as would have obtained had the
adjustment which was made upon the issuance of such Option or Convertible
Security prior to such change been made upon the basis of such change; and
(E) No readjustment pursuant to clause (B), (C) or (D)
above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (i) the Conversion Price on the original adjustment
date, or (ii) the Conversion Price that would have resulted from any issuances
of Additional Shares of Common Stock between the original adjustment date and
such readjustment date.
In the event the Corporation, after the Original Issue Date, amends the
terms of any Options or Convertible Securities (whether such Options or
Convertible Securities were outstanding on the Original Issue Date or were
issued after the Original Issue Date), then such Options or Convertible
Securities, as so amended, shall be deemed to have been issued after the
Original Issue Date and the provisions of this Subsection 4(d)(iii) shall apply.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock.
----------------------
In the event the Corporation shall at any time after the Original Issue
Date issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Subsection 4(d)(iii), but excluding
shares issued as a stock split or combination as provided in Subsection 4(e) or
upon a dividend or distribution as provided in Subsection 4(f)), without
consideration or for a consideration per share less than the applicable
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<PAGE>
Conversion Price in effect on the date of and immediately prior to such
issuance, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction, (A) the numerator
of which shall be (1) the number of shares of Common Stock outstanding
immediately prior to such issue plus (2) the number of shares of Common Stock
which the aggregate consideration received or to be received by the Corporation
for the total number of Additional Shares of Common Stock so issued would
purchase at such Conversion Price; and (B) the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued; provided
--------
that, (i) for the purpose of this Subsection 4(d)(iv), all shares of Common
- ----
Stock issuable upon exercise or conversion of Options (including the conversion
into Common Stock of Convertible Securities issuable upon the exercise of such
Options) or Convertible Securities outstanding immediately prior to such issue
shall be deemed to be outstanding, (ii) the number of shares of Common Stock
deemed issuable upon exercise or conversion of such outstanding Options and
Convertible Securities shall not give effect to any adjustments to the
conversion price or conversion rate of such Options or Convertible Securities
resulting from the issuance of Additional Shares of Common Stock that is the
subject of this calculation, and (iii) immediately after any Additional Shares
of Common Stock are deemed issued pursuant to Section 4(d)(iii), such Additional
Shares of Common Stock shall be, deemed to be outstanding.
(v) Determination of Consideration. For purposes of this
------------------------------
Subsection 4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
-----------------
(I) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Corporation, excluding amounts paid
or payable for accrued interest or accrued dividends;
(II) insofar as it consists of property other than
cash, be computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (I) and (II) above,
as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration
----------------------------------
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Subsection 4(d)(iii), relating to Options
and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable
by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating
37
<PAGE>
thereto, without regard to any provision contained therein for a subsequent
adjustment of such consideration) payable to the Corporation upon the exercise
of such Options or the conversion or exchange of such Convertible Securities, or
in the case of Options for Convertible Securities, the exercise of such Options
for Convertible Securities and the conversion or exchange of such Convertible
Securities, by
(y) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(vi) Multiple Closing Dates. In the event the Corporation shall
----------------------
issue on more than one date Additional Shares of Common Stock which are
comprised of shares of the same series or class of Preferred Stock, and such
issuance dates occur within a period of no more than 120 days, then the
Conversion Price shall be adjusted only once on account of such issuances, with
such adjustment to occur upon the final such issuance and to give effect to all
such issuances as if they occurred on the date of the final such issuance.
(e) Adjustment for Stock Splits and Combinations. If the Corporation
--------------------------------------------
shall at any time or from time to time after the Original Issue Date effect a
subdivision of the outstanding Common Stock into a greater number of shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in
Common Stock), the Conversion Price then in effect immediately before that
subdivision shall be proportionately decreased. If the Corporation shall at any
time or from time to time after the Original Issue Date combine the outstanding
shares of Common Stock into a lesser number of shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the event
--------------------------------------------------
the Corporation at any time, or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price for the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Conversion Price for
the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock, as applicable, then in effect by a fraction:
(1) the numerator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the
close of business on such record date, and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the
close of business on such
38
<PAGE>
record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall be recomputed accordingly as
of the close of business on such record date and thereafter the Conversion Price
for the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock shall be adjusted pursuant to this paragraph as of the time of
actual payment of such dividends or distributions; and provided further,
however, that no such adjustment shall be made to Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock if the holders of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
respectively, simultaneously receive a dividend or other distribution of shares
of Common Stock in a number equal to the number of shares of Common Stock as
they would have received if all, outstanding shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, respectively, had been
converted into Common Stock on the date of such event.
(g) Adjustments for Other Dividends and Distributions. In the event
-------------------------------------------------
the Corporation at any time or from time to time after the Original Issue Date
for the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
respectively, shall receive upon conversion thereof in addition to the number of
shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had the Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, respectively, been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period, giving application to all adjustments called for during such period
under this paragraph with respect to the rights of the holders of the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock; and
provided further, however, that no such adjustment to the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock shall be made if the
holders of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, respectively, simultaneously receive a dividend or other
distribution of such securities in an amount equal to the amount of such
securities as they would have received if all outstanding shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
respectively, had been converted into Common Stock on the date of such event.
(h) Adjustment for Reclassification, Exchange, or Substitution. If
----------------------------------------------------------
the Common Stock issuable upon the conversion of the Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock shall be changed into the
same or a different number of shares of any class or classes of stock, whether
by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend provided for above, or a
reorganization, merger, consolidation, or sale of assets provided for below),
then and in each such event the holder of each such share of Series A Preferred
Stock, Series B Preferred Stock or
39
<PAGE>
Series C Preferred Stock, respectively, shall have the right thereafter to
convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change, by holders of the number of shares of Common Stock into which
such shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, respectively, might have been converted immediately prior to
such reorganization, reclassification, or change, all subject to further
adjustment as provided herein.
(i) Adjustment for Merger or Reorganization, etc. In case of any
--------------------------------------------
consolidation or merger of the Corporation with or into another corporation or
the sale or transfer of all or substantially all of the assets of the
Corporation to another corporation, each share of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall thereafter be
convertible into the kind and amount of shares of stork or other securities or
property to which a holder of the number of shares of Common Stock of the
Corporation deliverable upon conversion of such Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock, respectively, would have been
entitled upon such consolidation, merger, sale or transfer; and, in such case,
appropriate adjustment (as determined in good faith by the Board of Directors)
shall be made in the application of the provisions in this Section 4 set forth
with respect to the rights and interest thereafter of the holders of the Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, to the
end that the provisions set forth in this Section 4 (including provisions with
respect to changes in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock, respectively. Each holder of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock, upon the occurrence of a merger or
consolidation of the Corporation into or with another corporation (where the
Corporation is not the surviving entity and where the stockholders of the
Corporation fail to hold a majority of the voting securities of the surviving
corporation) or the sale or all or substantially all of the assets of the
Corporation, shall have the option of electing treatment of his shares of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock under
either this Section 4(i) or Section 2(c) hereof.
(j) No Impairment. The Corporation will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
against impairment.
(k) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
A Preferred Stock, Series B Preferred Stock or
40
<PAGE>
Series C Preferred Stock, furnish or cause to be furnished to such holder a
similar certificate setting forth (i) such adjustments and readjustments, (ii)
the Conversion Price then in effect and (iii) the number of shares of Common
Stock and the amount, if any, of other property which then would be received
upon the conversion of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock.
(l) Notice of Record Date. In the event:
---------------------
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock, whether in cash, property, stock or other
securities;
(ii) that the Corporation offers for subscription pro rata to
the holders of any class or series of its capital stock any additional shares of
stock of any class or series or other rights;
(iii) that the Corporation subdivides or combines its outstanding
shares of Common Stock;
(iv) of any reclassification of the Common Stock of the
corporation (other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into or with another corporation, or
of the sale of all or substantially all of the assets of the Corporation; or
(v) of the involuntary or voluntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, and shall cause to be mailed by first class
mail postage prepaid to the holders of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock at their last addresses as shown on
the records of the Corporation or such transfer agent, at least twenty (20) days
prior to the date specified in (A) below or twenty days before the date
specified in (B) below, a notice stating
(A) the record date of such dividend, distribution, subscription
right, subdivision or combination, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution, subdivision or
combination are to be determined, or
(B) the date on which such reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger,
sale, dissolution or winding up.
41
<PAGE>
5. Mandatory Conversion.
--------------------
(a) Upon the closing of the sale of shares of Common Stock in a
public offering underwritten by a nationally recognized underwriter, pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, in which the Corporation, prior to giving effect to the proceeds of the
Offering, is valued at at least $135,000,000 (determined by multiplying the
number of outstanding shares of capital stock of the Corporation on a fully
diluted basis by the initial public offering price) and resulting in at least
$15,000,000 of net proceeds (determined by subtracting underwriters' discounts
and commissions from gross proceeds) to the Corporation (the "Mandatory
Conversion Date"), (i) all outstanding shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall automatically be
converted into shares of Common Stock, at the then effective conversion rate and
(ii) the number of authorized shares of Preferred Stock shall be automatically
reduced by the number of shares of Preferred Stock that had been designated as
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
and all provisions included under the caption "Series A, B and C Convertible
Preferred Stock" and all references to the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall be deleted and shall be of no
further force or effect.
(b) All holders of record of shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock shall be given written
notice of the Mandatory Conversion Date and the place designated for mandatory
conversion of all such shares of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock, respectively, pursuant to this Section 5.
Such notice need not be given in advance of the occurrence of the Mandatory
Conversion Date. All holders of record of shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be given written
notice of the filing by the Corporation of a registration statement under the
Securities Act of 1933, as amended, in connection with which the Corporation is
proposing to undertake a public offering, the closing date of which would be the
"Mandatory Conversion Date" as defined in paragraph (a) above. Such notice shall
be given within ten days following the filing of such registration statement.
Any notice required pursuant to this paragraph (b) shall be sent by first class
or registered mail, postage prepaid, to each record holder of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock at such holder's
address last shown on the records of the transfer agent for the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock (or the
records of the Corporation, if it serves as its own transfer agent). Upon
receipt of such notice, each holder of shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock shall surrender his or its
certificate or certificates for all such shares to the Corporation at the place
designated in such notice, and shall thereafter receive certificates for the
number of shares of Common Stock to which such holder is entitled pursuant to
this Section 5. On the Mandatory Conversion Date, all rights with respect to the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
so converted, including the rights, if any, to receive notices and vote (other
than as a holder of Common Stock) will terminate, except only the rights of the
holders thereof, upon surrender of their certificate or certificates therefor,
to receive certificates for the number of shares of Common Stock into which such
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
has been converted, and payment of any declared but unpaid dividends thereon. If
so required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
42
<PAGE>
form satisfactory to the Corporation, duly executed by the registered holder or
by his or its attorney duly authorized in writing. As soon as practicable after
the Mandatory Conversion Date and the surrender of the certificate or
certificates for Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, the Corporation shall cause to be issued and delivered to such
holder, or on his or its written order, a certificate or certificates for the
number of full shares of Common Stock issuable on such conversion in accordance
with the provisions hereof and cash as provided in Subsection 4(b) in respect of
any fraction of a share of Common Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock which are required to be
surrendered for conversion in accordance with the provisions hereof shall, from
and after the Mandatory Conversion Date, be deemed to have been retired and
cancelled and the shares of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock represented thereby converted into Common Stock for
all purposes, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. The Corporation may
thereafter take such appropriate action (without the need for stockholder
action) as may be necessary to reduce the authorized Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock accordingly.
6. Mandatory Redemption.
--------------------
(a) The Corporation will, subject to the conditions set forth in
Subsection 6(b) below, upon the request of any holder of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock delivered in writing
to the Company at least six (6) months prior to the applicable Mandatory
Redemption Date (as defined below) in accordance with Section 6(c) below, on
June 30, 2000 and on each of the first and second anniversaries thereof (each
such date being referred to hereinafter as a Mandatory Redemption Date"), redeem
from such holder of shares of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock, at a price equal to (i) in the case of Series A
Preferred Stock and Series C Preferred Stock, $4.00 per share, and in the case
of Series B Preferred Stock, $6.00 per share, plus accrued interest at a rate
equal to the "prime rate" of Citibank, N.A., as announced from time to time,
plus 2% per annum, plus (ii) any dividends declared but unpaid thereon, subject
to appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares (the
"Mandatory Redemption Price"), the following respective portions of the
aggregate number of shares of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock held by such holder for which Corporation received
cash in payment for the issuance and sale thereof, on the applicable Mandatory
Redemption Date:
Portion of Shares of Series A, B and C
Redemption Date Preferred Stock To Be Redeemed
- --------------- ------------------------------
June 30, 2000 33%
June 30, 2001 Any shares of Series A, B and C Preferred
Stock entitled to be redeemed on the first
Mandatory Redemption Date that were not
redeemed plus 50% of all remaining shares
43
<PAGE>
of Series A, B and C Preferred Stock
June 30, 2002 100% (or all remaining shares of Series A, B
and C Preferred Stock)
(b) If the funds of the Corporation legally available for redemption
of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock on any Mandatory Redemption Date are insufficient to redeem the number of
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock required under this Section 6 to be redeemed on such date, those
funds which are legally available will be used to redeem the maximum possible
number of such shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock ratably on the basis of the number of shares of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock which
would be redeemed on such date if the funds of the Corporation legally available
therefor bad been sufficient to redeem all shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock required to be redeemed on
such date. At any time thereafter when additional funds of the Corporation
become legally available for the redemption of Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock, such funds will be used, at the
end of the next succeeding fiscal quarter, to redeem the balance of the shares
which the Corporation was theretofore obligated to redeem, or such portion
thereof for which funds are available, ratably on the basis set forth in the
preceding sentence.
(c) The holder of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock requesting redemption shall, provide notice of any
redemption of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock pursuant to this Section 6, by registered mail, postage prepaid,
to the Corporation not less than six (6) months prior to the date on which such
redemption is to be made. The notice will specify the number of shares which are
to be redeemed. Upon receipt of any such notice of redemption, the Corporation
will become obligated to redeem on the applicable Mandatory Redemption Date all
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
specified therein (other than such shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock as are duly converted pursuant to
Section 4 prior to the close of business on the fifth full day preceding the
Mandatory Redemption Date). In case less than all Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock represented by any
certificate is redeemed in any redemption pursuant to this Section 6, a new
certificate will be issued representing the unredeemed Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock without cost to the holder
thereof.
(d) Unless there shall have been a default in payment of the
Mandatory Redemption Price, no share of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock that is redeemed shall be entitled
to any dividends declared after its Mandatory Redemption Date, and on such
Mandatory Redemption Date all rights of the holder of such share as a
stockholder of the Corporation by reason of the ownership of such share will
cease, except the right to receive the Mandatory Redemption Price of such share,
without interest, upon presentation and surrender of the certificate
representing such share, and such share will not from and after such Mandatory
Redemption Date be deemed to be outstanding.
44
<PAGE>
(e) Any Series A Preferred Stock, Series B Preferred Stock or Series
C Preferred Stock redeemed pursuant to this Section 6 will be cancelled and will
not under any circumstances he reissued, sold or transferred and the Corporation
may from time to time take such appropriate action as may be necessary to reduce
the authorized Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock accordingly.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
this 20/th/ day of February, 1998.
SWITCHBOARD INCORPORATED
By: /s/ Douglas A. McIntyre
-------------------------------
President
Douglas A. McIntyre
45
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SWITCHBOARD INCORPORATED
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
--------------------------------
Switchboard Incorporated (hereinafter called the "Corporation"), organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a resolution was
duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amendment to the Certificate of
Incorporation of the Corporation and declaring said amendment to be advisable.
The stockholders of the Corporation duly approved said proposed amendment by
written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware, and written notice of such consent has
been given to all stockholders who have not consented in writing to such
amendment. The resolution setting forth the amendment is as follows:
RESOLVED: That Article FOURTH of the Certificate of Incorporation of the
--------
Corporation be and hereby is deleted in its entirety and the following Article
FOURTH is inserted in lieu thereof:
FOURTH: The total number of shares of all classes of stock which the
------
Corporation shall have authority to issue is (i) 17,500,000 shares of Common
Stock, $.01 par value per share ("Common Stock") and (ii) 4,500,000 shares of
Preferred Stock, $.01 par value per share ("Preferred Stock"), 750,000 of which
are designated as Series A Convertible Preferred Stock, 1,500,000 of which are
designated as Series B Convertible Preferred Stock, and 2,250,000 of which are
designated as Series C Convertible Preferred Stock, as set forth below.
The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.
46
<PAGE>
A. COMMON STOCK.
------------
1. General. The voting, dividend and liquidation rights of the holders
-------
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any Issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
------
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting,
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242 (b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
---------
from funds lawfully available therefor and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
-----------
whether voluntary or involuntary, holders of Common Stork will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
---------------
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law or except as otherwise set
forth herein. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purposes of voting by classes
unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
special voting rights, conversion rights, redemption privileges and liquidation
preferences, as shall be stated and expressed in such resolutions, all to the
full extent now or hereafter permitted by the General Corporation Law of
Delaware. Without limiting the generality of the foregoing, except as otherwise
specifically provided in this Certificate of Incorporation, the resolutions
providing for issuance of any series of Preferred Stock may provide that such
series be superior or rank equally or be junior to the Preferred Stock of any
other series to the extent permitted by law. Except as otherwise specifically
provided in this Certificate of Incorporation, no vote of the holders of the
47
<PAGE>
Preferred Stock or Common Stock shall be a prerequisite to the issuance of any
shares of any series of the Preferred Stock authorized by and complying with the
conditions of this Certificate of Incorporation, the right to have such vote
being expressly waived by all present and future holders of the capital stock of
the Corporation.
C. SERIES A, B AND C CONVERTIBLE PREFERRED STOCK.
---------------------------------------------
Seven hundred fifty thousand (750,000) shares of the authorized and
unissued Preferred Stock of the Corporation are hereby designated "Series A
Convertible Preferred Stock" (the "Series A Preferred Stock"), one million five
hundred thousand (1,500,000) shares of the authorized and unissued Preferred
Stock of the Corporation are hereby designated "Series B Convertible Preferred
Stock" (the "Series B Preferred Stock"), and two million two hundred fifty
thousand (2,250,000) shares of the authorized and unissued Preferred Stock of
the Corporation are hereby designated "Series C Convertible Preferred Stock"
(the "Series C Preferred Stock") each with the following rights, preferences,
powers, privileges and restrictions, qualifications and limitations.
1. Dividends.
---------
Dividends may be declared and paid on the Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock from funds lawfully available
therefor as and when determined by the Board of Directors and subject to any
preferential dividend rights of any other class or series of then outstanding
preferred stock.
2. Liquidation, Dissolution or Winding Up; Certain Mergers,
--------------------------------------------------------
Consolidations and Asset Sales.
------------------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, after and subject to the payment
in full of all amounts required to be distributed to the holders of any other
class or series of stock of the Corporation ranking on liquidation prior and in
preference to the Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock (collectively referred to as "Senior Preferred Stock"), but
before any payment shall be made to the holders of Common Stock or any other
class or series of stock ranking on liquidation junior to the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock (such Common Stock
and other stock being collectively referred to as "Junior Stock") by reason of
their ownership thereof, an amount equal to $4.00 per share in the case of the
Series A Preferred Stock and Series C Preferred Stock and $6.00 per share in the
case of the Series B Preferred Stock (in each case subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock), plus declared but unpaid
dividends. If upon any such liquidation, dissolution or winding up of the
Corporation the remaining assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders of shares of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock the
full amount to which they shall be entitled, the holders of shares of Series A
Preferred Stock,
48
<PAGE>
Series B Preferred Stock and Series C Preferred Stock and any class or series of
stock ranking on liquidation on a parity with the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts which would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
(b) After the payment of all preferential amounts required to be paid
to the holders of Senior Preferred Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and any other class or series of stock
of the Corporation ranking on liquidation on a parity with the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, upon any
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, the holders of shares of Common Stock then outstanding shall be
entitled to receive the remaining assets and funds of the Corporation available
for distribution to its stockholders.
(c) A consolidation or merger of the Corporation with or into another
corporation or entity (where the Corporation is not the surviving entity and
where the stockholders of the Corporation do not hold a majority of the voting
securities of the surviving corporation), or a sale of all or substantially all
of the assets of the Corporation, shall be deemed a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 2; provided,
--------
however that each holder of Series A Preferred Stock and Series B Preferred
- -------
Stock shall have the right to elect the benefits of the provisions of Section
4(1) hereof in lieu of receiving payment in liquidation, dissolution or winding
up of the Corporation pursuant to this Section 2(c).
3. Voting.
------
(a) Each holder of outstanding shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be entitled to the
number of votes equal to the number of whole shares of Common Stock into which
the shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock held by such holder are then convertible (as adjusted from time
to time pursuant to Section 4 hereof), at each meeting of stockholders of the
Corporation (and written actions of stockholders in lieu of meetings) with
respect to any and all matters presented to the stockholders of the Corporation
for their action or consideration. Except as provided by law, by the provisions
of Subsection 3(b) or 3(c) below or by the provisions establishing any other
series of Preferred Stock, holders of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock and of any other outstanding series
of Series Preferred Stock shall vote together with the holders of Common Stock
as a single class.
(b) The Corporation shall not amend, alter or repeal the preferences,
special rights or other powers of the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock so as to affect adversely the Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, without
the written consent or affirmative vote of the holders of a majority of the then
outstanding shares of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock, respectively, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a class. For
this purpose, without limiting the generality of the foregoing, the
authorization of any shares of capital stock with preference or
49
<PAGE>
priority over the Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock as to redemption rights, voting rights or the right to receive
either dividends or amounts distributable upon liquidation, dissolution or
winding up of the Corporation or otherwise shall be deemed to affect adversely
the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock, and the authorization of any shares of capital stock on a parity with
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
as to redemption rights, voting rights or the right to receive either dividends
or amounts distributable upon liquidation, dissolution or winding up of the
Corporation shall not be deemed to affect adversely the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, respectively.
Notwithstanding the foregoing, the authorization of any shares of capital stock
(a) containing redemption rights similar to those of the Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock, except for
being entitled to a per share redemption price higher than that applicable to
the Series A Preferred Stock, the Series B Preferred Stock or the Series C
Preferred Stock, if such higher per share redemption price is equivalent to the
per share purchase price for such shares, (b) containing voting rights similar
to those of the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock, except for being entitled, exclusively and as a
separate class, to (i) elect one or more directors of the Corporation and (ii)
rights relating to such election or (c) containing rights upon liquidation,
dissolution or winding up of the Corporation similar to those of the Series A
Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock,
except for being entitled to be paid out of the assets of the Corporation a per
share amount higher than that applicable to the Series A Preferred Stock, the
Series B Preferred Stock or the Series C Preferred Stock, if such per share
amount is equivalent to the per share purchase price for such shares, shall not
be deemed to affect adversely the Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock. The number of authorized shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock may be
increased or decreased (but not below the number of shares then outstanding) by
the directors of the Corporation pursuant to Section 151 of the General
Corporation Law of Delaware or by the affirmative vote of the holders of a
majority of the then outstanding shares of the Common Stock, Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and all other classes
or series of stock of the Corporation entitled to vote thereon, voting as a
single class, irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of Delaware.
4. Optional Conversion. The holders of the Series A Preferred Stock,
-------------------
Series B Preferred Stock and Series C Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock, Series
----------------
B Preferred Stock and Series C Preferred Stock shall be convertible, at the
option of the holder thereof, at any time and from time to time, and without the
payment of additional consideration by the holder thereof, into such number of
fully paid and nonassessable shares of Common Stock as is determined by dividing
$4.00 by the Conversion Price (as defined below) in effect at the time of
conversion. The "Conversion Price" shall initially be $4.00. Such initial
Conversion Price, and the rate at which shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock may be converted into
shares of Common Stock, shall be subject to adjustment as provided below.
50
<PAGE>
In the event of a notice of redemption of any shares of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock pursuant to Section
6 hereof, the Conversion Rights of the shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, respectively, designated
for redemption shall terminate at the close of business on the fifth full day
preceding the date fixed for redemption, unless the redemption price is not paid
when due, in which case the Conversion Rights of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock for such shares shall
continue until such price is paid in full. In the event of a liquidation of the
Corporation, the Conversion Rights shall terminate at the close of business on
the first full day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of Series A Preferred Stock, Series
B Preferred Stock or Series C Preferred Stock, respectively.
(b) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued upon conversion of the Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock. In lieu of any fractional shares to which the
holder would otherwise be entitled, the Corporation shall pay cash equal to such
fraction multiplied by the then effective Conversion Price.
(c) Mechanics of Conversion.
-----------------------
(i) In order for a holder of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock to convert shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock into
shares of Common Stock. such holder shall surrender the certificate or
certificates for such shares of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock, at the office of the transfer agent for the
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
respectively (or at the principal office of the Corporation if the Corporation
serves as its own transfer agent), together with written notice that such holder
elects to convert all or any number of the shares of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock represented by such
certificate or certificates. Such notice shall state such holder's name or the
names of the nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or his
or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date") and such holder shall be treated as a record holder of
Common Stock on such date. The Corporation shall, as soon as practicable after
the Conversion Date, issue and deliver at such office to such holder of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, or to his
or its nominees, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled, together with cash in lieu
of any fraction of a share, and a certificate or certificates for the number of
shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock represented by the surrendered certificate but not converted.
(ii) The Corporation shall at a times when the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock shall be
outstanding, reserve and
51
<PAGE>
keep available out of its authorized but unissued stock, for the purpose of
effecting the conversion of the Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding Series A Preferred Stock, Series B Preferred Stock or Series
C Preferred Stock. Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value of the shares of Common
Stock issuable upon conversion of the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, the Corporation will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue fully paid and nonassessable
shares of Common Stock at such adjusted Conversion Price.
(iii)Upon any such conversion, adjustment to the Conversion Price
of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock, shall be made for any declared but unpaid dividends on the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
respectively, surrendered for conversion or on the Common Stock delivered upon
conversion.
(iv) All shares of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock which shall have been surrendered for
conversion as herein provided shall no longer be deemed to be outstanding and
all rights with respect to such shares, including the rights, if any, to receive
notices and to vote, shall immediately cease and terminate on the Conversion
Date, except only the right of the holders thereof to receive shares of Common
Stock in exchange therefor and payment of any dividends declared but unpaid
thereon. Any shares of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock so converted shall be retired and cancelled and shall
not be reissued, and the Corporation (without the need for stockholder action)
may from time to time take such appropriate action as may be necessary to reduce
the authorized Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and other taxes
that may be payable in respect of any issuance or delivery of shares of Common
Stock upon conversion of shares of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock pursuant to this Section 4. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of shares of Common Stock
in a name other than that in which the shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock so converted were
registered, and to the extent the Company would be required to pay such a tax,
no such issuance or delivery shall be made unless and until the person or entity
requesting such Issuance has paid to the Corporation the amount of any such tax
or has established, to the satisfaction of the Corporation, that such tax has
been paid.
(d) Adjustments to Conversion Price for Diluting Issues:
---------------------------------------------------
(i) Special Definition. For purposes of this Subsection 4(d),
------------------
the following definitions shall apply:
52
<PAGE>
(A) "Option" shall mean rights, options or warrants to
------
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities, excluding options described in subsection 4(d)(i)(D)(IV) below.
(B) "Original Issue Date" shall mean the date on which a
-------------------
share of Series A Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued (or pursuant to Subsection 4 (d) (iii) below,
deemed to be Issued) by the Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable.
(I) upon conversion of any Convertible Securities
outstanding on the Original Issue Date, or upon
exercise of any Options outstanding on the
Original Issue Date;
(II) as a dividend or distribution on Series A
Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock;
(III)by reason of a dividend, stock split, split-up or
other distribution on shares of Common Stock that
is covered by Subsection 4(e) or 4(f) below; or
(IV) to employees, officers or directors of, or
consultants or advisors to, the Corporation
pursuant to a plan adopted by the Board of
Directors of the Corporation (which, together with
all other such plans, provides for the issuance of
no more than an aggregate of 1,500,000 shares of
Common Stock (subject to appropriate adjustment in
the event of any stock dividend, stock split,
combination or other similar recapitalization
affecting the Common Stock).
(ii) No Adjustment of Conversion Price. No adjustment in the
---------------------------------
number of shares of Common Stock into which the Series A Preferred Stock, Series
B Preferred Stock, or Series C Preferred Stock is convertible shall be made, by
adjustment in the applicable Conversion Price thereof, unless the consideration
per share (determined pursuant to Subsection 4(d)(v)) for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is less than the
applicable Conversion Price in effect on the date of, and immediately prior to,
the issue of such Additional Shares.
53
<PAGE>
(iii)Issue of Securities Deemed Issue of Additional Shares of
--------------------------------------------------------
Common Stock.
------------
If the Corporation at any time or from time to time after the Original
Issue Date shall any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Subsection 4(d)(v) hereof
hereto of such Additional Shares of Common Stock would be less than the
applicable Conversion Price in effect on the date of and immediately prior to
such issue, or such record date, as the case may be, and provided further than
in any such case in which Additional Shares of Common Stock are deemed to be
issued:
(A) No further adjustment in the Conversion Price shall be
made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) If such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, upon the exercise, conversion or
exchange thereof, the Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase becoming
effective, be recomputed to reflect such increase insofar as it affects such
Options or rights of conversion or exchange under such Convertible Securities;
(C) Upon the expiration or termination of any unexercised
Option, the Conversion Price shall be readjusted, and the Additional Shares of
Common Stock deemed issued as the result of the original issue of such Option
shall not be deemed issued for the purposes of any subsequent adjustment of the
Conversion Price;
(D) In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Conversion Price then in effect shall
forthwith be readjusted to such Conversion Price as would have obtained had the
adjustment which was made upon the issuance of such Option or Convertible
Security prior to such change been made upon the basis of such change; and
(E) No readjustment pursuant to clause (B), (C) or (D)
above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (i) the Conversion Price on the original adjustment
date, or (ii) the Conversion Price that would
54
<PAGE>
have resulted from any issuances of Additional Shares of Common Stock between
the original adjustment date and such readjustment date.
In the event the Corporation, after the Original Issue Date, amends the
terms of any Options or Convertible Securities (whether such Options or
Convertible Securities were outstanding on the Original Issue Date or were
issued after the Original Issue Date), then such Options or Convertible
Securities, as so amended, shall be deemed to have been issued after the
Original Issue Date and the provisions of this Subsection 4 (d) (iii) shall
apply,
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock.
----------------------
In the event the Corporation shall at any time after the Original Issue
Date issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be Issued pursuant to Subsection 4(d) (iii), but
excluding shares issued as a stock split or combination as provided in
Subsection 4(e) or upon a dividend or distribution as provided in Subsection
4(b), without consideration or for a consideration per share less than the
applicable Conversion Price in effect on the date of and immediately prior to
such issuance, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction, (A) the numerator
of which shall be (1) the number of shares of Common Stock outstanding
immediately prior to such issue plus (2) the number of shares of Common Stock
which the aggregate consideration received or to be received by the Corporation
for the total number of Additional Shares of Common Stock so issued would
purchase at such Conversion Price; and (B) the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued; provided
--------
that (i) for the purpose of this Subsection 4(d)(iv), all shares of Common Stock
- ----
issuable upon exercise or conversion of Options (including the conversion into
Common Stock of Convertible Securities issuable upon the exercise of such
Options) or Convertible Securities outstanding immediately prior to such issue
shall be deemed to be outstanding, (ii) the number of shares of Common Stock
deemed issuable upon exercise or conversion of such outstanding Options and
Convertible Securities shall not give effect to any adjustments to the
conversion price or conversion rate of such Options or Convertible Securities
resulting from the issuance of Additional Shares of Common Stock that is the
subject of this calculation, and (iii) immediately after any Additional Shares
of Common Stock are deemed issued pursuant to Section 4(d)(iii), such Additional
Shares of Common Stock shall be deemed to be outstanding.
(v) Determination of Consideration. For purposes of this
------------------------------
Subsection 4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
-----------------
(I) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation, excluding amounts paid or
payable for accrued interest or accrued dividends;
55
<PAGE>
(II) insofar as it consists of property other than
cash, be computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(III)in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (I) and (II) above,
as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration
----------------------------------
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Subsection 4(d)(iii), relating to Options
and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable
by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(y) the maximum number or shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(vi) Multiple Closing Dates. In the event the Corporation shall
----------------------
issue on more than one date Additional Shares of Common Stock which are
comprised of shares of the same series or class of Preferred Stock, and such
issuance dates occur within a period of no more than 120 days, then the
Conversion Price shall be adjusted only once on account of such issuances, with
such adjustment to occur upon the final such issuance and to give effect to all
such issuances as if they occurred on the date of the final such issuance.
(e) Adjustment for Stock Splits and Combinations. If the Corporation
--------------------------------------------
shall at any time or from time to time after the Original Issue Date effect a
subdivision of the outstanding Common Stock into a greater number of shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in
Common Stock), the Conversion Price then in effect immediately before that
subdivision shall be proportionately decreased. If the Corporation shall at any
time or from time to time after the Original Issue Date combine the outstanding
shares of Common Stock into a lesser number of shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
56
<PAGE>
(f) Adjustment for Certain Dividends and Distributions. In the event
--------------------------------------------------
the Corporation at any time, or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price for the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Conversion Price for
the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock, as applicable, then in effect by a fraction:
(1) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend
or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion price for the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall be recomputed accordingly as
of the close of business on such record date and thereafter the Conversion Price
for the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock shall be adjusted pursuant to this paragraph as of the time of
actual payment of such dividends or distributions; and provided further,
however, that no such adjustment shall be made to Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock if the holders of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
respectively, simultaneously receive a dividend or other distribution of shares
of Common Stock in a number equal to the number of shares of Common Stock as
they would have received if all outstanding shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, respectively, had been
converted into Common Stock on the date of such event.
(g) Adjustments for Other Dividends and Distributions. In the event
-------------------------------------------------
the Corporation at any time or from time to time after the Original Issue Date
for the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
respectively, shall receive upon conversion thereof in addition to the number of
shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had the Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, respectively, been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period, giving application to all adjustments called for during such period
under this paragraph with respect to the rights of the holders of the Series
57
<PAGE>
A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock; and
provided further, however, that no such adjustment to the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock shall be made if the
holders of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, respectively, simultaneously receive a dividend or other
distribution of such securities in an amount equal to the amount of such
securities as they would have received if all outstanding shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
respectively, had been converted into Common Stock on the date of such event.
(h) Adjustment for Reclassification, Exchange or Substitution. If
---------------------------------------------------------
the Common Stock issuable upon conversion of the Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock shall be changed into the
same or a different number of shares of any class or classes of stock, whether
by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend provided for above, or a
reorganization, merger, consolidation, or sale of assets provided for below),
then and in each such event-the holder of each such share of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, respectively, shall
have the right thereafter to convert such share into the kind and amount of
shares of stock and other securities and property receivable upon such
reorganization, reclassification, or other change by holders of the number of
shares of Common Stock into which such shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, respectively, might have
been converted immediately prior to such reorganization, reclassification, or
change, all subject to further adjustment as provided herein.
(i) Adjustment for Merger or Reorganization, etc. In case of any
--------------------------------------------
consolidation or merger of the Corporation with or into another corporation or
the sale or transfer of all or substantially all of the assets of the
Corporation to another corporation, each share of Series A Preferred Stock.
Series B Preferred Stock and Series C Preferred Stock shall thereafter be
convertible into the kind and amount of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock of the
Corporation deliverable upon conversion of such Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock, respectively, would have been
entitled upon such consolidation, merger, sale or transfer; and, in such case,
appropriate adjustment (as determined in good faith by the Board of Directors)
shall be made in the application of the provisions in this Section 4 set forth
with respect to the rights and interest thereafter of the holders of the Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, to the
end that the provisions set forth In this Section 4 (including provisions with
respect to changes in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock, respectively. Each holder of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, upon the occurrence of a merger or
consolidation of the Corporation into or with another corporation (where the
Corporation is not the surviving entity and where the stockholders of the
Corporation fall to hold a majority of the voting securities of the surviving
corporation) or the sale of all or substantially all of the assets of the
Corporation, shall have the option of electing treatment of his shares of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock under
either this Section 4(1) or Section 2(c) hereof.
58
<PAGE>
(j) No Impairment. The Corporation will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
against impairment.
(k) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, furnish
or cause to be furnished to such holder a similar certificate setting forth (i)
such adjustments and readjustments, (ii) the Conversion Price then in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which then would be received upon the conversion of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock.
(l) Notice of Record Date. In the event:
---------------------
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock, whether in cash,
property, stock or other securities;
(ii) that the Corporation offers for subscription pro rata to
the holders of any class or series of its capital stock any
additional shares of stock of any class or series or other
rights;
(iii) that the Corporation subdivides or combines its outstanding
shares of Common Stock;
(iv) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock or a stock dividend or
stock distribution thereon), or of any consolidation or
merger of the Corporation into or with another corporation,
or of the sale of all or substantially all of the assets of
the Corporation; or
(v) of the involuntary or voluntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, and
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<PAGE>
shall cause to be mailed by first class mail postage prepaid to the holders of
the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock at their last addresses as shown on the records of the Corporation or such
transfer agent, at least twenty (20) days prior to the date specified in (A)
below or twenty days before the date specified in (B) below, a notice stating
(A) the record date of such dividend, distribution,
subscription right, subdivision or combination, or, if
a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to
such dividend, distribution, subdivision or combination
are to be determined, or
(B) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which
it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale,
dissolution or winding up.
5. Mandatory Conversion.
--------------------
(a) Upon the closing of the sale of shares of Common Stock in a
public offering, underwritten by a nationally recognized underwriter, pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, in which the Corporation, 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 Corporation on a fully
diluted basis by the initial public offering price) and resulting in at least
$15,000,000 of net proceeds (determined by subtracting underwriters' discounts
and commissions from gross proceeds) to the Corporation (the "Mandatory
Conversion Date"), (i) all outstanding shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall automatically be
converted into shares of Common Stock, at the then effective conversion rate and
(ii) the number of authorized shares of Preferred Stock shall be automatically
reduced by the number of shares of Preferred Stock that had been designated as
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
and all provisions included under the caption "Series A, B and C Convertible
Preferred Stock" and all references to the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall be deleted and shall be of no
further force or effect.
(b) All holders of record of shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock shall be given written
notice of the Mandatory Conversion Date and the place designated for mandatory
conversion of all such shares of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock, respectively, pursuant to this Section 5.
Such notice need not be given in advance of the occurrence of the Mandatory
Conversion Date. An holders of record of shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be given written
notice of the filing by the Corporation
60
<PAGE>
of a registration statement under the Securities Act of 1933, as amended, in
connection with which the Corporation is proposing to undertake a public
offering, the closing date of which would be the "Mandatory Conversion Date" as
defined In paragraph (a) above. Such notice shall be given within ten days
following the filing of such registration statement. Any notice required
pursuant to this paragraph (b) shall be sent by first class or registered mail,
postage prepaid, to each record holder of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock at such holder's address last shown
on the records of the transfer agent for the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock (or the records of the Corporation,
if it serves as its own transfer agent). Upon receipt of such notice, each
holder of shares of Series A Preferred Stock, Series B Preferred Stock or Series
C Preferred Stock shall surrender his or its certificate or certificates for all
such shares to the Corporation at the place designated in such notice, and shall
thereafter receive certificates for the number of shares of Common Stock to
which such holder is entitled pursuant to this Section 5. On the Mandatory
Conversion Date, all rights with respect to the Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock so converted, including the
rights, if any, to receive notices and vote (other than as a holder of Common
Stock) will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive certificates
for the number of shares of Common Stock into which such Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock has been converted,
and payment of any declared but unpaid dividends thereon. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
his or its attorney duly authorized in writing. As soon as practicable after the
Mandatory Conversion Date and the surrender of the certificate or certificates
for Series A Preferred Stock, Series B Prefer-red Stock or Series C Preferred
Stock, the Corporation shall cause to be issued and delivered to such holder, or
on his or its written order, a certificate or certificates for the number of
full shares of Common Stock issuable on such conversion in accordance with the
provisions hereof and cash as provided in Subsection 4(b) in respect of any
fraction of a share of Common Stock other-wise issuable upon such conversion.
(c) All certificates evidencing shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock which are required to be
surrendered for conversion in accordance with the provisions hereof shall, from
and after the Mandatory Conversion Date, be deemed to have been retired and
cancelled and the shares of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock represented thereby converted into Common Stock for
all purposes, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. The Corporation may
thereafter take such appropriate action (without the need for stockholder
action) as may be necessary to reduce the authorized Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock accordingly,
6. Mandatory Redemption.
-----------------------
(a) The Corporation will, subject to the conditions set forth in
Subsection 6(b) below, upon the request of any holder of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock delivered in writing
to the Company at least six (6) months prior to the applicable Mandatory
Redemption Date (as defined below) in accordance with Section 6(c)
61
<PAGE>
below, on June 30, 2000 and on each of the first and second anniversaries
thereof (each such date being referred to hereinafter as a "Mandatory Redemption
Date"), redeem from such holder of shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock, at a price equal to (i) in the
case of Series A Preferred Stock and Series C Preferred Stock, $4.00 per share,
and in the case of Series B Preferred Stock, $6.00 per share, plus accrued
interest at a rate equal to the "prime rate" of Citibank, N.A., as announced
from time to time, plus 2% per annum, plus (ii) any dividends declared but
unpaid thereon, subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares (the "Mandatory Redemption Price"), the following respective
portions of the aggregate number of shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock held by such holder for which
Corporation received cash in payment for the issuance and sale thereof, on the
applicable Mandatory Redemption Date.
Portion of Shares of Series A, B
Redemption Date and C Preferred Stock To Be Redeemed
- --------------- ------------------------------------
June 30, 2000 33%
June 30, 2001 Any shares of Series A, B and C Preferred Stock
entitled to be redeemed on the first Mandatory
Redemption Date that were not redeemed plus 50% of
all remaining shares of Series A, B and C Preferred
Stock
June 30, 2002 100% (or all remaining shares of Series A, B and C
Preferred Stock)
(b) If the funds of the Corporation legally available for redemption
of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock on any Mandatory Redemption Date are insufficient to redeem the number of
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock required under this Section 6 to be redeemed on such date, those
funds which are legally available will be used to redeem the maximum possible
number of such shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock ratably on the basis of the number of shares of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock which
would be redeemed on such date if the funds of the Corporation legally available
therefor had been sufficient to redeem all shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock required to be redeemed on
such date. At any time thereafter when additional funds of the Corporation
become legally available for the redemption of Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock, such funds will be used, at the
end of the next succeeding fiscal quarter, to redeem the balance of the shares
which the Corporation was theretofore obligated to redeem, or such portion
thereof for which funds are available, ratably on the basis set forth in the
preceding sentence.
(c) The holder of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock requesting redemption shall provide notice of any
redemption of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock pursuant to this Section 6, by registered mail, postage prepaid,
to the Corporation not less than six (6) months prior to the
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<PAGE>
date on which such redemption is to be made. The notice will specify the number
of shares which are to be redeemed. Upon receipt of any such notice of
redemption, the Corporation will become obligated to redeem on the applicable
Mandatory Redemption Date all Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock specified therein (other than such shares of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock as are
duly converted pursuant to Section 4 prior to the close of business on the fifth
full day preceding the Mandatory Redemption Date). In case less than all Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
represented by any certificate is redeemed in any redemption pursuant to this
Section 6, a new certificate will be issued representing the unredeemed Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock without
cost to the holder thereof.
(d) Unless there shall have been a default in payment of the
Mandatory Redemption Price, no share of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock that is redeemed shall be entitled
to any dividends declared after is Mandatory Redemption Date, and on such
Mandatory Redemption Date all rights of the holder of such shares as a
stockholder of the Corporation by reason of the ownership of such share will
cease, except the right to receive the Mandatory Redemption Price of such share,
without interest, upon presentation and surrender of the certificate
representing such share, and such share will not from and after such Mandatory
Redemption Date be deemed to be outstanding.
(e) Any Series A Preferred Stock, Series B Preferred Stock or Series
C Preferred Stock redeemed pursuant to this Section 6 will be cancelled and will
not under any circumstances be reissued, sold or transferred and the Corporation
may from time to time take such appropriate action as may be necessary to reduce
the authorized Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock accordingly.
EXECUTED this 29 day of March, 1999.
SWITCHBOARD INCORPORATED
/s/ Dean Polnerow
-----------------
Dean Polnerow, President
63
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE 0F INCORPORATION
OF
SWITCHBOARD INCORPORATED
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
___________________________
Switchboard Incorporated (hereinafter called the "Corporation"), organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a resolution was
duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amendment to the Certificate of
Incorporation of the Corporation and declaring said amendment to be advisable.
The stockholders of the Corporation duly approved said proposed amendment by
written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware, and written notice of such consent has
been given to all stockholders who have not consented in writing to such
amendment. The resolution setting forth the amendment is as follows:
RESOLVED: That Article FOURTH of the Certificate of Incorporation of the
--------
Corporation be and hereby is deleted in its entirety and the following Article
FOURTH is inserted in lieu thereof:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is (i) 30,000,000 shares of Common
Stock, $.01 par value per share ("Common Stock") and (ii) 10,000,000 shares of
Preferred Stock, $.01 par value per share ("Preferred Stock"), 750,000 of which
are designated as Series A Convertible Preferred Stock, 1,500,000 of which are
designated as Series B Convertible Preferred Stock, 4,000,000 of which are
designated as Series C Convertible Preferred Stock and 1,500,000 of which are
designated as Series D Convertible Preferred Stock, as set forth below.
64
<PAGE>
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
-------------
1. General. The voting, dividend and liquidation rights of the holders
-------
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
------
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
---------
from funds lawfully available therefor and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
-----------
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK
---------------
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law or except as otherwise set
forth herein. Different series or Preferred Stock shall not be construed to
constitute different classes of shares for the purposes of voting by classes
unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
special voting rights, conversion rights, redemption privileges and liquidation
preferences, as shall be stated and expressed in such resolutions, all to the
full extent now or hereafter permitted by the General Corporation Law of
Delaware. Without limiting the generality of the foregoing, except as
65
<PAGE>
otherwise specifically provided in this Certificate of Incorporation, the
resolutions providing for issuance of any series of Preferred Stock may provide
that such series be superior or rank equally or be junior to the Preferred Stock
of any other series to the extent permitted by law. Except as otherwise
specifically provided in this Certificate of Incorporation, no vote of the
holders of the Preferred Stock or Common Stock shall be a prerequisite to the
issuance of any shares of any series of the Preferred Stock authorized by and
complying with the conditions of this Certificate of Incorporation, the right to
have such vote being expressly waived by all present and future holders of the
capital stock of the Corporation.
C. SERIES A, B, C AND D CONVERTIBLE PREFERRED STOCK
------------------------------------------------
Seven hundred fifty thousand (750,000) shares of the authorized and
unissued Preferred Stock of the Corporation are hereby designated "Series A
Convertible Preferred Stock" (the "Series A Preferred Stock"), one million five
hundred thousand (1,500,000) shares of the authorized and unissued Preferred
Stock of the Corporation are hereby designated "Series B Convertible Preferred
Stock" (the "Series B Preferred Stock"), four million (4,000,000) shares of the
authorized and unissued Preferred Stock of the Corporation are hereby designated
"Series C Convertible Preferred Stock" (the "Series C Preferred Stock") and one
million five hundred thousand (1,500,000) shares of the authorized and unissued
Preferred Stock of the Corporation are hereby designated Series D Convertible
Preferred Stock (the "Series D Preferred Stock"), each with the following
rights, preferences, powers, privileges and restrictions, qualifications and
limitations. The Series D Preferred Stock may be issued in one or more sub-
series, with any shares of Series D Preferred Stock with an identical Series D
Issuance Price (as defined below) constituting such a sub-series.
1. Dividends
---------
Dividends may be declared and paid on the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any other class or
series of then outstanding preferred stock.
2. Liquidation, Dissolution or Winding Up Certain Mergers,
-------------------------------------------------------
Consolidations and Asset Sales
------------------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any other class or series of stock of the Corporation ranking on
liquidation prior and in preference to the Series A Preferred Stock. Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
(collectively referred to as "Senior Preferred Stock"), but before any payment
shall be made to the holders of Common Stock or any other class or series of
stock ranking on liquidation junior to the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock (such
Common Stock and other stock being collectively referred to as "Junior Stock")
by reason of their ownership thereof, an amount
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<PAGE>
equal to $4.00 per share in the case of the Series A Preferred Stock and Series
C Preferred Stock, $6.00 per share in the case of the Series B Preferred Stock
and, with respect to the Series D Preferred Stock, an amount per share equal to
the consideration per share paid to the Corporation for such share (the "Series
D Issuance Price") (in each case subject to appropriate adjustment in the event
of any stock dividend, stock split, combination or other similar
recapitalization affecting such shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock), plus
declared but unpaid dividends. If upon any such liquidation, dissolution or
winding up of the Corporation the remaining assets of the Corporation available
for distribution to its stockholders shall be insufficient to pay the holders of
shares of Series A Preferred Stork, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock the full amount to which they shall be
entitled, the holders of shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock shall share ratably in any distribution of the remaining assets and funds
of the Corporation in proportion to the respective amounts which would otherwise
be payable in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.
(b) After the payment of all preferential amounts required to be paid
to the holders of Senior Preferred Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and any
other class or series of stock of the Corporation ranking on liquidation on a
parity with the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock, upon any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the holders of shares
of Common Stock then outstanding shall be entitled to receive the remaining
assets and funds of the Corporation available for distribution to its
stockholders.
(c) A consolidation or merger of the Corporation with or into another
corporation or entity (where the Corporation is not the surviving entity and
where the stockholders of the Corporation do not hold a majority of the voting
securities of the surviving corporation), or a sale of all or substantially all
of the assets of the Corporation, shall be deemed a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 2; provided,
--------
however, that each holder of Series A Preferred Stock, Series B Preferred Stock,
- -------
Series C Preferred Stock and Series D Preferred Stock shall have the right to
elect the benefits of the provisions of Section 4(i) hereof in lieu of receiving
payment in liquidation, dissolution or winding up of the Corporation pursuant to
this Section 2(c).
3. Voting.
------
(a) Each holder of outstanding shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which the shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock held by
such holder are then convertible (as adjusted from time to time pursuant to
Section 4 hereto, at each meeting of stockholders of the Corporation (and
written actions of stockholders in lieu of meetings) with respect to any and all
matters presented to the stockholders
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<PAGE>
of the Corporation for their action or consideration. Except as provided by law,
by the provisions of Subsection 3(b) below or by the provisions establishing any
other series of Preferred Stock, holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and of
any other outstanding series of Series Preferred Stock shall vote together with
the holders of Common Stock as a single class.
(b) The Corporation shall not amend, alter or repeal the preferences,
special rights or other powers of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stork so as to
affect adversely the Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock or Series D Preferred Stock, without the written consent or
affirmative vote of the holders of a majority of the then outstanding shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock, respectively, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a class. For
this purpose, without limiting the generality of the foregoing, the
authorization of any shares of capital stock with preference or priority over
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
or Series D Preferred Stock as to redemption rights, voting rights or the right
to receive either dividends or amounts distributable upon liquidation,
dissolution or winding up of the Corporation or otherwise shall be deemed to
affect adversely the Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock or Series D Preferred Stock, and the authorization of any
shares of capital stock on a parity with Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock as to
redemption rights, voting rights or the right to receive either dividends or
amounts distributable upon liquidation, dissolution or winding up of the
Corporation shall not be deemed to affect adversely the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock, respectively. Notwithstanding the foregoing, the authorization of any
shares of capital stock (a) containing redemption rights similar to those of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock, except for being entitled to a per share redemption
price higher than that applicable to the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, if such
higher per share redemption price is equivalent to the per share purchase price
for such shares, (b) containing voting rights similar to those of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock, except for being entitled, exclusively and as a separate class,
to (i) elect one or more directors of the Corporation and (ii) rights relating
to such election or (c) containing rights upon liquidation, dissolution or
winding up of the Corporation similar to those of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock,
except for being entitled to be paid out of the assets of the Corporation a per
share amount higher than that applicable to the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, if such
per share amount is equivalent to the per share purchase price for such shares,
shall not be deemed to affect adversely the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock. The
number of authorized shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock may be increased or
decreased (but not below the number of shares then outstanding) by the directors
of the Corporation pursuant to Section 151 of the General Corporation Law of
Delaware or by the affirmative vote of the holders of a majority of the then
outstanding shares of the Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D
68
<PAGE>
Preferred Stock and all other classes or series of stock of the Corporation
entitled to vote thereon, voting as a single class, irrespective of the
provisions of Section 242(b)(2) of the General Corporation Law of Delaware.
4. Optional Conversion. The holders of the Series A Preferred Stock,
-------------------
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock, Series
----------------
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall
be convertible, at the option of the holder thereof, at any time and from time
to time, and without the payment of additional consideration by the holder
thereof, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing, in the case of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock, $4.00, and in the case of
a share of the Series D Preferred Stock, the applicable Series D Issuance Price,
by the applicable Conversion Price (as defined below) in effect at the time of
conversion. The "Conversion Price" shall initially be $4.00 in the case of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
and in the case of a share of the Series D Preferred Stock, by the applicable
Series D Issuance Price. Such applicable initial Conversion Price, and the rate
at which shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock may be converted into shares of
Common Stock, shall be subject to adjustment as provided below.
In the event of a notice of redemption of any shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock pursuant to Section 6 hereof, the Conversion Rights of the shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock, respectively, designated for redemption shall
terminate at the close of business on the fifth full day preceding the date
fixed for redemption, unless the redemption price is not paid when due, in which
case the Conversion Rights of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock for such shares
shall continue until such price is paid in full. In the event of a liquidation
of the Corporation, the Conversion Rights shall terminate at the close of
business on the first full day preceding the date fixed for the payment of any
amounts distributable on liquidation to the holders of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
respectively.
(b) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
(c) Mechanics of Conversion.
-----------------------
(i) In order for a holder of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock to convert
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred
69
<PAGE>
Stock into shares of Common Stock, such holder shall surrender the certificate
or certificates for such shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock, at the office of
the transfer agent for the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock, respectively (or at the
principal office of the Corporation if the Corporation serves as its own
transfer agent), together with written notice that such holder elects to convert
all or any number of the shares of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
represented by such certificate or certificates. Such notice shall state such
holder's name or the names of the nominees in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. If required
by the Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or his
or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date") and such holder shall be treated as a record holder of
Common Stock on such date. The Corporation shall, as soon as practicable after
the Conversion Date, issue and deliver at such office to such holder of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock, or to his or its nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share, and a certificate or
certificates for the number of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
represented by the surrendered certificate but not converted.
(ii) The Corporation shall at all times when the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock. Before taking any action which
would cause an adjustment reducing the Conversion Price below the then par value
of the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock, the Corporation will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly and
legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.
(iii) Upon any such conversion, adjustment to the Conversion Price
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
or Series D Preferred Stock, shall be made for any declared but unpaid dividends
on the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock, respectively, surrendered for conversion or
on the Common Stock delivered upon conversion.
(iv) All shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock which shall have
been surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with
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respect to such shares, including the rights, if any, to receive notices and to
vote, shall immediately cease and terminate on the Conversion Date, except only
the right of the holders thereof to receive shares of Common Stock in exchange
therefor and payment of any dividends declared but unpaid thereon. Any shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock so converted shall be retired and cancelled and shall
not be reissued, and the Corporation (without the need for stockholder action)
may from time to time take such appropriate action as may be necessary to reduce
the authorized Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and other taxes
that may be payable in respect of any issuance or delivery of shares of Common
Stock upon conversion of shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock pursuant to this
Section 4. The Corporation shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of shares of Common Stock in a name other than that in which the shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock so converted were registered, and to the extent the
Company would be required to pay such a tax, no such issuance or delivery shall
be made unless and until the person or entity requesting such issuance has paid
to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(d) Adjustments to Conversion Price for Diluting Issues:
---------------------------------------------------
(i) Special Definitions. For purposes of this Subsection 4(d),
-------------------
the following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
------
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities, excluding options described in subsection 4(d)(i)(D)(IV) below.
(B) "Original Issue Date" shall mean the date on which a
-------------------
share of Series A Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued (or, pursuant to Subsection 4(d)(iii) below,
deemed to be issued) by the Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable:
(I) upon conversion of any Convertible Securities
outstanding on the Original Issue Date, or upon
exercise of any Options outstanding on the
Original Issue Date;
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(II) as a dividend or distribution on Series A
Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock or Series D Preferred Stock;
(III) by reason of a dividend, stock split, split-up or
other distribution on shares of Common Stock that
is covered by Subsection 4(e) or 4(f) below; or
(IV) to employees, officers or directors of, or
consultants or advisors to, the Corporation
pursuant to a plan adopted by the Board of
Directors of the Corporation (which, together
with all other such plans, provides for the
issuance of no more than an aggregate of
1,500,000 shares of Common Stock (subject to
appropriate adjustment in the event of any stock
dividend, stock split, combination or other
similar recapitalization affecting the Common
Stock)).
(ii) No Adjustment of Conversion Price. No adjustment in the number
---------------------------------
of shares of Common Stock into which the Series A Preferred Stock. Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock is
convertible shall be made, by adjustment in the applicable Conversion Price
thereof, unless the consideration per share (determined pursuant to Subsection
4(d)(v)) for an Additional Share of Common Stock issued or deemed to be issued
by the Corporation is less than the applicable Conversion Price in effect on the
date of, and immediately prior to, the issue of such Additional Shares.
(iii) Issue of Securities Deemed Issue of Additional Shares
-----------------------------------------------------
of Common Stock.
---------------
If the Corporation at any time or from time to time after the Original
Issue Date shall any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Subsection 4(d)(v) hereof)
of such Additional Shares of Common Stock would be less than the applicable
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further than in any such
case in which Additional Shares of Common Stock are deemed to be issued:
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(A) No further adjustment in the Conversion Price shall be made
upon the subsequent issue of Convertible Securities or shares of Common Stock
upon the exercise of such Options or conversion or exchange of such Convertible
Securities;
(B) If such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, upon the exercise, conversion or
exchange thereof, the Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase becoming
effective, be recomputed to reflect such increase insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities;
(C) Upon the expiration or termination of any unexercised
Option, the Conversion Price shall be readjusted, and the Additional Shares of
Common Stock deemed issued as the result of the original issue of such Option
shall not be deemed issued for the purposes of any subsequent adjustment of the
Conversion Price;
(D) In the event of any change in the number of shares of Common
Stock issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Conversion Price then in effect shall
forthwith be readjusted to such Conversion Price as would have obtained had the
adjustment which was made upon the issuance of such Option or Convertible
Security prior to such change been made upon the basis of such change; and
(E) No readjustment pursuant to clause (B), (C) or (D) above
shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the original adjustment date,
or (ii) the Conversion Price that would have resulted from any issuances of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date.
In the event the Corporation, after the Original Issue Date, amends the
terms of any Options or Convertible Securities (whether such Options or
Convertible Securities were outstanding on the Original Issue Date or were
issued after the Original Issue Date), then such Options or Convertible
Securities, as so amended, shall be deemed to have been issued after the
Original Issue Date and the provisions of this Subsection 4(d)(iii) shall apply.
(iv) Adjustment of Conversion Price Upon Issuance of
------------------------------------------------
Additional Shares of Common Stock.
---------------------------------
In the event the Corporation shall at any time after the Original Issue
Date issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Subsection 4(d)(iii), but excluding
shares issued as a stock split or combination as provided in Subsection 4(e) or
upon a dividend or distribution as provided in Subsection 4(f), without
consideration or for a consideration per share less than the applicable
Conversion Price in effect on the date of and immediately prior to such
issuance, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue, to a price
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(calculated to the nearest cent) determined by multiplying such Conversion Price
by a fraction, (A) the numerator of which shall be (1) the number of shares of
Common Stock outstanding immediately prior to such issue plus (2) the number of
shares of Common Stock which the aggregate consideration received or to be
received by the Corporation for the total number of Additional Shares of Common
Stock so issued would purchase at such Conversion Price; and (B) the denominator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of such Additional Shares of Common Stock so
issued; provided that (i) for the purpose of this Subsection 4(d)(iv), all
-------- ----
shares of Common Stock issuable upon exercise or conversion of Options
(including the conversion into Common Stock of Convertible Securities issuable
upon the exercise of such Options) or Convertible Securities outstanding
immediately prior to such issue shall be deemed to be outstanding, (ii) the
number of shares of Common Stock deemed issuable upon exercise or conversion of
such outstanding Options and Convertible Securities shall not give effect to any
adjustments to the conversion price or conversion rate of such Options or
Convertible Securities resulting from the issuance of Additional Shares of
Common Stock that is the subject of this calculation, and (iii) immediately
after any Additional Shares of Common Stock are deemed issued pursuant to
Section 4(d)(iii), such Additional Shares of Common Stock shall be deemed to be
outstanding.
(v) Determination of Consideration. For purposes of this
------------------------------
Subsection 4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
-----------------
(I) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Corporation, excluding amounts paid
or payable for accrued interest or accrued dividends;
(II) insofar as it consists of property other than
cash, be computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors, and
(III) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (I) and (II) above,
as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration
----------------------------------
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Subsection 4(d)(iii), relating to Options
and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable
by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or
74
<PAGE>
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities, by
(y) the maximum number or shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(vi) Multiple Closing Dates. In the event the Corporation shall
----------------------
issue on more than one date Additional Shares of Common Stock which are
comprised of shares of the same series or class of Preferred Stock, and such
issuance dates occur within a period of no more than 120 days, then the
Conversion Price shall be adjusted only once on account of such issuances, with
such adjustment to occur upon the final such issuance and to give effect to all
such issuances as if they occurred on the date of the final such issuance.
(e) Adjustment for Stock Splits and Combinations. If the Corporation
--------------------------------------------
shall at any time or from time to time after the Original Issue Date effect a
subdivision of the outstanding Common Stock into a greater number of shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in
Common Stock), the Conversion Price then in effect immediately before that
subdivision shall be proportionately decreased. If the Corporation shall at any
time or from time to time after the Original Issue Date combine the outstanding
shares of Common Stock into a lesser number of shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the event
--------------------------------------------------
the Corporation at any time, or from time to time after the Original Issue Date
shall make or issue, or from a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price for the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock then in effect shall be decreased
as of the time of such issuance or, in the event such a record date shall have
been fixed, as of the close of business on such record date, by multiplying the
Conversion Price for the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock, as applicable, then in
effect by a fraction:
(1) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or
distribution:
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<PAGE>
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Conversion Price for the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be
adjusted pursuant to this paragraph as of the time of actual payment of such
dividends or distributions; and provided further, however, that no such
adjustment shall be made to Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock if the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock, respectively, simultaneously receive a dividend or other
distribution of shares of Common Stock in a number equal to the number of shares
of Common Stock as they would have received if all outstanding shares of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series
D Preferred Stock, respectively, had been converted into Common Stock on the
date of such event.
(g) Adjustments for Other Dividends and Distributions. In the event
-------------------------------------------------
the Corporation at any time or from time to time after the Original Issue Date
for the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that the
holders of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock, respectively, shall receive upon
conversion thereof in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities of the Corporation that they
would have received had the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock, respectively, been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period, giving application to all adjustments called for during such period
under this paragraph with respect to the rights of the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock; and provided further, however, that no such adjustment to the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock shall be made if the holders of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock, respectively, simultaneously receive a dividend or other distribution of
such securities in an amount equal to the amount of such securities as they
would have received if all outstanding shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
respectively, had been converted into Common Stock on the date of such event.
(h) Adjustment for Reclassification, Exchange or Substitution. If the
---------------------------------------------------------
Common Stock issuable upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock shall be
changed into the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification, or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation, or sale of assets
76
<PAGE>
provided for below), then and in each such event the holder of each such share
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
or Series D Preferred Stock, respectively, shall have the right thereafter to
convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change by holders of the number of shares of Common Stock into which
such shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock, respectively, might have been
converted immediately prior to such reorganization, reclassification, or change,
all subject to further adjustment as provided herein.
(i) Adjustment for Merger or Reorganization, etc. In case of any
---------------------------------------------
consolidation or merger of the Corporation with or into another corporation or
the sale or transfer of all or substantially all of the assets of the
Corporation to another corporation, each share of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
shall thereafter be convertible into the kind and amount of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock of the Corporation deliverable upon conversion of such Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, respectively, would have been entitled upon such consolidation, merger,
sale or transfer; and, in such case, appropriate adjustment (as determined in
good faith by the Board of Directors) shall be made in the application of the
provisions in this Section 4 set forth with respect to the rights and interest
thereafter of the holders of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock, to the end that the
provisions set forth in this Section 4 (including provisions with respect to
changes in and other adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other property thereafter deliverable upon the conversion of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock, respectively. Each holder of Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, upon
the occurrence of a merger or consolidation of the Corporation into or with
another corporation (where the Corporation is not the surviving entity and where
the stockholders of the Corporation fail to hold a majority of the voting
securities of the surviving corporation) or the sale of all or substantially all
of the assets of the Corporation, shall have the option of electing treatment of
his shares of Series A Preferred Stock. Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock under either this Section 4(i) or
Section 2(c) hereof.
(j) No Impairment. The Corporation will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock against impairment.
(k) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense
77
<PAGE>
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock, furnish or cause to be furnished to such holder a similar certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion Price
then in effect, and (iii) the number of shares of Common Stock and the amount,
if any, of other property which then would be received upon the conversion of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock.
(l) Notice of Record Date. In the event:
---------------------
(i) that the Corporation declares a dividend (or any
other distribution) on its Common Stock. whether in
cash, property, stock or other securities;
(ii) that the Corporation offers for subscription pro rata
to the holders of any class or series of its capital
stock any additional shares of stock of any class or
series or other rights;
(iii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iv) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination
of its outstanding shares of Common Stock or a stock
dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into or
with another corporation, or of the sale of all or
substantially all of the assets of the Corporation;
or
(v) of the involuntary or voluntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, and shall cause to
be mailed by fist class mail postage prepaid to the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock at their last addresses as shown on the records of the
Corporation or such transfer agent, at least twenty (20) days prior to the date
specified in (A) below or twenty days before the date specified in (B) below. a
notice stating
(A) the record date of such dividend, distribution,
subscription right, subdivision or combination,
or, if a record is not to be taken, the date as
of which the holders of Common Stock of record
to be entitled to such dividend, distribution,
subdivision or combination are to be
determined, or
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<PAGE>
(B) the date on which such reclassification,
consolidation, merger, sale, dissolution,
liquidation or winding up is expected to become
effective, and the date as of which it is
expected that holders of Common Stock of record
shall be entitled to exchange their shares of
Common Stock for securities or other property
deliverable upon such reclassification,
consolidation, merger, sale, dissolution or
winding up.
5. Mandatory Conversion.
--------------------
(a) Upon the closing of the sale of shares of Common Stock in a
public offering, underwritten by a nationally recognized underwriter, pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, in which the Corporation, prior to giving effect to the proceeds of the
Offering, is valued at at least $135,000,000 (determined by multiplying the
number of outstanding shares of capital stock of the Corporation on a fully
diluted basis by the initial public offering price) and resulting in at least
$15,000,000 of net proceeds (determined by subtracting underwriters' discounts
and commissions from gross proceeds) to the Corporation (the "Mandatory
Conversion Date"), (i) all outstanding shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
shall automatically be converted into shares of Common Stock, at the then
effective conversion rate and (ii) the number of authorized shares of Preferred
Stock shall be automatically reduced by the number of shares of Preferred Stock
that had been designated as Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock, and all provisions
included under the caption "Series A, B, C and D Convertible Preferred Stock"
and all references to the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock shall be deleted and shall
be of no further force or effect.
(b) All holders of record of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
shall be given written notice of the Mandatory Conversion Date and the place
designated for mandatory conversion of all such shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock, respectively, pursuant to this Section 5. Such notice need not be given
in advance of the occurrence of the Mandatory Conversion Date. All holders of
record of shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock shall be given written notice of
the filing by the Corporation of a registration statement under the Securities
Act of 1933, as amended, in connection with which the Corporation is proposing
to undertake a public offering, the closing date of which would be the
"Mandatory Conversion Date" as defined in paragraph (a) above. Such notice
shall be given within ten days following the filing of such registration
statement. Any notice required pursuant to this paragraph (b) shall be sent by
first class or registered mail, postage prepaid, to each record holder of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series
D Preferred Stock at such holder's address last shown on the records of the
transfer agent for the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock (or the records of the
Corporation, if it serves as its own transfer agent). Upon receipt of such
notice, each holder of shares of Series A Preferred Stock, Series B Preferred
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Stock, Series C Preferred Stock or Series D Preferred Stock shall surrender his
or its certificate or certificates for all such shares to the Corporation at the
place designated in such notice, and shall thereafter receive certificates for
the number of shares of Common Stock to which such holder is entitled pursuant
to this Section 5. On the Mandatory Conversion Date, all rights with respect to
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock so converted, including the rights, if any, to
receive notices and vote (other than as a holder of Common Stock) will
terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
has been converted, and payment of any declared but unpaid dividends thereon. If
so required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by his or its attorney duly authorized in writing. As soon as practicable after
the Mandatory Conversion Date and the surrender of the certificate or
certificates for Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection 4(b) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the Mandatory Conversion Date, be deemed
to have been retired and cancelled and the shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be necessary
to reduce the authorized Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock accordingly.
6. Mandatory Redemption
----------------------
(a) The Corporation will, subject to the conditions set forth in
Subsection 6(b) below, upon the request of any holder of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock delivered in writing to the Company at least six (6) months prior to the
applicable Mandatory Redemption Date (as defined below) in accordance with
Section 6(c) below, on June 30, 2000 and on each of the first and second
anniversaries thereof (each such date being referred to hereinafter as a
"Mandatory Redemption Date"), redeem from such holder of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock, at a price equal to (i) in the case of Series A Preferred Stock
and Series C Preferred Stock, $4.00 per share, in the case of Series B Preferred
Stock, $6.00 per share, and in the case of the Series D Preferred Stock, the
applicable Series D Issuance Price, in each case plus accrued interest at a rate
equal to the "prime rate" of
80
<PAGE>
Citibank, N.A., as announced from time to time, plus 2% per annum, plus (ii) any
dividends declared but unpaid thereon, subject to appropriate adjustment in the
event of any stock dividend, stock split. combination or other similar
recapitalization affecting such shares (the "Mandatory Redemption Price"), the
following respective portions of the aggregate number of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock held by such holder for which Corporation received cash in
payment for the issuance and sale thereof, on the applicable Mandatory
Redemption Date.
Portion of Shares of Series A, B, C and D
Redemption Date Preferred Stock To Be Redeemed
- --------------- ------------------------------
June 30, 2000 33%
June 30, 2001 Any share of Series A, B, C and D Preferred Stock
entitled to be redeemed on the first Mandatory
Redemption Date that were not redeemed plus 50% of all
remaining shares of Series A, B, C and D Preferred
Stock
June 30, 2002 100% (or all remaining shares of Series A, B, C and D
Preferred Stock)
(b) If the funds of the Corporation legally available for redemption
of Series A Preferred Stock. Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock on any Mandatory Redemption Date are insufficient
to redeem the number of shares of Series A Preferred Stock, Series B Preferred
Stock, Series C, Preferred Stock and Series D Preferred Stock required under
this Section 6 to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of such shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock ratably on the basis of the number of shares of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock which would be redeemed on such date if the funds of the
Corporation legally available therefor had been sufficient to redeem all shares
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock required to be redeemed on such date. At any time
thereafter when additional funds of the Corporation become legally available for
the redemption of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock, such funds will be used, at the
end of tile next succeeding fiscal quarter to redeem the balance of the shares
which the Corporation was theretofore obligated to redeem, or such portion
thereof for which funds are available. ratably on the basis set forth in the
preceding sentence.
(c) The holder of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock requesting redemption shall
provide notice of any redemption of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock pursuant to this
Section 6, by registered mail, postage prepaid, to the Corporation not less than
six (6) months prior to the date on which such redemption is to be made. The
notice will specify the number of shares which are to be redeemed. Upon receipt
of any such notice of redemption, the Corporation will become obligated to
redeem on the
81
<PAGE>
applicable Mandatory Redemption Date all Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock specified
therein (other than such shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock as are duly
converted pursuant to Section 4 prior to the close of business on the fifth full
day preceding the Mandatory Redemption Date). In case less than all Series A
Preferred Stock, Series B Preferred Stock. Series C Preferred Stock or Series D
Preferred Stock represented by any certificate is redeemed in any redemption
pursuant to this Section 6, a new certificate will be issued representing the
unredeemed Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock without cost to the holder thereof.
(d) Unless there shall have been a default in payment of the
Mandatory Redemption Price, no share of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock that is
redeemed shall be entitled to any dividends declared after is Mandatory
Redemption Date, and on such Mandatory Redemption Date all rights of the holder
of such shares as a stockholder of the Corporation by reason of the ownership of
such share will cease, except the right to receive the Mandatory Redemption
Price of such share, without interest. upon presentation and surrender of the
certificate representing such share, and such share will not from and after such
Mandatory Redemption Date be deemed to be outstanding.
(e) Any Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock redeemed pursuant to this Section 6
will be cancelled and will not under any circumstances be reissued, sold or
transferred and the Corporation may from time to time take such appropriate
action as may be necessary to reduce the authorized Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
accordingly,
EXECUTED this 3/rd/ day of May, 1999.
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
----------------------------------
Dean Polnerow, President
82
<PAGE>
CERTIFICATION OF DESIGNATIONS OF THE PREFERRED STOCK
OF
SWITCHBOARD INCORPORATED
TO BE DESIGNATED
SERIES E SPECIAL VOTING PREFERRED STOCK
----------------------------------------------------
Switchboard Incorporated, a Delaware corporation (the "Corporation"),
pursuant to authority conferred on the Board of Directors of the Corporation by
the Certificate of Incorporation, as amended, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, certifies that the Board of Directors of the Corporation, at a meeting
duly called and held, at which a quorum was present and acting throughout, duly
adopted the following resolution:
RESOLVED: That, pursuant to the authority expressly granted to and vested
--------
in the Board of Directors of the Corporation in accordance with the provisions
of its Certificate of Incorporation, as amended, a series of Preferred Stock of
the Corporation be and hereby is established, consisting of one share, to be
designated "Series E Special Voting Preferred Stock" (hereinafter "Series E
Preferred Stock"); that the Board of Directors be and hereby is authorized to
issue such share of Series E Preferred Stock for such consideration and on such
terms as the Board of Directors shall determine; and that, subject to the
limitations provided by law and by the Certificate of Incorporation, as amended,
the powers, designations, preferences and relative, participating, optional or
other special rights of, and the qualifications, limitations or restrictions
upon, the Series E Preferred Stock shall be as follows:
"SERIES E SPECIAL VOTING PREFERRED STOCK
---------------------------------------
One (1) share of the authorized and unissued Preferred Stock of the
Corporation is hereby designated "Series E Special Voting Preferred Stock" (the
"Series E Preferred Stock") with the following rights, preferences, powers,
privileges and restrictions, qualifications and limitations.
1. General.
-------
Except as provided in Section 2 with respect to voting, the share of Series
E Preferred Stock shall have the rights, preferences, powers, privileges and
restrictions, qualifications and limitations of one share of Common Stock. For
the avoidance of doubt, the Series E Preferred Stock is junior to the
Corporation's Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series 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 the Corporation.
2. Voting.
------
2.1 Regular Voting Rights. The holder of the outstanding share of Series
---------------------
E Preferred Stock shall be entitled to one vote at each meeting of
stockholders of the corporation (and written actions of stockholders
in lieu of meetings) with respect to any and all matters presented to
the stockholders of the Corporation for their action or
consideration. Except as provided by law, by the provisions of
Section 2.2 hereof or by the provisions establishing any other series
of Preferred Stock, the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, Series E Preferred Stock and of any other outstanding series
of Series Preferred Stock shall vote together with the holders of
Common Stock as a single class.
2.2 Special Voting Rights. From the date of issuance until the
---------------------
Termination Date, the holder of the Series E Preferred Stock, voting
as a separate class, shall be entitled to elect that number of
directors of the Corporation as is determined in accordance with the
following table:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
If: Then, the Number of Directors is:
- -- --------------------------------
- ----------------------------------------------------------------------------------------------
<S> <C>
the CBS Fully-Diluted Ownership Percentage is 0% 0
and the License Agreement is not in effect
- ----------------------------------------------------------------------------------------------
the CBS Fully-Diluted Ownership Percentage is 0% 1
and the License Agreement is in effect
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
If: Then, the Number of Directors is:
- -- --------------------------------
- ----------------------------------------------------------------------------------------------
<S> <C>
the CBS Fully-Diluted Ownership Percentage is such number of directors, rounded down to
more than 0% the nearest whole number, as represents
the percentage of the then authorized
number of members of the Board of
Directors of the Corporation equal to the
CBS Fully-Diluted Ownership Percentage;
provided, however; that in no event shall
-------- -------
the number be (i) less than one at any
time that the License Agreement is in
effect or (ii) greater than the maximum
number of directors constituting a
minority of the then authorized number of
members of the Board of Directors of the
Corporation.
- ----------------------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing, the holder of the Series E Preferred
Stock shall not be entitled to elect any directors as a class at any
time following a Termination Date. The term of office of all
directors elected pursuant to the special voting rights set forth in
this Section 2.2 shall be deemed to automatically terminate upon the
Termination Date.
A vacancy in any directorship filled by the holder of Series E
Preferred Stock shall be filled only by vote or written consent in
lieu of a meeting of the holder of the Series E Preferred Stock or by
any remaining director or directors elected by the holder of Series E
Preferred Stock pursuant to this Section 2.2.
The holder of the Series E Preferred Stock may remove any director
elected pursuant to this Section 2.2 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.
2.3 Definitions. The following terms have the meanings set forth:
-----------
(a) "CBS Fully-Diluted Ownership Percentage" means the number of
shares of the Corporation's Common Stock beneficially owned (as
defined in Section 13(d) of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder or
any successor provision thereto) by CBS Corporation, a
Pennsylvania corporation, and any entity controlling, controlled
by or under common control of CBS Corporation, assuming the
conversion into Common Stock of all convertible securities and
the exercise or all outstanding options and warrants, whether
vested or unvested.
(b) "License Agreement" means the License Agreement to be entered
into by this Corporation and CBS Corporation at the closing of
the transactions contemplated by that certain Common Stock and
Warrant Purchase
Agreement dated June 1, 1999 by and among the Corporation, CBS
Corporation, a Pennsylvania corporation, and Banyan Systems
Incorporated, a Massachusetts corporation.
(c) "Termination Date" means the first to occur of:
(i) the date on which the CBS Fully-Diluted Ownership
Percentage is 0% and the License Agreement is no
longer in effect; and
(ii) the date on which any person or entity which is a
Switchboard Competitor has directly or indirectly
acquired beneficial ownership of more than 30% of the
outstanding shares of the common stock, or securities
representing, in the aggregate, more than 30% of the
voting power of CBS Corporation (or any person
controlling CBS Corporation), or all or substantially
all of CBS Corporation's assets.
(iii) the date on which the share of Series E Preferred
Stock is held by any person or entity other than CBS
Corporation or an entity controlling, controlled by or
under common control of CBS Corporation.
(d) "Switchboard Competitor" means any person, other than Switchboard
or an affiliate of Switchboard, who/which is engaged, either
directly or indirectly through an affiliate in the business of
providing or promoting an online, interactive directory which
allows users to search for, among other things, residential
listing information, business listing information and
advertisements, e-mail addresses and websites. An "affiliate" of
the person concerned in the preceding sentence means a person
that directly or indirectly (through one or more intermediaries)
controls, is controlled by, or is under common control with, such
person concerned.
3. Mandatory Conversion.
--------------------
3.1 Upon the Termination Date, the outstanding share of Series E Preferred
Stock shall automatically be converted into one share of Common Stock.
3.2 Upon the Termination Date, the holder of the share of Series E
Preferred Stock shall surrender its certificate for such share to the
Corporation, and shall thereafter receive a certificate for the one
share of Common Stock to which such holder is entitled pursuant to
Section 3.1. On the Termination Date, the outstanding share of Series
E Preferred Stock shall be deemed to have been converted into one
share of Common Stock, which shall be deemed to be outstanding of
record, and all rights with respect to the Series E Preferred Stock so
converted, including the rights, if any, to receive notices and vote
(other than as a holder of Common Stock) will terminate, except only
the rights of the holders thereof, upon surrender of its certificate
therefor, to receive a certificate for the one share of Common
Stock into which such Series E Preferred Stock has been converted. The
certificate surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered
holder or by its attorney duly authorized in writing. As soon as
practicable after the Termination Date and the surrender of the
certificate for Series E Preferred Stock, the Corporation shall cause
to be issued and delivered to such holder a certificate for the one
share of Common Stock issuable on such conversion in accordance with
the provisions hereof.
3.3 The certificate evidencing the share of Series E Preferred Stock which
is required to be surrendered for conversion in accordance with the
provisions of this Section 3 shall, from and after the Termination
Date, be deemed to have been retired and cancelled and the share of
Series E Preferred Stock represented thereby converted into Common
Stock for all purposes, notwithstanding the failure of the holder
thereof to surrender such certificate on or prior to such date. Such
converted Series E Preferred Stock may not be reissued, and the
Corporation may thereafter take such appropriate action (without the
need for stockholder action) as may be necessary to reduce the
authorized number of shares of Series E Preferred Stock accordingly.
4. Optional Conversion. At the written request of the holder of the
-------------------
outstanding share of Series E Preferred Stock at any time, the
outstanding share of Series E Preferred Stock may be converted into
one share of Common Stock.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations
to be signed by its President this day of June 28, 1999.
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
----------------------------
Dean Polnerow
President
83
<PAGE>
Exhibit 3.2
-----------
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SWITCHBOARD INCORPORATED
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
Switchboard Incorporated, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
By written action of the Board of Directors of the Corporation resolutions
were duly adopted, pursuant to Sections 141 and 242 of the General Corporation
Law of the State of Delaware, setting forth amendments to the Certificate of
Incorporation of the Corporation declaring said amendments to be advisable and
directing that they be submitted to and be considered by the stockholders of the
Corporation for approval. The stockholders of the Corporation duly approved said
proposed amendments by written consent in accordance with Sections 228 and 242
of the General Corporation Law of the State of Delaware. The resolutions
setting forth the amendments are as follows:
<PAGE>
RESOLVED: That the first paragraph of Article FOURTH of the Certificate of
- -------- Incorporation of the Corporation be and hereby is deleted in its
entirety and the following paragraph is inserted in lieu thereof:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is (i) 85,000,000 shares of Common
Stock, $.01 par value per share ("Common Stock") and (ii) 10,000,000 shares of
Preferred Stock, $.01 par value per share ("Preferred Stock"), 750,000 of which
are designated as Series A Convertible Preferred Stock, 1,500,000 of which are
designated as Series B Convertible Preferred Stock, 4,000,000 of which are
designated as Series C Convertible Preferred Stock, 1,500,000 of which are
designated as Series D Convertible Preferred Stock and one of which is
designated as Series E Special Voting Preferred Stock, as set forth below.
FURTHER
RESOLVED: That an Article ELEVENTH be added to the Certificate of
- --------- Incorporation as follows:
ELEVENTH. This Article is inserted for the management of the business and
for the conduct of the affairs of the Corporation. The provisions of this
Article ELEVENTH will become effective upon the closing of the Corporation's
initial public offering of Common Stock, pursuant to the Securities Act of 1933,
as amended.
1. Number of Directors; Election of Directors. The number of directors
------------------------------------------
of the Corporation shall not be less than three. The exact number of directors
within the limitations specified in the preceding sentence shall be determined
from time to time by, or in the manner provided in, the By-laws of the
Corporation. Election of directors need not be by written ballot, except as and
to the extent provided in the By-laws of the Corporation.
2. Classes of Directors. Except for any directors entitled to be elected
--------------------
by the holders of preferred stock or any other securities of the Corporation
(other than common stock), the Board of Directors shall be and is divided into
three classes: Class I, Class II and Class III. No one class shall have more
than one director more than any other class. If a fraction is contained in the
quotient arrived at by dividing the authorized number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class I, and if such fraction is two-thirds, one of the extra directors shall be
a member of Class I and one of the extra directors shall be a member of Class
II, unless otherwise provided by resolution of the Board of Directors.
3. Terms of Office. Except for any directors entitled to be elected by
---------------
the holders of preferred stock or any other securities of the Corporation (other
than common stock), each director shall serve for a term ending on the date of
the third
-2-
<PAGE>
annual meeting following the annual meeting at which such director was elected;
provided, that each initial director in Class I shall serve for a term expiring
- --------
at the Corporation's annual meeting of stockholders held in 2001; each initial
director in Class II shall serve for a term expiring at the Corporation's annual
meeting of stockholders held in 2002; and each initial director in Class III
shall serve for a term expiring at the Corporation's annual meeting of
stockholders held in 2003; provided further, that the term of each director
-------- -------
shall continue until the election and qualification of his successor and be
subject to his earlier death, resignation or removal.
4. Allocation of Directors Among Classes in the Event of Increases or
------------------------------------------------------------------
Decreases in the Authorized Number of Directors. In the event of any increase
- -----------------------------------------------
or decrease in the authorized number of directors, (i) each director then
serving as such shall nevertheless continue as a director of the class of which
he is a member until the expiration of his current term, subject to his earlier
death, resignation or removal and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors in accordance with
the provisions of Section 2 of this Article ELEVENTH. To the extent possible,
consistent with the provisions of Section 2 of this Article ELEVENTH, any newly
created directorships shall be added to those classes whose terms of office are
to expire at the latest dates following such allocation, and any newly
eliminated directorships shall be subtracted from those classes whose terms of
offices are to expire at the earliest dates following such allocation, unless
otherwise provided from time to time by resolution of the Board of Directors.
5. Quorum. A majority of the directors at any time in office shall
------
constitute a quorum for the transaction of business. In the event one or more
of the directors shall be disqualified to vote at any meeting, then the required
quorum shall be reduced by one for each director so disqualified, provided that
in no case shall less than one-third of the number of directors fixed pursuant
to Section 1 of this Article ELEVENTH constitute a quorum. If at any meeting of
the Board of Directors there shall be less than such a quorum, a majority of the
directors present may adjourn the meeting from time to time without further
notice other than announcement at the meeting, until a quorum shall be present.
6. Action at Meeting. Every act or decision done or made by a majority
-----------------
of the directors present at a meeting duly held at which a quorum is present
shall be regarded as the act of the Board of Directors unless a greater number
is required by law, by this Certificate of Incorporation, or by the By-laws of
the Corporation.
7. Removal. Prior to July 2, 2001 (or if earlier the date that the
-------
Stockholders' Voting Agreement dated as of June 30, 1999 by and among the
corporation, CBS Corporation and Banyan Systems Incorporated (the "Voting
Agreement") is terminated
-3-
<PAGE>
or expires), directors of the Corporation may be removed by the stockholders,
with or without cause, by the affirmative vote of the holders of at least a
majority of the votes which all the stockholders would be entitled to cast in
any annual election of directors or class of directors. On and after July 2,
2001 (or if earlier the date that the Voting Agreement is terminated or
expires), directors of the Corporation may be removed only for cause by the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors. Notwithstanding the prior two
sentences, any directors entitled to be elected by the holders of preferred
stock or any other securities of the Corporation (other than common stock) may
be removed in accordance with the applicable provisions of this Certificate of
Incorporation.
8. Vacancies. Except for any directors entitled to be elected by the
---------
holders of preferred stock or any other securities of the Corporation (other
than common stock), any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board, shall be filled
only by vote of a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected to hold office until the next election of the class for which
such director shall have been chosen, subject to the election and qualification
of his successor and to his earlier death, resignation or removal.
9. Stockholder Nominations and Introduction of Business, Etc. Advance
----------------------------------------------------------
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided by the By-laws of the Corporation.
10. Amendments to Article. Notwithstanding any other provisions of law,
---------------------
this Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article ELEVENTH.
FURTHER
RESOLVED: That an Article TWELFTH be added to the Certificate of
- --------- Incorporation as follows:
TWELFTH. That effective upon the closing of the Corporation's initial
public offering of Common Stock, pursuant to the Securities Act of 1933, as
amended, the stockholders of the Corporation may not take any action by written
consent in lieu of a
-4-
<PAGE>
meeting. Notwithstanding any other provisions of law, this Certificate of
Incorporation or the By-laws of the Corporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the votes which all the
stockholders would be entitled to cast in any annual election of directors or
class of directors shall be required to amend or repeal, or to adopt any
provision inconsistent with, this Article TWELFTH.
FURTHER
RESOLVED: That an Article THIRTEENTH be added to the Certificate of
- --------- Incorporation as follows:
THIRTEENTH. That effective upon the closing of the Corporation's initial
public offering of Common Stock, pursuant to the Securities Act of 1933, as
amended, special meetings of stockholders for any purpose or purposes may be
called at any time by the Board of Directors, the Chairman of the Board or the
Chief Executive Officer, but such special meetings may not be called by any
other person or persons. Business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting. Notwithstanding any other provision of law,
this Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article THIRTEENTH.
* * * * *
-5-
<PAGE>
EXECUTED by the undersigned on this 4th day of February, 2000.
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
-------------------------------------
Dean Polnerow
President
-6-
<PAGE>
Exhibit 3.3
-----------
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SWITCHBOARD INCORPORATED
Switchboard Incorporated (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
1. The Corporation filed its original Certificate of Incorporation with
the Secretary of the State of Delaware on April 18, 1996 under the name
Switchboard.com Incorporated.
2. At a meeting of the Board of Directors of the Corporation, a resolution
was duly adopted, pursuant to Sections 242 and 245 of the General Corporation
Law of the State of Delaware, setting forth an Amended and Restated Certificate
of Incorporation of the Corporation and declaring said Amended and Restated
Certificate of Incorporation advisable. The stockholders of the Corporation duly
approved said proposed Amended and Restated Certificate of Incorporation by
written consent in accordance with Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware. The resolution setting forth the
Amended and Restated Certificate of Incorporation is as follows:
RESOLVED: That the Certificate of Incorporation of the Corporation, as
--------
amended to date, be and hereby is amended and restated in its
entirety so that the same shall read as follows:
FIRST. The name of the Corporation is Switchboard Incorporated.
SECOND. The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 90,000,000 shares, consisting of
(i) 85,000,000 shares of Common Stock, $.01 par value per share ("Common
Stock"), and (ii) 5,000,000 shares of Preferred Stock, $.01 par value per share
("Preferred Stock").
<PAGE>
The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
------------
1. General. The voting, dividend and liquidation rights of the holders of
-------
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock shall have voting rights at
------
all meetings of stockholders, each such holder being entitled to one vote for
each share thereof held by such holder. There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock from
---------
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
-----------
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
---------------
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issuance of the shares thereof, to determine and fix such voting powers,
full or limited, or no voting powers, and such designations, preferences and
relative participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, including without limitation thereof,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, as shall be stated and expressed in such resolutions, all to the
full extent now or hereafter permitted by the General Corporation Law of
Delaware. Without limiting the generality of the foregoing, the resolutions
providing for
-2-
<PAGE>
issuance of any series of Preferred Stock may provide that such series shall be
superior or rank equally or be junior to the Preferred Stock of any other series
to the extent permitted by law. Except as otherwise provided in this Certificate
of Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.
C. SERIES E SPECIAL VOTING PREFERRED STOCK.
---------------------------------------
One (1) share of the authorized and unissued Preferred Stock of the
Corporation is hereby designated "Series E Special Voting Preferred Stock" (the
"Series E Preferred Stock") with the following rights, preferences, powers,
privileges and restrictions, qualifications and limitations.
1. General.
-------
Except as provided in Section 2 with respect to voting, the share of Series
E Preferred Stock shall have the rights, preferences, powers, privileges and
restrictions, qualifications and limitations of one share of Common Stock.
2. Voting.
------
2.1 Regular Voting Rights. The holder of the outstanding share of
---------------------
Series E Preferred Stock shall be entitled to one vote at each
meeting of stockholders of the corporation (and written actions
of stockholders in lieu of meetings) with respect to any and all
matters presented to the stockholders of the Corporation for
their action or consideration. Except as provided by law, by the
provisions of Section 2.2 hereof or by the provisions
establishing any other series of Preferred Stock, the holders
Series E Preferred Stock and of any other outstanding series of
Series Preferred Stock shall vote together with the holders of
Common Stock as a single class.
2.2 Special Voting Rights. From the date of issuance until the
---------------------
Termination Date, the holder of the Series E Preferred Stock,
voting as a separate class, shall be entitled to elect that
number of directors of the Corporation as is determined in
accordance with the following table:
-3-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
If: Then, the Number of Directors is:
--------------------------------------------------------------------------------------------------------------------------
the CBS Fully-Diluted Ownership Percentage is 0% 0
and the License Agreement is not in effect
--------------------------------------------------------------------------------------------------------------------------
the CBS Fully-Diluted Ownership Percentage is 0% 1
and the License Agreement is in effect
--------------------------------------------------------------------------------------------------------------------------
the CBS Fully-Diluted Ownership Percentage is such number of directors, rounded down to
more than 0% the nearest whole number, as is equal to the CBS Fully-Diluted
Ownership Percentage multiplied by the then authorized number of
members of the Board of Directors of the Corporation; provided,
--------
however; that in no event shall the number be (i) less than one at
-------
any time that the License Agreement is in effect or (ii) greater than
the maximum number of directors constituting a minority of the then
authorized number of members of the Board of Directors of the
Corporation.
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing, the holder of the Series E Preferred Stock
shall not be entitled to elect any directors as a class at any time following a
Termination Date. The term of office of all directors elected pursuant to the
special voting rights set forth in this Section 2.2 shall be deemed to
automatically terminate upon the Termination Date.
A vacancy in any directorship filled by the holder of Series E Preferred
Stock shall be filled only by vote or written consent in lieu of a meeting of
the holder of the Series E Preferred Stock or by any remaining director or
directors elected by the holder of Series E Preferred Stock pursuant to this
Section 2.2.
The holder of the Series E Preferred Stock may remove any director elected
pursuant to this Section 2.2 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.
2.3 Definitions. The following terms have the meanings set forth:
-----------
(a) "CBS Fully-Diluted Ownership Percentage" means the number
expressed as a percentage equal to (i) the number of shares of
the Corporation's Common Stock beneficially owned (as defined in
Section 13(d) of the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder or any successor
provision thereto) by CBS Corporation, a Pennsylvania
corporation, and any entity controlling, controlled by or under
common control of CBS Corporation, assuming the conversion
-4-
<PAGE>
into Common Stock of all convertible securities and the exercise
of all outstanding options and warrants, whether vested or
unvested divided by (ii) the total number of shares of the
Corporation's Common Stock outstanding, assuming the conversion
into Common Stock of all convertible securities and the exercise
of all outstanding options and warrants, whether vested or
unvested.
(b) "License Agreement" means the License Agreement to be entered
into by this Corporation and CBS Corporation at the closing of
the transactions contemplated by that certain Common Stock and
Warrant Purchase Agreement dated June 1, 1999 by and among the
Corporation, CBS Corporation, a Pennsylvania corporation, and
Banyan Systems Incorporated, a Massachusetts corporatio n.
(c) "Termination Date" means the first to occur of:
(i) the date on which the CBS Fully-Diluted Ownership Percentage
is 0% and the License Agreement is no longer in effect;
(ii) the date on which any person or entity which is a
Switchboard Competitor has directly or indirectly acquired
beneficial ownership of more than 30% of the outstanding
shares of the common stock, or securities representing, in
the aggregate, more than 30% of the voting power of CBS
Corporation (or any person controlling CBS Corporation), or
all or substantially all of CBS Corporation's assets; and
(iii) the date on which the share of Series E Preferred Stock is
held by any person or entity other than CBS Corporation or
an entity controlling, controlled by or under common control
of CBS Corporation.
(d) "Switchboard Competitor" means any person, other than Switchboard
or an affiliate of Switchboard, who/which is engaged, either
directly or indirectly through an affiliate in the business of
providing or promoting an online, interactive directory which
allows users to search for, among other things, residential listing
information, business listing information and advertisements, e-
mail addresses and websites. An "affiliate" of the person concerned
in the preceding sentence means a person that directly or
indirectly (through one or more intermediaries) controls, is
controlled by, or is under common control with, such person
concerned.
-5-
<PAGE>
3. Mandatory Conversion.
--------------------
3.1 Upon the Termination Date, the outstanding share of Series E
Preferred Stock shall automatically be converted into one
share of Common Stock.
3.2 Upon the Termination Date, the holder of the share of Series E
Preferred Stock shall surrender its certificate for such share
to the Corporation, and shall thereafter receive a certificate
for the one share of Common Stock to which such holder is
entitled pursuant to Section 3.1. On the Termination Date, the
outstanding share of Series E Preferred Stock shall be deemed
to have been converted into one share of Common Stock, which
shall be deemed to be outstanding of record, and all rights
with respect to the Series E Preferred Stock so converted,
including the rights, if any, to receive notices and vote
(other than as a holder of Common Stock) will terminate,
except only the rights of the holders thereof, upon surrender
of its certificate therefor, to receive a certificate for the
one share of Common Stock into which such Series E Preferred
Stock has been converted. The certificate surrendered for
conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to
the Corporation, duly executed by the registered holder or by
its attorney duly authorized in writing. As soon as
practicable after the Termination Date and the surrender of
the certificate for Series E Preferred Stock, the Corporation
shall cause to be issued and delivered to such holder a
certificate for the one share of Common Stock issuable on such
conversion in accordance with the provisions hereof.
3.3 The certificate evidencing the share of Series E Preferred
Stock which is required to be surrendered for conversion in
accordance with the provisions of this Section 3 shall, from
and after the Termination Date, be deemed to have been retired
and cancelled and the share of Series E Preferred Stock
represented thereby converted into Common Stock for all
purposes, notwithstanding the failure of the holder thereof to
surrender such certificate on or prior to such date. Such
converted Series E Preferred Stock may not be reissued, and
the Corporation may thereafter take such appropriate action
(without the need for stockholder action) as may be necessary
to reduce the authorized number of shares of Series E
Preferred Stock accordingly.
4. Optional Conversion. At the written request of the holder of the
-------------------
outstanding share of Series E Preferred Stock at any time, the outstanding share
of Series E Preferred Stock may be converted into one share of Common Stock.
FIFTH. Except as otherwise provided herein, the Corporation reserves the
right to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute and this Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
-6-
<PAGE>
SIXTH. In furtherance and not in limitation of the powers conferred upon
it by the laws of the State of Delaware, the Board of Directors shall have the
power to adopt, amend, alter or repeal the Corporation's By-laws. The
affirmative vote of a majority of the directors present at any regular or
special meeting of the Board of Directors at which a quorum is present shall be
required to adopt, amend, alter or repeal the Corporation's By-laws. The
Corporation's By-laws also may be adopted, amended, altered or repealed by the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors. Notwithstanding any other
provisions of law, this Certificate of Incorporation or the By-Laws of the
Corporation, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the votes which all the stockholders would be entitled to cast
in any annual election of directors or class of directors shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article
SIXTH.
SEVENTH. Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
EIGHTH. 1. Actions, Suits and Proceedings Other than by or in the Right
------------------------------------------------------------
of the Corporation. The Corporation shall indemnify each person who was or is a
- ------------------
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer, partner, employee or trustee
of, or in a similar capacity with, another corporation, partnership, joint
venture, trust or other enterprise (including any employee benefit plan) (all
such persons being referred to hereafter as an "Indemnitee"), or by reason of
any action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom, 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 Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
---------------
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
2. Actions or Suits by or in the Right of the Corporation. The
------------------------------------------------------
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director
-7-
<PAGE>
or officer of the Corporation, or is or was serving, or has agreed to serve, at
the request of the Corporation, as a director, officer, partner, employee or
trustee of, or in a similar capacity with, another corporation, partnership,
joint venture, trust or other enterprise (including any employee benefit plan),
or by reason of any action alleged to have been taken or omitted in such
capacity, against all expenses (including attorneys' fees) and, to the extent
permitted by law, amounts paid in settlement actually and reasonably incurred by
him or on his behalf in connection with such action, suit or proceeding and any
appeal therefrom, 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 Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of Delaware
shall determine upon application that, despite the adjudication of such
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses (including
attorneys' fees) which the Court of Chancery of Delaware shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding the
------------------------------------------------
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article EIGHTH, or in defense
of any claim, issue or matter therein, or on appeal from any such action, suit
or proceeding, he shall be indemnified against all expenses (including
attorneys' fees) actually and reasonably incurred by him or on his behalf in
connection therewith. Without limiting the foregoing, if any action, suit or
proceeding is disposed of, on the merits or otherwise (including a disposition
without prejudice), without (i) the disposition being adverse to the Indemnitee,
(ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a
plea of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that
---------------
the Indemnitee did not act in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
4. Notification and Defense of Claim. As a condition precedent to his
---------------------------------
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such action,
suit, proceeding or investigation, other than as provided below in this Section
4. The Indemnitee shall have the right to employ his own counsel in connection
with such action, suit, proceeding or investigation, but the fees and expenses
of such counsel incurred after notice from the Corporation of its assumption of
the defense thereof shall be at the expense of the Indemnitee unless (i) the
employment of counsel by the Indemnitee has been authorized by the Corporation,
(ii) counsel to the Indemnitee shall have reasonably concluded that there may be
a conflict of interest or position on any significant issue between the
Corporation and the Indemnitee in the conduct of the defense of such action,
suit, proceeding or investigation or (iii) the Corporation
-8-
<PAGE>
shall not in fact have employed counsel to assume the defense of such action,
suit, proceeding or investigation, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above. The Corporation shall not be required to indemnify the Indemnitee
under this Article for any amounts paid in settlement of any action, suit,
proceeding or investigation effected without its written consent. The
Corporation shall not settle any action, suit, proceeding or investigation in
any manner which would impose any penalty or limitation on the Indemnitee
without the Indemnitee's written consent. Neither the Corporation nor the
Indemnitee will unreasonably withhold or delay its consent to any proposed
settlement.
5. Advance of Expenses. Subject to the provisions of Section 6 of this
-------------------
Article EIGHTH, in the event that the Corporation does not assume the defense
pursuant to Section 4 of this Article EIGHTH of any action, suit, proceeding or
investigation of which the Corporation receives notice under this Article, any
expenses (including attorneys' fees) incurred by an Indemnitee in defending a
civil or criminal action, suit, proceeding or investigation or any appeal
therefrom shall be paid by the Corporation in advance of the final disposition
of such matter; provided, however, that the payment of such expenses incurred by
-------- -------
the Indemnitee in advance of the final disposition of such matter shall be made
only upon receipt of an undertaking by or on behalf of the Indemnitee to repay
all amounts so advanced in the event that it shall ultimately be determined that
the Indemnitee is not entitled to be indemnified by the Corporation as
authorized in this Article; and further provided that no such advancement of
------- --------
expenses shall be made if it is determined (in the manner described in Section
6) that (i) the Indemnitee did not act in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, or (ii) with respect to any criminal action or proceeding, the
Indemnitee had reasonable cause to believe his conduct was unlawful. Such
undertaking shall be accepted without reference to the financial ability of the
Indemnitee to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or
-----------------------------
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article EIGHTH,
the Indemnitee shall submit to the Corporation a written request, including in
such request such documentation and information as is reasonably available to
the Indemnitee and is reasonably necessary to determine whether and to what
extent the Indemnitee is entitled to indemnification or advancement of expenses.
Any such indemnification or advancement of expenses shall be made promptly, and
in any event within 60 days after receipt by the Corporation of the written
request of the Indemnitee, unless with respect to requests under Section 1, 2 or
5 of this Article EIGHTH the Corporation determines within such 60-day period
that the Indemnitee did not meet the applicable standard of conduct set forth in
Section 1, 2 or 5 of this Article EIGHTH, as the case may be. Such
determination shall be made in each instance (a) by a majority vote of the
directors of the Corporation consisting of persons who are not at that time
parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) by a majority vote of a committee of
disinterested directors designated by majority vote of disinterested directors,
whether or not a quorum, (c) if there are no disinterested directors, or if
disinterested directors so direct, by independent legal counsel (who may, to the
extent permitted
-9-
<PAGE>
by law, be regular legal counsel to the Corporation) in a written opinion, or
(d) by the stockholders of the Corporation.
7. Remedies. The right to indemnification or advances as granted by this
--------
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the
Corporation to have made a determination prior to the commencement of such
action that indemnification is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Corporation pursuant to Section 6 of this Article EIGHTH
that the Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct. The Indemnitee's expenses (including
attorneys' fees) incurred in connection with successfully establishing his right
to indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.
8. Limitations. Notwithstanding anything to the contrary in this Article,
-----------
except as set forth in Section 7 of the Article EIGHTH, the Corporation shall
not indemnify an Indemnitee in connection with a proceeding (or part thereof)
initiated by the Indemnitee unless the initiation thereof was approved by the
Board of Directors of the Corporation. Notwithstanding anything to the contrary
in this Article, the Corporation shall not indemnify an Indemnitee to the extent
such Indemnitee is reimbursed from the proceeds of insurance, and in the event
the Corporation makes any indemnification payments to an Indemnitee and such
Indemnitee is subsequently reimbursed from the proceeds of insurance, such
Indemnitee shall promptly refund such indemnification payments to the
Corporation to the extent of such insurance reimbursement.
9. Subsequent Amendment. No amendment, termination or repeal of this
--------------------
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
10. Other Rights. The indemnification and advancement of expenses
------------
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time
to time by its Board of Directors, grant indemnification rights to
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<PAGE>
other employees or agents of the Corporation or other persons serving the
Corporation and such rights may be equivalent to, or greater or less than, those
set forth in this Article.
11. Partial Indemnification. If an Indemnitee is entitled under any
-----------------------
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
12. Insurance. The Corporation may purchase and maintain insurance, at
---------
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of Delaware.
13. Merger or Consolidation. If the Corporation is merged into or
-----------------------
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
14. Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
15. Definitions. Terms used herein and defined in Section 145(h) and
-----------
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
16. Subsequent Legislation. If the General Corporation Law of Delaware is
----------------------
amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
NINTH. This Article is inserted for the management of the business and for
the conduct of the affairs of the Corporation.
1. Number of Directors; Election of Directors. The number of directors of
------------------------------------------
the Corporation shall not be less than three. The exact number of directors
within the limitations specified in the preceding sentence shall be determined
from time to time by, or in the manner
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<PAGE>
provided in, the By-laws of the Corporation. Election of directors need not be
by written ballot, except as and to the extent provided in the By-laws of the
Corporation.
2. Classes of Directors. Except for any directors entitled to be elected
--------------------
by the holders of preferred stock or any other securities of the Corporation
(other than common stock), the Board of Directors shall be and is divided into
three classes: Class I, Class II and Class III. No one class shall have more
than one director more than any other class. If a fraction is contained in the
quotient arrived at by dividing the authorized number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class I, and if such fraction is two-thirds, one of the extra directors shall be
a member of Class I and one of the extra directors shall be a member of Class
II, unless otherwise provided by resolution of the Board of Directors.
3. Terms of Office. Except for any directors entitled to be elected by
---------------
the holders of preferred stock or any other securities of the Corporation (other
than common stock), each director shall serve for a term ending on the date of
the third annual meeting following the annual meeting at which such director was
elected; provided, that each initial director in Class I shall serve for a term
--------
expiring at the Corporation's annual meeting of stockholders held in 2001; each
initial director in Class II shall serve for a term expiring at the
Corporation's annual meeting of stockholders held in 2002; and each initial
director in Class III shall serve for a term expiring at the Corporation's
annual meeting of stockholders held in 2003; provided further, that the term of
-------- -------
each director shall continue until the election and qualification of his
successor and be subject to his earlier death, resignation or removal.
4. Allocation of Directors Among Classes in the Event of Increases or
------------------------------------------------------------------
Decreases in the Authorized Number of Directors. In the event of any increase
- -----------------------------------------------
or decrease in the authorized number of directors, (i) each director then
serving as such shall nevertheless continue as a director of the class of which
he is a member until the expiration of his current term, subject to his earlier
death, resignation or removal and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors in accordance with
the provisions of Section 2 of this Article NINTH. To the extent possible,
consistent with the provisions of Section 2 of this Article NINTH, any newly
created directorships shall be added to those classes whose terms of office are
to expire at the latest dates following such allocation, and any newly
eliminated directorships shall be subtracted from those classes whose terms of
offices are to expire at the earliest dates following such allocation, unless
otherwise provided from time to time by resolution of the Board of Directors.
5. Quorum. A majority of the directors at any time in office shall
------
constitute a quorum for the transaction of business. In the event one or more
of the directors shall be disqualified to vote at any meeting, then the required
quorum shall be reduced by one for each director so disqualified, provided that
in no case shall less than one-third of the number of directors fixed pursuant
to Section 1 of this Article NINTH constitute a quorum. If at any meeting of
the Board of Directors there shall be less than such a quorum, a majority of the
directors present may adjourn the meeting from time to time without further
notice other than announcement at the meeting, until a quorum shall be present.
-12-
<PAGE>
6. Action at Meeting. Every act or decision done or made by a majority of
-----------------
the directors present at a meeting duly held at which a quorum is present shall
be regarded as the act of the Board of Directors unless a greater number is
required by law, by this Certificate of Incorporation, or by the By-laws of the
Corporation.
7. Removal. Prior to July 2, 2001 (or if earlier the date that the
-------
Stockholders' Voting Agreement dated as of June 30, 1999 by and among the
corporation, CBS Corporation and Banyan Systems Incorporated (the "Voting
Agreement") is terminated or expires), directors of the Corporation may be
removed by the stockholders, with or without cause, by the affirmative vote of
the holders of at least a majority of the votes which all the stockholders would
be entitled to cast in any annual election of directors or class of directors.
On and after July 2, 2001 (or if earlier the date that the Voting Agreement is
terminated or expires), directors of the Corporation may be removed only for
cause by the affirmative vote of the holders of at least seventy-five percent
(75%) of the votes which all the stockholders would be entitled to cast in any
annual election of directors or class of directors. Notwithstanding the prior
two sentences, any directors entitled to be elected by the holders of preferred
stock or any other securities of the Corporation (other than common stock) may
be removed in accordance with the applicable provisions of this Certificate of
Incorporation.
8. Vacancies. Except for any directors entitled to be elected by the
---------
holders of preferred stock or any other securities of the Corporation (other
than common stock), any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board, shall be filled
only by vote of a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected to hold office until the next election of the class for which
such director shall have been chosen, subject to the election and qualification
of his successor and to his earlier death, resignation or removal.
9. Stockholder Nominations and Introduction of Business, Etc. Advance
----------------------------------------------------------
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided by the By-laws of the Corporation.
10. Amendments to Article. Notwithstanding any other provisions of law,
---------------------
this Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article NINTH.
TENTH. Stockholders of the Corporation may not take any action by written
consent in lieu of a meeting. Notwithstanding any other provisions of law, this
Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article TENTH.
-13-
<PAGE>
ELEVENTH. Special meetings of stockholders for any purpose or purposes may
be called at any time by the Board of Directors, the Chairman of the Board or
the Chief Executive Officer, but such special meetings may not be called by any
other person or persons. Business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting. Notwithstanding any other provision of law,
this Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article ELEVENTH.
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by its duly authorized officer this
_____ day of ___________, 2000.
SWITCHBOARD INCORPORATED
By:_____________________________________
Name:
Title:
-14-
<PAGE>
Exhibit 3.4
-----------
BY-LAWS
OF
SWITCHBOARD INCORPORATED
<PAGE>
BY-LAWS
-------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 - Stockholders.......................................... 1
1.1 Place of Meetings............................................ 1
1.2 Annual Meeting............................................... 1
1.3 Special Meetings............................................. 1
1.4 Notice of Meetings........................................... 1
1.5 Voting List.................................................. 1
1.6 Quorum....................................................... 2
1.7 Adjournments................................................. 2
1.8 Voting and Proxies........................................... 2
1.9 Action at Meeting............................................ 2
1.10 Action without Meeting....................................... 2
ARTICLE 2 - Directors............................................. 3
2.1 General Powers............................................... 3
2.2 Number; Election and Qualification........................... 3
2.3 Enlargement of the Board..................................... 3
2.4 Tenure....................................................... 3
2.5 Vacancies.................................................... 3
2.6 Resignation.................................................. 3
2.7 Regular Meetings............................................. 3
2.8 Special Meetings............................................. 4
2.9 Notice of Special Meetings................................... 4
2.10 Meetings by Telephone Conference Calls....................... 4
2.11 Quorum....................................................... 4
2.12 Action at Meeting............................................ 4
2.13 Action by Consent............................................ 4
2.14 Removal...................................................... 5
2.15 Committees................................................... 5
2.16 Compensation of Directors.................................... 5
ARTICLE 3 - Officers.............................................. 5
3.1 Enumeration.................................................. 5
3.2 Election..................................................... 5
3.3 Qualification................................................ 6
3.4 Tenure....................................................... 6
3.5 Resignation and Removal...................................... 6
3.6 Vacancies.................................................... 6
3.7 Chairman of the Board and Vice-Chairman of the Board......... 6
3.8 President.................................................... 6
3.9 Vice Presidents.............................................. 7
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
3.10 Secretary and Assistant Secretaries........................... 7
3.11 Treasurer and Assistant Treasurers............................ 7
3.12 Salaries...................................................... 8
ARTICLE 4 - Capital Stock.......................................... 8
4.1 Issuance of Stock............................................. 8
4.2 Certificates of Stock......................................... 8
4.3 Transfers..................................................... 8
4.4 Lost, Stolen or Destroyed Certificates........................ 9
4.5 Record Date................................................... 9
ARTICLE 5 - General Provisions..................................... 10
5.1 Fiscal Year................................................... 10
5.2 Corporate Seal................................................ 10
5.3 Waiver of Notice.............................................. 10
5.4 Voting of Securities.......................................... 10
5.5 Evidence of Authority......................................... 10
5.6 Certificate of Incorporation.................................. 10
5.7 Transactions with Interested Parties.......................... 10
5.8 Severability.................................................. 11
5.9 Pronouns...................................................... 11
ARTICLE 6 - Amendments............................................. 11
6.1 By the Board of Directors..................................... 11
6.2 By the Stockholders........................................... 11
</TABLE>
-ii-
<PAGE>
BY-LAWS
OF
SWITCHBOARD INCORPORATED
ARTICLE 1 - Stockholders
------------------------
1.1 Place of Meetings. All meetings of stockholders shall be held at such
-----------------
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors or the President or, if not so designated, at the
registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election
--------------
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Board of
Directors or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the Board
of Directors or the President and stated in the notice of the meeting if no
annual meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and any action taken
at that special meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case all references in these By-laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be called at
----------------
any time by the President or by the Board of Directors. Business transacted at
any special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
------------------
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
1.5 Voting List. The officer who has charge of the stock ledger of the
-----------
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for
<PAGE>
a period of at least 10 days prior to the meeting, at a place within the city
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time of the meeting, and may be
inspected by any stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
------
Incorporation or these By-laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
------------
other time and to any other place at which a meeting of stockholders may be held
under these By-laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
------------------
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to
vote at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize another person or persons to vote or act for him by
written proxy executed by the stockholder or his authorized agent and delivered
to the Secretary of the corporation. No such proxy shall be voted or acted upon
after three years from the date of its execution, unless the proxy expressly
provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
-----------------
holders of shares of stock representing a majority the votes cast on a matter
(or if there are two or more classes stock entitled to vote as separate classes,
then in the case of each such class, the holders of shares of stock of that
class representing a majority of the votes cast on a matter) shall decide any
matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these By-Laws. When a quorum is present at any meeting, any
election by stockholders shall be determined by a plurality of the votes cast on
the election.
1.10 Action without Meeting. Any action required or permitted to be taken
----------------------
at any annual or special meeting of stockholders of the corporation may be taken
without a meeting, notice and without a vote, if a consent in writing, action so
taken, is signed by the holders of having not less than the minimum number of
votes a without prior setting forth the outstanding stock that would be
necessary to authorize or take such action at meeting at which all shares
entitled to vote on such action were present and voted.
-2-
<PAGE>
Prompt notice of the taking of corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE 2 - Directors
---------------------
2.1 General Powers. The business and affairs of the corporation shall be
--------------
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law or the
Certificate of Incorporation. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.
2.2 Number; Election and Qualification. The number of directors which
----------------------------------
shall constitute the whole Board of Directors shall be determined by resolution
of the stockholders or the Board of Directors, but in no event shall be less
than one. The number of directors may be decreased at any time and from time to
time either by the stockholders or by a majority of the directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the corporation.
2.3 Enlargement of the Board. The number of directors may be increased at
------------------------
any time and from time to time by the stockholders or by a majority of the
directors then in office.
2.4 Tenure. Each director shall hold office until the next annual meeting
------
and until his successor is elected and qualified, or until his earlier death,
resignation or removal.
2.5 Vacancies. Unless and until filled by the stockholders, any vacancy
---------
in the Board of Directors, however occurring, including a vacancy resulting from
an enlargement of the Board, may be filled by vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, and a director chosen to fill a
position resulting from an increase in the number of directors shall hold office
until the next annual meeting of stockholders and until his successor is elected
and qualified, or until his earlier death, resignation or removal.
2.6 Resignation. Any director may resign by delivering his written
-----------
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.7 Regular Meetings. Regular meetings of the Board of Directors may be
----------------
held without notice at such time and place, either within or without the State
of Delaware,
-3-
<PAGE>
as shall be determined from time to time by the Board of Directors; provided
that any director who is absent when such a determination is made shall be given
notice of the determination. A regular meeting of the Board of Directors may be
held without notice immediately after and at the same place as the annual
meeting of stockholders.
2.8 Special Meetings. Special meetings of the Board of Directors may be
----------------
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, two or, more directors, or by
one director in the event that there is only a single director in office.
2.9 Notice of Special Meetings. Notice of any special meeting of
--------------------------
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 48 hours in advance of the meeting, (ii) by sending a telegram or telex,
or delivering written notice by hand, to his last known business or home address
at least 48 hours in advance of the meeting, or (iii) by mailing written notice
to his last known business or home address at least 72 hours in advance of the
meeting. A notice or waiver of notice of a meeting of the Board of Directors
need not specify the purposes of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any members of
--------------------------------------
any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.11 Quorum. A majority of the total number of the whole Board of
------
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.12 Action at Meeting. At any meeting of the Board of Directors at which
-----------------
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these By-Laws.
2.13 Action by Consent. Any action required or permitted to be taken at
-----------------
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
-4-
<PAGE>
2.14 Removal. Except as otherwise provided by the General Corporation Law
-------
of Delaware, any one or more or all of the directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, except that the directors elected by the holders of
a particular class or series of stock may be removed without cause only by vote
of the holders of a majority of the outstanding shares of such class or series.
2.15 Committees. The Board of Directors may, by resolution passed by a
----------
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors and subject to the
provisions of the General Corporation Law of the State of Delaware, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers which may require it. Each
such committee shall keep minutes and make such reports as the Board of
Directors may from time to time request. Except as the Board of Directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these By-laws for the Board of Directors.
2.16 Compensation of Directors. Directors may be paid such compensation
-------------------------
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment
shall preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE 3 - Officers
--------------------
3.1 Enumeration. The officers of the corporation shall consist of a
-----------
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
--------
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
-5-
<PAGE>
3.3 Qualification. No officer need be a stockholder. Any two or more
-------------
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
------
Incorporation or by these By-laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
-----------------------
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
---------
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of
----------------------------------------------------
Directors may appoint a Chairman of the Board and may designate the Chairman of
the Board as Chief Executive officer. If the Board of Directors appoints a
Chairman of the Board, he shall perform such duties and possess such powers as
are assigned to him by the Board of Directors. If the Board of Directors
appoints a Vice-Chairman of the Board, he shall, in the absence or disability of
the Chairman of the Board, perform the duties and exercise the powers of the
Chairman of the Board and shall perform such other duties and possess such other
powers as may from time to time be vested in him by the Board of Directors.
3.8 President. The President shall, subject to the direction of the Board
---------
of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders and, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has
designated the Chairman of the Board or another officer as Chief Executive
officer, the President shall be the Chief Executive officer of the corporation.
The President shall perform such other duties and shall have such other powers
as the Board of Directors may from time to time prescribe.
-6-
<PAGE>
3.9 Vice Presidents. Any Vice President shall perform such duties and
---------------
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall perform such
-----------------------------------
duties and shall have such powers as the Board of Directors or the President may
from time to time prescribed. In addition, the Secretary shall perform such
duties and have such powers as are incident to the office of the secretary,
including without limitation the duty and power to give notices of all meetings
of stockholders and special meetings of the Board of Directors, to attend all
meetings of stockholders and the Board of Directors and keep a record of the
proceedings, to maintain a stock ledger and prepare lists of stockholders and
their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary, (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such
----------------------------------
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the President or the Treasurer may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer, (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
-7-
<PAGE>
3.12 Salaries. Officers of the corporation shall be entitled to such
--------
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE 4 - Capital Stock
-------------------------
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
-----------------
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the corporation shall
---------------------
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
him in the corporation. Each such certificate shall be signed by, or in the
name of the corporation by, the Chairman or Vice-Chairman, if any, of the Board
of Directors, or the President or a Vice President, and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-laws,
applicable securities laws or any agreement among any number of shareholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of each certificate representing shares of such
class or series of stock, provided that in lieu of the foregoing requirements
there may be set forth on the face or back of each certificate representing
shares of such class or series of stock a statement that the corporation will
furnish without charge to each stockholder who so requests a copy of the full
text of the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
4.3 Transfers. Except as otherwise established by rules and regulations
---------
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or
-8-
<PAGE>
accompanied by a written assignment or power of attorney properly executed, and
with such proof of authority or the authenticity of signature as the corporation
or its transfer agent may reasonably require. Except as may be otherwise
required by law, by the Certificate of incorporation or by these By-laws, the
corporation shall be entitled to treat the record holder of stock as shown on
its books as the owner of such stock for all purposes, including the payment of
dividends and the right to vote with respect to such stock, regardless of any
transfer, pledge or other disposition of such stock until the shares have been
transferred on the books of the corporation in accordance with the requirements
of these By-laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a
--------------------------------------
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
-----------
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 10 days after the date of adoption of a
record date for a written consent without a meeting, nor more than 60 days prior
to any other action to which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is properly delivered to the corporation. The record date
for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
-9-
<PAGE>
ARTICLE 5 - General Provisions
------------------------------
5.1 Fiscal Year. Except as from time to time otherwise designated by the
-----------
Board of Directors, the fiscal year of the corporation shall begin on the first
day of January in each year and end on the last day of December in each year.
5.2 Corporate Seal. The corporate seal shall be in such form as shall be
--------------
approved by the Board of Directors.
5.3 Waiver of Notice. Whenever any notice whatsoever is required to be
----------------
given by law, by the Certificate of Incorporation or by these By-laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
5.4 Voting of Securities. Except as the directors may otherwise
--------------------
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5.5 Evidence of Authority. A certificate by the Secretary, or an
---------------------
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
5.6 Certificate of Incorporation. All references in these By-laws to the
----------------------------
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
5.7 Transactions with Interested Parties. No contract or transaction
------------------------------------
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
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<PAGE>
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of Directors,
a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
5.8 Severability. Any determination that any provision of these By-laws
------------
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-laws.
5.9 Pronouns. All pronouns used in these By-laws shall be deemed to refer
--------
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE 6 - Amendments
----------------------
6.1 By the Board of Directors. These By-laws may be altered, amended or
-------------------------
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
6.2 By the Stockholders. These By-laws may be altered, amended or
-------------------
repealed or new by-laws may be adopted by the affirmative vote of the holders of
a majority of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting.
-11-
<PAGE>
Exhibit 3.5
-----------
AMENDED AND RESTATED BY-LAWS
OF
SWITCHBOARD INCORPORATED
[To be effective upon the closing of the corporation's
initial public offering of common stock pursuant
to the Securities Act of 1933, as amended]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I STOCKHOLDERS.......................................................... 1
1.1 Place of Meetings..................................................... 1
1.2 Annual Meeting........................................................ 1
1.3 Special Meetings...................................................... 1
1.4 Notice of Meetings.................................................... 1
1.5 Voting List........................................................... 1
1.6 Quorum................................................................ 2
1.7 Adjournments.......................................................... 2
1.8 Voting and Proxies.................................................... 2
1.9 Action at Meeting..................................................... 2
1.10 Nomination of Directors............................................... 3
1.11 Notice of Business at Annual Meetings................................. 4
1.12 Conduct of Meetings................................................... 6
1.13 No Action by Written Consent in Lieu of a Meeting..................... 7
ARTICLE II DIRECTORS............................................................. 7
2.1 General Powers........................................................ 7
2.2 Number, Election and Qualification.................................... 7
2.3 Classes of Directors.................................................. 7
2.4 Terms of Office....................................................... 8
2.5 Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Authorized Number of Directors....................... 8
2.6 Quorum................................................................ 8
2.7 Action at Meeting..................................................... 8
2.8 Removal............................................................... 9
2.9 Vacancies............................................................. 9
2.10 Resignation........................................................... 9
2.11 Regular Meetings...................................................... 9
2.12 Special Meetings...................................................... 9
2.13 Notice of Special Meetings............................................ 10
2.14 Meetings by Telephone Conference Calls................................ 10
2.15 Action by Written Consent............................................. 10
2.16 Committees............................................................ 10
2.17 Compensation of Directors............................................. 11
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ARTICLE III OFFICERS................................................. 11
3.1 Titles................................................... 11
3.2 Election................................................. 11
3.3 Qualification............................................ 11
3.4 Tenure................................................... 11
3.5 Resignation and Removal.................................. 11
3.6 Vacancies................................................ 12
3.7 Chairman of the Board.................................... 12
3.8 President................................................ 12
3.9 Vice Presidents.......................................... 12
3.10 Secretary and Assistant Secretaries...................... 12
3.11 Treasurer and Assistant Treasurers....................... 13
3.12 Salaries................................................. 14
ARTICLE IV CAPITAL STOCK............................................ 14
4.1 Issuance of Stock........................................ 14
4.2 Certificates of Stock.................................... 14
4.3 Transfers................................................ 14
4.4 Lost, Stolen or Destroyed Certificates................... 15
4.5 Record Date.............................................. 15
ARTICLE V GENERAL PROVISIONS....................................... 16
5.1 Fiscal Year.............................................. 16
5.2 Corporate Seal........................................... 16
5.3 Execution of Instruments................................. 16
5.4 Waiver of Notice......................................... 16
5.5 Voting of Securities..................................... 16
5.6 Evidence of Authority.................................... 16
5.7 Certificate of Incorporation............................. 17
5.8 Transactions with Interested Parties..................... 17
5.9 Severability............................................. 18
5.10 Pronouns................................................. 18
ARTICLE VI AMENDMENTS............................................... 18
</TABLE>
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<PAGE>
ARTICLE I
STOCKHOLDERS
1.1 Place of Meetings. All meetings of stockholders shall be held at such
-----------------
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors, the Chairman of the Board or the Chief Executive
Officer or, if not so designated, at the registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election of
--------------
directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Board of
Directors, the Chairman of the Board or the Chief Executive Officer (which date
shall not be a legal holiday in the place where the meeting is to be held) at
the time and place to be fixed by the Board of Directors, the Chairman of the
Board or the Chief Executive Officer and stated in the notice of the meeting. If
no annual meeting is held in accordance with the foregoing provisions, the Board
of Directors shall cause the meeting to be held as soon thereafter as is
convenient. If no annual meeting is held in accordance with the foregoing
provisions, a special meeting may be held in lieu of the annual meeting, and any
action taken at that special meeting shall have the same effect as if it had
been taken at the annual meeting, and in such case all references in these By-
laws to the annual meeting of the stockholders shall be deemed to refer to such
special meeting.
1.3 Special Meetings. Special meetings of stockholders for any purpose or
----------------
purposes may be called at any time by the Board of Directors, the Chairman of
the Board or the Chief Executive Officer, but such special meetings may not be
called by any other person or persons. Business transacted at any special
meeting of stockholders shall be limited to matters relating to the purpose or
purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written notice
------------------
of each meeting of stockholders, whether annual or special, shall be given not
less than 10 nor more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting. The notices of all meetings shall
state the place, date and hour of the meeting. The notice of a special meeting
shall state, in addition, the purpose or purposes for which the meeting is
called. If mailed, notice shall be deemed given when deposited in the United
States mail, postage prepaid, directed to the stockholder at such stockholder's
address as it appears on the records of the corporation.
1.5 Voting List. The Secretary shall prepare, at least 10 days before every
-----------
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in
<PAGE>
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time of the meeting, and
may be inspected by any stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
------
Incorporation or these By-laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business. A quorum, once established at a meeting,
shall not be broken by the withdrawal of enough votes to leave less than a
quorum.
1.7 Adjournments. Any meeting of stockholders may be adjourned from time to
------------
time to any other time and to any other place at which a meeting of stockholders
may be held under these By-laws by the stockholders present or represented at
the meeting and entitled to vote, although less than a quorum, or, if no
stockholder is present, by any officer entitled to preside at or to act as
secretary of such meeting. It shall not be necessary to notify any stockholder
of any adjournment of less than 30 days if the time and place of the adjourned
meeting are announced at the meeting at which adjournment is taken, unless after
the adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each share
------------------
of stock entitled to vote held of record by such stockholder and a proportionate
vote for each fractional share so held, unless otherwise provided by law or the
Certificate of Incorporation. Each stockholder of record entitled to vote at a
meeting of stockholders may vote in person or may authorize another person or
persons to vote for him by a proxy executed in writing (or in such other manner
permitted by the General Corporation Law of Delaware) by the stockholder or his
authorized agent and delivered (including by electronic transmission) to the
Secretary of the corporation. No such proxy shall be voted upon after three
years from the date of its execution, unless the proxy expressly provides for a
longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, any matter
-----------------
to be voted upon by the stockholders at such meeting shall be decided by the
affirmative vote of the holders of a majority of the stock present or
represented and voting on such matter (or if there are two or more classes of
stock entitled to vote as separate classes, then in the case of each such
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<PAGE>
class, the holders of a majority of the stock of that class present or
represented and voting on such matter), except when a different vote is required
by law, the Certificate of Incorporation or these By-laws. When a quorum is
present at any meeting, any election by stockholders shall be determined by a
plurality of the votes cast by the stockholders entitled to vote on the
election.
1.10 Nomination of Directors.
-----------------------
(a) Except for (i) any directors entitled to be elected by the holders
of preferred stock or any other securities of the corporation (other than common
stock) and (ii) any directors elected in accordance with Section 2.9 hereof by
the Board of Directors to fill a vacancy, only persons who are nominated in
accordance with the procedures in this Section 1.10 shall be eligible for
election as directors. Nomination for election to the Board of Directors of the
corporation at a meeting of stockholders may be made (i) by or at the direction
of the Board of Directors or (ii) by any stockholder of the corporation who (x)
complies with the notice procedures set forth in Section 1.10(b) and (y) is a
stockholder of record on the date of the giving of such notice and on the record
date for the determination of stockholders entitled to vote at such meeting.
(b) To be timely, a stockholder's notice must be received by the
Secretary at the principal executive offices of the corporation as follows:
(a) in the case of an election of directors at an annual meeting of
stockholders, not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting; provided,
--------
however, that (i) in the case of the annual meeting of stockholders of the
- -------
corporation to be held in 2001 and in the event that the date of the annual
meeting in any other year is advanced by more than 20 days, or delayed by
more than 60 days, from such anniversary date, a stockholder's notice must
be so received not earlier than the ninetieth day prior to such annual
meeting and not later than the close of business on the later of (A) the
sixtieth day prior to such annual meeting and (B) the tenth day following
the day on which notice of the date of such annual meeting was mailed or
public disclosure of the date of such annual meeting was made, whichever
first occurs; or (b) in the case of an election of directors at a special
meeting of stockholders, not earlier than the ninetieth day prior to such
special meeting and not later than the close of business on the later of
(i) the sixtieth day prior to such special meeting and (ii) the tenth day
following the day on which notice of the date of such special meeting was
mailed or public disclosure of the date of such special meeting was made,
whichever first occurs.
The stockholder's notice to the Secretary shall set forth (a) as to each
proposed nominee (i) such person's name, age, business address and, if known,
residence address, (ii) such person's principal occupation or employment, (iii)
the class and number of shares of stock of the corporation which are
beneficially owned by such person, and (iv) any other information
-3-
<PAGE>
concerning such person that must be disclosed as to nominees in proxy
solicitations pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended; (b) as to the stockholder giving the notice (i) such
stockholder's name and address, as they appear on the corporation's books, (ii)
the class and number of shares of stock of the corporation which are owned,
beneficially and of record, by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder and (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the person(s) named in its notice; and (c) as to the
beneficial owner, if any, on whose behalf the nomination is being made (i) such
beneficial owner's name and address, (ii) the class and number of shares of
stock of the corporation which are beneficially owned by such beneficial owner,
and (iii) a description of all arrangements or understandings between such
beneficial owner and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be made. In
addition, to be effective, the stockholder's notice must be accompanied by the
written consent of the proposed nominee to serve as a director if elected. The
corporation may require any proposed nominee to furnish such other information
as may reasonably be required to determine the eligibility of such proposed
nominee to serve as a director of the corporation.
(c) The chairman of any meeting shall, if the facts warrant, determine
that a nomination was not made in accordance with the provisions of this
Section 1.10, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded.
(d) Except as otherwise required by law, nothing in this Section 1.10
shall obligate the corporation or the Board of Directors to include in any proxy
statement or other stockholder communication distributed on behalf of the
corporation or the Board of Directors information with respect to any nominee
for director submitted by a stockholder.
1.11 Notice of Business at Annual Meetings.
-------------------------------------
(a) At any annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (i) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (ii) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (iii) properly brought before the
meeting by a stockholder. For business to be properly brought before an annual
meeting by a stockholder, (i) if such business relates to the election of
directors of the corporation, the procedures in Section 1.10 must be complied
with and (ii) if such business
-4-
<PAGE>
relates to any other matter, the stockholder must (x) have given timely notice
thereof in writing to the Secretary in accordance with the procedures set forth
in Section 1.11(b) and (y) be a stockholder of record on the date of the giving
of such notice and on the record date for the determination of stockholders
entitled to vote at such annual meeting.
(b) To be timely, a stockholder's notice must be received by the
Secretary at the principal executive offices of the corporation not less than 60
days nor more than 90 days prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the case of the annual meeting
-------- -------
of stockholders of the corporation to be held in 2001 and in the event that the
date of the annual meeting in any other year is advanced by more than 20 days,
or delayed by more than 60 days, from such anniversary date, a stockholder's
notice must be so received not earlier than the ninetieth day prior to such
annual meeting and not later than the close of business on the later of (A) the
sixtieth day prior to such annual meeting and (B) the tenth day following the
day on which notice of the date of such annual meeting was mailed or public
disclosure of the date of such annual meeting was made, whichever first occurs.
The stockholder's notice to the Secretary shall set forth as to each matter
the stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, and the name and address of the beneficial owner, if
any, on whose behalf the proposal is made, (iii) the class and number of shares
of stock of the corporation which are owned, of record and beneficially, by the
stockholder and beneficial owner, if any, (iv) a description of all arrangements
or understandings between such stockholder or such beneficial owner, if any, and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of the
stockholder or such beneficial owner, if any, in such business, and (v) a
representation that such stockholder intends to appear in person or by proxy at
the annual meeting to bring such business before the meeting. Notwithstanding
anything in these By-laws to the contrary, no business shall be conducted at any
annual meeting of stockholders except in accordance with the procedures set
forth in this Section 1.11; provided that any stockholder proposal which
complies with Rule 14a-8 of the proxy rules (or any successor provision)
promulgated under the Securities Exchange Act of 1934, as amended, and is to be
included in the corporation's proxy statement for an annual meeting of
stockholders shall be deemed to comply with the requirements of this Section
1.11.
(c) The chairman of any meeting shall, if the facts warrant, determine
that business was not properly brought before the meeting in accordance with the
provisions of this Section 1.11, and if he should so determine, he shall so
declare to the meeting and such business shall not be brought before the
meeting.
-5-
<PAGE>
1.12 Conduct of Meetings.
-------------------
(a) Chairman of Meeting. Meetings of stockholders shall be presided over
-------------------
by the Chairman of the Board, if any, or in his absence by the Vice Chairman of
the Board, if any, or in his absence by the Chief Executive Officer, or in his
absence by the President, or in his absence by a Vice President, or in the
absence of all of the foregoing persons by a chairman designated by the Board of
Directors, or in the absence of such designation by a chairman chosen by vote of
the stockholders at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
(b) Rules, Regulations and Procedures. The Board of Directors of the
---------------------------------
corporation may adopt by resolution such rules, regulations and procedures for
the conduct of any meeting of stockholders of the corporation as it shall deem
appropriate. Except to the extent inconsistent with such rules, regulations and
procedures as adopted by the Board of Directors, the chairman of any meeting of
stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the corporation, their duly authorized
and constituted proxies or such other persons as shall be determined; (iv)
restrictions on entry to the meeting after the time fixed for the commencement
thereof; and (v) limitations on the time allotted to questions or comments by
participants. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with the rules of parliamentary procedure.
(c) Closing of Polls. The chairman of the meeting shall announce at the
----------------
meeting when the polls for each matter to be voted upon at the meeting will be
opened and closed. If no announcement is made, the polls shall be deemed to have
opened when the meeting is convened and closed upon the final adjournment of the
meeting. After the polls close, no ballots, proxies or votes or any revocations
or changes thereto may be accepted.
(d) Inspectors of Election. In advance of any meeting of stockholders, the
----------------------
Board of Directors, the Chairman of the Board or the President shall appoint one
or more inspectors or election to act at the meeting and make a written report
thereof. One or more other persons may be designated as alternate inspectors to
replace any inspector who fails to act. If no
-6-
<PAGE>
inspector or alternate is present, ready and willing to act at a meeting of
stockholders, the chariman of the meeting shall appoint one or more inspectors
to act at the meeting. Unless otherwise required by law, inspectors may be
officers, employees or agents of the corporation. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability. The inspector shall have the duties
prescribed by law and shall take charge of the polls and, when the vote in
completed, shall make a certificate of the result of the vote taken and of such
other facts as may be required by law.
(e) No Action by Written Consent in Lieu of a Meeting. Stockholders of
-------------------------------------------------
the corporation may not take any action by written consent in lieu of a meeting.
ARTICLE II
DIRECTORS
2.1 General Powers. The business and affairs of the corporation shall be
--------------
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law, the
Certificate of Incorporation or these By-laws. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
2.2 Number, Election and Qualification. The number of directors which shall
----------------------------------
constitute the whole Board of Directors shall be determined from time to time by
resolution of the Board of Directors, but in no event shall be less than three.
Except for any directors entitled to be elected by the holders of preferred
stock or any other securities of the corporation (other than common stock), the
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the corporation.
2.3 Classes of Directors. Except for any directors entitled to be elected by
--------------------
the holders of preferred stock or any other securities of the corporation (other
than common stock), the Board of Directors shall be and is divided into three
classes: Class I, Class II and Class III. No one class shall have more than one
director more than any other class. If a fraction is contained in the quotient
arrived at by dividing the authorized number of directors by three, then, if
such fraction is one-third, the extra director shall be a member of Class I, and
if such fraction is two-thirds, one of the extra directors shall be a member of
Class I and one of the extra directors shall be a member of Class II, unless
otherwise provided by resolution of the Board of Directors.
-7-
<PAGE>
2.4 Terms of Office. Except for any directors entitled to be elected by the
---------------
holders of preferred stock or any other securities of the corporation (other
than common stock), each director shall serve for a term ending on the date of
the third annual meeting following the annual meeting at which such director was
elected; provided, that each initial director in Class I shall serve for a term
--------
expiring at the corporation's annual meeting of stockholders held in 2001; each
initial director in Class II shall serve for a term expiring at the
corporation's annual meeting of stockholders held in 2002; and each initial
director in Class III shall serve for a term expiring at the corporation's
annual meeting of stockholders held in 2003; provided further, that the term of
----------------
each director shall continue until the election and qualification of his
successor and be subject to his earlier death, resignation or removal.
2.5 Allocation of Directors Among Classes in the Event of Increases or
------------------------------------------------------------------
Decreases in the Authorized Number of Directors. In the event of any increase
- -----------------------------------------------
or decrease in the authorized number of directors, (i) each director then
serving as such shall nevertheless continue as a director of the class of which
he is a member until the expiration of his current term, subject to his earlier
death, resignation or removal and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors in accordance with
the provisions of Section 2.3. To the extent possible, consistent with the
provisions of Section 2.3, any newly created directorships shall be added to
those classes whose terms of office are to expire at the latest dates following
such allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution of the Board of Directors.
2.6 Quorum. A majority of the directors at any time in office shall
------
constitute a quorum for the transaction of business. In the event one or more of
the directors shall be disqualified to vote at any meeting, then the required
quorum shall be reduced by one for each director so disqualified, provided that
in no case shall less than one-third of the number of directors fixed pursuant
to Section 2.2 constitute a quorum. If at any meeting of the Board of Directors
there shall be less than such a quorum, a majority of the directors present may
adjourn the meeting from time to time without further notice other than
announcement at the meeting, until a quorum shall be present.
2.7 Action at Meeting. Every act or decision done or made by a majority of
-----------------
the directors present at a meeting duly held at which a quorum is present shall
be regarded as the act of the Board of Directors unless a greater number is
required by law, by the Certificate of Incorporation or by these By-laws.
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<PAGE>
2.8 Removal. Prior to July 2, 2001(or if earlier the date that the
-------
Stockholders' Voting Agreement dated as of June 30, 1999 by and among the
corporation, CBS Corporation and Banyan Systems Incorporated (the "Voting
Agreement") is terminated or expires), directors of the corporation may be
removed by the stockholders, with or without cause, by the affirmative vote of
the holders of at least a majority of the votes which all the stockholders would
be entitled to cast in any annual election of directors or class of directors.
On and after July 2, 2001 (or if earlier the date that the Voting Agreement is
terminated or expires), directors of the corporation may be removed only for
cause by the affirmative vote of the holders of at least seventy-five percent
(75%) of the votes which all the stockholders would be entitled to cast in any
annual election of directors. Notwithstanding the prior two sentences, any
directors entitled to be elected by the holders of preferred stock or any other
securities of the corporation (other than common stock) may be removed in
accordance with the applicable provisions of the Certificate of Incorporation.
2.9 Vacancies. Except for any directors entitled to be elected by the
---------
holders of preferred stock or any other securities of the corporation (other
than common stock), any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board, shall be filled
only by vote of a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected to hold office until the next election of the class for which
such director shall have been chosen, subject to the election and qualification
of his successor and to his earlier death, resignation or removal.
2.10 Resignation. Any director may resign by delivering his written
-----------
resignation to the corporation at its principal office or to the Chairman of the
Board, the President or the Secretary. Such resignation shall be effective upon
receipt unless it is specified to be effective at some later time or upon the
happening of some later event.
2.11 Regular Meetings. Regular meetings of the Board of Directors may be held
----------------
without notice at such time and place, either within or without the State of
Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
2.12 Special Meetings. Special meetings of the Board of Directors may be held
----------------
at any time and place, within or without the State of Delaware, designated in a
call by the Chairman of the Board, the President, two or more directors, or by
one director in the event that there is only a single director in office.
-9-
<PAGE>
2.13 Notice of Special Meetings. Notice of any special meeting of directors
--------------------------
shall be given to each director by the Secretary or by the officer or one of the
directors calling the meeting. Notice shall be duly given to each director (i)
by giving notice to such director in person or by telephone at least 24 hours in
advance of the meeting, (ii) by sending a telegram, telecopy, telex or
electronic mail, or delivering written notice by hand or reputable overnight
courier, to his last known business, home or electronic mail address at least 48
hours in advance of the meeting, or (iii) by sending written notice, via first-
class mail, to his last known business or home address at least 72 hours in
advance of the meeting. A notice or waiver of notice of a meeting of the Board
of Directors need not specify the purposes of the meeting.
2.14 Meetings by Telephone Conference Calls. Directors may participate in
--------------------------------------
meetings of the Board of Directors or any committee thereof by means of
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other, and participation by
such means shall constitute presence in person at such meeting.
2.15 Action by Written Consent. Any action required or permitted to be taken
-------------------------
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all members of the Board or committee, as the case
may be, consent to the action in writing, and the written consents are filed
with the minutes of proceedings of the Board or committee.
2.16 Committees. The Board of Directors may designate one or more committees,
----------
each committee to consist of one or more of the directors of the corporation.
The Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of law, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation and may authorize the seal of the corporation to be
affixed to all papers which may require it. Each such committee shall keep
minutes and make such reports as the Board of Directors may from time to time
request. Except as the Board of Directors may otherwise determine, any committee
may make rules for the conduct of its business, but unless otherwise provided by
the directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these By-laws for the Board of
Directors.
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<PAGE>
2.17 Compensation of Directors. Directors may be paid such compensation for
-------------------------
their services and such reimbursement for expenses of attendance at meetings as
the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE III
OFFICERS
3.1 Titles. The officers of the corporation shall consist of a President, a
------
Secretary, a Treasurer and such other officers with such other titles as the
Board of Directors shall determine, including a Chairman of the Board, a Vice
Chairman of the Board, and one or more Vice Presidents, Assistant Treasurers,
and Assistant Secretaries. The Board of Directors may appoint such other
officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
--------
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or more offices
-------------
may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
------
Incorporation or by these By-laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
resolution electing or appointing him, or until his earlier death, resignation
or removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
-----------------------
written resignation to the corporation at its principal office or to the Chief
Executive Officer or the Secretary. Such resignation shall be effective upon
receipt unless it is specified to be effective at some later time or upon the
happening of some later event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his
-11-
<PAGE>
compensation be by the month or by the year or otherwise, unless such
compensation is expressly provided in a duly authorized written agreement with
the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in any
---------
office for any reason and may, in its discretion, leave unfilled for such period
as it may determine any offices other than those of President, Treasurer and
Secretary. Each such successor shall hold office for the unexpired term of his
predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board. The Board of Directors may appoint from its
---------------------
members a Chairman of the Board. If the Board of Directors appoints a Chairman
of the Board, he shall perform such duties and possess such powers as are
assigned to him by the Board of Directors and, if the Chairman of the Board is
also designated as the corporation's Chief Executive Officer, he shall have the
powers and duties of the Chief Executive Officer prescribed in Section 3.8 of
these By-laws. Unless otherwise provided by the Board of Directors, the Chairman
of the Board shall preside at all meetings of the Board of Directors and
stockholders.
3.8 President. Unless the Board of Directors has designated the Chairman of
---------
the Board or another officer of the corporation as the corporation's Chief
Executive Officer, the President shall be the Chief Executive Officer of the
corporation and, as such, shall have general charge and supervision of the
business of the Corporation subject to the direction of the Board of Directors.
The President shall perform such other duties and shall have such other powers
as the Board of Directors and the Chief Executive Officer (if an officer other
than the President is serving in such position) may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
---------------
possess such powers as the Board of Directors or the Chief Executive Officer may
from time to time prescribe. In the event of the absence, inability or refusal
to act of the Chief Executive Officer, the President (if he is not the Chief
Executive Officer), and then the Vice President (or if there shall be more than
one, the Vice Presidents in the order determined by the Board of Directors),
shall perform the duties of the Chief Executive Officer and when so performing
shall have all the powers of and be subject to all the restrictions upon the
Chief Executive Officer. The Board of Directors may assign to any Vice President
the title of Executive Vice President, Senior Vice President or any other title
selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall perform such
-----------------------------------
duties and shall have such powers as the Board of Directors or the Chief
Executive Officer may from time to time prescribe. In addition, the Secretary
shall perform such duties and have such powers as are incident to the office of
the secretary, including without limitation the duty and power to give
-12-
<PAGE>
notices of all meetings of stockholders and special meetings of the Board of
Directors, to attend all meetings of stockholders and the Board of Directors and
keep a record of the proceedings, to maintain a stock ledger and prepare lists
of stockholders and their addresses as required, to be custodian of corporate
records and the corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers as
the Board of Directors, the Chief Executive Officer or the Secretary may from
time to time prescribe. In the event of the absence, inability or refusal to act
of the Secretary, the Assistant Secretary (or if there shall be more than one,
the Assistant Secretaries in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting of
stockholders or directors, the chairman of the meeting shall designate a
temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such
----------------------------------
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors or the Chief Executive Officer. In addition, the
Treasurer shall perform such duties and have such powers as are incident to the
office of treasurer, including without limitation the duty and power to keep and
be responsible for all funds and securities of the corporation, to deposit funds
of the corporation in depositories selected in accordance with these By-laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such powers as
the Board of Directors, the Chief Executive Officer or the Treasurer may from
time to time prescribe. In the event of the absence, inability or refusal to act
of the Treasurer, the Assistant Treasurer (or if there shall be more than one,
the Assistant Treasurers in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Treasurer.
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<PAGE>
3.12 Salaries. Officers of the corporation shall be entitled to such
--------
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE IV
CAPITAL STOCK
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
-----------------
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the corporation shall be
---------------------
entitled to have a certificate, in such form as may be prescribed by law and by
the Board of Directors, certifying the number and class of shares owned by him
in the corporation. Each such certificate shall be signed by, or in the name of
the corporation by, the Chairman or Vice Chairman, if any, of the Board of
Directors, or the President or a Vice President, and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any restriction on
transfer pursuant to the Certificate of Incorporation, these By-laws, applicable
securities laws or any agreement among any number of stockholders or among such
holders and the corporation shall have conspicuously noted on the face or back
of the certificate either the full text of the restriction or a statement of the
existence of such restriction.
There shall be set forth on the face or back of each certificate representing
shares of such class or series of stock of the corporation a statement that the
corporation will furnish without charge to each stockholder who so requests a
copy of the full text of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
4.3 Transfers. Except as otherwise established by rules and regulations
---------
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of
-14-
<PAGE>
attorney properly executed, and with such proof of authority or the authenticity
of signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to such stock, regardless of any transfer, pledge or other disposition of such
stock until the shares have been transferred on the books of the corporation in
accordance with the requirements of these By-laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a new
--------------------------------------
certificate of stock in place of any previously issued certificate alleged to
have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
-----------
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. If no record date is fixed, the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote at
a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
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<PAGE>
ARTICLE V
GENERAL PROVISIONS
5.1 Fiscal Year. Except as from time to time otherwise designated by the
-----------
Board of Directors, the fiscal year of the corporation shall begin on the first
day of January of each year and end on the last day of December in each year.
5.2 Corporate Seal. The corporate seal shall be in such form as shall be
--------------
approved by the Board of Directors.
5.3 Execution of Instruments. The Chief Executive Officer and the President
------------------------
shall each, acting singly, have power and authority to execute and deliver on
behalf and in the name of the corporation any instrument requiring the signature
of an officer of the corporation which may be authorized by the Board of
Directors, except where the execution and delivery of such an instrument shall
be expressly delegated by the Board of Directors to some other officer or agent
of the corporation. The other officers of the corporation may execute and
deliver on behalf and in the name of the corporation any instrument requiring
the signature of an officer of the corporation when so authorized by the Board
of Directors.
5.4 Waiver of Notice. Whenever any notice whatsoever is required to be given
----------------
by law, by the Certificate of Incorporation or by these By-laws, a waiver of
such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telecopy or any other available
method, whether before, at or after the time stated in such waiver, or the
appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
5.5 Voting of Securities. Except as the Board of Directors may otherwise
--------------------
designate, the Chief Executive Officer, the President or the Treasurer may waive
notice of, and act as, or appoint any person or persons to act as, proxy or
attorney-in-fact for this corporation (with or without power of substitution) at
any meeting of stockholders or shareholders of any other corporation or
organization, the securities of which may be held by this corporation.
5.6 Evidence of Authority. A certificate by the Secretary, or an Assistant
---------------------
Secretary, or a temporary Secretary, as to any action taken by the stockholders,
directors, a committee or any officer or representative of the corporation shall
as to all persons who rely on the certificate in good faith be conclusive
evidence of such action.
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<PAGE>
5.7 Certificate of Incorporation. All references in these By-laws to the
----------------------------
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
5.8 Transactions with Interested Parties. No contract or transaction between
------------------------------------
the corporation and one or more of the directors or officers, or between the
corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors at which the contract or transaction is authorized or solely
because his or their votes are counted for such purpose, if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
-17-
<PAGE>
5.9 Severability. Any determination that any provision of these By-laws is
------------
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-laws.
5.10 Pronouns. All pronouns used in these By-laws shall be deemed to refer to
--------
the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE VI
AMENDMENTS
These By-laws may be altered, amended or repealed, in whole or in part, or
new By-laws may be adopted by the Board of Directors or by the stockholders as
provided in the Certificate of Incorporation.
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<PAGE>
Exhibit 5
---------
Hale and Dorr LLP
Counsellors at Law
www.haledorr.com
60 State Street . Boston, Massachusetts 02109
617-526-6000 . fax 617-526-5000
February 8, 2000
Switchboard Incorporated
115 Flanders Road
Westboro, Massachusetts 01581
Re: Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form S-1 (File No. 333-90013) (the "Registration Statement") filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), for the registration
of 6,325,000 shares of Common Stock, $0.01 par value per share (the "Shares"),
of Switchboard Incorporated, a Delaware corporation (the "Company"), including
825,000 Shares issuable upon exercise of an over-allotment option granted by the
Company.
The Shares are to be sold by the Company pursuant to an underwriting
agreement (the "Underwriting Agreement") to be entered into by and among the
Company and FleetBoston Robertson Stephens Inc., J.P Morgan Securities Inc., The
Robinson-Humphrey Company, LLC and SoundView Technology Group, Inc., as
representatives of the several underwriters named in the Underwriting Agreement,
the form of which has been filed as Exhibit 1 to the Registration Statement.
We are acting as counsel for the Company in connection with the issue
and sale by the Company of the Shares. We have examined signed copies of the
Registration Statement as filed with the Commission. We have also examined and
relied upon the Underwriting Agreement, minutes of meetings of the stockholders
and the Board of Directors of the Company as provided to us by the Company,
stock record books of the Company as provided to us by the Company, the
Certificate of Incorporation and By-Laws of the Company, each as restated and/or
amended to date, and such other documents as we have deemed necessary for
purposes of rendering the opinions hereinafter set forth.
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as copies, the authenticity of the originals of such latter documents and the
legal competence of all signatories to such documents.
We assume that the appropriate action will be taken, prior to the
offer and sale of the Shares in accordance with the Underwriting Agreement, to
register and qualify the Shares for sale under all applicable state securities
or "blue sky" laws.
We express no opinion herein as to the laws of any state or
jurisdiction other than the state laws of the Commonwealth of Massachusetts, the
General Corporation Law of the State of Delaware and the federal laws of the
United States of America.
<PAGE>
Switchboard Incorporated
February 8, 2000
Page 2
Based upon and subject to the foregoing, we are of the opinion that
the Shares have been duly authorized for issuance and, when the Shares are
issued and paid for in accordance with the terms and conditions of the
Underwriting Agreement, the Shares will be validly issued, fully paid and
nonassessable.
It is understood that this opinion is to be used only in connection
with the offer and sale of the Shares while the Registration Statement is in
effect.
Please note that we are opining only as to the matters expressly set
forth herein, and no opinion should be inferred as to any other matters. This
opinion is based upon currently existing statutes, rules, regulations and
judicial decisions, and we disclaim any obligation to advise you of any change
in any of these sources of law or subsequent legal or factual developments which
might affect any matters or opinions set forth herein.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act and to the use of our
name therein and in the related Prospectus under the caption "Validity of Common
Stock." In giving such consent, we do not hereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act or the rules and regulations of the Commission.
Very truly yours,
/s/ Hale and Dorr LLP
HALE AND DORR LLP
<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
Amendment
to
1999 Stock Incentive Plan
Section 4(a)(i) of the 1999 Stock Incentive Plan (the "Plan") of
Switchboard Incorporated, a Delaware corporation, is hereby amended to increase
from 1,500,000 to 1,875,000 the number of shares of Common Stock, $0.01 par
value per share, authorized for issuance under the Plan.
Except to the extent amended hereby, the Plan is in all respects hereby
ratified and confirmed and shall continued in full force and effect.
<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. Notwithstanding
anything to the contrary, the first Plan Period shall begin on the first date
that the Common Stock is publicly traded following the Company's initial public
offering ("IPO") and shall end on the date six months thereafter.
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
-2-
<PAGE>
subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value
of such 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; provided, that, with respect to the first Plan Period,
- ----------------------- -------- ----
the closing price on the Offering Commencement Date shall be the initial public
offering price provided for in the underwriting agreement entered into by
-3-
<PAGE>
the Company in connection with the IPO. 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.
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.
-4-
<PAGE>
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.
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
-5-
<PAGE>
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 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
-6-
<PAGE>
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 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 10.10
-------------
FINANCIAL REPORTING AGREEMENT
This Financial Reporting Agreement (the "Agreement") dated as of January
28, 2000 is entered into by and among Switchboard Incorporated, a Delaware
corporation ("Switchboard"), Banyan Systems Incorporated, a Massachusetts
corporation ("Banyan"), and CBS Corporation, a Pennsylvania corporation ("CBS").
WHEREAS, CBS and Banyan are significant stockholders in Switchboard;
WHEREAS, each of Banyan and CBS is or may in the future be subject to
certain financial reporting obligations with respect to their respective
ownership of securities of Switchboard; and
WHEREAS, the parties desire to memorialize their understanding regarding
the provision by Switchboard of financial information to Banyan and CBS;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Provision of Financial Statements. Switchboard shall provide each
---------------------------------
of Banyan and CBS with unaudited monthly, quarterly, and annual financial
information consisting of summarized financial information as described in
Securities and Exchange Commission ("SEC") Regulation S-X, each prepared in
accordance with generally accepted accounting practices in the U.S. ("GAAP")
within 30 days following each period end. Switchboard will promptly notify each
of Banyan and CBS of any adjustment made to such financial information. In
addition, Switchboard shall provide each of Banyan and CBS with annual audited
financial statements prepared in accordance with GAAP, together with an audit
opinion from a "Big 5" public accounting firm no later than 90 days following
year end.
If (x) Banyan or any of its affiliates and/or (y) CBS or any of its
affiliates notifies Switchboard that the party giving such notification is
required to include summarized Switchboard financial information in its
consolidated financial statements, thereafter Switchboard shall provide the
party giving such notification with (1) audited annual financial statements of
Switchboard prepared in accordance with GAAP within 75 days following year end;
and (2) reviewed quarterly financial statements of Switchboard within 40 days
following period end.
If (x) Banyan or any of its affiliates and/or (y) CBS or any of its
affiliates notifies Switchboard that Switchboard represents an unconsolidated
subsidiary of the size to qualify as a "significant subsidiary" (as defined by
SEC Regulation S-X) at the 20% level of the party giving such notification, then
Switchboard shall provide to the party giving such notification (1) draft
audited annual financial statements within 45 days following period end; (2)
audited financial statements within 75 days following year end; (3)
<PAGE>
reviewed draft quarterly financial statements within 35 days following period
end; and (4) final quarterly financial statements within 40 days following
period end.
2. Provision of Additional Information. If requested by Banyan and/or CBS,
-----------------------------------
Switchboard shall provide the requesting party with 12 month projections, in
reasonable detail, of Switchboard's results of operations, statement of
financial position, related cash flow and expected use of CBS advertising (the
"Forecast Information") in order for the requesting party to estimate its
consolidated results of operations, including its equity earnings/(loss) in
Switchboard and its statement of financial position and for tax planning and
other similar purposes. Banyan and/or CBS, as the case may be, agree to treat
any such Forecast Information which is provided to them as confidential and not
to use such Forecast Information for any purpose other than as set forth above.
CBS agrees that no specific Forecast Information regarding Switchboard will be
publicly disclosed in any CBS financial information without Switchboard's prior
consent. Such Forecast Information shall be delivered in the case of a request
made by CBS to the Vice President and Controller of CBS. The Vice President and
Controller of CBS shall only allow such Forecast Information to be reviewed and
used by those persons who need such information to estimate CBS' consolidated
financial results. Banyan agrees that no specific Forecast Information regarding
Switchboard will be publicly disclosed in any Banyan financial information
without Switchboard's prior consent. Such Forecast Information shall be
delivered in the case of a request made by Banyan to the Chief Executive Officer
and Chief Financial Officer of Banyan. The Chief Executive Officer and Chief
Financial Officer of Banyan shall only allow such Forecast Information to be
reviewed and used by those persons who need such information to estimate
Banyan's consolidated financial results.
3. General. This Agreement may be executed in two or more counterparts,
-------
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. This Agreement will be binding upon
Switchboard, Banyan and CBS and their respective successors and assigns. 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). Any term of this Agreement may be amended or terminated
with written consent of each of the parties to this Agreement. Any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) with written consent of each of the parties to
this Agreement that is affected by such waiver.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date set forth above.
CBS CORPORATION
By: /s/ Fredric G. Reynolds
--------------------------------
Name: Fredric G. Reynolds
------------------------------
Title: Executive Vice President and
Chief Financial Officer
-----------------------------
SWITCHBOARD INCORPORATED
By: /s/ John Jewett
--------------------------------
Name: John Jewett
------------------------------
Title: Vice President, CFO
-----------------------------
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
-------------------------------
Name: Richard M. Spaulding
------------------------------
Title: Senior Vice President, CFO
-----------------------------
-3-
<PAGE>
EXHIBIT 10.21
-------------
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
DATABASE LICENSE AGREEMENT
This AGREEMENT made and entered into as of December 31, 1997 (the
"Effective Date") by and between American Business Information, Inc.(R) ("ABI"),
a Delaware corporation, and Switchboard Incorporated ("LICENSEE"), a Delaware
corporation.
WHEREAS, ABI owns a proprietary database as defined in paragraph 1 of this
AGREEMENT containing information on businesses and individuals in the United
States and desires to license this database on the terms provided in this
AGREEMENT.
WHEREAS, the LICENSEE desires to license ABI's database on the terms provided in
this Agreement.
Now therefore the parties mutually agree as follows:
1. DEFINITIONS.
-----------
1.1 ABI DATABASE refers to:
a) a national database of approximately 10 million businesses in the
United States with data elements described in APPENDIX A, Attachment A
and any additional data elements which may be added from time to time
at ABI's sole discretion; and
b) a national database of approximately 115,000,000 individuals in the
United States with data elements described in APPENDIX A, Attachment B
and any additional data elements which may be added from time to time
at ABI's sole discretion.
1.2 USER refers to any company, organization or individual which has access to
the SERVICE for its own internal use through LICENSEE under the terms of
this AGREEMENT.
1.3 LICENSE FEES refers to the fees due ABI for the use of the ABI DATABASE as
provided in paragraph 3 below, and fully described in APPENDIX B.
1.4 SERVICE refers to:
a) LICENSEE's internet-based directory service known as Switchboard,
which includes a free business and residential telephone look-up
SERVICE for USERS, including as such services may be accessed through
or from any third party web site or interfaces, co-branded or
otherwise which will display information from the ABI DATABASE
pursuant to the terms of this Agreement. In the event that any third
party web site or interface is constructed in partnership with
Switchboard, the web site or
1
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions
interface shall include Switchboard brand identification. USERS may
search the ABI DATABASE through the SERVICE by business name or
business category within a state, city, zip code or local proximity.
In addition, business name searches can be conducted on a nationwide
basis. Nationwide business name searches are subject to the further
restrictions as outlined in APPENDIX D section D1.1B. Business search
results may show up to, but not exceed [**] search results per screen.
Users may search the ABI DATABASE through the SERVICE by individual
name within the United States, state, city, zip code. Individual
search results may show up to, but not exceed [**] listings per
screen. In the event LICENSEE's competitors show more than [**]
listings per screen and, in LICENSEE's sole discretion, this becomes a
competitive threat to LICENSEE, ABI agrees to work with LICENSEE to
relax this restriction to eliminate the competitive threat.
b) SERVICE also includes additional enhanced SERVICES which may be
developed by LICENSEE allowing access to information in the ABI
DATABASE through data access mechanisms, including but not limited to
Lightweight Directory Assistance and Protocol Directory Assistance, as
well as Intranet Directory Assistance for corporate USERS subject to
the terms outlined in paragraph 2.2 herein.
2. LICENSE.
-------
2.1 Subject to the terms and conditions of this AGREEMENT, ABI grants the
LICENSEE a limited non-exclusive, non-transferable license during the term
of this AGREEMENT to incorporate the ABI DATABASE into the SERVICE in the
manner described in paragraph 1.4.a. above and to allow USERS to access the
ABI DATABASE through the SERVICE for USERS' internal purposes only.
In the event that LICENSEE develops additional SERVICES as described in
paragraph 1.4.b. above, Switchboard shall compensate ABI for additional use
of the ABI DATABASE by
a) paying ABI [**] of the "net revenue" derived by Switchboard from
such additional Services which return results from the ABI Database of
individuals pursuant to Section 1.1b and
b) payments to be mutually agreed upon from such additional services
which return results from the ABI Database of businesses pursuant to
Section 1.1a.
For the purposes of the preceding sentences, "net revenue" shall mean
Switchboard's revenue from such additional Services less any commissions,
fees, revenue splits, uncollectable accounts receivables, and applicable
sales and use taxes in connection therewith.
2
<PAGE>
2.2 Any use of the ABI DATABASE not expressly authorized in this AGREEMENT is
strictly prohibited. Without limiting the generality of the foregoing,
LICENSEE and the USERS are expressly prohibited from (i) sublicensing or
reselling the ABI DATABASE; (ii) [NOTE: THIS COVERED IN SECTION 2.6] using
the ABI DATABASE, in any PRODUCT or SERVICE, or offering it through any
third party, other than as specifically authorized in this AGREEMENT; or
(iii) disassembling, decompiling, reverse engineering, modifying or
otherwise altering the ABI DATABASE, except as required to provide the
SERVICE, or any part thereof without ABI's prior written consent, such
consent may be withheld in ABI's sole discretion.
2.3 LICENSEE acknowledges that any unauthorized use of the ABI DATABASE may
cause irreparable harm and injury to ABI for which there is no adequate
remedy at law. In addition to all other remedies available under this
AGREEMENT, at law or in equity, LICENSEE further agrees that ABI shall be
entitled to seek injunctive relief in the event LICENSEE uses the ABI
DATABASE in violation of the limited license granted hereunder and fails to
cure within thirty (30) days after notice of such violation from ABI.
2.4 LICENSEE agrees to provide appropriate legal notices relevant to the ABI
DATABASE on the SERVICE as reasonably requested by ABI to protect its
rights therein including: "Data provided by American Business Information,
Inc.(R), Omaha, Nebraska, Copyright (C) 1997 All Rights Reserved", and as
further described in APPENDIX C. The LICENSEE must receive ABI's prior
written approval to use any ABI logo, trademark, service mark or trade name
except as mandated in this AGREEMENT.
2.5 LICENSEE shall maintain a system of controls set forth in Appendix D which
are designed to:
(a) Protect the integrity of the ABI DATABASE;
(b) Control access to the ABI DATABASE;
(c) Prevent unauthorized usage of the ABI DATABASE; and
(d) Reasonably ensure that the amount of usage of the ABI DATABASE is
accurately recorded.
2.6 LICENSEE shall:
(a) House the ABI DATABASE on the Internet behind firewalls necessary
to prevent unauthorized usage of the ABI DATABASE.
(b) Allow ABI access to its computers, software, and technicians as
reasonably necessary and upon reasonable prior notice to insure
and confirm that the security designed to prevent unauthorized
usage of the ABI DATABASE by Internet Users is adequate.
Unauthorized usage shall be defined to include any downloading or
printing of the ABI DATABASE in whole or in part (except as to
printing of single listings or listings up to the number stated in
Appendix D)
3
<PAGE>
and any other use which is either expressly prohibited by this
AGREEMENT or not specifically authorized under this AGREEMENT.
(c) Include a policy statement on the LICENSEE's SERVICE which states
that USERS may not use the ABI DATABASE for the purpose of
compiling, enhancing, verifying, or modifying in any way any
mailing list, directory, or other compilation of information
which is sold, rented, published, furnished, or in any other
manner provided to third parties.
3. LICENSEE FEES.
-------------
3.1 The LICENSEE shall pay to ABI LICENSE FEES, and shall promote ABI's Sales
Leads and Business Profiles through Banner Advertising on the SERVICE, as
described in APPENDIX B.
3.2 Within thirty (30) days following the close of each month during the term
of this AGREEMENT, the LICENSEE will supply ABI with a Banner Advertising
Report which documents the actual number of ABI Banner Advertising
impressions which were displayed the previous month.
3.3 Any fees payable under this AGREEMENT by LICENSEE which are not paid when
due shall accrue interest at the annual rate of 10% from the due date until
paid.
3.4 Time is of the essence with respect to LICENSEE's payment of any fees under
this AGREEMENT, and LICENSEE specifically acknowledges that failure to make
payment when due may, at ABI's sole discretion, be treated as a material
breach of this AGREEMENT pursuant to the provisions of paragraph 6.1(a)
herein. In the event this AGREEMENT is terminated for whatever reason,
LICENSEE acknowledges that such termination shall not terminate, diminish
or otherwise affect LICENSEE's obligation to pay any fees as described in
this paragraph 3 and in APPENDIX B which have accrued under this AGREEMENT
up to the date of termination.
4. DELIVERY.
--------
4.1 Time is of the essence with respect to ABI's provision of the initial ABI
DATABASE and updates under this AGREEMENT and ABI specifically acknowledges
that failure to make a delivery thereof when due may, at LICENSEE's sole
discretion, be treated as a material breach of this AGREEMENT pursuant to
the provisions of paragraph 6.1(a) herein. ABI will supply the LICENSEE
with the initial ABI DATABASE within ten (10) working days of the Effective
Date of this AGREEMENT.
4.2 ABI will supply LICENSEE with a monthly updated transaction file containing
new adds, changes, and deletes of the ABI DATABASE throughout the term of
the AGREEMENT. ABI shall not be required to deliver updates pursuant to
this agreement during the period of
4
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
Switchboard's material breach of its payment obligations pursuant to
Section 3, provided that ABI shall provide a current update upon
Switchboard's cure of such breach.
4.3 The ABI DATABASE shall be delivered to and used exclusively at:
Switchboard, Inc.
ATTN: [**]
115 Flanders Road
Westboro, MA 01581
4.4 In the event that ABI achieves the ability to update the ABI DATABASE via
electronic means and as a result could offer more frequent updates than as
provided in paragraph 4.2 above, ABI shall provide LICENSEE access to said
enhanced services.
5. TERM.
----
5.1 The term of this AGREEMENT will be for one (1) year and shall commence on
December 31, 1997 and terminate on December 30, 1998, and shall
automatically renew for successive one year periods unless terminated by
either party with sixty (60) days written notice.
6. TERMINATION.
-----------
6.1 Either party may terminate this AGREEMENT if the other party:
(a) materially breaches any term or condition of this AGREEMENT
(except as provided in paragraph 6.2 of this AGREEMENT) and fails
to remedy such breach within thirty (30) days after written
notice of such breach; or
(b) becomes subject to any receivership, insolvency, bankruptcy,
moratorium or similar proceeding for more than thirty (30) days.
6.2 Switchboard may terminate this AGREEMENT with sixty (60) days written
notice if the quality of data supplied by ABI, as measured according to the
provisions of APPENDIX E of this Agreement, falls below the minimum
thresholds described therein. Any payments due by LICENSEE shall be
prorated in the event that termination is to occur prior to the end of a
calendar quarter.
6.3 Both parties will work together to reach a mutually agreeable solution to
ABI's concerns regarding the unauthorized mining of data associated with
business category searches. In the event a mutually agreeable solution can
not be reached, ABI may terminate this AGREEMENT with ninety (90) days
written notice. Any payments due by LICENSEE shall be prorated in the event
that termination is to occur prior to the end of a calendar quarter.
6.4 Upon termination of this AGREEMENT for any reason, LICENSEE shall (i)
ensure that all copies of the ABI DATABASE and any related data and
information is deleted from its computers and the computers of any service
provider or other third party who processed the
5
<PAGE>
ABI DATABASE for the LICENSEE; (ii) cease any and all use of the ABI
DATABASE; (iii) return all copies, whether in print, tape or other media,
of all or any part of the ABI DATABASE to ABI no later than five (5) days
after termination of this AGREEMENT; and, (iv) certify in writing within
ten (10) days after termination of this AGREEMENT that LICENSEE and its
service providers have deleted or returned to ABI all copies of the ABI
DATABASE.
6.5 Except as otherwise provided in this AGREEMENT, the remedies contained in
this AGREEMENT are in addition to all other remedies available to either
party at law or in equity.
7. PROPRIETARY RIGHTS. The LICENSEE acknowledges that all rights, title and
------------------
interest to the ABI DATABASE, regardless of the form of media in which it
is contained, shall be retained by ABI, subject to the license granted to
LICENSEE hereunder. Notwithstanding the foregoing or any other provision of
this Agreement, as between the parties hereto, LICENSEE owns any changes to
the data made by registered users of LICENSEE's SERVICE; ABI acknowledges
and agrees that (i) LICENSEE may use the ABI DATABASE and/or such modified
data for the purpose of enhancing the utility of the SERVICE for registered
users of the LICENSEE; and (ii) such modifications made by registered users
of LICENSEE's SERVICE shall not be deemed part of the ABI DATABASE,
including as such term is used in this AGREEMENT.
8. CONFIDENTIALITY. Except as required by law or any provision of this
---------------
AGREEMENT (and then only after prior reasonable written notice thereof),
the parties agree during the term of this AGREEMENT and for a period of one
(1) year thereafter to retain in confidence and not disclose to any third
party all confidential information whether tangible or intangible, or
stored electronically or in magnetic media) received from the other party
within the scope of this AGREEMENT, provided that if in tangible form, the
confidential information is marked "Confidential," and that if in oral
form, is identified as confidential at the time of disclosure and
summarized in a writing which identifies such information as confidential
within thirty (30) days after such oral disclosure. Information received
from the other party shall be deemed confidential pursuant to this Section
8 except where the party receiving such disclosures can establish that: (i)
such information was known to the receiving party prior to disclosure by
the other; (ii) such information was known to the public prior to
disclosure to the receiving party, or has become known to the public
through no fault of the receiving party; (iii) such information was
subsequently disclosed to the receiving party by a third party with a
lawful right to make such disclosure without limitation on disclosure; or
(iv) such information was independently developed by the recipient party
without resort to the other party's confidential information. For purposes
of this AGREEMENT, the parties expressly agree that the ABI DATABASE and
its contents are confidential and proprietary to ABI.
6
<PAGE>
9. WARRANTY, DISCLAIMER LIMITATION OF LIABILITY, AND INDEMNIFICATION.
-----------------------------------------------------------------
9.1 ABI represents and warrants that (a) it is authorized to enter into this
Agreement, to grant the licenses and rights and perform its obligations
herein; (b) the ABI DATABASE as licensed herein shall not infringe any
copyrights, patents, trade secrets, or any intellectual property and
privacy rights of any person or entity; (c) the ABI DATABASE is derived
from public sources, that it uses reasonable efforts to screen unlisted
telephone numbers therefrom, and that it will remove such data upon notice
from LICENSEE; and (d) the ABI DATABASE will conform to the quality
standards set forth in Appendix E.
9.2 Except as set forth in Section 9.1, the ABI DATABASE is licensed on an "AS
IS" basis without guarantee. ABI does not guarantee that the ABI DATABASE
will meet the LICENSEE's or USER's requirements; that it will operate in
the combinations, or in the equipment, selected by the LICENSEE or USERs;
or that its operation will be error-free or without interruption.
9.3 LICENSEE represents and warrants that it is authorized to enter into this
AGREEMENT and to perform its obligations herein.
9.4 EXCEPT AS STATED HEREIN, NEITHER PARTY MAKES ANY EXPRESS OR IMPLIED
WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY
OF FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY OF MERCHANTABILITY.
9.5 EXCEPT FOR INDEMNIFICATION OBLIGATIONS PURSUANT TO SECTION 9.7, IN NO EVENT
SHALL EITHER PARTY'S LIABILITY HEREUNDER TO THE OTHER PARTY OR THIRD
PARTIES CLAIMING THROUGH SUCH PARTY (WHETHER SUCH CLAIMS ARE BASED IN
CONTRACT, TORT OR OTHERWISE), EXCEED the lesser of TWO HUNDRED THOUSAND
DOLLARS ($200,000) or the amounts paid under this Agreement.
9.6 EXCEPT FOR INDEMNIFICATION OBLIGATIONS PURSUANT TO SECTION 9.7, NEITHER
PARTY SHALL BE LIABLE HEREUNDER TO THE OTHER PARTY OR THIRD PARTIES
CLAIMING THROUGH SUCH PARTY FOR CONSEQUENTIAL, INDIRECT, SPECIAL, OR
INCIDENTAL DAMAGES OR FOR ANY LOST PROFITS OR ANY CLAIM OR DEMAND OF A
SIMILAR NATURE OR KIND, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
9.7 LICENSEE agrees to indemnify and hold ABI harmless from any and all third
party claims, actions, demands, and liability, and from all losses, costs,
or expenses, including reasonable attorneys' fees, in connection therewith
(collectively herein, "Liabilities") which result from the use of the ABI
Database through LICENSEE or from LICENSEE'S breach of the warranties set
forth in Section 9.3, except to the extent in either case that such
Liabilities result from ABI's breach of warranty, negligence, or willful
misconduct.
7
<PAGE>
9.8 ABI agrees to indemnify and hold LICENSEE harmless from any and all third
party claims, actions, demands, liability, and from all losses, costs, or
expenses, including reasonable attorneys' fees, in connection therewith
(collectively herein, "Liabilities") which result from ABI's breach of the
warranties set forth in Section 9.1, except to the extent that such
Liabilities result from LICENSEE's breach of warranty, negligence, or
willful misconduct.
10. FORCE MAJEURE. Neither party shall be responsible for delays or failures in
-------------
performance resulting from acts beyond the reasonable control of such
party. Such acts shall include but not be limited to acts of God, riots,
acts of war, and other disasters.
11. ASSIGNMENTS. Neither party shall assign this AGREEMENT, or any rights or
-----------
obligations hereunder, except to an entity acquiring all or substantially
all of the assets or stock of such party, without the prior written consent
of the other party and any attempt to do so shall be void and of no effect.
This Agreement shall be fully binding on any permitted assigns.
12. MODIFICATION. No modification of this AGREEMENT shall be binding upon the
------------
LICENSEE and ABI unless made in writing and signed by duly authorized
officers of both parties.
13. WHOLE AGREEMENT. This AGREEMENT and any Appendices attached hereto
---------------
constitute the entire agreement between the parties and supersedes all
prior agreements, representations, warranties, statements, promises,
information, arrangements and understandings, whether oral or written,
express or implied, with respect to the subject matter hereof.
14. WAIVERS. The failure of either party to require the performance of any term
-------
or condition of this AGREEMENT, shall not prevent any subsequent
enforcement of this term or condition, nor shall it be deemed a waiver of
any subsequent breach.
15. GOVERNING LAW. This AGREEMENT shall be governed by and construed in
-------------
accordance with the laws of the State of Nebraska, without regard to
Nebraska's conflicts of laws principles.
16. SEVERABILITY. A decision by any court of competent jurisdiction
------------
invalidating or holding unenforceable any part of this AGREEMENT will not
affect the validity and enforceability of any other part of this AGREEMENT.
17. NO THIRD PARTY BENEFICIARIES. This AGREEMENT is made solely and
----------------------------
specifically between and for the benefit of the parties signatory hereto,
and no other person or entity whatsoever shall have any rights, interests
or claims hereunder or be entitled to any benefits under or on account of
this AGREEMENT as a third party beneficiary or otherwise.
18. NOTICES. All correspondence and data deliveries required by this AGREEMENT
-------
shall be addressed as follows:
8
<PAGE>
If to LICENSEE: Dean Polnerow
Senior Vice President
Switchboard, Incorporated
115 Flanders Road
Westboro, MA 01581
with a copy to: Mary Regan
General Counsel
Switchboard Incorporated
115 Flanders Road
Westboro, MA 01581
If to ABI: Bill Kerrey, Sr. Vice President
American Business Information, Inc.
5711 South 86/th/ Circle, Box 27347
Omaha, NE 68127
with a copy to: Michael C. Pallesen, Esq.
Corporate Counsel
American Business Information
5711 South 86/th/ Circle, Box 27347
Omaha, NE 68127
Any notice required shall be given in writing and shall be deemed
effectively given upon personal delivery, deposit in the U.S. post office
as certified or registered mail or deposited in a private next day delivery
service.
19. RELATIONSHIP OF PARTIES. This AGREEMENT does not create a joint venture or
-----------------------
partnership between ABI and the LICENSEE, and each will act independently
of the other. Neither party is empowered to bind or commit the other to any
contract or other obligation.
20. COMPLIANCE. With respect to its rights and obligations pursuant to this
----------
Agreement, each party shall comply with all applicable federal, state and
local laws, rules and regulations.
21. TAXES. LICENSEE shall be responsible to pay all taxes of any type, nature
-----
or description (including, but not limited to, sale, use, gross receipts,
excise, import, export, income and employment taxes); provided, however,
LICENSEE shall not be responsible for any income taxes imposed upon ABI by
any taxing jurisdiction, arising by virtue of the performance of this
AGREEMENT.
9
<PAGE>
READ AND APPROVED
SWITCHBOARD, INCORPORATED AMERICAN BUSINESS INFORMATION, INC.
Signature /s/ Dean Polnerow Signature /s/ Bill Kerrey
Dean Polnerow Bill Kerrey
- ------------- -----------
Name Name
Senior Vice President Senior Vice President
- --------------------- ---------------------
Title Title
12/24/97 12/30/97
- --------------------- ----------------------
Date Date
10
<PAGE>
APPENDIX A
----------
ATTACHMENT A
------------
SWITCHBOARD, INC.
-----------------
DATA ELEMENTS FOR BUSINESS FILE
-------------------------------
Name, Address and City should be mixed "Proper" case. Ascii, Fixed field, 4 MM
dat.
Field Name Length
Business Name/Professional Name 30
Address (Location) 30
City 16
State 2
Zip Code 5
Zip 4 4
Phone 11
Last Name 14
First Name 11
Professional Title 3
Professional Flag 1
primary_sic 6
yellowpage_code 5
franchise_code 6
industry_spec_code 1
filler 1
sec_sic_1 6
sec yellowpage_code_1 5
sec_franchise_code 1 6
sec industry spec_code_1 1
filler 1
sec_sic_2 6
sec_yellowpage_code_2 5
sec_franchise_code_2 6
sec_industry_spec code 2 1
filler 1
sec_sic_3 6
sec_yellowpage_code_3 5
sec_franchise code 3 6
sec_industry_spec_code_3 1
filler 1
sec_sic_4 6
sec yellowpage_code_4 5
sec franchise_code_4 6
sec industry_spec_code_4 1
filler 1
ABI # 9
Note: Code Master File, including Franchise Master and Industry Master is to be
included.
Note: When there are multiple professional names for a business, the entire
record is repeated.
Sort records by city within state, then by company name.
11
<PAGE>
APPENDIX A
----------
ATTACHMENT B
------------
SWITCHBOARD, INC.
-----------------
DATA ELEMENTS FOR WHITE PAGES FILE
----------------------------------
Sequence Number
First Name
Middle Initial
Last Name
Last Name Suffix
Primary Number
Pre Directional
Primary Name: RR, HC, General Delivery, Street Name
Street Suffix
Post Direction
Unit Type
Unit Number
City
State
Zip code
Zip + 4
Phone
Sort Sequence:
- -------------
1. Last Name
2. First Name
3. Middle
4. Last name suffix
5. Balance
Sort by city within state, then by last name
4MM, Ascii, Fixed field.
12
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
APPENDIX B
----------
SWITCHBOARD, INC.
-----------------
LICENSE FEES
------------
LICENSEE shall pay to ABI LICENSE FEES and shall provide Banner Advertising on
its SERVICE as follows:
B.1.1 LICENSEE shall pay an annual database LICENSE FEE of [**] per year.
B.1.2 LICENSEE shall pay the first [**] payment of the LICENSE FEE within thirty
days after the effective date, provide that ABI has delivered the initial ABI
DATABASE to LICENSEE pursuant to Section 4.1. Thereafter, LICENSEE shall make
quarterly payments of [**] in advance of each quarter due and payable on the
last day of the previous calendar quarter for each year of the term of this
AGREEMENT, provided that ABI shall have delivered all monthly updates to
LICENSEE during such quarter and that ABI shall have invoiced LICENSEE for such
payments. If ABI shall not have delivered all monthly updates by such time,
LICENSEE's payment obligation shall be deferred until fifteen (15) days after
all such monthly updates for the quarter have been delivered.
B.2.1 LICENSEE shall display a minimum of [**] impressions (page views) per
month of ABI's Sales Leads and Business Profiles through Banner Advertisements
on its SERVICE throughout the term of this AGREEMENT. ABI and LICENSEE will
discuss the placement of the ABI Banner Advertisements within the LICENSEE'S
SERVICE, however the final determination as to placement of such Banner
Advertisements shall be LICENSEE's.
B.3.1 ABI shall provide to LICENSEE monthly updates of the ABI DATABASE at no
additional fee to LICENSEE.
13
<PAGE>
APPENDIX C
----------
SWITCHBOARD, INC.
-----------------
INTERNET SERVICE
----------------
The following announcements shall appear on all search screens and response
screens:
"Business and Residential Information provided by American Business
Information(R), Omaha, Nebraska, Copyright(C) 1997 All Rights
Reserved."
This announcement shall be hyperlinked to ABI's home page.
Attached are samples of how these buttons shall appear.
14
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
APPENDIX D
----------
SWITCHBOARD INC. DATA MINING PROTECTION
---------------------------------------
D.1.1 LICENSEE agrees to incorporate the following protection measures in
connection with the SERVICE to prevent unauthorized downloading of mailing
information which may harm ABI's business:
A) Each query to the SERVICE shall be broken into a number of
client/server requests. Only a small number of names will be returned per
request to the SERVICE (for example, 8). This shall require repeated calls
to be made to the SERVICE, which slows automated programs down and make
detection of a violation easier.
B) There will be an upper limit on the number of names returned from a
single unmodified query ([**] on residential,[**] on business). Secure
encryption keys with download limits will be issued by the service and
attached to each request to the SERVICE to enforce this limit. The use of
such keys will not require any special action on the part of the USER.
Certain businesses categories will be subject to a further restriction of
[**] records returned. ABI and LICENSEE shall work together to agree upon
the further restricted categories. The parties have already agreed that
Nationwide business name searches will be subject to the [**] record
restriction.
C) SERVICE logs will be continuously generated and will be reviewed
manually or programmatically on a regular basis to look for patterns of
abuse, particularly multiple queries from a single address. LICENSEE
expects to build log analysis tools that can run automatically and flag
potential violations based upon criteria such as frequency of queries from
individual addresses.
D) LICENSEE agrees to work with ABI in good faith throughout the term of
the Agreement to prevent abuse by users attempting to collect names for
the purposes of creating mailing lists, and agrees to implement mutually
agreed upon additional safeguards to prevent such abuse.
15
<PAGE>
APPENDIX E
----------
ABI DATABASE QUALITY STANDARDS
------------------------------
Switchboard will regularly review the quality of the ABI Database as delivered
to Switchboard during the Term of this Agreement. The method for this review is
described below.
1. Switchboard will spot check the ABI Database monthly with each delivery.
Approximately 300 Switchboard members, and approximately 200 businesses will be
chosen at random from a base of approximately 1 million. Members chosen will
have supplied Switchboard with their current address and phone number
information some time within the previous 18 months.
2. Switchboard will use a "reverse lookup" technique to verify the information
in the ABI Database. Using a software tool, Switchboard will input the phone
number in a query and analyze the resulting information for that phone number
from the ABI Database. The results will be scored according to partial and
complete matches.
3. Starting with the third month of this Agreement, if the score negatively
deviates more than 15% in any given month from the average score for all
previous months, Switchboard will do a more comprehensive test on the ABI
Database, using the same technique but with a substantially larger sample size.
4. If the score on the subsequent test negatively deviates more than 15% from
the average score from all previous months, then Switchboard shall notify ABI in
writing of the suspected deficiency in the ABI Database quality.
5. ABI agrees to quickly work with Switchboard to identify the source of the
deficiency and agrees to correct the problem, if one exists, with a new delivery
of the ABI Database within thirty (30) days.
6. If the deficiency cannot be corrected within thirty (30) days, and a mutually
agreeable solution cannot be identified, Switchboard shall have the right to
terminate this Agreement with sixty (60) days written notice to ABI.
16
<PAGE>
AMENDMENT NUMBER ONE (1) TO
DATABASE LICENSE AGREEMENT
This is AMENDMENT Number One (1) (the "AMENDMENT") to the Database License
Agreement, between Switchboard Incorporated (LICENSEE), and infoUSA Inc,
formerly American Business Information, Inc. ("INFOUSA") dated December 31,
1997, (the AGREEMENT) and is effective as of the later of the two signature
dates below (the "Amendment Effective Date").
The parties desire to amend the AGREEMENT to provide, among other things,
for:
(i) An extension of the term of the AGREEMENT through December 31, 1999;
and
(ii) The incorporation of a link to INFOUSA'S LIST EXPRESS products (as
defined below) from LICENSEE'S SERVICE.
The parties hereby agree to the following amendments to the AGREEMENT:
1) Unless otherwise set forth herein,, all capitalized terms shall have the
meanings ascribed to them in the AGREEMENT.
2) The following definition is added to Section 1 of the AGREEMENT:
1.5 LIST EXPRESS allows the USER to purchase data from
the INFOUSA DATABASE in a mailing list format.
3) APPENDIX F, which sets forth the requirement for incorporating INFOUSA's
LIST EXPRESS hyper-linked button to the SERVICE is added to the AGREEMENT
following APPENDIX E. APPENDIX F is attached hereto and incorporated herein
by this reference.
4) Paragraph 1.4 is amended by adding subparagraph c) as follows:
c) With respect to LIST EXPRESS products, the term SERVICE specifically
excludes any third-party websites linking to http://www.switchboard.com,
--------------------------
through co-branded interfaces or otherwise, on which LICENSEE or such third
party does not wish to promote LIST EXPRESS products.
5) Paragraph 2.5 is amended by changing the copyright notice by substituting
infoUSA for American Business Information and the date to 1998, and adding
the following paragraph to Paragraph 2.5:
"In the event that INFOUSA makes reasonable changes to its copyright
or other proprietary legal notices set forth herein, LICENSEE agrees
to incorporate the changes into its SERVICE within thirty (30) days of
INFOUSA's prior written notice of such change."
6) Paragraph 3.1 is amended by changing "ABI's Sales Leads and Business
Profiles" to "INFOUSA's List Express and Profile Express".
1
<PAGE>
7) Paragraph 4.2 is amended and replaced in its entirety as follows:
"INFOUSA will supply LICENSEE with a monthly updated full-file to the
business portion of the INFOUSA DATABASE (the "Business File")
described in Attachment A to APPENDIX A, and a monthly updated full-
file to the residential portion of the INFOUSA DATABASE (the "White
Pages File") described in Attachment B to APPENDIX A throughout the
term of the AGREEMENT. After LICENSEE's notice of its election to have
the Business File delivered in transaction-file form, containing only
new adds, changes and deletes, INFOUSA shall deliver such monthly
updates in such requested transaction-file form, provided that such
election shall take effect no sooner than thirty (30) days after
notice from LICENSEE. LICENSEE will receive transaction-file updates
for the White Pages File when the file becomes available, provided
that LICENSEE has given INFOUSA written notice of its election to
receive the White Pages File in such format. As of the date of
delivery of any updated file pursuant to this Section 4.2, the
delivered portion of the INFOUSA DATABASE shall be as complete and
accurate as that made available by INFOUSA to its own users or other
third parties. INFOUSA shall not be required to deliver updates
pursuant to this AGREEMENT during the period of LICENSEE's material
breach of its payment obligations pursuant to Section 3, provided that
INFOUSA shall provide a current update upon LICENSEE's cure of such
breach."
8) Paragraph 5 is amended and replaced in its entirety to read:
"The term of this AGREEMENT shall commence on December 31, 1997 and
expire on December 31, 1999 and shall automatically renew for
successive one year periods unless terminated by either party with
sixty (60) days written notice."
9) Section 6 is hereby amended by adding the following Paragraph 6.6:
"In the event that either party materially breaches Section B.3.1 of
Appendix B or any provision of Appendix F, in each case as amended by
this Amendment Number One, the other party shall have a right to
terminate only that portion of the AGREEMENT which relates to LIST
EXPRESS products, which shall be deemed to be only the provisions
referenced in this sentence. Breach of such stated provisions shall in
no event be cause for termination of the AGREEMENT. Termination of the
LIST EXPRESS portion of the AGREEMENT shall take effect only after the
non-breaching party provides the breaching party with thirty (30) days
prior written notice of such breach and the breaching party fails to
remedy such breach within such notice period."
10) The following paragraph is added to Section 9 of the AGREEMENT:
9.9. INFOUSA's Internet division will place an opt in function on the
registration screen so that a customer may choose to be included
in regular communications from INFOUSA or SWITCHBOARD. Customer
who opt out will not be included in these solicitations.
11) APPENDIX B is replaced in its entirety with the amended APPENDIX B attached
to this AMENDMENT incorporated herein by this reference.
2
<PAGE>
12) Wherever in the AGREEMENT the name "American Business Information, Inc."
("ABI") appears, the name "infoUSA Inc.", is hereby substituted therefor.
All references to INFOUSA are hereby deemed to be references to infoUSA.
Wherever in the AGREEMENT the term, "ABI DATABASE" appears, the term,
"INFOUSA DATABASE" is hereby substituted therefor.
13) Except as set forth in this AMENDMENT, the AGREEMENT shall remain unchanged
and in full force and effect.
WHEREBY, the parties enter into this AMENDMENT as of the later of the two
signature dates below.
SWITCHBOARD INCORPORATED infoUSA, INC.
Signature /s/ Dean Polnerow Signature /s/ Bill Kerrey
Dean Polnerow Bill Kerrey
- --------------------- ---------------------
Name Name
Senior Vice President Senior Vice President
- --------------------- ---------------------
Title Title
12/24/97 12/30/97
- --------------------- ---------------------
Date Date
3
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
APPENDIX B
----------
SWITCHBOARD, INC.
-----------------
LICENSE FEES
------------
LICENSEE shall pay to INFOUSA LICENSE FEES and shall provide Banner Advertising
on its SERVICE as follows:
B.1.1 LICENSE FEES.
------------
a) LICENSEE shall pay an annual, database LICENSEE FEE of [**] for the
first year of the term of the AGREEMENT. INFOUSA shall provide to
LICENSEE monthly updates of the INFOUSA DATABASE at no additional fee
to LICENSEE.
b) For the second year of the term (12/30/98 - 12/31/99) LICENSEE shall
pay an annual, LICENSE FEE of [**] which includes a monthly update FEE
totaling [**] for the second year term of the AGREEMENT for the
updated versions of the INFOUSA DATABASE described in Paragraph 4.2.
B.1.2 PAYMENT SCHEDULE.
----------------
a) For the first year of the term, LICENSEE shall pay the first [**]
payment of the LICENSE FEE within thirty days after the effective
date, provided that INFOUSA has delivered the initial INFOUSA DATABASE
to LICENSEE pursuant to Section 4.1. Thereafter, LICENSEE shall make
quarterly payments of [**] in advance of each quarter due and payable
on the last day of the previous calendar quarter for each year of the
term of this AGREEMENT, provided that INFOUSA shall have delivered all
monthly updates to LICENSEE during such quarter and that INFOUSA shall
have invoiced LICENSEE for such payments. If INFOUSA has not delivered
all monthly updates by such time, LICENSEE's payment obligation shall
be deferred until fifteen (15) days after all such monthly updates for
the quarter have been delivered.
b) For the second year of the term, LICENSEE shall pay the first [**]
payment of the LICENSE FEE within thirty days after the Amendment
Effective Date. Thereafter, LICENSEE shall make quarterly payments of
[**] in advance of each quarter due and payable on the last day of the
previous calendar quarter for each year of the term of this AGREEMENT,
provided that INFOUSA shall have delivered all monthly updates to
LICENSEE during such quarter and that INFOUSA shall have invoiced
LICENSEE for such payments. If INFOUSA has not delivered all monthly
updates by such time, LICENSEE's payment obligation shall be deferred
until fifteen (15) days after all such monthly updates for the quarter
have been delivered.
4
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
B.2.1 BANNER ADVERTISING.
------------------
LICENSEE shall display an aggregate minimum of [**] impressions (page
views) per month of INFOUSA's List Express and Profile Express through
Banner Advertisements on its SERVICE throughout the term of this
AGREEMENT. INFOUSA and LICENSEE will discuss the placement of the INFOUSA
Banner Advertisements within the LICENSEE'S SERVICE, however the final
determination as to placement of such Banner Advertisements shall be
LICENSEE's.
B.3.1. REVENUE SHARE FOR HYPERLINKED BUTTONS.
-------------------------------------
INFOUSA will pay LICENSEE a royalty of [**] of "Net Revenue" for all
sales generated from the hyperlink to INFOUSA's web-site from the month
in which such net revenues were collected, which payment shall be made
within thirty (30) days after the end of the month such Net Revenues were
collected. "Net Revenue" means the revenue collected by INFOUSA, less any
third-party commissions or fees applicable to such sales. INFOUSA will
report monthly to LICENSEE showing Net Revenue and, in reasonably
sufficient detail, the calculation of royalties due hereunder.
5
<PAGE>
APPENDIX F
----------
SWITCHBOARD, INC.
-----------------
LIST EXPRESS
------------
F.1 HYPER-LINKED ICON
-----------------
The LICENSEE shall post on the screens of its SERVICE the following
"hyperlinked" button for LIST EXPRESS products as set forth below:
For every business category search in the SERVICE, which results in more than
one page of search results, LICENSEE will feature a hyper-linked icon on the
bottom of the second screen of search results. LICENSEE may feature such hyper-
linked icon on other pages of the SERVICE at LICENSEE'S sole discretion.
LICENSEE may change the placement of any hyper-linked icons in connection with
any change to the functionality or look and feel of the SERVICE.
The hyper-linked icon will contain a text message to be agreed upon by both
parties. An example would be "Download All Found Records ($)".
The hyper-linked icon will link the USER'S search criteria and attach to the
following URL: [______] (To be provided by INFOUSA) or, at LICENSEE's election,
to an interim co-branded page hosted by LICENSEE from which a USER can link to
the foregoing URL.
F.2 CO-BRANDED PAGES.
----------------
The hyper-linked icon referenced in APPENDIX F will link USERS to the web pages
hosted by INFOUSA which contain equal branding of LICENSEE and INFOUSA ("
Co-Branded Pages.") All pages accessible to Users directly or indirectly through
such hyper-linked icons shall feature: (i) the co-branding referenced in the
prior sentence, (ii) mutually agreeable navigation buttons allowing Users to
link back to the LICENSEE's SERVICE. Neither the hyperlinked icon described in
Section F.1 above nor the Co-Branded Pages shall allow USERS to link directly or
indirectly to any content on the INFOUSA web site other than content directly
associated with the description, promotion or sale of LIST EXPRESS products.
F.3 SAMPLE SCREEN SHOT(S).
---------------------
Sample screen shots from the Co-Branded Pages are attached hereto as Attachment
A.
F.4 CONTRACTS; BILLING INFORMATION.
------------------------------
All contracts for the sale of LIST EXPRESS products shall be directly between
INFOUSA and USERS. LICENSEE shall not be a party to such contracts. As between
the parties hereto, INFOUSA shall be solely responsible for the performance of
such contracts, and for the billing and collection of amounts due thereunder.
All billing information collected by INFOUSA including USER name, address,
telephone number and email address will be forwarded to LICENSEE on a monthly
basis.
6
<PAGE>
F.5 LICENSEE REPORTING.
------------------
LICENSEE will report monthly to INFOUSA showing total click-through rate from
the hyperlinked icon referenced in paragraph F.1.
7
<PAGE>
FINAL
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
1999 RENEWAL to
DATABASE LICENSE AGREEMENT
This is a Renewal to the Database License Agreement between Switchboard
Incorporated ("Licensee") and infoUSA Inc ("infoUSA) dated December 31, 1997, as
amended September 28, 1998 (the "Agreement"). This Renewal is effective as of
December 31, 1999 (the "Renewal Effective Date").
The parties desire to renew the Agreement as follows:
1) Unless otherwise set forth herein, all capitalized terms shall have the
meanings ascribed to them in the Agreement. Wherever in the Agreement the
name "American Business Information, Inc." ("ABI") appears, the name
"infoUSA Inc.", is hereby substituted therefor. All references to ABI are
hereby deemed to be references to infoUSA. All references to "License Fees"
hereinafter are referenced as "CPM Royalties". Unless referenced below, all
terms and conditions of the Agreement are unchanged.
2) Paragraphs 1.4 and 1.5, DEFINITIONS, are replaced in their entirety as
follows:
1.4 "SERVICE or "Service" refers to Licensee's Internet directory service
which will incorporate the infoUSA Database as described in Appendix C -
Renewal:
1.5 "Buttons" refers to hyperlinked icons or text links displayed on
Licensee's Service which allow Users access to specified pages of the
infoUSA web site where they can purchase infoUSA products and services
electronically as described in Appendix F -Renewal.
1.6 "Direct Competitor(s)" shall mean [**], and any other parties which
directly compete, as a primary part of their business, with infoUSA in the
data compilation or direct marketing industry, provided that infoUSA has
given Licensee prior written notice during the term of this Agreement that
such parties are to be deemed "Direct Competitors" of infoUSA for the
purposes hereof.
3) Paragraphs 2.1 and 2.5, LICENSE, are replaced in their entirety as follows:
2.1 Subject to the terms and conditions of this AGREEMENT, infoUSA grants
LICENSEE a limited non-exclusive, non-transferable license during the term
of this AGREEMENT to incorporate the infoUSA DATABASE into the SERVICE in
the manner described in Appendix C.
1.5 LICENSEE agrees to provide appropriate legal notices relevant to the
infoUSA DATABASE on the SERVICE as described in Appendix C.
Page 1
<PAGE>
4) Paragraph 2.4 is hereby amended by adding the following paragraph 2.4(a):
"infoUSA acknowledges that its failure to provide the infoUSA Database or any
updates thereto in accordance with the terms of this Agreement may cause
irreparable harm and injury to Licensee for which there is no adequate remedy at
law. In addition to all other remedies available under this Agreement, at law
or in equity, infoUSA further agrees that Licensee shall be entitled to seek
injunctive relief in the event that infoUSA fails to provide the infoUSA
Database or any updates thereto in accordance with the terms hereof and fails to
cure within thirty (30) days after notice of such violation from Licensee."
5) Paragraph 2.7(b) is hereby amended by deleting the second sentence and
replacing it with the following:
"Unauthorized usage shall be defined to include any downloading or printing
of the infoUSA Database in whole or in part (except as expressly authorized by
this Agreement) and any other use which is either expressly prohibited by this
Agreement or not specifically authorized by this Agreement."
6) Paragraphs 3.1 and 3.2 are hereby deleted in its entirety.
7) Paragraph 4.3 is hereby amended by adding to the end:
"provided that Switchboard may use the infoUSA Database at hosting
locations for the primary and back-up Licensee sites for the Service, which
locations are listed on Appendix G. Licensee will provide infoUSA written notice
of any changes or additions to the locations shown on Appendix G.
8) Paragraph 4.4 is deleted in its entirety.
9) Paragraph 5.1, TERM, is replaced in its entirety as follows:
5.1 The term of this AGREEMENT will be for three (3) years and shall commence
on December 31, 1999 and terminate on December 30, 2002 ("Term").
Thereafter, the Agreement shall automatically renew for successive one-year
periods (each a "Renewal Term") unless written notice of non-renewal is given by
either party at least sixty (60) days prior to the expiration of the then-
current Term or Renewal Term.
At least 120 days prior to the expiration of the then-current Term (or Renewal
Term), the parties shall negotiate the terms which will be applicable during the
following Renewal Term.
Page 2
<PAGE>
10) Paragraph 6.3 is hereby deleted in its entirety.
11) The following paragraph 6.6 is added to section 6, TERMINATION:
6.6 infoUSA may terminate this Agreement immediately upon written notice
if Licensee materially and willfully breaches this Agreement by
participating in any unauthorized use of the infoUSA Database, or the
infoUSA Brand Features in a way that significantly harms infoUSA's business
or intellectual property rights, provided that Licensee fails to remedy
such breach within ten (10) days of written notice of such breach, which
notice expressly states that it is given pursuant to this Section 6.6 which
allows only ten (10) days to cure.
Either party may terminate this Agreement with 90 day prior written notice,
if (a) all or substantially all of the assets of Licensee are sold,
assigned or otherwise transferred to a Direct Competitor (as defined in
paragraph 1.6 above) (b) 50% or more of the equity securities or voting
interests of Licensee or the ultimate parent of Licensee is sold, assigned
or otherwise transferred in a single transaction or a series of related
transactions to a Direct Competitor; or (c) Licensee or its ultimate parent
is a party to a merger, consolidation or other similar transaction with a
Direct Competitor.
infoUSA may terminate this Agreement with 90 day prior written notice if
Licensee has materially breached any term or condition of this Agreement on
3 or more occasions in any one year of the Agreement, even if previous
breaches were cured in accordance with the provisions of Paragraph 5.1(a),
provided that infoUSA provided Licensee with written notice of each breach
within a reasonable time after infoUSA's discovery of such breach.
If Licensee feels the quality of the infoUSA Database is less than the
quality of previous versions of the infoUSA Database or than that of a
competitor database, Licensee will provide written notice to infoUSA. Upon
infoUSA's receipt of Licensee's notice, the parties will discuss Licensee's
database issues, and infoUSA will have 90 days from the conclusion of
discussions to remedy the quality issues raised by Licensee, provided that
infoUSA shall use commercially reasonable efforts to remedy such quality
issues as soon as practicable. If, after such 90 day period Licensee is not
satisfied with the improvements made by infoUSA, Licensee may terminate the
Agreement with 90 day prior written notice to infoUSA.
12) Paragraph 9.1 is amended by adding subparagraph (e) as follows:
and (e) infoUSA will provide Licensee the most current, accurate and
complete information infoUSA has available for license.
Paragraph 9.3 is replaced in its entirety as follows:
9.3 Licensee warrants and represents that it (a) it has the necessary
power and authority to enter into and perform its obligations under this
Agreement and has properly authorized the same
Page 3
<PAGE>
by all requisite action; and (b) it has all necessary rights to accept the
license granted to Licensee under this Agreement.
13) Paragraph 9.5 is replaced in its entirety as follows:
EXCEPT FOR INDEMNIFICAITON OBLIGATIONS PURSUANT TO SECTION 9.7, IN NO EVENT
SHALL EITHER PARTY'S LIABILITY HEREUNDER TO THE OTHER PARTY OR THIRD
PARTIES CLAIMING THROUGH SUCH PARTY (WHETHER SUCH CLAIMS ARE BASED IN
CONTRACT, TORT, OR OTHERWISE) EXCEED THE CPM ROYALTIES PAID OR PAYABLE BY
LICENSEE TO INFOUSA DURING THE TWELVE (12) MONTH PERIOD PRIOR TO THE DATE
THE CAUSE OF ACTION AROSE.
14) Paragraphs 9.7 and 9.7[sic] are hereby replaced in their entirety as
follows:
8.7 LICENSEE agrees to indemnify, defend and hold infoUSA harmless from
any and all third party claims, actions, demands, and liability, and from
all losses costs, or expenses, including reasonable attorneys' fees, in
connection therewith (collectively herein, "Liabilities") which result from
(i) Licensee's breach of any terms, conditions, or warranties under this
Agreement; or (ii) any infringement or alleged infringement by the Service
(specifically excluding any content provided by infoUSA) of any third
party's trademark, copyright, trade secret, patent, or other intellectual
property right, except to the extent in either case that such Liabilities
result from infoUSA's breach of warranty, negligence, or willful
misconduct.
9.8 infoUSA agrees to indemnify, defend and hold Licensee harmless from any and
all third party claims, actions, demands, and liability, and from all losses
costs, or expenses, including reasonable attorneys' fees, in connection
therewith (collectively herein, "Liabilities") which result from (i) infoUSA's
breach of any terms, conditions, or warranties under this Agreement; or (ii) any
infringement or alleged infringement by the infoUSA Database (specifically
excluding any content provided by Licensee) of any third party's trademark,
copyright, trade secret, patent, or other intellectual property right, except to
the extent in either case that such Liabilities result from Licensee's breach of
warranty, negligence, or willful misconduct.
15) Paragraph 11, ASSIGNMENTS, is replaced in its entirety as follows:
Neither party shall assign this AGREEMENT, or any rights or obligations
hereunder, except to an entity acquiring all or substantially all of the
assets or stock of such party (unless such entity is a "Direct Competitor"
of infoUSA) without the prior written consent of the other party and any
attempt to do so shall be void and of no effect. This Agreement shall be
fully binding on any permitted assigns.
Page 4
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
16) The following changes are made to paragraph 18, NOTICES:
If to Licensee: Switchboard Incorporated
115 Flanders Road
Westboro, MA 01581
Attn: President
Fax No: (508)870-2000
With a copy to: Switchboard Incorporated
115 Flanders Road
Westboro, MA 01581
Attn: General Counsel
Fax No: (508)870-2000
If to infoUSA: infoUSA Inc.
5711 S. 86 Circle
Omaha, NE 68127
Attn: Director, Internet License Division
Fax No.: (402) 331-4950
with a copy to: infoUSA Inc.
5711 S.86 Circle
Omaha, NE 68127
Attn: Corporate Counsel
Fax No.: (402) 537-6197
From time to time, infoUSA receives urgent requests to remove or modify
certain listings. In such cases, Licensee can be contacted via e-mail at
----------
the following address or such other email address provided by Licensee: For
both business and residential: [**] @switchboard.com with a copy to for
business listing updates: bus_and for residential updates:
[email protected].
17) The following Appendices to the Agreement remain unchanged, but are
attached:
Appendix A, Data Elements
Appendix D, Data Mining Protection
Appendix E, infoUSA Database Quality Standards
Page 5
<PAGE>
FINAL
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
18) The following Appendices to the Agreement are replaced in their entirety or
added to this Renewal:
Appendix B, License Fees is replaced with Appendix B-Renewal, CPM Royalties
& License Fees
Appendix C, Internet Service is replaced with Appendix C-Renewal, Internet
Service
Appendix F, List Express is replaced with Appendix F-Renewal, Merchandizing
Appendix G, Licensee's Hosting Locations
19) Except as set forth in this Renewal, the Agreement shall remain unchanged
and in full force and effect.
In consideration of the foregoing promises and covenants, and for other good
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties enter into this Renewal as of December 31, 1999 ("Renewal Effective
Date").
READ AND APPROVED
Switchboard Incorporated, Licensee infoUSA Inc.
Signature /s/ Dean Polnerow Signature /s/ William J. Chasse
Dean Polnerow William J. Chasse
- ------------- -----------------
Name Name
President President & CEO, infoUSA.com
- --------- ----------------------------
Title (a division of infoUSA Inc.)
Page 6
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
APPENDIX B - RENEWAL
SWITCHBOARD, INC.
CPM ROYALTIES
-------------
Licensee shall pay to infoUSA CPM Royalties as follows:
1) CPM ROYALTIES: Subject to adjustment in accordance with Section 2 below,
Licensee shall pay infoUSA "CPM Royalties" based on the number of "Pages"
as displayed to Users of the Service. "Page" is defined as any display of
[**] Listings (as defined in Appendix C.1a - c), specifically excluding any
web pages or other displays accessed through clicking on a Listing. For
each Page viewed, Licensee will pay infoUSA:
a) For the Service (other than as set forth in Paragraph 1(b) below:
Less than [**] in CPM Royalties: [**] per thousand)
More than [**] in CPM Royalties: [**] per thousand)
b) For Wireless and XML Applications (as defined in C.1.d of appendix
C):
[**] per thousand)
2) MINIMUM CPM ROYALTIES AND CAP: If the CPM Royalties otherwise payable
pursuant to Section 1 are less than the applicable Annual Minimum Royalties
set forth in this Paragraph, Licensee shall be obligated to pay the
applicable Annual Minimum Royalties. If the CPM Royalties otherwise payable
pursuant to Section 1 are more than the applicable Annual Minimum
Royalties, then Licensee shall pay the CPM Royalties as calculated pursuant
to Section 1, but only up to, and not exceeding, the applicable Annual Cap
set forth in this Paragraph.
Annual Annual Quarterly
Year Minimum Royalty Minimum
Royalties Cap Payment
----------------------------------------
1 [**] [**] [**]
2 [**] [**] [**]
3* [**] [**] [**]
*The parties may review and renegotiate the Annual Minimum CPM
Royalties and Annual Cap prior to the second anniversary of the
Renewal Effective Date of this Agreement.
Page 7
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
3) PAYMENT OF CPM ROYALTIES. Licensee shall pay infoUSA the CPM Royalties in
accordance with sections 1 and 2 of this Appendix B, as follows:
Licensee shall pay the Annual Minimum Royalties in the Quarterly Minimum
Payments as set forth in Section 2. Except for the first Quarterly Minimum
Payment, which shall be payable within thirty (30) days after the Renewal
Effective Date, Licensee shall pay each Quarterly Minimum Payment prior to
the last day of the previous calendar quarter, provided that (a) infoUSA
has delivered the initial INFOUSA DATABASE or all monthly updates for the
quarter, as applicable, to Licensee pursuant to Section 4; and (b) infoUSA
shall have invoiced Licensee for such payments at least thirty (30) days
prior to the end of such previous calendar quarter. If infoUSA has not
delivered all monthly updates or any invoice by such time, Licensee's
payment obligation shall be deferred until fifteen (15) days after all such
monthly updates for the quarter and the invoice have been delivered. Within
thirty (30) days after the end of each one-year period of this Agreement,
Licensee shall pay infoUSA the difference, if any, between the CPM
Royalties payable pursuant to Section 1 of this Appendix B, and the Annual
Minimum Royalties paid by Licensee applicable to such one-year period. In
no event shall Licensee be obligated to pay any amount exceeding the Annual
Cap for any one-year period or any other license or other fees not
expressly set forth in this Appendix B.
4) REPORTING: Within thirty (30) days following the close of each month during
the term of this Agreement, Licensee will supply infoUSA with a CPM Report
setting forth the number of Pages viewed by Users, the breakdown between
Pages on the Service and those displayed through Wireless and XML
Applications, and the applicable CPM rate applied pursuant to Section 1(a)
of this Appendix B.
5) UPDATES: There will be no additional fee for the monthly updates of the
infoUSA Database. In the event infoUSA offers updates of the infoUSA
Database on a more frequent basis than monthly to any other licensees,
whether via electronic means or otherwise, infoUSA shall notify Licensee,
and Licensee may elect to receive updates with the same frequency and/or in
the same electronic format offered to such other licensees.
6) BUTTONS REVENUE SHARE DUE TO LICENSEE: infoUSA will pay Licensee on a
quarterly basis, a royalty equal to [**] of Net Revenues from sales to
Users who accessed infoUSA's web site through the Buttons (described in
Appendix F).
"Net Revenue" means the amounts collected by infoUSA from such sales, less
any third-party commissions or fees applicable to such sales. infoUSA will
report quarterly to Licensee showing the Net Revenue and applicable third
party commissions or fees in reasonably sufficient detail to allow
verification of the calculation thereof.
Page 8
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
7) AUDIT: Each party hereto shall permit the other party, through an
independent certified public accountant reasonably acceptable to the
audited party, to audit its accounts, books and records, as they relate to
the audited party's obligation to make payments hereunder (or, in the case
of the Licensee, as they relate specifically to the number of co-branding
relationships of Licensee). Such audits shall be at the expense of the
auditing party and shall be made only upon reasonable notice. The right
granted under this Section shall exist during the term of this Agreement
and for one year thereafter. Upon concluding any audit, the auditing shall
notify the other party of the results thereof. In the event that the
auditing party notifies the other that an adjustment must be made to the
royalties or payments previously paid by such audited party hereunder, the
parties shall use their best efforts in good faith to agree upon the amount
of any such adjustment. Any such adjustment shall be paid within 5 business
days after such agreement is reached. In the event the parties agree that
the total amount of royalties or payments previously paid was less than the
amount required to be paid under this Agreement and such deficiency is 10%
or more of the amount previously paid, the audited party shall pay the
reasonable and actual audit costs incurred by the auditing party.
8) ADDRESS BOOK ROYALTIES: In connection with Address Book features set forth
in Section C.1.f.(iii) of Appendix C, (in which more than [**] Listings
and/or Records may be downloaded into the Address Book), Licensee will pay
infoUSA an additional [**] per thousand) on CPM Royalties attributable to
Pages of Listings and/or Records displayed by Licensee to Users of such
third party Co-Branded Sites or Wireless or XML Applications.
Page 9
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
APPENDIX C - RENEWAL
--------------------
SWITCHBOARD, INC.
-----------------
THE INTERNET DIRECTORY SERVICE
------------------------------
C. Licensee may reproduce, distribute, display and transmit (collectively,
"Display") the infoUSA Database in electronic form as a part of the Service
(defined below) and may permit Users to search for, locate and subsequently
view, download and print (with the right to actively enable Users to download
and print limited to the Address Book applications only) (collectively "Access")
such infoUSA Database.
C.1 The Service: The Service is an Internet directory service known as of the
Renewal Effective Date as "Switchboard," "Switchboard.com," and/or "CBS
Switchboard.com", and also includes other Licensee- owned or operated web sites
which offer similar business and residential directory services (expressly
including, without limitation, Licensee's "Maps On Us" web site and service),
which enable Users to Access, at no charge, information on businesses and
persons from the infoUSA Database in the following manner:
a. SEARCHES BY NAME OR REVERSE-SEARCHES BY TELEPHONE NUMBER
. The Service shall permit Users to search by a business or persons' name or
by telephone number by a city name, metropolitan statistical area ("MSA") or
other local geographic area, or state.
. In response to a search by name or phone number, the Service may display a
"Page" of listings of persons or businesses which show name, street address,
city, state, and/or phone number and, for only the first [**] listings
displayed in response to a single search, zip code (no infoUSA number)(each
such listing is hereinafter referred to as a "Listing").
. A User may click on a Listing in order to view a Page showing a single
record which includes zip code and infoUSA number (each such record is
hereinafter referred to as a "Record").
. No Page shall show more than [**] Listings at one time.
b. SEARCHES BY BUSINESS CATEGORY
. The Service shall permit Users to search by one business category at a time
by a city name, metropolitan statistical area ("MSA") or other local
geographic area, state, or proximity from a location Nationwide searches
within a business category shall be prohibited unless the User includes a
business name as described in subparagraph c below.
In response to a search by a business category, the Service may display a
Page of listings of businesses which show name, street address, city, state
and/or phone number and, for only the first [**] listings displayed in
response to a single search, zip code (no infoUSA number)(each such listing
is hereinafter referred to as a "Listing".
. A User may click on one of the Listings to view one business record on a
Page which includes zip code and infoUSA number (a "Record").
. No page shall show more than [**] Listings.
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<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
c. NATIONWIDE SEARCHES BY NAME or by BUSINESS NAME & CATEGORY
. The Service shall permit Users to search nationwide by a business or
persons' name, or by business category and business name. (Nationwide
---
searches solely by business category are expressly prohibited)
. In response to a nationwide search by a person's or business name or, by
business name and category, the Service may display a Page of listings of
persons or businesses with the same or similar names which show name, street
address, city, state and/or phone number and, for only the first [**]
listings displayed in response to a single search, zip code (no infoUSA
number)(each such listing is hereinafter referred to as a "Listing").
. A User may click on one of the Listings to view one business or person's
record on a Page which includes zip code and infoUSA number (a "Record").
. No page shall show more than [**] Listings.
From time to time, infoUSA may provide written notice to Licensee
regarding a change to the search and display provisions described herein,
and Licensee agrees to discuss in good faith the feasibility of making
such changes, but will be under no obligation to make such changes.
d. In addition to the services specified in Section C.1. of this Appendix C,
the Service shall also be deemed to include the following: (i) additional
enhanced Services developed by LICENSEE, including but not limited to
Lightweight Directory Assistance and Protocol Directory Assistance, as well as
Intranet Directory Assistance for corporate USERS; (ii) applications that allow
API access to search results/content from the infoUSA Database as used in the
Licensee's services referenced in Section C.1 through wireless devices and/or
other types of applications that are designed to accept XML results
(collectively, "Wireless and XML Applications"); and (iii) third party web sites
to the extent that they access the ABI Database through links to the Licensee's
services in accordance with Section C.3.
e. At Licensee's option, Licensee may post navigation buttons which allow
its Users to link back to the SERVICE from the infoUSA web site.
f. ADDRESS BOOK FEATURE: The Service may include a feature which allows each
User to download Listings and/or Records from the infoUSA Database for
incorporation, possibly along with other information, into the User's personal
address book ("Address Book") for such User's personal use, subject to the
following restrictions:
(i) For the Service (including Co-Branded sites and Wireless and XML
Applications), where Licensee provides the technology for the Address
Book feature: For searches other than reverse searches by telephone
number, Licensee shall use commercially reasonable efforts to limit Users
to downloading and storing [**] Listings and/or Records into such Address
Book, including the requirement that Users select individual Listings
and/or Records on a one-by-one basis into the Address Book.
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Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
(ii) For the Service (including Co-Branded sites and Wireless and XML
Applications) where Licensee or a third party provides the technology for
the Address Book Feature: For reverse-searches by telephone number, Users
shall not be subject to the [**] Listing and/or Record restriction set
forth in (i) above.
(iii) For those Co-Branded sites and Wireless and XML Applications where
Licensee does not provide the technology for the Address Book feature, and
the Address Book permits Users to download and store more than [**]
Listings and/or Records, Licensee shall pay infoUSA the applicable Address
Book Royalty described in Section 8 of Appendix B - Renewal.
C.2 LEGAL, COPYRIGHT AND OTHER NOTICES
Each search results page on a standard computer display containing infoUSA
Content will continuously display the following logo, copyright notice, and
"click here" language:
data by
[LOGO OF INFOUSA]
Click here for sales leads, mailing lists and business credit reports.
----------
The infoUSA logo will provided by infoUSA. and will be 113 pixels x 54 pixels in
size.
Search results from the infoUSA Database displayed other than on a standard
computer display (for example, on a wireless device such as a pager or mobile
phone) shall contain the following textual copyright notice in a manner, size,
and placement which is reasonable given the type of display: "Listings by
infoUSA, O 1999".
Listing: A Listing(s) will appear as follows (except that Licensee may elect to
display less information to Users as part of the Listing or to format
information differently) , with the zip code displayed only for the first 10
Listings in response to a single search:
XYZ Company
123 Main Street
Anywhere, USA [98765]
(123)456-7890
Record: A Record will appear as a result of a User clicking on a Listing, with
the infoUSA number displayed in connection therewith:
Page 12
<PAGE>
XYZ Company
123 Main Street
Anywhere, USA 98765
(123)456-7890
infoUSA No. 123456789
C.3 Co-Branding
Licensee may co-brand the service to a third party's web site. "Co-Branding"
shall mean that the third party (hereinafter "Co-Brander") publishes Licensee's
corporate name, link or logo on its web site.
Licensee will publish infoUSA's Buttons and copyright logo (as described in this
Appendix C and in Appendix F) on every such Co-Branded site, provided however,
that Licensee may honor all co-branding requirements under its current co-
branding agreements, until such time as they expire or are renewed, so long as
the current Co-Branders display the infoUSA text copyright statement during the
remainder of their current term with Licensee.
Licensee is prohibited from pursuing or establishing co-branding relationships
with then-current, direct licensees of infoUSA with the intended purpose of
supplanting the infoUSA Database with Licensee's Service, without prior written
approval from infoUSA
Licensee shall provide infoUSA with quarterly reports identifying the number of
all Co-Branding relationships Licensee has established with Co-Branders who have
access to the infoUSA Database through the Service.
Licensee will immediately notify Co-Brander upon learning of any breach in
connection with the use of the infousa data in order to start the applicable
cure period, AND LICENSEE AGREES THAT IT shall terminate the Co-Branding
Agreement if such breach is not cured within such cure period.
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<PAGE>
APPENDIX F - RENEWAL
--------------------
SWITCHBOARD, INC.
-----------------
BUTTONS
-------
F.1 HYPER-LINKED "BUTTONS".
-----------------------
Buttons: Licensee will post on the screens of its Service the following
advertisements in the form of buttons ("Buttons"). Such Buttons will provide a
hyperlink to URLs specified by infoUSA to allow Users to link to the
infoUSA.com web site to purchase the following "infoUSA Products":
a) Sales Leads and Mailing Labels: Allows Users to purchase infoUSA Content
in a mailing list format through the Service. Licensee will feature Button
on the search results screen for every Category search on the Service.
b) Business Credit Reports: Allows Users to purchase infoUSA Content in a
print report format through the Service.
Screen shots showing examples of the type of placement and presentation of the
Buttons and Logo on the Service are attached hereto as Appendix G. Switchboard
shall have the right to determine the placement of the Buttons and Logo,
provided that the parties shall mutually review the placement of Buttons and
Logos on a quarterly basis to ensure that the placement and presentation is
reasonably satisfactory to both parties.
F.2 CONTRACTS; BILLING INFORMATION. All contracts for the sale of infoUSA
------------------------------
Products shall be directly between infoUSA and USERS. Licensee shall not be a
party to such contracts. As between the parties hereto, infoUSA shall be solely
responsible for the performance of such contracts, and for the billing and
collection of amounts due thereunder.
F.3 REPORTING. Licensee will report monthly to infoUSA showing total click-
---------
through rate from the hyperlinked Button referenced in paragraph F.1.
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<PAGE>
APPENDIX G - RENEWAL
--------------------
SWITCHBOARD, INC.
-----------------
LICENSEE'S HOSTING LOCATIONS
----------------------------
(as described in paragraph 7 of this 1999 Renewal of Database License Agreement)
[TO BE PROVIDED BY LICENSEE WHEN APPLICABLE]
Page 15
<PAGE>
Exhibit 10.22
-------------
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
ETAK, INC.
INTERNET PROVIDER AGREEMENT
AGREEMENT NO. IP-96-007
ARTICLE 1: PARTIES, BACKGROUND AND DEFINITIONS
1.1 Parties to Agreement. This Internet Provider Agreement (the
--------------------
"Agreement") is entered into by and between Etak, Inc., a California corporation
("Etak") and Lucent Technologies Inc., a Delaware corporation ("Lucent").
1.2 Background. Etak develops and distributes digital geographic data,
----------
geographic access software, navigation products, geocoding services, and related
materials. Lucent wishes to obtain from Etak the Licensed Products listed on
Exhibit A so that Lucent can create Derivative Products that are used to provide
Geographic Services to End Users via the Internet as further set forth in
Article 2. Defined terms used in this Agreement are set forth in Section 11.1.
ARTICLE 2: APPOINTMENT OF LUCENT AND GRANT OF LICENSE
2.1 Appointment. Etak hereby appoints Lucent, on a non-exclusive basis,
-----------
and Lucent accepts such appointment, as an authorized Etak Internet Provider.
2.2 Grant of Development License. Etak hereby grants to Lucent a non-
----------------------------
exclusive, non-transferable, license to use each Licensed Product in object-code
form for the limited purpose of in-house development by Lucent of (i) Derivative
Products and (ii) Geographic Services on the Internet using those Derivative
Products.
2.3 Grant of Right to Provide Geographic Services on the Internet. Etak
-------------------------------------------------------------
hereby grants to Lucent the non-exclusive, non-transferable right to use the
Derivative Products to provide Geographic Services on the Internet to End Users,
provided that (i) Lucent has paid to Etak all fees due in accordance with
Exhibit A; and (ii) Lucent continues to comply with all provisions of this
Agreement.
2.4 Permitted Geographic Services. Lucent is permitted to provide the
-----------------------------
following Geographic Service to End Users via the Internet, subject to the
following restrictions:
(a) Three Classes of Geographic Services.
------------------------------------
(1) "Maps On Us" WWW Site. Lucent is authorized to operate the
---------------------
"Maps on Us" World Wide Web site to provide Map Images (as defined below in
section 2.4(b)) and Route Guidance (as defined below) to End Users. "Route
Guidance" means providing text-based or bit-map graphical directions regarding
how to travel from Point A to Point B in response to an End User inquiry for
such information, but does not include requests or instructions for more than
[**] endpoints [**] per request or more than [**] intermediate points per
request. The Maps On Us World Wide Web site shall be marketed and provided (i)
directly on behalf of Lucent and not on behalf of or by any third party, and
(ii) only under trade names and trademarks owned and controlled directly by
Lucent (except that Lucent shall include Etak's copyright notice and license
agreement link in accordance with section 2.4(b)(4)).
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<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
(2) "Maps On Us" Internet Service. Lucent is authorized to
-----------------------------
operate the "Maps on Us" Internet Service by which Lucent will provide a
linked Internet service to a third party (the "Lucent Customer") with its
own World Wide Web site so that End Users of the Lucent Customer's World
Wide Web site can obtain Map Images and Route Guidance pertinent to the
information contained on the Lucent Customer's World Wide Web site. Unlike
the Maps On Us WWW Site, the Maps On Us Internet Service may be marketed
and provided so that Lucent is invisible to the End User and is offered
under the trade names and trademarks of the Lucent Customer, provided,
however, that all other restrictions and conditions set forth in this
Agreement are met.
(3) "Maps On Us" Intranet Service. Lucent is authorized to
-----------------------------
operate the "Maps on Us" Intranet Service with the same scope of services
as permitted above with respect to the Maps On Us World Wide Web Site, with
the following distinction: the only End Users who shall be permitted to
obtain access to the Maps on Us Intranet Service are those who have been
granted a password by Lucent to access the Intranet Service, and Lucent
shall retrieve and retain an audit trail showing each hit when a particular
End User is using the Service, the particular End User using the Service,
and what type and level of Service that End User is accessing as defined in
section B3 of Exhibit A.
(b) Restrictions Applicable to all Classes of Geographic Services.
-------------------------------------------------------------
(1) The Geographic Services shall be provided via
telecommunications connection to the Internet, by means of a World Wide Web
site owned and controlled by Lucent, the site server for which is located
at a geographic location controlled by Lucent.
(2) Products shall not be disclosed, disseminated or distributed
in digital form to any third party, including without limitation any End
User or Lucent Customer. Products in digital form shall be used only on
Lucent's own in-house server and not anywhere else or by anyone else.
(3) The Geographic Services shall consist of bit-mapped (raster)
graphics images derived from the Products ("Map Images") and standard
English text derived from the Products. In order to minimize data transfer
time, Lucent is permitted to utilize Java Applets or Plug-in Mechanisms to
provide the Geographic Services to the End User and Lucent Customer in
digital, vector-based form. However, such digital form shall be invisible
to and unusable by the End User and Lucent Customer. The End User and
Lucent Customer shall be able to access, utilize and store the Map Images
in bit-mapped (raster) graphic form, and in no other form. Lucent shall not
authorize or enable the End User or Lucent Customer to download or access
the Map Images or the Products in any form except as expressly authorized
in this paragraph. Except as expressly permitted above in this section 2.4,
Lucent shall not distribute, disclose, or market the Map Images or Products
in any vector-based or digital form. Lucent may allow the Map Images to be
rotated or zoomed by the End User's entering a manual keystroke for each
such movement or rotation. A single Map Image shall not contain more than
[**] "Features" derived from Etak's original digital Licensed Product. A
"Feature" is defined as a one-cell as denoted in Etak's database. The Map
Images may include icons added by Lucent representing the location of
points, lines and areas of interest. End Users may be permitted to download
more than one selected Image Map at a time, provided that all Map Images
together do
2
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
not contain more than [**] Features; however, if the screen consists of an
Etak U.S. small scale Map Image or a portion thereof, plus an inset large-
scale map or maps showing details of an area or areas of interest from
within the bounds of the small scale Map Image, then only the Features
contained in the inset large-scale Map Image(s) shall be counted towards
the limit of [**] total Features. In no event shall End Users be
authorized, enabled or permitted to download, access, utilize or store the
Products or Map Images in any form except as expressly authorized above in
this section 2.4.
(4) Lucent shall include an initial screen that must necessarily
and unavoidably be viewed by each user that contains the following notice
in conspicuous type: "Copyright Etak, Inc. 1984-1996. All Rights Reserved.
By using this site, you agree to the attached LICENSE AGREEMENT." The term
-----------------
LICENSE AGREEMENT shall, when clicked on, hot link to a page containing the
-----------------
full, unaltered text of the End User Internet License Agreement attached
hereto as Exhibit B. In the same location Lucent shall also include a
conspicuous disclaimer stating "Routes and road conditions may change and
may not be accurately reflected in all cases. Please pay attention at all
times to road conditions, routes, and street signs and other posted
directional information."
Each Map Image displayed shall conspicuously include the
following notice: "Copyright Etak, Inc. 1984-1996. All Rights Reserved. Use
Subject to LICENSE." The term LICENSE shall, when clicked on, hot link to a
------- -------
page containing the full, unaltered text of the End User Internet License
Agreement attached hereto as Exhibit B. If it is not technically possible
to include the "LICENSE" hot link within the Map Image itself, then the Map
Image may include the notice as ordinary text, provided that the hot link
is placed immediately adjacent to the Map Image.
Lucent shall submit Lucent's web page designs to Etak for Etak's
review and approval as being compliant with this section 2.4 before Lucent
utilizes any such designs. Lucent may submit a web page template to Etak
that Etak approves and a new web page design need not be submitted to Etak
if the notices as required by this section are included in the same manner
as Etak previously approved in the template. Etak agrees to review and
respond to Lucent's submission of a web page design within ten (10) working
days of the date of receipt by Etak.
2.5 Ownership. This Agreement does not constitute a transfer of any
---------
title or interest in the Licensed Products, and Etak reserves all rights in
the Licensed Products not expressly granted to Lucent by this Agreement.
Any portion of the Licensed Products that is modified or merged into other
computer programs or data by Lucent, or is combined with other programs or
data to form Derivative Products, shall continue to be subject to the
provisions of this Agreement, and Etak retains ownership of all such
Licensed Products and all such portions. However, Lucent shall be owner of
any item which Lucent can show through contemporaneous, tangible evidence
to be a Lucent Product. Nothing in this Agreement shall be construed as, or
deemed to be, an express or implied license for Lucent to obtain or utilize
any of Etak's patents, copyrights, trade secrets, or other intellectual
property, except for the limited license with respect to Etak's copyrights
and trade secrets for Etak's software and data expressly granted under the
terms and conditions set forth in this Article 2.
2.6 Authorized Purpose. Lucent shall not use the Products for any
------------------
purpose except as
3
<PAGE>
expressly authorized by this Article 2. By way of example and not by way of
limitation, Lucent is expressly prohibited from enabling the Product with any of
the following functions, or from creating a capability that allows third parties
to enable any of the following functions:
PROHIBITED FUNCTIONS:
--------------------
. Batch Geocoding (that is, determining geographic location such as
latitude and longitude from address or intersection information
through any means other than manual entry by the user of each request
for geographic information); provided, however, that Lucent shall be
permitted to utilize batch geocoding for Lucent's internal use only,
and shall not provide Batch Geocoding services to any third party or
enable the Product with Batch Geocoding.
. Communications to other devices for purposes of in-vehicle navigation
or automated vehicle tracking, including without limitation:
. Interfacing to any user or vehicle motion or location sensors,
including but not limited to CPS, gyroscopes, and wheel sensors;
. Rotating or moving map display (other than that produced by the user
manually entering a keystroke for each given movement or rotation).
. Distribution by any means other than electronic telecommunications
through the Internet as expressly authorized above. 2.7
2.7 Object Code and Data Only. This license from Etak is for data and
-------------------------
software in object code only. Etak does not grant any rights whatsoever to, and
Lucent shall not obtain access to or any use of, Etak source code or files.
However, if the parties agree, Etak will provide source code to Lucent for
certain software, subject to the terms and conditions of a mutually acceptable
separate agreement. In order to preserve Etak's trade secret, proprietary
information that is contained in the Products, Lucent shall not derive or
attempt to derive the source code, files or structure of all or any portion of
the Licensed Products by reverse engineering, disassembly, decompilation or any
other means.
2.8 Copyrights. The Licensed Products are copyrighted by Etak, and
----------
unauthorized copying of the Licensed Products, or any portion thereof, is
expressly prohibited. Lucent shall ensure that each copy of a Product and any
portion thereof shall bear the same trademarks, logos, copyright notices and
proprietary legends as the Licensed Products which Lucent received from Etak,
and Lucent shall not remove such notice or alter or augment it (except for
adding Lucent's own copyright notice for Lucent Products). Specifically, Lucent
shall conspicuously display Etak's copyright notice as described above in
section 2.4.
2.9 Duplication of Products. Lucent shall not duplicate, manufacture, copy
-----------------------
or reproduce any Products, or any portion thereof, except as necessary for (i)
internal use as expressly permitted in this Article 2; (ii) distribution in Map
Image form only to End Users via the Internet subject to the restrictions set
forth in Section 2.4; (iii) a limited number of copies at Lucent's own site for
back-up and archival purposes. Under no circumstances shall Lucent permit any
third parties to duplicate, manufacture, copy or reproduce any Products, or any
portion thereof.
4
<PAGE>
2.10 Electronic Shipping. If Etak delivers any Licensed Products to
-------------------
Lucent via modem or other electronic means, all terms and conditions of this
Agreement shall apply to those Licensed Products in the same manner as if they
were delivered via traditional physical media.
ARTICLE 3: ORDERS AND PAYMENT TERMS
3.1 License Fees, Royalties. Lucent shall pay to Etak (i) fees, and (ii)
-----------------------
royalties; in accordance with the Schedule of Fees and Royalties set forth in
Exhibit A with respect to each of the three authorized classes of Geographic
Services set forth in Section 2.4 of this Agreement.
3.2 Shipment of Licensed Products. Etak shall ship to Lucent any Licensed
-----------------------------
Products ordered by Lucent under this Agreement within a commercially reasonable
time after receipt of Lucent's order therefor.
3.3 Order Procedure. All orders by Lucent shall be controlled by the terms
---------------
and conditions of this Agreement. Any proposed variation from or addition to
these terms and conditions appearing on any purchase order or other document
submitted by Lucent shall be null and void, unless specifically accepted in a
writing signed by an authorized officer of Etak. Purchase orders are not valid
until accepted in writing by Etak. Shipments will be scheduled by Etak only upon
receipt of a duly executed purchase order from Lucent and upon acceptance of the
purchase order by Etak.
3.4 Shipment Terms. All Licensed Products licensed under this Agreement
--------------
shall be shipped F.O.B. from a facility of Etak. Lucent is responsible for all
shipping, insurance and related charges, and all risk of damage or loss to the
Licensed Products shall pass to Lucent at Etak's facility upon tender by Etak to
the carrier.
3.5 Payment Terms. Net payment for fees and royalties due Etak from Lucent
-------------
shall be due and payable in accordance with Exhibit A. Etak may refuse to ship,
or may delay the shipment of, any Licensed Products on order if Lucent becomes
delinquent in the payment of any of its obligations to Etak. All outstanding
amounts which are not paid when due shall bear interest at the lesser of: (i)
the maximum allowable statutory rate at the time, or (ii) 16% per annum. All
prices are net of any local, state or federal taxes, fees, assessments or other
levies, which shall be the sole obligation of Lucent. Lucent shall pay to Etak
all applicable local, state and federal taxes and levies unless Lucent has
presented to Etak a valid and appropriate certificate of exemption from those
taxes and levies.
ARTICLE 4: PROTECTION OF ETAK'S INTELLECTUAL PROPERTY
4.1 Confidentiality of the Licensed Products. Lucent shall be the owner of
----------------------------------------
the storage media on which Etak delivers the Licensed Products. However, the
Licensed Products themselves, including all aspects thereof used or incorporated
in Derivative Products, together with all materials and knowledge related
thereto (the "Confidential Items"), are obtained by Lucent, and its employees,
agents and representatives, in confidence and except as expressly permitted by
this Agreement, shall not be used, duplicated or disclosed by any of them in any
form for the use or benefit of any person or entity, nor reproduced,
transcribed, imitated or
5
<PAGE>
simulated in whole or in part, except for distribution in Map Image form or text
for Route Guidance to End Users via the Internet subject to the restrictions set
forth in Article 2. Lucent may disclose relevant aspects of the Confidential
Items to its employees, agents or representatives with a need to know who have
been advised that the Confidential Items are proprietary and confidential, and
who have previously or contemporaneously signed a nondisclosure agreement with
Lucent that is consistent with the standard Lucent Employee Intellectual
Property Agreement attached hereto as Exhibit C. Lucent shall protect and
preserve the confidentiality of the Licensed Products in accordance with
Lucent's standard policies applicable to Lucent's own confidential information
of an equivalent level of security, but in no event with less than reasonable
care.
4.2 Duty to Assist. Lucent shall notify Etak promptly if Lucent has
--------------
knowledge of any misappropriation of the Products or use of the Products by
anyone in any manner not expressly authorized by this Agreement, and shall
cooperate with any efforts by Etak to prevent any misappropriation or misuse of
the Products. The foregoing sentence does not obligate Lucent to conduct an
investigation of suspected misappropriation. In the event of any violation or
suspected violation of any provisions of this Article 4, Lucent shall promptly
notify Etak and shall, at Etak's expense, assist Etak in Etak's enforcement of
Article 4 against any current or former employee, agent or representative of
Lucent or any End User.
ARTICLE 5: WARRANTIES AND DISCLAIMER THEREOF
5.1 Limited Warranty By Etak.
------------------------
(a) Etak warrants to Lucent that the Software Licensed Products will,
for ninety (90) days from the date of initial delivery, and that the Data
Licensed Products will, for one (1) year from the date of initial delivery,
substantially conform to the contemporaneous specifications contained in Etak's
Documentation, when used in an Etak-approved operating environment; and that the
media (if any) on which Etak delivers the Licensed Products to Lucent will be
free of manufacturing defects on the date of initial delivery.
(b) Lucent acknowledges that the Licensed Products are complex and
may contain some nonconformities, defects or errors. Etak does not warrant that
the Licensed Products will meet Lucent's needs or expectations, that operations
of the Licensed Products will be error free or uninterrupted, or that all the
nonconformities can or will be corrected. Lucent must notify Etak in writing
within the applicable warranty period set forth above of any claim that the
Licensed Products do not meet this Limited Warranty. Etak's SOLE OBLIGATION and
Lucent's SOLE REMEDY under this Limited Warranty is for Etak to use reasonable
efforts to repair or replace the Licensed Products or to provide an avoidance
procedure at Etak's expense within a commercially reasonable time so that the
Licensed Products substantially conform to the specifications contained in the
Documentation, or at Etak's option, to refund the royalties previously paid by
Lucent for the units of Licensed Products involved. If Lucent is unable to
describe the claimed nonconformity with sufficient specificity to enable Etak to
confirm it, then no nonconformity shall be deemed to exist.
(c) If the media delivered to Lucent by Etak containing the Licensed
Products possess manufacturing defects, upon notice from Lucent, Etak will
provide Lucent with a replacement copy of the Licensed Products, and Lucent
shall return to Etak the defective copy.
6
<PAGE>
Etak's policy is to use virus-checking software on the Licensed Products before
they are shipped; however, because virus-checking software is not one hundred
percent reliable, Etak cannot and does not warrant that the Licensed Products
will be free from all viruses. Accordingly, Lucent should run its own virus-
checking software on the Licensed Products before loading them. If Lucent
discovers a virus on a Licensed Product as delivered by Etak that Lucent cannot
remove, Etak shall make another delivery of that Licensed Product to Lucent upon
Lucent's return of the first delivery. Etak agrees not to intentionally insert
into the Licensed Products any malicious code, program or other internal
component (e.g. computer virus, computer worm, computer time bomb, or similar
component) which is designed to damage, destroy or alter software or data.
(d) Etak agrees that Etak's pricing to Lucent will be consistent with
applicable trade regulations.
(e) This warranty shall not apply to any nonconformities arising from
Lucent's modification or attempted modification of the Licensed Products. If,
upon Lucent's request, Etak chooses to correct nonconformities resulting from
Lucent's modification of the Licensed Products, Lucent shall be charged for and
agrees to pay for custom programming at Etak's then current standard hourly
rate.
(f) This Limited Warranty is void if any nonconformity has resulted from
accident, abuse, misuse, or misapplication. This Limited Warranty is for
Lucent's exclusive benefit and is non-transferable, and Lucent agrees that this
Limited Warranty fulfills its essential purpose.
(g) THE EXPRESS WARRANTY PROVIDED IN SECTIONS 5.1(a) THROUGH (f) IS A
LIMITED WARRANTY AND IT IS THE ONLY WARRANTY MADE BY ETAK. ETAK MAKES AND LUCENT
RECEIVES NO OTHER WARRANTY, WHETHER EXPRESS OR IMPLIED, AND ALL WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.
THE STATED EXPRESS WARRANTY IS THE EXCLUSIVE REMEDY FOR DAMAGES AND IS IN LIEU
OF ALL LIABILITIES OR OBLIGATIONS OF ETAK. NO ORAL OR WRITTEN ADVICE OR
INFORMATION PROVIDED BY ETAK OR ANY OF ITS AGENTS OR EMPLOYEES SHALL CREATE A
WARRANTY OR IN ANY WAY INCREASE THE SCOPE OF THIS LIMITED WARRANTY, AND LUCENT
IS NOT ENTITLED TO RELY ON ANY SUCH ADVICE OR INFORMATION.
5.2 Lucent Express Warranty. Lucent represents and warrants that it
-----------------------
possesses the financial resources, technical facilities and skill, and other
requirements necessary for its timely and full performance pursuant to the terms
and conditions of this Agreement, and that it is an experienced and
knowledgeable user and distributor of computer software and data.
ARTICLE 6: INDEMNIFICATION
6.1 Indemnification by Etak.
-----------------------
(a) Lucent shall notify Etak promptly upon learning of any threatened
or asserted claim that the Licensed Products infringe any patents, copyrights,
trade secrets or other intellectual property rights of any third party. Etak
shall have the sole right to control the
7
<PAGE>
defense and negotiation of all such claims with respect to the Licensed Products
as originally delivered to Lucent or as incorporated within the Derivative
Products, and Lucent shall fully cooperate in Etak's defense of all such claims
at Etak's expense.
(b) Etak shall protect, defend (or in Etak's discretion, settle),
indemnify and hold Lucent harmless from any and all claims, demands,
liabilities, obligations, damages, suits, judgments or settlements
(collectively, "Claims"), including reasonable costs and attorneys' fees, that
are asserted against Lucent to the extent that such Claims are based upon a
contention that the Licensed Products used within the scope of this Agreement
infringe any patents, copyrights, trade secrets or other intellectual property
rights of any third party created by United States federal law, the law of any
of the United States, or the law of any nation that is a signatory to the Berne
Convention or the General Agreement on Tariffs and Trade, provided that Lucent
notified Etak in writing of such claim in sufficient time to enable Etak to
fully protect its interests without prejudice.
(c) If, as a result of any claim of infringement described in this
Section 6.1, Etak reasonably believes that an injunction or temporary
restraining order or such a claim is likely, Etak may in its sole discretion and
at its expense procure the right for Lucent to continue to use said Licensed
Product, or replace or modify the Licensed Product so as to make it non-
infringing. If, as a result of any claim of infringement described in this
Section 6.1, a temporary restraining order or injunction is issued prohibiting
Etak from licensing or sublicensing any Licensed Product, or prohibiting Lucent
from using any Licensed Product, Etak may in its sole discretion and at its
expense procure the right for Lucent to continue to use said Licensed Product,
replace or modify the Licensed Product so as to make it non-infringing, or if
the above options are not available to Etak on a commercially reasonable basis,
terminate this Agreement and refund the unamortized portion of the license fees
and royalties previously paid by Lucent for the use of the affected units said
Licensed Product. Calculation of the unamortized portion of the license fees
royalties shall be based upon five (5) years' straight line depreciation.
(d) Etak shall not have any liability under this Article 6 to the
extent that such a claim of infringement is based upon the use of the Licensed
Products in combination with other products not furnished or made by Etak (other
than a claim based upon the combination of the Licensed Products with operating
software that Etak lists as compatible with the Licensed Products), the use of
the Licensed Products in practicing any infringing process, the modification of
the Licensed Products or any portion thereof by anyone other than Etak, or
application or for the use Licensed Products in a manner for which they were not
designed or specified by Etak.
(e) Sections 6.1(a) through 6.1(e) state the entire and exclusive
obligation of Etak to Lucent or Lucent's End User for any claim of infringement
relating to the Licensed Products.
6.2 Indemnification by Lucent. Lucent shall protect, defend, indemnify and
-------------------------
hold Etak harmless from any and all claims, demands, liabilities, obligations,
damages, suits, judgments or settlements (collectively, "Claims"), including
reasonable costs and attorneys' fees, that arise from the act, neglect, omission
or unperformed obligation of Lucent in the development, modification, use or
distribution of the Derivative Products or Lucent Products or Lucent's breach of
any provision of this Agreement.
8
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ARTICLE 7: LIMITATION ON LIABILITY
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY CLAIM OR LOSS INCURRED BY
THE OTHER PARTY (INCLUDING WITHOUT LIMITATION COMPENSATORY, INCIDENTAL, DIRECT,
INDIRECT, SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, LOST PROFITS,
EXPENDITURES, LOSS OF GOODWILL, OR DAMAGES RESULTING FROM LOST DATA OR INABILITY
TO USE DATA) IRRESPECTIVE OF WHETHER SUCH PARTY HAS BEEN INFORMED OF, KNEW OF,
OR SHOULD HAVE KNOWN OF THE LIKELIHOOD OF SUCH DAMAGES, EXCEPT AS EXPRESSLY
PROVIDED IN ARTICLES 5 AND 6 AND 9, AND IN THE SENTENCE SET FORTH BELOW AT THE
END OF THIS ARTICLE 7. THIS LIMITATION APPLIES TO ALL CAUSES OF ACTION IN THE
AGGREGATE, INCLUDING WITHOUT LIMITATION BREACH OF CONTRACT, BREACH OF WARRANTY,
NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION, AND OTHER TORTS, NOR SHALL
EITHER PARTY BE LIABLE FOR ANY CLAIM OR DEMAND AGAINST THE OTHER PARTY BY ANY
OTHER PERSON, ORGANIZATION OR ENTITY (EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE
6). ETAK SHALL NOT BE LIABLE TO LUCENT BECAUSE OF ANY EXPIRATION, TERMINATION
OR FAILURE TO RENEW OR EXTEND THIS AGREEMENT, OR FOR FAILURE TO TIMELY DELIVER
PRODUCT. IF ETAK'S LIMITED WARRANTY OR THE LIMITATION OF LIABILITY SET FORTH IN
THIS AGREEMENT SHALL FOR ANY REASON WHATSOEVER BE HELD UNENFORCEABLE OR
INAPPLICABLE, EACH PARTY AGREES THAT THE OTHER PARTY'S LIABILITY SHALL NOT
EXCEED FIFTY PERCENT (50%) OF THE ROYALTIES PAID BY LUCENT TO ETAK WITH RESPECT
TO THE LICENSED PRODUCTS UNITS THAT ARE THE SUBJECT OF THE CLAIM. EXCEPTION:
THIS ARTICLE 7 SHALL NOT APPLY TO ANY CLAIM BY ETAK AGAINST LUCENT WITH RESPECT
TO: (1) VIOLATION OF ANY OF ETAK'S INTELLECTUAL PROPERTY RIGHTS; (2) VIOLATION
BY LUCENT OF ARTICLES 2 OR 4 HEREOF. FURTHER, THIS ARTICLE 7 SHALL NOT BE
CONSTRUED TO PRECLUDE ETAK FROM COLLECTING FEES AND ROYALTIES OWED BY LUCENT
UNDER THE PROVISIONS OF THIS AGREEMENT.
ARTICLE 8: RECORDS, REPORTS AND AUDITS
8.1 Required Records. Lucent shall prepare and maintain at its expense
----------------
complete and accurate books and records documenting the provision of any
Geographic Services to End Users and Lucent Customers, and any revenues of any
type received or derived therefrom. The books and records prepared by Lucent
shall be retained for a minimum of three (3) years from the date on which Lucent
is obligated to pay such fee to Etak.
8.2 Reports to Etak. Lucent shall, within thirty (30) days after the end
---------------
of each calendar month, provide Etak with a written report of Lucent activities
under this Agreement. Such report shall include the number of Internet accesses
of the Geographic Services occurring that month, and shall state the gross
revenue received or derived by Lucent from the Products or related services.
Etak shall hold such information confidential, except as needed by Etak to
enforce its rights or Lucent's obligations under this Agreement.
8.3 Audit. During the initial term hereof, any renewal periods, and for a
-----
period of one (1) year after expiration or termination of this Agreement, Etak
shall have the right, not more
9
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
often than once per year, at its expense and upon reasonable notice, to examine
or have examined by its authorized representative, Lucent's books and records to
determine or verify Lucent's performance hereunder with respect to license and
confidentiality provisions (Articles 2 and 4), the amounts of license, support
and other fees due to Etak by Lucent hereunder, and the extent that such amounts
have been paid, and the accuracy of any such reports furnished by Lucent to
Etak. If the audit demonstrates that Lucent has paid to Etak 95% or less of the
fees or royalties actually owed to Etak, then Lucent shall promptly pay the cost
of such audit, in addition to the amounts actually owed. Etak shall hold
confidential the information obtained from Lucent through such audit, except as
needed by Etak to enforce its rights or Lucent's obligations under this
Agreement. Lucent shall have the option of requiring Etak to use an outside,
independent auditor, for such examination, upon written request to Etak,
provided that Lucent first deposits with such outside auditor the estimated cost
thereof.
ARTICLE 9: TERM AND RENEWAL
Unless terminated earlier pursuant to any provision of Article 10, this
Agreement shall commence on the date countersigned by an authorized officer of
Etak after having been signed by Lucent, and shall continue in force for three
(3) years from said date. However, Lucent shall have the right to terminate this
Agreement at the end of the first year or second year that this Agreement is in
effect by giving written notice thereof to Etak at least ninety (90) days before
the end of the first year or second year of this Agreement, respectively,
provided that Lucent first pays to Etak a $25,000 termination fee in addition to
all fees and royalties owed by Lucent hereunder through the date of termination.
Thereafter, this Agreement shall be automatically renewed for one-year periods,
unless during any such one-year period either party notifies the other party at
least ten months before the expiration date of this Agreement, as it may have
been extended, of that party's intention not to extend the Agreement, in which
event this Agreement shall expire automatically without judicial action. Etak
shall notify Lucent at least 120 days before the expiration date of this
Agreement, as it may have been extended, of any proposed changes in the
royalties and fees to be paid by Lucent in the renewal period. In no event shall
the [**] that [**] is then [**] Internet providers who are making the [**] and
offering the [**] using the same type of [**]. If the above sentence is
violated, then as Lucent's SOLE REMEDY and Etak's SOLE OBLIGATION, Etak shall
[**] to the [**] and the [**] by the [**] over the period during which [**] than
what the [**]. This [**] but only as [**]. This [**] provision shall not apply
to third party [**] settlement or litigation.
Lucent does not have or acquire by execution of this Agreement, by
performance hereunder, or otherwise, any vested right with respect to the
distribution of Products or the renewal of this Agreement. If Etak continues a
business relationship with Lucent after termination or nonrenewal of this
Agreement, that relationship shall not be construed as a renewal of this
Agreement or a waiver of termination, but such relationship shall be "at will,"
terminable at any time with or without cause or notice by either party, and all
such transactions shall be governed by terms otherwise identical to the relevant
provisions of this Agreement, unless the parties have executed a new written
agreement superseding this Agreement.
10
<PAGE>
ARTICLE 10: TERMINATION, EFFECTS THEREOF AND REMEDIES
10.1 Termination Events.
------------------
(a) Etak may terminate this Agreement immediately, without judicial
action, and (i) with two (2) days' notice if Lucent violates any of the
provisions of Articles 2 or 4; and (ii) with thirty days, notice and opportunity
to cure: if Lucent commits a material breach of any other provision of this
Agreement or otherwise fails materially to fulfill any of its obligations
hereunder, or if Lucent neglects or fails to conduct its business in a manner
that represents fairly Etak products and the good name, goodwill and reputation
of Etak. In addition, Lucent shall have the right to terminate this Agreement
with thirty days' notice and opportunity to cure if Etak commits a material
breach of any provision of this Agreement.
(b) Either party hereto may terminate this Agreement immediately upon
written notice to the other party without opportunity for cure if such other
party becomes insolvent or, whether voluntary or involuntary, if any process or
proceeding of any court is instituted against such party by attachment or levy
or execution, in insolvency or bankruptcy, or in receivership, or if any general
assignment is made or attempted to be made for the benefit of creditors by such
party. If either party ceases to conduct its business in the normal course of
business, the other party may by thirty (30) days written notice terminate this
Agreement.
10.2 Survival. Termination of this Agreement for any reason or its natural
--------
expiration shall not relieve Lucent of its obligations to make full payment to
Etak for any and all amounts that are owed by Lucent to Etak. In addition,
Sections 2.5, 2.7, 2.8, 2.9, Article 4, Article 5, Article 6, Article 7, Article
8, Section 10.3, and Article 11 hereof shall survive any such termination or
expiration.
10.3 Return of Information. Promptly upon expiration or termination of this
---------------------
Agreement Lucent shall, at its expense, return to Etak all copies of the
Products, related materials, and other materials developed by or belonging to
Etak which are in possession or control of Lucent, and shall make no further use
thereof in any form. Concurrently therewith, a duly authorized employee of
Lucent shall certify in writing to Etak that all such materials have been
returned to Etak.
ARTICLE 11: GENERAL PROVISIONS
11.1 Definitions. In this Agreement, the following are defined terms:
-----------
(a) "Licensed Products' means all software ("Software"), data ("Data"),
documentation and related materials as listed on Exhibit A hereto, as amended
from time to time by the mutual consent of the parties, or supplied by Etak to
Lucent.
(b) "Products" means Licensed Products and Derivative Products.
(c) "Lucent Products" means all new and original products independently
created by Lucent without use or inclusion of any portion of a Licensed Product.
(d) "Derivative Products" means all works created by Lucent which are
based upon or incorporate all or part of one or more Licensed Products, such as
a revision, modification, translation, abridgment, condensation, expansion,
collection, compilation or any other form in which such Licensed Products may be
recast, transformed or adapted.
11
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
(e) "End User" means any third party who is granted the right to use any
of the Products.
(f) "Geographic Services" shall have the meaning set forth in section 2.4
of this Agreement.
11.2 Final Agreement. This Agreement supersedes all prior and
---------------
contemporaneous agreements and understandings between the parties relating to
its subject matter and is the complete and exclusive statement of the terms of
their Agreement, and may be amended only by a writing so stating its purpose,
and signed by both parties.
11.3 Governing Law; Jurisdiction. This Agreement and all aspects of the
---------------------------
relationship between Etak and Lucent shall be governed by and construed in
accordance with the internal laws of the State of California.
11.4 Product Changes. Etak has the right to modify or discontinue any of
---------------
the Licensed Products at any time whatsoever, with [**] written notice to
Lucent. If Etak modifies or discontinues any License Product, Etak shall [**]
make any [**] with respect to Licensed Products previously delivered to Lucent.
11.5 Arbitration. Any dispute arising out of, connected with or relating to
-----------
this Agreement, the past, present or future relationship between Etak and
Lucent, or the termination or non-renewal of this Agreement or of the
relationship between Etak and Lucent, whether sounding in contract, tort or
otherwise, shall be finally resolved exclusively by arbitration. Such
arbitration shall be conducted by a panel of three arbitrators. To the greatest
extent practicable, the arbitrators shall be appointed from a pool of
arbitrators who are stated to have experience or expertise in the computer
industry. The arbitration shall proceed in accordance with the then current
commercial rules of the American Arbitration Association. Any award made by the
arbitration panel, however constituted, shall be final, binding and conclusive
on all parties for all purposes and judgment may be entered thereon by any state
or federal court having jurisdiction.
11.6 Notices. Any notice, request or demand required to be given or made
-------
hereunder in writing, and may be delivered in person, by certified or registered
mail, postage prepaid, or by facsimile confirmed by overnight courier. All
notices shall be addressed to the party and address set forth at the end of this
Agreement, unless and until a party provides written notice of a new address for
receipt of notice. All notices shall be deemed received when (i) received; or
(ii) when delivery is first attempted by the carrier at the address of record,
whichever comes first. A copy of all notices to Etak shall also be sent to Etak
Contract Administration
11.7 Severability. If any provision of this Agreement or the application
------------
thereof to any party or circumstance shall to any extent be invalid or
unenforceable in any jurisdiction, that provision shall be severed from this
Agreement as to such jurisdiction (but, to the extent permit by law, not
elsewhere), and shall not affect the remainder hereof.
11.8 No Waiver. No waiver of any obligation or right of either party shall
---------
be effective unless in writing, executed by the party against whom it is being
enforced. Any such waiver shall not preclude a party from exercising any other
right or later exercising the same right.
12
<PAGE>
11.9 Attorney Fees. If either party defaults in the performance of its
-------------
material obligations under this Agreement, such party shall pay to the other
party all reasonable costs and expenses incurred by such other party in
enforcing its rights under this Agreement, including without limitation, costs
and attorneys' fees.
11.10 Assignment. This Agreement shall inure to the benefit of and shall be
----------
binding upon the parties hereto and their respective successors, legal
representatives and permitted assigns, except that Lucent shall not assign or
transfer this Agreement or any part hereof without Etak's prior written consent,
which consent shall not be unreasonably withheld. This restriction on
assignments or transfers shall apply to assignments or transfers by operation of
law, as well as by contract, merger or consolidation. Any attempted assignment
or transfer in derogation of this prohibition is void.
11.11 Force Majeure. Neither party shall be liable for non-performance or
-------------
delays in performance hereunder if caused by factors beyond its reasonable
control; provided, however, that Lucent shall be liable regardless of the
circumstances if Lucent is overdue by more than two (2) weeks in making payments
to Etak.
11.12 Compliance with Laws. Lucent acknowledges and understands that the
--------------------
Products may be subject to restrictions on exportation and re-exportation
pursuant to the United States Export Administration Regulations, 15 CFR Parts
368-399. Prior to export of any Product, Lucent will be familiar with the
requirements of the Export Administration Regulations and will comply strictly
with those requirements in all transactions involving any Products supplied by
Etak hereunder. Lucent shall comply with all applicable laws and regulations,
and maintain all required licenses and permits.
11.13 Government Right. If any Product is used in any fashion, directly or
----------------
indirectly, in connection with foreign or domestic government contracting or
subcontracting, including without limitation, Lucent's performance of any
government contracts or subcontracts, then Lucent shall ensure that the
government entity receives nothing more than limited license rights to use the
Products pursuant to a sublicense agreement equivalent to that allowed under
section 2.4 and Exhibit B of this Agreement. Lucent shall inform any government
entity or prime contractor with which it is contracting exactly how it intends
to use the Products in connection with its government contracts, that such
Products are proprietary to Etak and that Licensee has no right to grant to the
government entity or prime contractor any rights in the Products. The software
is a "commercial item," as that term is defined at 48 C.F.R. 2.101 (Oct. 1995)
consisting of "commercial computer software" and "commercial computer
documentation," as such terms are used in 48 C.F.R. 12.212 (Sept. 1995).
Consistent with 48 C.F.R. 12.212 and 48 C.F.R. 227.7202-1 through 227.7202-4
(June 1995), all U.S. Governmental End Users acquire the software with only
those license rights set forth herein. For purpose of any public disclosure
provision under any federal, state or local law, it is agreed that these
Products are trade secret and proprietary commercial products and not subject to
disclosure. The Products are copyright (c) 1984-1996 by Etak, Inc. UNPUBLISHED.
ALL RIGHTS RESERVED UNDER THE COPYRIGHT LAWS OF THE UNITED STATES.
11.14 No Joint Relationship. Lucent and Etak are independent contractors and
---------------------
neither has nor shall have any power, nor will either represent that either has
any power to bind the other party, or to assume or create any obligation or
responsibility, express or implied, on behalf of the other party or in the other
party's name. This Agreement shall not be construed as constituting Lucent and
Etak as employees, agents, partners, joint venturers, franchisors or
franchisees, to create any other form of legal association or arrangement which
might impose liability upon Etak or Lucent for any act or failure to act of the
other.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and entered into this
Agreement as of the date indicated below on which it is countersigned by an
authorized officer of Etak after having been signed by Lucent.
<TABLE>
<S> <C>
LUCENT TECHNOLOGIES INC. ETAK, INC.
A Delaware corporation a California corporation
600 Mountain Avenue 1430 O'Brien Drive
Room 2A-536 Menlo Park, CA 94025
Murray Hill, NJ 07974 (415) 328-3825
(908) 582-5590
By: /s/ Stephen J. Socolof By: /s/ Steven T. Dodds
------------------------------------ -----------------------------------
Name: Stephen J. Socolof Name: Steven T. Dodds
--------------------------------- --------------------------------
Title: Strategy & Business Development Title: VP of Product Marketing & Sales
--------------------------------- --------------------------------
Date: 11-21-96 Date: November 25, 1996
--------------------------------- --------------------------------
</TABLE>
14
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
EXHIBIT A
A. LICENSED PRODUCTS:
-----------------
Upon final execution of this Agreement by the parties, Etak agrees to deliver to
Lucent the following Licensed Products at no charge:
[ ] RELEASED
*Software
- MapDraw Library
- MapRetrieve Library
- Etak GeoCode Library
- GeoRetrieve Library
- GeoCoder Workstation for Windows (qty. 3)
*Data
- US Database/MapAccess Format
- EtakMap USA
- Business Listings in Etak standard released format
[ ] UNRELEASED
*Software
- [**]
- [**]
- [**]
- [**]
- [**]
*Data
- [**] (as release during the first 18 months
of the term of this Agreement)
- [**] Format
Etak agrees to provide each calendar quarter those updates to the above released
items that are generally released by Etak.
B. FEES AND ROYALTIES:
------------------
(1) Maps On Us WWW Site
Lucent shall pay Etak the greater of (a) or (b) below in this section B.(1)
(a) Lucent shall pay to Etak in each year that this Agreement is in effect,
a minimum annual guaranteed royalty of [**], payable in installments in the
following manner: [**] shall be paid within thirty (30) days of the commencement
of each annual period, then [**] shall be paid three months after such
commencement. The minimum annual guaranteed royalty shall be payable regardless
of the actual Gross Revenues of Maps On US. For purposes of royalty calculation,
the first annual period shall commence on the earlier of (i) the date that
Lucent first offers to any Lucent customer one or more of the services described
in this Agreement, or (ii) December 15, 1996.
15
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
(b) Maps on Us WW Site Royalty Rate (Percent of Maps On Us Gross Revenues)
<TABLE>
<S> <C> <C>
Level 1 Etak Map Premium Databases with available one ways [**]
In year one of this Agreement: [**]
Level 2 Above including Imputed Turn Restrictions and [**]
Highway Netfiles
Level 3 Above including full Turn By Turn attributes [**]
After year one of this Agreement:
</TABLE>
The percentage Royalty Rate shall be based on a weighted formula,
calculated as follows:
Etak will report at the beginning of each calendar quarter the percentage
of the Untied States population that is covered by Etak Level 2 databases and
that has been shipped to Lucent over the term of this Agreement (EL2), and the
percentage of the United States population that is covered by Etak Level 3
databases and that has been shipped to Lucent over the term of this Agreement
(EL3).
Divide [**]
Divide [**]
Multiply [**]
Multiply [**]
Divide [**] = the percentage Royalty Base.
Example: If Etak Level 2 databases cover [**] of the population, while Etak
Level 3 databases cover [**] of the population, the formula would operate as
follows:
[**] divided by [**]
[**] divided by [**]
Multiply [**] by [**]
Multiply [**] by [**]
Add [**] and [**]
Through payment of the [**] minimum annual guaranteed royalty set forth above in
B(1)(a), Lucent will have in effect prepaid royalties for that year up to [**]
for the Maps On Us WWW Site. Thus, Lucent shall not be required to actually pay
the royalty amounts set forth above in this section B(1)(b) until the accrued
royalties owed Etak for that year exceed [**], at which point Lucent shall
commence paying to Etak the above royalties.
After Lucent has paid to Etak royalties equal to [**] (including the minimal
annual guaranteed royalty paid by Lucent) in any given annual period that this
Agreement is in effect, the Royalty Rate for the remainder of that same annual
period as set forth above in this
16
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
subsection B(1)(b) of this Exhibit A shall decrease to [**] of the percentages
set forth above for Level 1, Level 2, and Level 3. However, at the start of the
next annual period the Royalty Rate shall increase to the figures set for Level
1, Level 2, and Level 3.
Optional Additional Fees (applicable if Etak provides the following updates to
Lucent)
Updates to Business Listings [**] per update
Etak's goal is to update Business Listings once per quarter.
If Lucent is paying Etak the minimum annual license fees and royalties due
under this section 1, then Lucent is permitted to offer the following additional
two classes of services:
(2) "Maps On Us" Internet Service
-----------------------------
Lucent shall pay Etak the greater of (a) or (b) below in this section B.(2)
(a) Lucent shall pay to Etak in each year that this Agreement is in
effect, a minimum annual guaranteed royalty of [**] per Lucent Customer without
Business Listings, and [**] per Lucent Customer with Business Listings, payable
within thirty (30) days of the commencement of each annual period. The minimum
annual guaranteed royalty shall be payable regardless of the actual Gross
Revenues of Lucent.
(b) Royalty Rate (Percent of Maps On Us Gross Revenues)
<TABLE>
<S> <C>
Level 1 EtakMap Premium databases with available one ways [**]
In year one of this Agreement:
Level 2 Above including Imputed Turn Restrictions and [**]
Highway Netfiles
Level 3 Above including full Turn By Turn attributes [**]
After year one of this Agreement:
</TABLE>
The percentage Royalty Rate shall be based on a weighted formula,
calculated as follows:
Etak will report at the beginning of each calendar quarter the percentage
of the United States population that is covered by Etak Level 2 databases and
that has been shipped to Lucent over the term of this Agreement (EL2), and the
percentage of the United States population that is covered by Etak Level 3
databases and that has been shipped to Lucent over the term of this Agreement
(EL3).
Divide [**]
Divide [**]
Multiply [**]
Multiply [**]
Add [**] = the percentage Royalty Rate.
17
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
Through payment of the [**], as the case may be, per Customer minimum annual
guaranteed royalty set forth above in B(2)(a), Lucent will have in effect
prepaid royalties for that year up to [**], as the case may be, per Customer for
the Maps On Us Internet Service. Thus, Lucent shall not be required to actually
pay the royalty amounts set forth in this section B(2)(b) until the accrued
royalties owed Etak with respect to that Customer for that year exceed [**], as
the case may be, at which point Lucent shall commence paying to Etak the above
royalties for that Customer.
There are no additional discounts which apply to the Maps On Us Internet Service
royalty calculation.
(3) "Maps On Us" Intranet Service
(a) Lucent shall pay to Etak in each year that this Agreement is in
effect, a minimum annual guaranteed royalty of [**] per Lucent Customer without
Business Listings, and [**] per Lucent Customer with Business Listings, payable
within thirty (30) days of the commencement of each annual period. The minimum
annual guaranteed royalty shall be payable regardless of the actual Gross
Geographic Service Revenues of Lucent.
(b) Lucent shall pay to Etak the following royalty per "hit", based on the
number of hits per month and the Level of service provided.
<TABLE>
<CAPTION>
Number of Hits Per Month
<S> <C> <C> <C>
less than 25k 25-100k greater than 100k
Level 1 [**] [**] [**]
</TABLE>
In year one of this Agreement:
<TABLE>
<S> <C> <C> <C>
Level 2 [**] [**] [**]
Level 3 [**] [**] [**]
</TABLE>
After year one of this Agreement:
The per hit Royalty shall be based on a weighted formula, calculated as
follows:
Etak will report at the beginning of each calendar quarter the percentage
of the United States population that is covered by Etak Level 2 databases and
that has been shipped to Lucent over the term of this Agreement (EL2), and the
percentage of the United States population that is covered by Etak Level 3
databases and that has been shipped to Lucent over the term of this Agreement
(EL3).
Divide [**]
Divide [**]
Multiply [**] from the table below = [**]
Multiply [**] from the table below = [**]
18
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
<TABLE>
<CAPTION>
Number of Hits Per Month
<S> <C> <C> <C>
less than 25k 25-100k greater than 100k
FACTOR (f2 or f3)
Level 2 [**] [**] [**]
Level 3 [**] [**] [**]
</TABLE>
Add [**] = the percentage Royalty Rate.
Levels of Service are defined as follows:
Level 1 EtakMap Premium Databases with available one ways
Level 2 Above including Imputed Turn Restrictions and Highways Netfiles
Level 3 Above including full Turn by Turn attributes
For purposes of this section B.3. of this Exhibit A, a "hit" means each access
to a Map Image by any End User or Customer.
Through payment of the [**], as the case may be, per Customer minimum annual
guaranteed royalty set forth above in B(3)(a), Lucent will have in effect
prepaid royalties for that year up to [**], as the case may be, per Customer for
the Maps On Us Intranet Service. Thus, Lucent shall not be required to actually
pay the royalty amounts set forth above in this section B(3)(b) until the
accrued royalties owed Etak with respect to that Customer for that year exceed
[**], as the case may be, at which point Lucent shall commence paying to Etak
the above royalties for that Customer.
---
For purposes of this Exhibit A, sections B.1. and B.2., "Gross Revenues" shall
include any consideration in any form received by Lucent or any affiliate of
Lucent with respect to any Web Site that includes or uses any Etak Licensed
Products or any portion thereof in any form.
For purposes of this Exhibit A, section B.3., "Gross Geographic Services
Revenues" shall include any consideration in any form received by Lucent or any
affiliate of Lucent with respect to the Geographic Services portion of any Web
Site that includes or uses any Etak Licensed Product or any portion thereof in
any form.
Under this Exhibit A, the Royalty shall both be accrued and paid on a monthly
basis at the same time that the report is due in accordance with section 8.2 of
the Agreement.
19
<PAGE>
EXHIBIT B
END USER INTERNET LICENSE
IMPORTANT-READ CAREFULLY BEFORE ACCESSING THIS WEB SITE.
--------------------------------------------------------
BY ACCESSING THIS WEB SITE YOU ACCEPT THIS AGREEMENT.
-----------------------------------------------------
THIS IS A LEGAL AGREEMENT BETWEEN YOU, THE END USER, AND LUCENT. BY ACCESSING
THIS WEB SITE, YOU ARE AGREEING TO BE BOUND BY THE TERMS OF THIS AGREEMENT. IF
YOU DO NOT AGREE WITH THESE TERMS, DO NOT ACCESS THIS WEB SITE.
1. GRANT OF LICENSE. Lucent is an authorized sublicensor of products owned and
----------------
created by Lucent's licensor. Lucent grants you a non-transferable, non-
exclusive license to use the map-images contained on this web site (the
"Products"), solely for internal use by your business or for your own personal
use, only with one central processing unit at any one time. You may not copy,
reverse engineer, translate, port, modify or make derivative works of the
Products. You may not rent, disclose, publish, sell, assign, lease, sublicense,
market, or transfer the Products or use them in any manner not expressly
authorized by this Agreement. You shall not derive or attempt to derive the
source code, source file or structure of all or any portion of the Products by
reverse engineering, disassembly, decompilation or other means. You shall not
use the Products to operate a service bureau or for any other uses involving the
processing of data of other persons or entities. You do not receive any, and
Lucent's licensor retains all, ownership rights in the Products. The Products
are copyrighted and may not be copied, even if modified or merged with other
Products. You shall not alter or remove any copyright notice or proprietary
legend contained in or on the Products.
2. LIMITED WARRANTY AND LIABILITY. The Products are provided to you on an "AS
------------------------------
IS" and "WITH ALL FAULTS" basis. You assume the entire risk of loss in using
the Products. The Products are complex and may contain some nonconformities,
defects or errors. Lucent does not warrant that the Products will meet your
needs or expectations, that operations of the Products will be error free or
uninterrupted, or that all nonconformities can or will be corrected. Routes and
road conditions may change and may not be accurately reflected in all cases.
Please pay attention at all times to road conditions, routes, and street signs
and other posted directional information. This Limited Warranty is non-
transferable.
THE EXPRESS WARRANTY IN THIS SECTION 2 IS A LIMITED WARRANTY AND IT IS THE ONLY
WARRANTY MADE BY LUCENT. LUCENT MAKES AND USER RECEIVES NO OTHER WARRANTY,
WHETHER EXPRESS OR IMPLIED, AND ALL WARRANTIES OF MERCHANTIBILITY, TITLE, AND
FITNESS FOR ANY PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED. THE STATED EXPRESS
WARRANTY IS THE EXCLUSIVE REMEDY FOR DAMAGES AND IS IN LIEU OF ALL LIABILITIES
OR OBLIGATIONS OF LUCENT.
IN NO EVENT SHALL LUCENT BE LIABLE FOR ANY DAMAGES, CLAIM OR LOSS INCURRED BY
USER (INCLUDING WITHOUT LIMITATION COMPENSATORY, INCIDENTAL, INDIRECT, SPECIAL,
CONSEQUENTIAL OR EXEMPLARY DAMAGES, LOST PROFITS, LOST SALES OR BUSINESS,
EXPENDITURES,
20
<PAGE>
INVESTMENTS, OR COMMITMENTS IN CONNECTION WITH ANY BUSINESS, LOSS OF ANY
GOODWILL, OR DAMAGES RESULTING FROM LOST DATA OR INABILITY TO USE DATA)
IRRESPECTIVE OF WHETHER LUCENT HAS BEEN INFORMED OF, KNEW OF, OR SHOULD HAVE
KNOWN OF THE LIKELIHOOD OF SUCH DAMAGES. THIS LIMITATION APPLIES TO ALL CAUSES
OF ACTION IN THE AGGREGATE INCLUDING WITHOUT LIMITATION BREACH OF CONTRACT,
BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION, AND OTHER
TORTS. IF LUCENT'S LIMITED WARRANTY OR LIMITATION OF LIABILITY SET FORTH IN THIS
AGREEMENT SHALL FOR ANY REASON WHATSOEVER BE HELD UNENFORCEABLE OR INAPPLICABLE,
USER AGREES THAT LUCENT'S LIABILITY SHALL NOT EXCEED $100.00. SOME STATES DO NOT
ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES OR THE
LIMITATION OF DURATION OF AN IMPLIED WARRANTY, SO THE LIMITATION OR EXCLUSION
HEREIN MAY NOT APPLY TO YOU. THIS WARRANTY SHALL NOT BE APPLICABLE TO THE EXTENT
THAT ANY PROVISION OF THIS WARRANTY IS PROHIBITED BY ANY FEDERAL, STATE OR LOCAL
LAW WHICH CANNOT BE PREEMPTED. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS,
AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
3. MISCELLANEOUS. This is the exclusive Agreement between Lucent and you
-------------
regarding its subject matter. You may not assign any part of this Agreement
without Lucent's prior written consent. This Agreement shall be governed by the
internal laws of California. You shall pay any taxes on the Products or
transactions, except for those based on Lucent's annual net income. If any
provision of this Agreement is declared invalid or unenforceable, the remaining
provisions of this Agreement shall remain in effect. Any notice under this
Agreement shall be delivered by U.S. certified mail, return receipt requested,
or by overnight courier to Lucent at the address below. Lucent's licensor shall
be a third party beneficiary of Lucent's rights under this Agreement, but is not
a party hereto and shall have no obligation hereunder.
COMMERCIAL COMPUTER SOFTWARE
The software is a "commercial item," as that term is defined at 48 C.F.R. 2.101
(Oct. 1995) consisting of "commercial computer software" and "commercial
computer documentation," as such terms are used in 48 C.F.R. 12.212 (Sept.
1995). Consistent with 48 C.F.R. 12.212 and 48 C.F.R. 227.7202-1 through
227.7202-4 (June 1995), all U.S. Governmental End Users acquire the software
with only those license rights set forth herein. For purpose of any public
disclosure provision under any federal, state or local law, it is agreed that
these Products are trade secret and proprietary commercial products and not
subject to disclosure. The Products are copyright (C) 1984-1996 by Etak, Inc.
UNPUBLISHED. ALL RIGHTS RESERVED UNDER THE COPYRIGHT LAWS OF THE UNITED STATES.
21
<PAGE>
EXHIBIT C
STANDARD LUCENT EMPLOYEE INTELLECTUAL PROPERTY AGREEMENT
22
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
March 21, 1997
Lucent Technologies, Inc.
Room 2C-220
600 Mountain Ave
Murray Hill, NJ 07974
Re: Amendment ("the Amendment") to Internet Provider Agreement NO. 96-007
between Lucent Technologies ("Provider") and Etak, Inc. ("Etak") dated November
25, 1996 (the "Agreement").
Provider hereby authorizes Etak to market, distribute and sublicense directly
and through Etak's channels of distribution the Maps On Us Service and Maps On
Us Products and other services that the parties agree to. For those services
that are actually fulfilled by Provider (rather than by Etak or another party),
Etak shall pay to Provider the greater of: (a) [**] the royalties that Etak
collects for said services, or (b) [**] of the then current Provider list price
for said services.
Notwithstanding the above, for current customers and prospective customers to
whom Etak has issued a quote as of the date of this Amendment, for which Etak
fulfills services using the Provider services, Etak shall pay Provider [**]
the royalties that Etak collects for said services.
The royalties payable by Provider to Etak as described in the Exhibit A of the
Agreement, shall be [**] for the subcontracted services (Maps On Us Service,
Maps On Us Products and other services that the parties agree to) that are
fulfilled by Provider under this Amendment.
This is a non-exclusive sub-contracting relationship. Either party may
terminate this sub contracting relationship with 120 days written notice,
without affecting the Agreement.
For each such service set forth above, Provider shall deliver to Etak an
accurate monthly report showing the number of hits that the service for each
particular Etak End User has generated, and based on that report Etak shall make
payment to Provider of applicable royalties within thirty (30) days of Etak's
receipt of that report.
23
<PAGE>
This Amendment shall be conterminous with Agreement.
<TABLE>
<CAPTION>
Accepted:
<S> <C>
LUCENT TECHNOLOGIES INC. ETAK, INC.
By: /s/ Narain Gehani By: /s/ Steven T. Dodds
------------------------------- -------------------------------
Name: Narain Gehani Name: Steven T. Dodds
----------------------------- -------------------------------
Title: President, Maps On Us Title:
Lucent Technologies ----------------------------
----------------------------
Date: 3/22/97 Date: March 22, 1997
---------------------------- ----------------------------
</TABLE>
24
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
AMENDMENT #2 TO INTERNET PROVIDER AGREEMENT
BETWEEN ETAK, INC. AND LUCENT TECHNOLOGIES INC.
This Amendment #2 (the "Amendment #2") to the Internet Provider Agreement
between Etak, Inc. ("Etak") and Lucent Technologies Inc. ("Provider") entered
into on November 22, 1996 (the "Agreement") is entered into as of March 31,
1997. Except as expressly amended herein, the Agreement shall remain in full
effect in accordance with its terms.
A. Etak's Internet Geocoding Server
--------------------------------
Provider wishes to obtain, and Etak agrees to provide, Etak's Internet
Geocoding Server (Formerly called E-Map Locate) (the "Geocoder") in conjunction
with the Maps On Us Web Site, the Maps On Us Internet Service, and the Maps on
Us Intranet Service. The purpose of this Amendment #2 is to set forth the
specific terms and conditions that apply to the Geocoder.
1. License for the Geocoder. Etak hereby agrees to grant a license to
------------------------
Provider to use the Geocoder solely in conjunction with the Maps On Us Web Site,
the Maps On Us Internet Service, and the Maps On Us Intranet Service under the
license restrictions and pursuant to the terms and conditions set forth in the
Agreement.
2. Term. The license for the Geocoder shall commence on the date
----
countersigned by an authorized officer of Etak after having been signed by
Lucent (the "Geocoder Commencement Date"), and shall continue in force for one
(1) year. Thereafter, this Agreement shall be automatically renewed for one (1)
year terms unless either party terminates the license for use of the Geocoder
for the next year with ninety (90) days written notice prior to the end of the
anniversary date of this Amendment #2.
3. License Fee. Provider agrees to pay to Etak a annual license free of
-----------
[**] (the "Geocoder Annual License Fee"), payable within thirty (30) days of
execution of this Amendment #2. Subsequent Geocoder Annual License Fees shall be
due on the anniversary of the execution of this Amendment #2. The Geocoder
Annual License Fee for any year in which the term of the Agreement shall expire
prior to twelve (12) months from the Geocoder Commencement Date shall be
prorated accordingly.
IN WITNESS WHEREOF, the parties hereto have executed and entered into this
Amendment #2 as of March 31, 1997, provided it has been countersigned by an
authorized officer of Etak after having been signed by Provider.
25
<PAGE>
<TABLE>
<S> <C>
LUCENT TECHNOLOGIES INC. ETAK, INC.
a Delaware corporation a California corporation
Room 2C-220 1430 O'Brien Drive
600 Mountain Avenue Menlo Park, California 94025
Murray Hill, NJ 07974 (415) 328-3825
(908) 582-4432
By: /s/ Narain H. Gehani By: /s/ Stephen T. Dodds
---------------------------- --------------------------------------
Name: Narain H. Gehani Name: Stephen T. Dodds
------------------------- -----------------------------------
Title: President, Maps On Us Title: VP of Product Marketing and Sales
------------------------- -----------------------------------
Date: May 16, 1997
-----------------------------------
</TABLE>
26
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
AMENDMENT #3 TO ETAK INTERNET PROVIDER AGREEMENT
NO IP-96-007
This is the third Amendment ("Amendment #3") to the Agreement (the "Agreement")
between Lucent Technologies Inc. ("Provider") and Etak, Inc. ("Etak"),
(collectively, the "parties") entered into as of November 25, 1996.
WHEREAS the parties have entered into the Agreement for the licensing of Etak
software and data, and
WHEREAS the parties now wish to amend said Agreement,
Now, therefore, in consideration of the mutual undertakings and agreements
hereinafter set forth the parties agree to amend the Agreement as follows:
1. Beginning with the second annual period commencing on December 15,
1997, through payment of the [**] minimum annual guaranteed royalty
set forth in Exhibit A, Section B, sub-section 1(a), Provider will
have, in effect, prepaid royalties for that year up to [**] for the
Maps On Us WWW site and the Maps on Us Internet Service. Thus, except
for the revised minimum annual guaranteed royalty of [**] per Lucent
Customer with Business Listings as set forth in paragraph 2 below,
Provider shall not be required to actually pay the royalty amounts set
forth in Section B(1)(b) or Section B(2)(b) until the accrued
royalties owed Etak for that year exceed [**], at which point Provider
shall commence paying to Etak the applicable royalties.
2. Beginning on June 1, 1997, the minimum annual guaranteed royalties set
forth in Exhibit A, Section B, sub-section 2(a) shall be [**] for
Lucent Customers without Business Listings; Lucent shall pay to Etak
in each year that this Agreement is in effect, a minimum annual
guaranteed royalty of [**] per Lucent Customer with Business Listings,
payable within thirty (30) days of the commencement period. This
minimum annual guaranteed royalty shall be payable regardless of the
actual Gross Revenues of Lucent and shall not be applied to the
minimum annual guaranteed royalty set forth in Exhibit A, Section B,
sub-section 1(a) of the Agreement.
Through payment of the minimum annual guaranteed royalty of [**] per
Lucent Customer with Business Listings, Lucent will have in effect
prepaid royalties for that year up to [**] per Customer with Business
Listings for the Maps On Us Internet Service. Thus, Lucent shall not
be required to actually pay the royalty amounts set forth above in
this section B(2)(b) until the accrued royalties owed Etak with
respect to that Customer for that year exceed [**], at which point
Lucent shall commence paying to Etak the above royalties for that
Customer.
3. Lucent shall report all royalties due Etak per Section 8 and Exhibit
A, Section B as contracted. Lucent shall pay all royalties due Etak
per Section 8 and Exhibit A,
27
<PAGE>
Section B within thirty (30) days of collection of payment by Lucent
or within sixty (60) days of report to Etak, whichever comes first.
Except as otherwise amended herein, all terms and conditions of the Agreement
shall remain in full force and effect. In the event of conflict in terms, this
Amendment shall take precedence over the Agreement.
THIS AMENDMENT SHALL BECOME EFFECTIVE UPON EXECUTION BY AN OFFICER OF ETAK.
<TABLE>
<CAPTION>
<S> <C>
LUCENT TECHNOLOGIES INC. ETAK, INC.
By: /s/ Stephen M. Clemente By: /s/ Joseph W. Petrucci
------------------------------ -------------------------------------
Name: Stephen M. Clemente Name: Joseph W. Petrucci
---------------------------- -----------------------------------
Title: CEO Maps On Us Title: Vice President, Sales & Marketing
---------------------------- -----------------------------------
Date: March 10, 1998 Date: March 16, 1998
---------------------------- -----------------------------------
</TABLE>
28
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
Asterisks denote omissions.
AMENDMENT #4 TO ETAK INTERNET PROVIDER AGREEMENT
NO. IP-96-007
This is the fourth Amendment ("Amendment #4") to the Internet Provider Agreement
(the "Agreement") between Lucent Technologies Inc. ("Customer") and Etak, Inc.
("Etak"), (collectively, the "parties") entered into as of November 25, 1996.
WHEREAS, the parties have entered into the Agreement for the licensing of Etak
software and data, and
WHEREAS, the parties now wish to amend said Agreement,
Now, therefore, in consideration of the mutual undertakings and agreements
hereinafter set forth, the parties agree to amend the Agreement as follows:
Pursuant to Section 11.4 of the Agreement, Etak hereby provides Customer with
written notice that the Business Listings and all updates to the Business
Listings as set forth on Exhibit A, Section A of the Agreement shall be
discontinued on June 15, 1998. In consideration of the discontinuance of the
Business Listings as set forth in Exhibit A, Section A of the Agreement, Etak
agrees to reduce the minimum annual guaranteed royalty set forth in Exhibit A,
Section B of the Agreement by [**] for each month remaining the second year
(12/15/97-12/15/98) of the Agreement in which Customer is no longer using the
Business Listings as provided prior to June 15, 1998 and thereafter by [**] for
each such month remaining in the third year (12/15/98-12/15/99) of the Agreement
following: 1) written notification by Customer to Etak that Customer is no
longer using the Business Listings; 2) return to Etak of all Business Listings
and all Derivative Products that include Business Listings and 3) certification
by a duly authorized employee of Customer that all such materials have been
returned to Etak.
The parties agree to amend Article 11.4 Product Changes of the Agreement by
adding the following sentence at the end of the existing paragraph: "Except
with respect to the Business Listings, the parties agree that Etak's right to
modify or discontinue any Licensed Product is applicable only to modifications
or discontinuances of the Licensed Products to Etak's customers as a whole due
to changes in the provision by Etak of such Licensed Products."
Except as otherwise amended herein, all terms and conditions of the Agreement
shall remain in full force and effect. In the event of conflict in terms, this
Amendment shall take precedence over the Agreement.
<TABLE>
<S> <C>
LUCENT TECHNOLOGIES INC. ETAK, INC.
a Delaware corporation a California corporation
600 Mountain Avenue 1430 O'Brien Drive
Murray Hill, NJ 07974 Menlo Park, CA 94025
908/582-5590 650/328-3825
By: /s/ Stephen M. Clemente By: /s/ Joseph W. Petrucci
------------------------------ -----------------------------
Name: Stephen M. Clemente Name: Joseph W. Petrucci
---------------------------- ---------------------------
Title: CEO Maps On Us Title: VP Sales & Marketing B&P
---------------------------- ---------------------------
Date: May 13, 1998 Date: May 13, 1998
---------------------------- ---------------------------
</TABLE>
29
<PAGE>
AGREEMENT OF ASSIGNMENT AND ASSUMPTION
WHEREAS, for good and sufficient consideration Lucent Technologies Inc., a
Delaware corporation ("Transferor"), has agreed in principle to assign and
----------
transfer to Switchboard Incorporated, a Delaware corporation ("Transferee"), all
----------
of Transferor's right, title, and interest in and to substantially all the
assets of its Maps on Us business (the "Assigned Assets"), including rights and
---------------
privileges under certain contracts and agreements assigned to Transferee; and
WHEREAS, in consideration of Transferor's assignment and transfer of the
Assigned Assets, Transferee has, among other things, agreed to assume certain
liabilities and obligations of Transferor from and after the Closing Date (as
defined below), including obligations and liabilities under certain contracts
and agreements assigned to Transferee; and
WHEREAS, that certain Etak Internet Provider Agreement (Agreement No. IP-
96-007), as amended (the "Assigned Contract") between Transferor and Etak, Inc.
-----------------
(the "Obligee") is one of the contracts and agreements to be assigned to
Transferor, and therefore all rights and privileges of Transferor under the
Assigned Contract are to be assigned to Transferee and all liabilities, duties,
and obligations of Transferor under the Assigned Contract are to be assumed by
Transferee;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and representations set forth below, the parties to this Agreement of Assignment
and Assumption (this "Agreement") hereby agree as follows:
---------
1. Assignment of Assigned Contract at Closing Date. Transferor and
-----------------------------------------------
Transferee hereby notify Obligee of the assignment by Transferor to Transferee
of the Assigned Contract, effective as of consummation of the transfer of the
Assigned Assets, which consummation shall occur on such date as may be
determined by Transferor and Transferee (the "Closing Date"). The Closing Date
shall be deemed the effective date hereof. Promptly after the Closing Date,
------------
Transferor and Transferee will complete the Notice appended at the end hereof
and transmit executed counterparts hereof to Obligee.
2. Assumption of Obligations and Liabilities by Transferee. Transferee
-------------------------------------------------------
hereby assumes and agrees with Obligee and Transferor fully and faithfully to
discharge and perform all liabilities and obligations of Transferor under the
Assigned Contract from and after the Closing Date.
3. Approval of Assignment, Assumption and Guarantee. Obligee hereby
------------------------------------------------
approves, consents to, and accepts (a) the assignment by Transferor to
Transferee, effective as of the Closing Date of the Assigned Contract and all
rights and privileges of Transferor thereunder, and (b) the assumption by
Transferee, effective as of the Closing Date, of all liabilities and obligations
of Transferor under the Assigned Contract.
4. Modifications to Agreement. After the Closing Date, Obligee and
--------------------------
Transferee hereby agrees to work together in good faith to reach mutually
acceptance terms regarding
30
<PAGE>
modifications to the Agreement including the provision of ABI data and related
changes to financial terms, as are mutually agreed upon by Obligee and
Transferee.
IN WITNESS WHEREOF, the undersigned have executed this in multiple
counterparts upon the dates indicated below by their duly authorized
representatives, effective for all purposes as of the Closing Date.
TRANSFEROR
Lucent Technologies
- -------------------
By: /s/ Stephen M. Clemente
-------------------------------
Name: Stephen M. Clemente
----------------------------
Title: CEO Maps On Us
----------------------------
Date: May 13, 1998
----------------------------
OBLIGEE
- -------
Etak, Inc.
By: /s/ Joseph W. Petrucci
-------------------------------
Name: Joseph W. Petrucci
----------------------------
Title: VP Sales & Marketing B&P
----------------------------
Date: May 13, 1998
----------------------------
TRANSFEREE
- ----------
Switchboard Incorporated
By: /s/ Dean Polnerow
-------------------------------
Name: Dean Polnerow
----------------------------
Title: President
----------------------------
Date: May 13, 1998
----------------------------
31
<PAGE>
NOTICE
------
The Closing Date, as defined in paragraph 1 of this Agreement, was May 13, 1998.
TRANSFEROR
Lucent Technologies
- -------------------
By: /s/ Stephen M. Clemente
-------------------------------
Name: Stephen M. Clemente
----------------------------
Title: CEO Maps On Us
----------------------------
Date: May 13, 1998
----------------------------
TRANSFEREE
- ----------
Switchboard Incorporated
By: /s/ Dean Polnerow
-------------------------------
Name: Dean Polnerow
----------------------------
Title: President
----------------------------
Date: May 13, 1998
----------------------------
32
<PAGE>
Exhibit 10.23
-------------
CONVERTIBLE SECURED NOTE PURCHASE AGREEMENT
-------------------------------------------
This Agreement dated as of August 29, 1997 is entered into by and among
Switchboard Incorporated, a Delaware corporation (the "Company"), and Banyan
Systems Incorporated, a Massachusetts corporation (the "Purchaser").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Note.
------------------------------
1.1 Authorization. The Company has duly authorized the sale and
-------------
issuance, pursuant to the terms of this Agreement, of a Convertible Secured Note
in the maximum aggregate principal amount of $3,000,000.00, substantially in the
form attached hereto as Exhibit A (the "Note"). The Note shall be convertible,
---------
pursuant to the terms thereof, into shares of the Company's Series C Convertible
Preferred Stock, $.01 par value per share (the "Series C Preferred"), having the
rights, restrictions, privileges and preferences set forth in the Company's
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
and the Certificate of Amendment attached hereto as Exhibit B (the "Certificate
---------
of Amendment"). The Company has authorized and reserved, and will at all times
the Note is outstanding keep authorized and reserved, a sufficient number of
shares of its Series C Preferred to satisfy the conversion rights of the holder
of the Note and of its common stock to satisfy the conversion rights of holders
of shares of Series C Preferred set forth in Sections 4 and 5 of the Certificate
of Incorporation. As soon as practicable following the Closing (as defined
below), the Company will file the Certificate of Amendment with the Secretary of
State of the State of Delaware. The shares of Series C Preferred into which the
Note is convertible are referred to as the "Shares."
1.2 Initial Sale of Note. Subject to the terms and conditions of
--------------------
this Agreement, at the Initial Closing (as defined below) the Company will sell
and issue to the Purchaser, and the Purchaser will purchase, the Note. The
initial principal amount of the Note shall be evidenced by a notation on
Schedule I of the Note. The parties agree and acknowledge that any increases or
decreases in the principal amount of the Note outstanding at any time made in
accordance with Section 1.3 shall be evidenced by a further notation on Schedule
I of the Note (such notation to be made by the Purchaser, who will provide a
copy of the revised Schedule I to the Company). Any notations made to Schedule
I by the Purchaser shall be binding and final absent manifest error and unless
disputed by the Company within seven (7) business days of receipt by the Company
of such notice from the Purchaser. The parties further agree and acknowledge
that the form of the Note (specifically the stated maximum aggregate principal
amount of $3,000,000 and the use of Schedule I) is merely intended to facilitate
subsequent increases or decreases, if any, in principal amount in accordance
with Section 1.3 and that the Purchaser shall not, under any circumstances, be
obligated to purchase any additional principal amount beyond the initial
principal amount annotated on Schedule I of the Note.
1.3 Subsequent Increases and Decreases in Principal Amount.
------------------------------------------------------
<PAGE>
(a) Investment at the Request of the Company. The Company and
----------------------------------------
the Purchaser further agree that if within 32 months of the date of this
Agreement, in the discretion of the Board of Directors of the Company, the
Company shall desire additional financing, the Company shall deliver to the
Purchaser a written notice requesting that the principal amount of the Note be
increased by the amount stated in the notice in exchange for a payment from the
Purchaser to the Company of such amount. The Purchaser shall have the right (but
not the obligation), for a period of 15 days following delivery of such notice,
to so increase the principal amount of the Note. As a condition precedent to,
and simultaneously with, the increase in the principal amount of the Note, (x)
at the request of the Purchaser, the Company shall deliver to the Purchaser (A)
the most recent available Balance Sheet (as defined in Section 3.9 below), (B)
Exhibit C hereto, updated through the date of the closing of such increase, and
- ---------
(C) a certificate, dated as of the date of the closing of such increase,
certifying that the representations and warranties of the Company contained in
Section 3 of this Agreement are true and correct in all material respects as of
such date, (y) at the request of the Company, the Purchaser shall deliver to the
Company a certificate, dated as of the date of the increase in the principal
amount of the Note, certifying that the representations and warranties contained
in Section 4 of this Agreement with respect to the Purchaser are true and
correct as of such date and (z) Schedule I to the Note shall be updated to
reflect such increase.
(b) Investment at the Request of the Purchaser. The Company
------------------------------------------
hereby grants to the Purchaser an option to increase in the principal amount of
the Note up to the maximum aggregate principal amount as set forth in Section
1.1 (the "Option") by delivery of a written notice to the Company (the "Exercise
Notice"). The Purchaser shall have the right to exercise the Option (which shall
be deemed to occur upon delivery of the Exercise Notice for purposes of this
sentence) at any time and from time to time prior to the expiration of the 32-
month period beginning on the date of this Agreement.
(c) Redemption at the Request of the Company. The Note may, at
----------------------------------------
the option of the Company, be called for redemption, in whole or in part at any
time, at 100% of the principal amount so redeemed, plus accrued and unpaid
interest on such redeemed principal amount to the date fixed for redemption. The
Company shall give at least thirty (30) days prior written notice of redemption
to the Purchaser at its address below, and the notice of redemption shall
specify the date and place designated for redemption. On or after the redemption
date fixed in the notice of redemption, no further interest shall accrue on the
principal amount so redeemed, and the Note (to the extent so redeemed) shall
cease to be convertible as set forth in Section 2 of the Note, provided that the
Note shall remain convertible as set forth in Section 2 of the Note from the
date of notice of redemption until the redemption date fixed in such notice.
Payment of the redemption price shall be made to the Purchaser of this Note upon
presentation and surrender of this Note accompanied by a duly executed
instrument of transfer in blank, at the principal executive office of the
Company. In the event of a partial redemption, this Note shall be presented to
the Company for endorsement of the amount of payment and date paid as a
condition precedent to such payment.
2. The Closing. The initial closing (the "Initial Closing") of the
-----------
initial sale and purchase of the Note under this Agreement shall take place at
the offices of Hale and Dorr LLP, 60 State Street, Boston, MA 02109
simultaneously with the execution and delivery of this Agreement, or at such
other time, date and place as are mutually agreeable to the Company and
-2-
<PAGE>
the Purchaser. At the Initial Closing, the Company shall deliver to the
Purchaser the Note pursuant to Section 1.2 above. Subsequent closings (each a
"Subsequent Closing"), if any, of the sale and purchase of the Note under
Section 1.3 may take place from time to time at such time and place agreed to by
the parties no later than June 29, 2000. The Initial Closing and the Subsequent
Closings, if any, shall hereinafter be referred to individually as a "Closing"
and collectively as the "Closings." The date of each Closing is hereinafter
referred to as a "Closing Date." If at any Closing any of the conditions
specified in Section 5 shall not have been fulfilled, the Purchaser shall, at
its election, be relieved of all of its obligations under this Agreement without
thereby waiving any other rights it may have by reason of such failure or such
non-fulfillment. If at any Closing any of the conditions specified in Section 6
shall not have been fulfilled, the Company shall, at its election, be relieved
of all of its obligations under this Agreement without thereby waiving any other
rights it may have by reason of such failure or such non-fulfillment.
3. Representations of the Company. In order to induce the Purchaser to
------------------------------
enter into this Agreement and subject to and except as disclosed by the Company
in Exhibit C hereto, the Company hereby represents and warrants to the Purchaser
---------
as follows:
3.1 Organization and Standing. The Company is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted by it and to enter into and
perform this Agreement and the agreements set forth in Section 5.1 below
(collectively with the Note, the "Ancillary Agreements") and to carry out the
transactions contemplated by this Agreement and the Ancillary Agreements. The
Company is duly qualified to do business as a foreign corporation and is in good
standing in the Commonwealth of Massachusetts and in every other jurisdiction in
which the failure to so qualify would have a material adverse effect on the
operations or financial condition of the Company. The Company has furnished to
counsel to the Purchaser true and complete copies of its Certificate of
Incorporation and By-Laws, each as amended to date and presently in effect. The
Company is not in violation of any term of its Certificate of Incorporation or
By-laws, or in violation of any term of any agreement, instrument, judgement,
decree, order, statute, rule or government regulation applicable to the Company
or to which the Company is a party, other than any violation that would not have
a material adverse effect on the Company.
3.2 Capitalization. The authorized capital stock of the Company
--------------
(assuming the filing of the Certificate of Amendment with the Secretary of State
of the State of Delaware on the date hereof) consists of 25,000,000 shares of
common stock, $.01 par value per share (the "Common Stock"), of which 7,000,000
shares are issued and outstanding, and 4,500,000 shares of Preferred Stock, $.01
par value per share, 750,000 shares of which have been designated as Series A
Preferred Stock, $.01 par value per share (the "Series A Preferred"), 750,000 of
which shares are issued and outstanding, 1,500,000 shares of which have been
designated as Series B Preferred Stock, $.01 par value per share (the "Series B
Preferred"), none of which shares are issued or outstanding, and 2,250,000
shares of Series C Preferred, none of which are issued and outstanding. All of
the issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth in the
Series A Preferred Stock Purchase Agreement among the Company, America Online,
Inc., and Digital City, Inc. dated as of November 5, 1996 and the agreement and
warrants referenced
-3-
<PAGE>
therein (collectively, the "Series A Agreements") or rights to which the
Purchaser is entitled as set forth in this Agreement and the Ancillary
Agreements, and except for issuances pursuant to the Company's 1996 Stock
Incentive Plan (as it may be amended from time to time), (i) no subscription,
warrant, option, convertible security or other right (contingent or otherwise)
to purchase or acquire any shares of capital stock of the Company is authorized
or outstanding, (ii) the Company has no agreement or obligation (contingent or
otherwise) to issue any subscription, warrant, option, convertible security or
other such right or to issue or distribute to holders of any shares of its
capital stock any evidences of indebtedness or assets of the Company, and (iii)
the Company has no agreement or obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. All of the issued and outstanding shares of capital stock of
the Company have been offered, issued and sold by the Company in compliance with
applicable Federal and state securities laws. There are no preemptive rights,
rights of first refusal, put or call rights or obligations or anti-dilution
rights with respect to the issuance, sale or redemption of the Company's capital
stock, other than as set forth in the Series A Agreement and rights to which the
Purchaser is entitled as set forth in this Agreement and the Ancillary
Agreements. Except as set forth in the Series A Agreements and other than the
rights granted to the Purchasers herein or in the Ancillary Agreements, there
are no rights to have the Company's capital stock registered for sale to the
public in connection with the laws of any jurisdiction or under the Securities
Act of 1933, as amended (the "Securities Act"), no agreements relating to the
voting of the Company's voting securities to which the Company is a party or, to
its knowledge, any other such agreements, and no restrictions on the transfer of
the Company's capital stock under any agreement to which the Company is a party
or, to its knowledge, any other such agreement.
3.3 Subsidiaries, Etc. The Company has no subsidiaries and does not
-----------------
own or control, directly or indirectly, any shares of capital stock of any other
corporation or any interest in any partnership, joint venture or other non-
corporate business enterprise.
3.4 Stockholder List. Exhibit B summarizes the capital structure of
---------------- ---------
the Company as of the Closing Date.
3.5 Issuance of Note. The issuance, sale and delivery of the Note in
----------------
accordance with this Agreement, and the issuance and delivery of the Shares upon
conversion of the Note and the shares of Common Stock issuable upon conversion
of the Shares, have been duly authorized by all necessary corporate action on
the part of the Company, and all such shares have been duly reserved for
issuance. The Shares when so issued, sold and delivered against payment
therefor in accordance with the provisions of the Note, and the shares of Common
Stock issuable upon conversion of the Shares, when issued upon such conversion,
will be duly and validly issued, fully paid and non-assessable.
3.6 Authority for Agreement. The execution, delivery and performance
-----------------------
by the Company of this Agreement and the Ancillary Agreements, the issuance and
delivery of the Note, and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action. This Agreement and the Ancillary Agreements have been duly
executed and delivered by the Company and constitute valid and binding
obligations of the Company enforceable in accordance with their respective
-4-
<PAGE>
terms, subject to (i) applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting the rights of
creditors generally, (ii) statutory or decisional law concerning recourse by
creditors to security in the absence of notice or hearing, and (iii) duties and
standards imposed on creditors and parties to contracts, including, without
limitation, requirements of good faith, reasonableness and fair dealing. The
execution of and performance of the transactions contemplated by this Agreement
and the Ancillary Agreements and compliance with their provisions by the Company
will not violate, conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, or accelerate any
obligation under, or give rise to any right of termination of, its Certificate
of Incorporation or By-Laws (each as amended to date) or any indenture, lease,
agreement, obligation or other instrument to which the Company is a party or by
which it or any of its properties is bound, or any decree, judgment, order,
statute, rule or regulation applicable to the Company except insofar as such
violation, conflict or breach would not have a material adverse effect on the
Company.
3.7 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the Company
in connection with the execution and delivery of this Agreement, the offer,
issuance, sale and delivery of the Note, or the other transactions to be
consummated at the Closing, as contemplated by this Agreement or the Ancillary
Agreements, except such as shall have been made or obtained prior to and shall
be effective on and as of the Closing, and except where the failure to make or
obtain such would not have a material adverse effect on the Company's operations
or financial condition. Based on the representations made by the Purchaser in
Section 4 of this Agreement, the offer and sale of the Note and the Shares to
the Purchaser will be in compliance with applicable Federal and state securities
laws.
3.8 Litigation. There is no action, suit or proceeding, or
----------
governmental inquiry or investigation, pending, or, to the Company's knowledge,
any basis therefor or threat thereof, against the Company or affecting any of
its properties or assets or, to the Company's knowledge, against any officer or
director of the Company, which questions the validity or enforceability of this
Agreement or the agreements and transactions contemplated hereby or the right of
the Company to enter into this Agreement or the Ancillary Agreements, or which
would have a material adverse effect on the Company's operations or financial
condition, and, to the knowledge of the Company, no event has occurred and no
condition exists on the basis of which any such litigation, proceeding or
investigation might properly be instituted or commenced.
3.9 Financial Statements. The Company has furnished to the Purchaser
--------------------
a complete and correct copy of the unaudited balance sheet of the Company (the
"Balance Sheet") as at June 30, 1997 (the "Balance Sheet Date") and the related
pro forma statements of operations and cash flow for the six (6) months then
ended, compiled by the Company (collectively, the "Financial Statements"). The
Financial Statements are complete and correct, are in accordance with the books
and records of the Company and present fairly the financial condition and
results of operations of the Company, as at the dates and for the periods
indicated, and have been prepared in accordance with generally accepted
accounting principles consistently applied, except that the Financial Statements
have been prepared for the internal use of management and may not be in
accordance with generally accepted accounting principles
-5-
<PAGE>
because of the absence of footnotes normally contained therein and are subject
to normal year-end audit adjustments which in the aggregate will not be
material.
3.10 Absence of Liabilities. Except as disclosed in Exhibit C, the
---------------------- ---------
Company did not have, at the Balance Sheet Date, any liabilities of any type
which in the aggregate exceeded $25,000, whether absolute or contingent, which
were not fully reflected on the Balance Sheet, and, since the Balance Sheet
Date, the Company has not incurred or otherwise become subject to any such
liabilities or obligations except in the ordinary course of business.
3.11 Taxes. The amount shown on the Balance Sheet as provision for
-----
taxes is sufficient in all material respects for payment of all accrued and
unpaid Federal, state, county, local and foreign taxes (including penalties and
interest) for the period then ended and all prior periods. The Company has
filed or has obtained presently effective extensions with respect to all
Federal, state, county, local and foreign tax returns which are required to be
filed by it, such returns are true and correct and all taxes required to be paid
by the Company have been timely paid except those taxes which will not have a
material adverse effect on the business or financial condition of the Company.
No income tax returns of the Company have been audited by any taxing authority,
and no controversy with respect to taxes of any type is pending or, to the best
of the Company's knowledge, threatened. Neither the Company nor, to its
knowledge, any of its stockholders has ever filed (a) an election pursuant to
Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"), that
the Company be taxed as an S Corporation or (b) consent pursuant to Section
341(f) of the Code relating to collapsible corporations. The Company has never
received notice of any audit or of any proposed deficiencies from any taxing
authority. There are in effect no waivers of applicable statutes of limitations
with respect to any taxes owed by the Company for any year. No taxing authority
is now asserting or, to the knowledge of the Company, threatening to assert
against the Company any deficiency or claim for additional taxes or interest
thereon or penalties in connection therewith. The Company's net operating
losses for federal income tax purposes, as set forth in the Financial
Statements, are not subject to any limitations imposed by Section 382 of the
Code, and consummation of the transactions contemplated by this Agreement or by
any other agreement, understanding or commitment, contingent or otherwise, to
which the Company is a party or by which it is otherwise bound will not have the
effect of limiting the Company's ability to use such net operating losses in
full to offset such taxable income.
3.12 Property and Assets. The Company has good title to all of its
-------------------
properties and assets, including all properties and assets reflected in the
Balance Sheet, except those disposed of since the date thereof in the ordinary
course of business or that will not have a material adverse effect on the
Company, and none of such properties or assets is subject to any mortgage,
pledge, lien, security interest, lease, charge or encumbrance that will have a
material adverse effect on the Company, other than those the material terms of
which are described in the Balance Sheet or in Exhibit C.
---------
3.13 Intellectual Property. Except as set forth on Exhibit C:
--------------------- ---------
(a) The Company has exclusive ownership in all right, title and
interest to ("Owned Rights"), with the right to use, sell, license, dispose of,
and bring actions for infringement of, or has a valid license to use all
Intellectual Property Rights (as hereinafter
-6-
<PAGE>
defined) used in the conduct of its business as presently conducted and as
proposed to be conducted (the "Company Rights"), which Owned Rights are
exclusive to the Company and which Company Rights are sufficient in all material
respects for the conduct of its business as presently conducted.
(b) The business of the Company as presently conducted and the
manufacture, marketing, licensing, use and servicing of any products of the
Company, do not violate any agreements which the Company has with any third
party, infringe any copyright or trade secrets of any third parties, or to the
best knowledge of the Company, infringe any patent, trademark, or any other
Intellectual Property Rights (other than copyrights and trade secrets) of any
third parties.
(c) No claim is pending or, to the best knowledge of the
Company, threatened against the Company nor has the Company received any notice
or other claim from any person asserting that any of the Company's present or
contemplated activities infringe or may infringe any Intellectual Property
Rights of such person, and the Company is not aware of any infringement by any
other person of any rights of the Company under any Intellectual Property
Rights.
(d) The Company is not aware that any employee is obligated
under any contract (including any license, covenant or commitment of any
nature), or subject to any judgment, decree or order of any court or
administrative agency, that would materially conflict or interfere with (i) the
performance of such employee's duties as an officer, employee or director of the
Company, (ii) the use of such employee's best efforts to promote the interests
of the Company or (iii) the Company's business as conducted or proposed to be
conducted.
(e) As used herein, the term "Intellectual Property Rights"
shall mean all intellectual property rights, including, without limitation, all
of the registered rights set forth on Exhibit C and all patents, patent
---------
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service mark applications, copyrights, copyright applications,
computer programs and other computer software, inventions, designs, samples,
specifications, schematics, know-how, trade secrets, proprietary processes and
formulae, all sources and object code, algorithms, architecture, structure,
display screens, layouts, development tools, promotional materials, customer
lists, supplier and dealer lists and marketing research, and all documentation
and media constituting, describing or relating to the foregoing, including
without limitation, manuals, memoranda and records. Exhibit C contains a list
---------
and brief description of all Intellectual Property Rights owned by or registered
in the name of the Company or of which the Company is the licensor or a licensee
of a material right or in which the Company has any material right and, in each
case, a brief description of the nature of the right.
3.14 Insurance. Except as set forth on Exhibit C, the Company
--------- ---------
maintains valid policies of workers' compensation insurance and of insurance
with respect to its properties and business of the kinds and in the amounts not
less than is customarily obtained by corporations of established reputation
engaged in the same or similar business and similarly situated. There is no
default under any such policy, nor, to the knowledge of the Company, has any
event occurred which with notice, lapse of time or both would constitute a
material default thereunder.
-7-
<PAGE>
3.15 Material Contracts and Obligations. Except as set forth on
----------------------------------
Exhibit C hereto (with true and correct copies delivered to the Purchaser) and
- ---------
except for the Ancillary Agreements, the Company is not a party or subject to or
bound by:
(a) any contract, lease or agreement creating any obligation of
the Company to pay to any third party $10,000 or more with respect to any single
such contract or agreement, except for purchase orders entered into in the
ordinary course of business;
(b) any contract or agreement for the sale, license, lease or
disposition of products by the Company in excess of $10,000;
(c) any contract containing covenants directly or explicitly
limiting the freedom of the Company to compete in any line of business or with
any person or entity;
(d) any license agreement (as licensor or licensee) other than
licenses to off-the-shelf software;
(e) any contract or agreement or the purchase of any leasehold
improvements, equipment or fixed assets for a price in excess of $10,000;
(f) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for borrowing in excess of $10,000 or
any pledge or security arrangement;
(g) any material joint venture, partnership, manufacturing,
development or supply agreement;
(h) any employment contracts, or agreements with officers,
directors, employees or stockholders of the Company or persons or organizations
related to or affiliated with any such persons;
(i) any stock redemption or purchase agreements or other
agreements affecting or relating to the capital stock of the Company, including
without limitation any agreement relating to anti-dilution rights, registration
rights, voting arrangements, operating covenants or similar provisions;
(j) any pension, profit sharing, retirement or stock option
plans;
(k) any royalty, dividend or similar arrangement based on the
sales volume of the Company;
(l) any acquisition, merger or similar agreement; or
(m) any other contract not executed in the ordinary course of
business.
All of such agreements and contracts are valid, binding and in full force
and effect, subject to (i) applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting the rights of
creditors generally, (ii) statutory or decisional
-8-
<PAGE>
law concerning recourse by creditors to security in the absence of notice or
hearing, and (iii) duties and standards imposed on creditors and parties to
contracts, including, without limitation, requirements of good faith,
reasonableness and fair dealing. Neither the Company, nor, to the knowledge of
the Company, any other party is in material default under any of such agreements
or contracts (nor, to the knowledge of the Company, has any event occurred which
with notice, lapse of time or both would constitute a material default
thereunder), except to the extent that any such default would not have a
material adverse effect on the assets, liabilities, properties, business or
proposals of the Company, and the Company has not received notice of any alleged
default under any such contract or agreement.
3.16 Compliance. The Company has complied with all laws, regulations
----------
and orders applicable to its present and proposed business and has all permits
and licenses required thereby, except where the failure to so comply or obtain
would not have a material adverse effect on the Company's operations and
financial condition.
3.17 Absence of Changes. Since the Balance Sheet Date, there has
------------------
been no material adverse change in the condition, financial or otherwise, net
worth or results of operations of the Company, other than changes occurring in
the ordinary course of business which changes have not, individually or in the
aggregate, had a materially adverse effect on the business, prospects,
properties or condition, financial or otherwise, of the Company.
3.18 Employees. All current or former employees of the Company and
---------
each of the Company's consultants and independent contractors whose
responsibilities require access to confidential or proprietary information of
the Company have executed and delivered nondisclosure and assignment of
invention agreements with Purchaser, and all of such agreements are in full
force and effect with respect to such nondisclosure and assignment of invention
provisions. To the knowledge of the Company, none of such employees,
consultants or contractors is in violation or breach of any agreement or
arrangement with former or present employers relating to proprietary information
or assignment of inventions. None of the employees of the Company is
represented by any labor union, and, to the best of the Company's knowledge,
there is no labor strike or other labor trouble pending or threatened with
respect to the Company (including, without limitation, any organizational
drive).
3.19 ERISA. The Company does not have or otherwise contribute to or
-----
participate in any employee benefit plan subject to the Employee Retirement
Income Security Act of 1974, other than a medical benefit plan with respect to
which the Company has made all required contributions and has complied with all
applicable laws, if any.
3.20 Books and Records. The minute books of the Company contain
-----------------
complete and accurate records of all meetings and other corporate actions of its
stockholders and its Board of Directors and committees thereof. The stock
ledger of the Company is complete and reflects all issuances, transfers,
repurchases and cancellations of shares of capital stock of the Company.
3.21 Transactions with Affiliates. Except as set forth on Exhibit C
---------------------------- ---------
or contemplated by the Series A Agreements, there are no loans, licenses,
leases, guarantees, contracts, transactions, understandings or other
arrangements of any nature between the
-9-
<PAGE>
Company and any officer, director or five percent (5%) stockholder of the
Company or any family member or affiliate of any of the foregoing persons.
3.22 Disclosure. The representations and warranties made or
----------
contained in this Agreement, the schedules and exhibits hereto and the
certificates and statements executed or delivered in connection herewith, do not
and shall not contain any untrue statement of a material fact and do not and
shall not omit to sate any fact required to be stated therein or necessary in
order to make such representations, warranties or other material not misleading
in light of the circumstances in which they were made or delivered.
4. Representations of the Purchaser. The Purchaser represents and
--------------------------------
warrants to the Company as follows:
4.1 Investment. The Purchaser is acquiring the Note, the Shares into
----------
which the Note may be converted, and the shares of Common Stock into which the
Shares may be converted, for its own account for investment and not with a view
to, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the same; and, except as
contemplated by this Agreement and the Exhibits hereto, the Purchaser has no
present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof.
4.2 Authority. The Purchaser has full power and authority to enter
---------
into and to perform its obligations under this Agreement in accordance with
their terms. The Purchaser has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Company.
4.3 Experience. The Purchaser has carefully reviewed the
----------
representations concerning the Company contained in this Agreement, and has made
detailed inquiry concerning the Company, its business and its personnel; the
officers of the Company have made available to the Purchaser any and all written
information which it has requested and have answered to the Purchaser's
satisfaction all inquiries made by the Purchaser; and the Purchaser has
sufficient knowledge and experience in investing in companies similar to the
Company so as to be able to evaluate the risks and merits of its investment in
the Company and is able financially to bear the risks thereof.
5. Conditions to the Obligation of the Purchaser. At the Closing, the
---------------------------------------------
Company shall deliver or cause to be delivered to the Purchaser the agreements,
instruments and documents set forth below. The Purchaser shall not be obligated
to proceed with the Closing unless all of the following conditions have been
fulfilled at or prior to the Closing:
5.1 Other Agreements.
----------------
(a) The Amended and Restated Registration Rights Agreement
attached hereto as Exhibit D (the "Registration Rights Amendment") shall have
---------
been executed and delivered by the Company.
(b) The Security Agreement attached hereto as Exhibit E (the
---------
"Security Agreement") shall have been executed and delivered by the Company.
-10-
<PAGE>
5.2 Certificates and Documents. If requested by the Purchaser, the
--------------------------
Company shall have delivered to the Purchaser:
(a) The Certificate of Incorporation of the Company, as amended
and in effect as of the Closing Date (including the Certificate of Amendment),
certified by the Secretary of State of the State of Delaware;
(b) Certificates, as of the most recent practicable dates, as to
the corporate good standing of the Company issued by the Secretary of State of
the State of Delaware and the Secretary of the State of the Commonwealth of
Massachusetts;
(c) By-laws of the Company, certified by its Secretary or
Assistant Secretary as of the Closing Date;
(d) Resolutions of the Board of Directors of the Company,
authorizing and approving all matters in connection with this Agreement and the
transactions contemplated hereby, certified by the Secretary or Assistant
Secretary of the Company as of the Closing Date; and
(e) Certificate, as of the Closing Date, of an officer of the
Company certifying as to the truth and accuracy of the representations and
warranties of the Company.
5.3 Other Matters. All corporate and other proceedings in connection
-------------
with the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchaser, and the Purchaser shall have received all
such counterpart originals or certified or other copies of such documents as it
may reasonably request.
6. Condition to the Obligation of the Company. At the Closing, the
------------------------------------------
Purchaser shall deliver or cause to be delivered to the Company the agreements,
instruments and documents set forth below. The Company shall not be obligated
to proceed with the Closing unless all of the following conditions have been
fulfilled at or prior to the Closing:
6.1 Other Agreements. The Registration Rights Amendment shall have
----------------
been executed and delivered by the Purchaser.
6.2 Other Matters. All corporate and other proceedings in connection
-------------
with the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Company, and the Company shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
7. Covenants of the Company.
------------------------
7.1 Financial Statements and Other Information.
------------------------------------------
(a) The Company shall deliver to the Purchaser:
-11-
<PAGE>
(i) within 90 days after the end of each fiscal year of
the Company, an audited balance sheet of the Company as at the end of such year
and audited statements of income and of cash flows of the Company for such year,
certified by certified public accountants of established national reputation
selected by the Company, and prepared in accordance with generally accepted
accounting principles; and
(ii) within 45 days after the end of each fiscal quarter of
the Company (other than the fourth fiscal quarter), an unaudited balance sheet
of the Company as at the end of such quarter, and unaudited statements of income
and of cash flows of the Company for such fiscal quarter and for the current
fiscal year to the end of such fiscal quarter.
(b) The foregoing financial statements shall be prepared on a
consolidated basis if the Company then has any subsidiaries. The financial
statements delivered pursuant to clause (ii) of paragraph (a) shall be
accompanied by a certificate of the chief financial officer of the Company
stating that such statements have been prepared in accordance with generally
accepted accounting principles consistently applied (except as noted) and fairly
present the financial condition and results of operations of the Company at the
date thereof and for the periods covered thereby, except that such financial
statements will have been prepared for the internal use of management and may
not be in accordance with generally accepted accounting principles because of
the absence of footnotes normally contained therein and are subject to normal
year-end audit adjustments which in the aggregate will not be material.
(c) The annual budgetary information for each upcoming fiscal
year will be presented at a Board of Directors' meeting at least 30 days prior
to each fiscal year-end of the Company and will be subject to approval by the
Board of Directors. Such budgetary information shall include a budget for the
upcoming fiscal year and the succeeding one year describing in reasonable
detail, at a minimum, assumptions with respect to revenues, key operating
expenses and capital expenditures and financings. Any material deviations from
the budget for any fiscal year will be subject to prior approval by the Board of
Directors.
7.2 Indemnification and Insurance. For so long as the Note or any of
-----------------------------
the Shares remain outstanding, (i) the Certificate of Incorporation or By-Laws
of the Company will at all times during which any person elected solely by the
holders of Series A Preferred serves as director of the Company provide for
indemnification of the directors and limitations on the liability of the
directors to the fullest extent permitted under applicable state law, and (ii)
the Company will use its best efforts to obtain and maintain on reasonable
business terms directors and officers' liability insurance coverage of at least
$5,000,000 per occurrence.
7.3 Material Adverse Changes. The Company will monitor and promptly
------------------------
advise the Purchaser of any event which represents a material adverse change in
the condition or business, financial or otherwise, of the Company, and of each
suit or proceeding commenced or threatened against the Company which, if
adversely determined, in the reasonable judgment of the Company, could have a
material adverse effect on the Company or its financial conditions, business or
prospects.
7.4 Negative Covenants. So long as the Note or any Shares are
------------------
outstanding, the Company shall not, without the prior written consent of the
holders of not less than a
-12-
<PAGE>
majority of such outstanding Shares (which for this purpose shall include any
Shares into which the Note may be converted):
(a) Declare or pay any dividends or make any distribution of
cash, property or securities with respect to shares of its Common Stock, Series
A Preferred Stock or Series B Preferred Stock, other than dividends payable
solely in Common Stock;
(b) Enter into any transaction, agreement or arrangement with
any 5% stockholder, officer or director of the Company or any persons or
entities who are members of the immediate family of, or are controlled by or are
otherwise affiliates (as defined in the Securities Act) of, any of the foregoing
persons or entitles, except transactions (i) in the ordinary course of business,
(ii) under the terms of an employee stock or option plan approved by the Board
of Directors, or (iii) pursuant to the inter-company clearing account that has
been established between the Company and the Purchaser (provided, however, that
if any amounts owed by the Company to the Purchaser pursuant to such account are
not paid in full by the Company within 30 days after the end of the calendar
month in which such funds were first advanced to the Company, no additional
advances shall be accepted by the Company other than pursuant to this Section
7.4 without the exception provided in this clause (b));
(c) Grant any options, warrants or other similar rights to
purchase capital stock of the Company (other than options to purchase up to
1,500,000 shares of Common Stock that may be granted to employees, officers or
directors of, or consultants or advisors to, the Company pursuant to any stock
or option plan approved by the Board of Directors).
(d) Increase the number of members of the Board of Directors
above seven (7);
(e) Redeem, purchase or otherwise acquire for consideration any
shares of capital stock of the Company (other than any shares redeemed upon
termination of an employee's employment pursuant to a stock restriction or
similar agreement approved by the Board of Directors or its designee or redeemed
pursuant to the provisions of the Certificate of Amendment);
(f) (i) Merge with or into or consolidate with any Competitor,
(ii) sell, lease, or otherwise dispose of all or substantially all of its
properties or assets to any Competitor, or (iii) sell or issue any of its
securities representing greater than 5% of the capital stock of the Company on a
fully diluted basis on the date of such sale or issuance to any Competitor. For
purposes of this paragraph (f), "Competitor" means any of the following
companies: CompuServe, Prodigy, The Walt Disney Company, Yahoo, Excite,
Infoseek, Citysearch, Cityscape, Big Book, Netscape, Microsoft, AT&T, Sprint,
MCI, Ameritech, Bell Atlantic, NYNEX, BellSouth, Pacific Telesis, SBC
Communications, US West, GTE, New York Times, Tribune, Washington Post Company,
News Center Network; Time Warner, Times Mirror, TCI or Knight-Rider; or
(g) Issue any shares of its capital stock which are senior to
the Series A Preferred with respect to dividends, liquidation, redemptions,
voting, or otherwise.
-13-
<PAGE>
7.5 Reservation of Stock. The Company shall reserve and maintain a
--------------------
sufficient number of shares of (i) Common Stock to satisfy the conversion rights
of holders of Series C Preferred and (ii) Series C Preferred to satisfy the
rights to purchase shares of Series C Preferred pursuant to the Note.
7.6 Nondisclosure and Assignment Agreements. The Company shall use
---------------------------------------
its reasonable best efforts as soon as practicable following the Closing to
obtain from each of its employees and consultants and independent contractors
whose responsibilities require access to confidential or proprietary information
of the Company, nondisclosure and assignment of invention agreements
substantially in the form of Exhibit C.
---------
7.7 Termination of Covenants. The covenants of the Company contained
------------------------
in Sections 7.1 and 7.3 shall terminate, and be of no further force or effect,
upon the date the Company has a class of securities registered under the
Securities Exchange Act of 1934, as amended.
8. Transfer of Shares.
------------------
8.1 Restricted Shares. "Restricted Shares" means (i) the Note, (ii)
-----------------
the Shares, (iii) the shares of Common Stock issued or issuable upon conversion
of the Shares, and (iv) any other shares of capital stock of the Company issued
in respect of such shares (as a result of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events); provided, however,
-------- -------
that shares of Common Stock which are Restricted Shares shall cease to be
Restricted Shares (i) upon any sale pursuant to (a) the Registration Rights
Amendment, (b) an effective registration statement filed with the Securities and
Exchange Commission under the Securities Act registering such Restricted Shares,
(c) Section 4(1) of the Securities Act or (d) Rule 144 under the Securities Act
or (ii) at such time as they become eligible for sale under Rule 144(k) under
the Securities Act.
8.2 Requirements for Transfer. Restricted Shares shall not be sold
-------------------------
or transferred unless either (i) they first shall have been registered under the
Securities 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
Securities Act.
8.3 Legend. Each certificate representing Restricted Shares shall
------
bear a legend substantially in the following form:
"The shares 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 the shares are registered
under the Act or an opinion of counsel reasonably
satisfactory to the Company is obtained to the effect that
the registration is not required."
The foregoing legend shall be removed from the certificates representing any
Restricted Shares, at the request of the holder thereof, at such time as they
cease to be Restricted Shares as provided in Section 8.1.
-14-
<PAGE>
8.4 Rule 144A Information. The Company shall, at all times during
---------------------
which it is neither subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, upon
the written request of the Purchaser, provide in writing to the Purchaser and to
any prospective transferee of any Restricted Shares of the Purchaser the
information concerning the Company described in Rule 144A(d)(4) under the
Securities Act ("Rule 144A Information"). The Company's obligations under this
Section 8.4 shall at all times be contingent upon receipt from the prospective
transferee of Restricted Shares of a written agreement to take all reasonable
precautions to safeguard the Rule 144A Information from disclosure to anyone
other than persons who will assist such transferee in evaluating the purchase of
any Restricted Shares.
9. Miscellaneous.
-------------
9.1 Successors and Assigns. This Agreement, and the rights and
----------------------
obligations of the Purchaser hereunder, may not be assigned by the Purchaser to
any person or entity, provided, however, that the rights and obligations of the
Purchaser under Section 7 and 8 above may be assigned to any person to whom any
Note or Shares are transferred in compliance with the provisions of this
Agreement and the other agreements provided for herein.
9.2 Survival of Representations and Warranties. All agreements,
------------------------------------------
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby.
9.3 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, Massachusetts
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
and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, Attention: Mark G.
Borden, Esq.
If to the Purchaser, at 120 Flanders Road, Westboro,
Massachusetts 01581, Attention: President, or at such other address or addresses
as may have been furnished in writing by the Purchaser to the Company, with a
copy to Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109,
Attention: Mark G. Borden, Esq.
Notices provided in accordance with this Section 9.4 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.
9.4 Brokers. The Company and the Purchaser (i) represents and
-------
warrants to the other party hereto that it has retained no finder or broker in
connection with the transactions contemplated by this Agreement, and (ii) will
indemnify and save the other parties harmless from and against any and all
claims, liabilities or obligations with respect to brokerage or finders' fees or
commissions, or consulting fees in connection with the transactions contemplated
-15-
<PAGE>
by this Agreement asserted by any person on the basis of any statement or
representation alleged to have been made by such indemnifying party.
9.5 Entire Agreement. This Agreement and the Ancillary Agreements
----------------
embody 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.
9.6 Amendments and Waivers. Except as otherwise expressly set forth
----------------------
in this Agreement, 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 shares of Common Stock issued
or issuable upon conversion of the Shares into which the Note is converted or
convertible. Any amendment or waiver effected in accordance with this Section
9.6 shall be binding upon each holder of any Note, any Shares (including shares
of Common Stock into which such Shares have been converted), each future holder
of all such securities and the Company. 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.
9.7 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.
9.8 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.
9.9 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.
9.10 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware.
9.11 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.
9.12 Expenses. The Company shall pay all costs and expenses of the
--------
Company and the Purchaser in connection with the transactions contemplated
hereby.
9.13 Acknowledgement and Waiver. The parties hereto acknowledge and
--------------------------
agree that, except as contemplated by Section 1.2, the Purchaser is under no
obligation whatsoever to advance any amounts of the Company. The Company hereby
waives any and all claims it may have, including without limitation claims under
any agreement or instrument and under any applicable law, rule or regulation,
based upon any determination by the Purchaser not to advance any amounts to the
Company.
-16-
<PAGE>
9.14 Facsimile Signature. This Agreement may be executed by
-------------------
facsimile signatures.
COMPANY:
SWITCHBOARD INCORPORATED
By: /s/ Douglas McIntyre
---------------------------------
Name: Douglas McIntyre
Title: President
PURCHASER:
BANYAN SYSTEMS INCORPORATED
By: /s/ William P. Ferry
---------------------------------
Name: William P. Ferry
Title: Chief Executive Officer
-17-
<PAGE>
AMENDMENT TO
CONVERTIBLE SECURED NOTE PURCHASE AGREEMENT
-------------------------------------------
This Amendment dated as of February 20,1998, is entered into by and between
Banyan Systems Incorporated, a Massachusetts corporation (the "Purchaser"), and
Switchboard Incorporated, a Delaware corporation (the "Company"), and amends the
Convertible Secured Note Purchase Agreement dated as of August 29, 1997 by and
between the Purchaser and the Company (the "Agreement"). Capitalized terms used
but not defined herein shall have the respective meanings ascribed to such terms
in the Agreement.
The Agreement is hereby amended as follows:
1. The maximum aggregate principal amount of the Note is increased from
$3,000,000.00 to $7,000,000.00. All references in the Agreement to such
$3,000,000.00 amount are revised to $7,000,000.00.
2. The Note for the maximum aggregate principal amount of $3,000,000.00
previously issued and sold by the Company to the Purchaser pursuant to the
Agreement shall be cancelled, and the Company shall issue and sell to the
Purchaser a new note (the "Replacement Note") in the aggregate principal amount
of $7,000,000.00. The terms of the Replacement Note shall in all other respects
be identical to the terms of the Note (including an identical effective date).
The loans made through the date hereof that are referenced on Schedule I of the
Note shall be referenced on Schedule I of the Replacement Note. All references
in the Agreement to the "Note" shall be deemed to be references to the
Replacement Note.
3. As soon as practicable following the date hereof, the Company will
file with the Secretary of State of the State of Delaware a Certificate of
Amendment to Certificate of Incorporation substantially in the form attached
hereto as Attachment A (the "New Certificate of Amendment"). All references in
------------
the Agreement to the "Certificate of Amendment" shall be deemed to be references
to the New Certificate of Amendment.
4. The Company hereby represents and warrants to the Purchaser that,
except as set forth in Attachment B hereto, the representations and warranties
------------
of the Company set forth in Section 3 of the Agreement are true and correct in
all respects on the date hereof as if made on the date hereof. The first
sentence of Section 3.9 of the Agreement is amended to refer to the balance
sheet as of December 31, 1997 and the statements of operations and cash flows
for the twelve months then ended.
5. The Purchaser hereby represents and warrants to the Purchaser that the
representations and warranties of the Purchaser set forth in Section 4 of the
Agreement are true and correct in all respects on the date hereof as if made on
the date hereof.
6. As a condition to the effectiveness hereof, the Company shall deliver
to the Purchaser (a) the Amended and Restated Registration Rights Agreement
attached hereto as Exhibit C executed by each of the parties thereto (other than
---------
the Purchaser). and (b) the Amendment to Security Agreement attached hereto as
Attachment D executed by the Company.
- ------------
<PAGE>
Any reference in the Agreement to the "Ancillary Agreements" shall be deemed to
refer to the agreements referenced in this Paragraph 6.
7. Except as set forth above, all provisions of the Agreement shall
remain in full force and effect. Any rights either party hereto may have as a
result of a breach of, or misrepresentation contained in, the Agreement prior to
this Amendment shall remain in full force and effect and shall not be deemed to
be waived as a result of the execution and delivery of this Amendment.
EXECUTED as of the date first set forth above.
COMPANY:
SWITCHBOARD INCORPORATED
By: /s/ Douglas McIntyre
---------------------------------
Name: Douglas McIntyre
---------------------------
Title: President
--------------------------
PURCHASER:
BANYAN SYSTEMS INCORPORATED
By: /s/ William P. Ferry
---------------------------------
Name: William P. Ferry
---------------------------
Title: Chief Executive Officer
--------------------------
-2-
<PAGE>
AMENDMENT TO
CONVERTIBLE SECURED NOTE PURCHASE AGREEMENT
-------------------------------------------
This Amendment dated as of May 3, 1999, is entered into by and between
Banyan Systems Incorporated, a Massachusetts corporation (the "Purchaser"), and
Switchboard Incorporated, a Delaware corporation (the "Company"), and amends the
Convertible Secured Note Purchase Agreement dated as of August 29, 1997 by and
between the Purchaser and the Company, as amended as of February 20, 1998 (the
"Agreement"). Capitalized terms used but not defined herein shall have the
respective meanings ascribed to such terms in the Agreement.
The Agreement is hereby amended as follows:
1. The Note for the maximum aggregate principal amount of $7,000,000
previously issued and sold by the Company to the Purchaser pursuant to the
Agreement shall be cancelled, and the Company shall issue and sell to the
Purchaser (i) a new note in the aggregate principal amount of $10,000,000, which
is convertible into Series C Convertible Preferred Stock of the Company at an
initial conversion price of $4.00 per share (the "Series C Replacement Note"),
and (ii) a new note in the aggregate principal amount of $5,000,000, which is
convertible into Series D Convertible Preferred Stock of the Company at an
initial conversion price of $7.50 per share (the "Series D Note"). The terms of
the Series C Replacement Note shall in all other respects be identical to the
terms of the Note (including an identical effective date). The Series D Note
shall be in the form attached hereto as Attachment A. The loans made through
------------
the date hereof that are referenced on Schedule I of the Note shall be
referenced on Schedule I of the Series C Replacement Note. All future loans up
to and including the aggregate principal amount of $10,000,000 shall be made
under the Series C Replacement Note. Any loans beyond such $10,000,000 amount
shall be made under the Series D Note. All references in the Agreement to the
"Note" shall be deemed to be references to the Series C Replacement Note and the
Series D Note. All references in the Agreement to "$7,000,000" shall be to
"$10,000,000" with respect to the Series C Replacement Note and to "$5,000,000"
with respect to the Series D Note.
2. As soon as practicable following the date hereof, the Company will
file with the Secretary of State of the State of Delaware a Certificate of
Amendment to Certificate of Incorporation substantially in the form attached
hereto as Attachment B (the "New Certificate of Amendment"). All references in
------------
the Agreement to the "Certificate of Amendment" shall be deemed to be references
to the New Certificate of Amendment.
3. As a condition to the effectiveness hereof, the Company shall deliver
to the Purchaser the Amendment to Security Agreement attached hereto as
Attachment C executed by the Company. Any reference in the Agreement to the
- ------------
"Ancillary Agreements" shall be deemed to refer to the agreements referenced in
this Paragraph 3.
4. Except as set forth above, all provisions of the Agreement shall
remain in full force and effect. Any rights either party hereto may have as a
result of a breach of, or misrepresentation contained in, the Agreement prior to
this Amendment shall remain in full force
<PAGE>
and effect and shall not be deemed to be waived as a result of the execution and
delivery of this Amendment.
EXECUTED as of the date first set forth above.
COMPANY:
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
---------------------------------
Name: Dean Polnerow
---------------------------
Title: President
--------------------------
PURCHASER:
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
---------------------------------
Name: Richard M. Spaulding
---------------------------
Title: Vice President and CFO
--------------------------
-2-
<PAGE>
Exhibit 10.24
-------------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED UNLESS SO REGISTERED OR AN EXEMPTION FROM
REGISTRATION UNDER SAID ACT IS AVAILABLE.
SWITCHBOARD INCORPORATED
Amended and Restated Convertible Note Due January 1, 2001
$3,904,328.42 Westboro, Massachusetts
January 26, 2000
_____________________
This Amended and Restated Convertible Note due January 1, 2001 (this
"Note") amends and restates in its entirety that certain Convertible Secured
Note due June 29, 2000 (the "Original Note") dated May 3, 1999 by Switchboard
Incorporated, a Delaware corporation (the "Company"), to Banyan Systems
Incorporated, a Massachusetts corporation ("Banyan"), pursuant to Section 4(b)
of the Original Note with the consent of the Company and Banyan. As of June 30,
1999 and July 1, 1999, Banyan converted an aggregate of $1,095,671.58 of
outstanding principal and an aggregate of $3,115.92 of outstanding interest
under the Original Note into an aggregate of 146,505 shares of the Company's
Series D Convertible Preferred Stock, $.01 par value per share (the "Series D
Preferred"), pursuant to Section 2(a)(i) of the Original Note. The principal
amount available under this Note reflects the remaining balance of the principal
amount available under the Original Note subsequent to such conversion.
Concurrently with the execution of this Note, the Original Note is cancelled and
shall be of no further force and effect.
The Company, for value received, hereby promises to pay to Banyan, on
January 1, 2001, the principal sum of Three Million, Nine Hundred Four Thousand,
Three Hundred Twenty-Eight Dollars and Forty-Two Cents ($3,904,328.42) or such
lesser amount as may at the maturity hereof, whether by acceleration or
otherwise, be the aggregate unpaid principal amount of this Note as shown on
Schedule I hereto as such schedule will be updated from time to time, with
interest (computed annually on the basis of a 365-day year) from the date hereof
on the unpaid balance of such principal amount from time to time outstanding at
the fluctuating interest rate per annum described below, such interest to be due
and payable on January 1, 2001. The interest rate per annum with respect to
each loan evidenced hereby shall 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.
This Note is limited in aggregate principal amount to $3,904,328.42 and is
issued by the Company pursuant to the Convertible Secured Note Purchase
Agreement dated as of August 29,
<PAGE>
1997 between the Company and Banyan, as amended (the "Purchase Agreement"), to
which reference is made for a statement of certain additional rights and
benefits to which the holder of this Note is entitled. Banyan is authorized to
record all loans evidenced hereby in its records (including, but not limited to,
the grid attached hereto as Schedule I), and such entries shall be conclusive
evidence of amounts outstanding hereunder absent manifest error and unless
disputed by the Company within seven (7) business days of receipt by the Company
of such revision to Schedule I.
In order to request an advance hereunder, the Company shall deliver or fax
to Banyan a request in the form of Schedule II attached hereto, executed by the
Company, setting forth the amount of the requested advance and the interest rate
with respect to such advance. Within fifteen (15) business days of Banyan's
receipt of such a request, Banyan shall advance the requested amount by wire
transfer of immediately available funds to an account designated by the Company
or by other means mutually agreed upon by Banyan and the Company.
1. No Security. Payment of this Note is not secured by any pledge, lien or any
-----------
other security interest.
2. Conversion.
----------
(a) General. This Note shall be subject to optional conversion and
-------
mandatory conversion as set forth below:
(i) Optional Conversion. The holder of this Note has the right, at its
-------------------
option, at any time that any amount of principal or accrued interest is
outstanding hereunder, to convert any or all of the outstanding amount of
principal and/or interest of this Note into fully paid and non-assessable shares
of Series D Preferred at the rate of one share of Series D Preferred for each
$11.00 of the outstanding principal amount and/or accrued interest hereunder
surrendered for conversion, subject to adjustment as set forth herein (the
"Conversion Price"). In order to exercise this optional conversion privilege,
the holder of this Note shall surrender this Note to the Company during usual
business hours at the Company's principal executive office, accompanied by
written notice in form reasonably satisfactory to the Company that the holder
elects to convert the entire amount of this Note or a portion hereof specified
in such notice. Such notice shall also state the name or names (with address) in
which the certificate or certificates for shares of Series D Preferred which
shall be issuable on such conversion shall be issued.
(ii) Mandatory Conversion. The entire outstanding amount of principal
--------------------
and accrued interest of this Note shall automatically be converted into fully
paid and non-assessable shares of Series D Preferred at the then effective
Conversion Price immediately prior to the consummation of an underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale by the Company of Common
Stock to the public, in which the Company, prior to giving effect to the
proceeds of the offering, is valued at 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 in net proceeds (determined by subtracting underwriters'
discounts and commissions from gross proceeds) to the Company (a "Conversion
IPO"). The Company shall cause notice of mandatory conversion to be mailed to
the registered
-2-
<PAGE>
holder of this Note, at such holder's address appearing below, at least ten (10)
days prior to the date fixed for mandatory conversion of this Note. On or before
the date fixed for mandatory conversion, the holder shall surrender this Note at
the place designated in such notice, together with a statement of the name or
names (with address) in which the certificate or certificates for shares of
Series D Preferred which shall be issuable on such conversion shall be issued.
Upon the consummation of a Conversion IPO, other than to the extent necessary to
govern any mandatory conversion upon such Conversion IPO, this Note shall be
deemed cancelled in full, shall be of no further force and effect and no further
advances shall be made hereunder.
(b) Surrender of Note and Delivery of Certificates. When surrendered for
----------------------------------------------
optional or mandatory conversion this Note shall, unless the shares issuable on
conversion are to be issued in the same name as the name in which this Note is
then registered, be duly endorsed by, or accompanied by instruments of transfer
in form satisfactory to the Company duly executed by, the holder or his or its
duly authorized attorney. As promptly as practicable after the surrender of
this Note for conversion and the receipt of the notice specified above (in the
case of optional conversion), the Company shall deliver or cause to be delivered
at its principal executive office to the holder, or on the holder's written
order, a certificate or certificates for the number of full shares issuable upon
the conversion of this Note, or portion hereof, in accordance with the
provisions hereof. Such conversion shall be deemed to have been made at the
time this Note shall have been surrendered for conversion and the notice
specified above (in the case of optional conversion) shall have been received by
the Company at its principal executive office (the "Conversion Date"), and the
holder in whose name any certificate or certificates for shares of Series D
Preferred shall be issuable upon such conversion shall be deemed to have become
on the Conversion Date the holder of record of the shares represented thereby.
If less than the entire outstanding principal amount of this Note is being
converted (in the case of optional conversion), a new Note shall promptly be
delivered to the holder for the unconverted principal balance and shall be of
like tenor as to all terms as the Note surrendered.
(c) Adjustment of Conversion Price.
------------------------------
(i) In case the Company shall:
(A) declare a dividend of Series D Preferred on its Series D
Preferred,
(B) subdivide outstanding Series D Preferred into a larger number
of shares of Series D Preferred by reclassification, stock split or otherwise,
or
(C) combine outstanding Series D Preferred into a smaller number
of shares of Series D Preferred by reclassification or otherwise,
the number of shares of Series D Preferred issuable upon conversion of this
Note immediately prior to any such event shall be adjusted proportionately so
that thereafter the holder of this Note shall be entitled to receive upon
conversion of this Note the number of shares of Series D Preferred which such
holder would have owned after the happening of any of the events described above
had this Note been converted immediately prior to the happening of such event,
provided that the Conversion Price shall in no event be reduced to less than the
par value of the shares issuable upon conversion. An adjustment made pursuant
to this Section 2(c) shall become
-3-
<PAGE>
effective immediately after the record date in the case of a dividend and shall
become effective immediately after the effective date in the case of a
subdivision or combination.
(ii) If, prior to maturity of this Note, the Company shall at any
time consolidate or merge with another corporation (other than a merger or
consolidation in which the Company is the surviving corporation), the registered
holder hereof will thereafter be entitled to receive, upon the conversion
hereof, the securities or property to which a holder of the number of shares of
Series D Preferred then deliverable upon the conversion hereof would have been
entitled upon such consolidation or merger, and the Company shall take such
steps in connection with such consolidation or merger as may be necessary to
ensure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or property thereafter
deliverable upon the conversion of this Note.
(iii) If the Company shall sell equity securities in a capital raising
transaction or engage in any other transaction that is material to the Company,
then the Company and Banyan shall determine in good faith the fair market value
per share of Series D Preferred immediately following such transaction based, if
applicable, upon the actual or implied value of the Company in such transaction.
The Conversion Price shall be adjusted to reflect such fair market value;
provided, however, that such adjusted Conversion Price shall apply only to
- -------- -------
amounts advanced by Banyan hereunder subsequent to such transaction and shall
not apply to amounts advanced by Banyan hereunder prior to such transaction. The
Conversion Price applicable to each advance hereunder shall be set forth on
Schedule I.
(d) Notice. In case the Company proposes to take any action referred to in
------
Section 2(c) above, or to effect the liquidation, dissolution or winding up of
the Company, then the Company shall cause notice thereof to be mailed to the
registered holder of this Note, at the address appearing below, at least twenty
(20) days prior to the date on which the transfer books of the Company shall
close or a record be taken for such stock dividend or the date when such
reclassification, liquidation, dissolution or winding up shall be effective, as
the case may be.
(e) Statement of Adjustment. Whenever the Conversion Price shall be
-----------------------
adjusted as provided in Section 2(c) above, the Company shall forthwith send, by
mail, first class, postage prepaid, to Banyan, at the address appearing below, a
statement, signed by the Chairman of the Board, the President, any Vice
President, the Treasurer or Secretary of the Company, showing in reasonable
detail the facts requiring such adjustment and the Conversion Price that will be
effective after such adjustment. Where appropriate, such notice may be given
in advance and may be included as part of a notice required to be mailed under
the provisions of Section 2(d) hereof.
(f) Fractional Shares. No fractional shares of Series D Preferred shall be
-----------------
issuable upon conversion of this Note, but a payment in cash will be made in
respect of any fraction of a share which would otherwise be issuable upon the
surrender of this Note, or portion hereof, for conversion. Such payment shall
be based on the fair market value of the Series D Preferred at the time of
conversion of this Note, as determined in good faith by the Board of Directors.
(g) Securities Act of 1933. Upon conversion of this Note, the registered
----------------------
holder may be required to execute and deliver to the Company an instrument, in
form reasonably satisfactory
-4-
<PAGE>
to the Company, representing that the shares issuable upon conversion hereof are
being acquired for investment and not with a view to distribution within the
meaning of the Securities Act of 1933, as amended.
3. Default.
-------
The entire unpaid principal of this Note and the interest then accrued on
this Note shall become and be immediately due and payable upon written demand of
the holder of this Note, without any other notice or demand of any kind or any
presentment or protest, if any one of the following events shall occur and be
continuing at the time of such demand, whether voluntarily or involuntarily, or,
without limitation, occurring or brought about by operation of law or pursuant
to or in compliance with any judgment, decree or order of any court or any
order, rule or regulation of any governmental body:
(a) If default shall be made in the payment of any installment of principal
of the Note, or of any installment of interest on the Note, and if any such
default shall remain unremedied for ninety (90) days; or
(b) If the Company (i) makes a composition or an assignment for the benefit
of creditors or trust mortgage, (ii) applies for, consents to, acquiesces in,
files a petition seeking or admits (by answer, default or otherwise) the
material allegations of a petition filed against it seeking the appointment of a
trustee, receiver or liquidator, in bankruptcy or otherwise, of itself or of all
or a substantial portion of its assets, or a reorganization, arrangement with
creditors or other remedy, relief or adjudication available to or against a
bankrupt, insolvent or debtor under any bankruptcy or insolvency law or any law
affecting the rights of creditors generally, or (iii) admits in writing its
inability to pay its debts generally as they become due; or
(c) If an order for relief shall have been entered by a bankruptcy court or
if a decree, order or judgment shall have been entered adjudging the Company
insolvent, or appointing a receiver, liquidator, custodian or trustee, in
bankruptcy or otherwise, for it or for all or a substantial portion of its
assets, or approving the winding-up or liquidation of its affairs on the grounds
of insolvency or nonpayment of debts, and such order for relief, decree, order
or judgment shall remain undischarged or unstayed for a period of ninety (90)
days; or if any substantial part of the property of the Company is sequestered
or attached and shall not be returned to the possession of the Company or such
subsidiary or released from such attachment within ninety (90) days.
4. General.
-------
(a) Replacement. Upon receipt by the Company of evidence reasonably
-----------
satisfactory to it of the loss, theft, destruction or mutilation of this Note
and of indemnity reasonably satisfactory to it, and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of this Note (in case of mutilation) the Company will make and
deliver in lieu of this Note a new Note of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on the unpaid
principal amount of this Note in lieu of which such new Note is made and
delivered.
-5-
<PAGE>
(b) Successors and Assigns. This Note, and the obligations and rights of
----------------------
the Company hereunder, shall be binding upon and inure to the benefit of the
Company, the holder of this Note, and their respective heirs, successors and
assigns.
(c) Recourse. Recourse under this Note shall be to the general assets of
--------
the Company only and in no event to the officers, directors or stockholders of
the Company.
(d) Changes. Changes in or additions to this Note may be made or
-------
compliance with any term, covenant, agreement, condition or provision set forth
herein may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively), upon written consent of the Company
and the holder of this Note.
(e) Currency. All payments shall be made in such coin or currency of the
--------
United States of America as at the time of payment shall be legal tender therein
for the payment of public and private debts.
(f) Notices. All notices, requests, consents and demands shall be made in
-------
writing and shall be mailed postage prepaid, or delivered by hand, to the
Company or to the holder hereof at their respective addresses set forth below or
to such other address as may be furnished in writing to the other party hereto:
If to the holder:
Banyan Systems Incorporated
120 Flanders Road
Westboro, MA 01581
Attn: Chief Executive Officer
If to the Company:
Switchboard Incorporated
115 Flanders Road
Westboro, MA 01581
Attn: Chief Executive Officer
(g) Saturdays, Sundays, Holidays. If any date that may at any time be
----------------------------
specified in this Note as a date for the making of any payment of principal or
interest under this Note shall fall on Saturday, Sunday or on a day which in
Westboro, Massachusetts shall be a legal holiday, then the date for the making
of that payment shall be the next subsequent day which is not a Saturday, Sunday
or legal holiday.
(h) Governing Law. This Note shall be construed and enforced in accordance
-------------
with, and the rights of the parties shall be governed by, the laws of the
Commonwealth of Massachusetts (without regard to the conflicts of law provisions
thereof).
*****
-6-
<PAGE>
IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed
instrument on the date first above written by the duly authorized representative
of the Company.
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
---------------------------
Dean Polnerow
President
ATTEST:
/s/ John P. Jewett
- ------------------------------------------
John P. Jewett
Secretary
Consented and Agreed to:
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
--------------------------------------
Richard M. Spaulding
Chief Financial Officer
-7-
<PAGE>
Schedule I
----------
GRID TO AMENDED AND RESTATED CONVERTIBLE NOTE OF
SWITCHBOARD INCORPORATED
<TABLE>
<CAPTION>
Amount of Advance Interest Date of Conversion Notation
Rate Advance Price Made By
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
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- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
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- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
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</TABLE>
-8-
<PAGE>
Schedule II
-----------
LOAN REQUEST
------------
Banyan Systems Incorporated
Ladies and Gentlemen:
This Loan Request is delivered to you pursuant to the Amended and Restated
Convertible Note dated January __, 2000 executed by the undersigned (the
"Company") in favor of Banyan Systems Incorporated ("Banyan").
The Company hereby requests that an advance be made in the principal amount
of $___________ on ____________, 2000. The advance shall accrue interest
at the rate of ______.
Dated this _____ day of ______________, 2000.
Very truly yours,
SWITCHBOARD INCORPORATED
By:________________________________
Name:
Title:
-9-
<PAGE>
Exhibit 10.25
-------------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") dated as of
_____________, 2000 is entered into by and between Switchboard Incorporated, a
Delaware corporation (the "Company"), and Banyan Systems Incorporated, a
Massachusetts corporation ("Banyan").
Recitals
--------
WHEREAS, Banyan holds 7,000,000 shares of the Company's Common Stock; and
WHEREAS, the Company and Banyan desire to provide for certain arrangements
with respect to the possible future registration of such shares under the
Securities Act of 1933;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, 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 of the United States 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 the Exchange 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 (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 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" means the 7,000,000 shares of Common Stock issued to Banyan
------
during 1996.
"Stockholders" means Banyan and any persons or entities to whom the
------------
rights granted under this Agreement are transferred by Banyan, its successors or
assigns pursuant to Section 3 hereof.
2. Registration Rights
-------------------
2.1 Required Registrations.
----------------------
-2-
<PAGE>
(a) At any time after the first anniversary of the closing of the
Initial Public Offering, Banyan may request, in writing, that the Company effect
the registration on Form S-3 (or any successor form) of Registrable Shares owned
by Banyan having an aggregate value of at least $10,000,000 (based on the then
current market price or fair value). For avoidance of doubt, the parties agree
that the Company shall not be required to file a registration statement on Form
S-1 or Form S-2 (or any successor form which does not allow the incorporation by
reference of subsequently filed Exchange Act reports).
(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 Banyan 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 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 Registrable Shares and Other Holders requesting
registration in proportion, as nearly as practicable, to the
-3-
<PAGE>
respective number of shares held by them at the time of the request for
registration made pursuant to Section 2.1(a). For the avoidance of doubt, the
parties agree that no Stockholder shall be entitled to include any shares in a
registration requested pursuant to its rights under this Section 2.1 unless each
Other Holder under the following listed agreements (which term includes Banyan
to the extent so provided in one of the following listed agreements) is entitled
to include in such registration all of the shares of Common Stock which it
desires to include and which are registrable shares under one of the following
listed agreements: (1) Amended and Restated Registration Rights Agreement, dated
as of February 20, 1998, as amended, among the Company, America Online, Inc.,
Digital City Inc. and Banyan; (2) Registration Rights Agreement dated as of
December 31, 1997, between the Company and Continuum Software, Inc.; (3) Amended
and Restated Registration Rights Agreement dated as of May 3, 1999 between the
Company and Banyan; and (4) Registration Rights Agreement dated as of June 30,
1999 between the Company and CBS Corporation. 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 Banyan, which approval will not be
unreasonably withheld.
(e) The Company shall not be required to effect more than one
registration pursuant to Section 2.1(a) per year. 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 Banyan 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 Banyan 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 Banyan 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).
-4-
<PAGE>
(f) If at the time of any request to register Registrable Shares by
Banyan 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; 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 this 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
-5-
<PAGE>
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 as follows:
(i) first, there shall be included any shares proposed to
be sold by the Company;
(ii) second, there shall be included any shares permitted
to be included in the registration pursuant to Section 3(b) of the Amended and
Restated Registration Rights Agreement, dated as of February 20, 1998, as
amended, among the Company, America Online, Inc., Digital City Inc., and Banyan;
(iii) third, there shall be included in the registration
any shares permitted to be included pursuant to Section 2(b) of the Registration
Rights Agreement dated as of December 31, 1997 between the Company and Continuum
Software, Inc.;
(iv) fourth, there shall be included in the registration
any shares permitted to be included pursuant to Section 3(b) of the Amended and
Restated Registration Rights Agreement dated as of May 3, 1999 between the
Company and Banyan;
(v) fifth, there shall be included in the registration
any shares permitted to be included pursuant to Section 2(b) of the Registration
Rights Agreement dated as of June 30, 1999 between the Company and CBS
Corporation; and
(vi) sixth, except as otherwise required in any contract
to which the Company is a party, there shall be included in the registration any
shares requested to be included by the Stockholders and any Other Holders 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 clause
-6-
<PAGE>
(vi) of 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;
(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
-7-
<PAGE>
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 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
-8-
<PAGE>
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 Banyan (other
than as a result of information concerning the business or financial condition
of the Company which is first made known to Banyan after the date on which such
registration was requested or pursuant to the final sentence of Section 2.1(e))
and if Banyan elects not to have such registration counted as a registration
requested under Section 2.1, Banyan shall pay the Registration Expenses of such
registration. For purposes of this Section 2.4, 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 will reimburse such seller, underwriter
and each such controlling person, on
-9-
<PAGE>
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 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 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 2.5 (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
-10-
<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 2.5 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 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
-11-
<PAGE>
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 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 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.
2.8 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:
-12-
<PAGE>
(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(c)
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.
2.9 Termination. All of the Company's obligations to register
-----------
Registrable Shares under Sections 2.1 and 2.2 of this Agreement shall terminate
five years after the closing of the Initial Public Offering.
3. Transfers of Rights. This Agreement, and the rights and obligations
-------------------
of Banyan hereunder, may not be assigned by Banyan except that (i) Banyan may
assign this Agreement, and its rights and obligations hereunder, to any person
to which at least 3,600,000 Shares are validly transferred by Banyan and (ii)
any other person to which Shares are validly transferred shall be deemed a
"Stockholder" 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.
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, Banyan 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.
-13-
<PAGE>
(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 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 Banyan.
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 in writing by Banyan.
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 not 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) Entire 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, 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 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
-14-
<PAGE>
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 signature.
(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]
-15-
<PAGE>
Executed as of the date first written above.
COMPANY:
SWITCHBOARD INCORPORATED
By:
---------------------------------------
Name:
Title:
PURCHASER:
BANYAN SYSTEMS INCORPORATED
By:
---------------------------------------
Name:
Title:
-16-
<PAGE>
Exhibit 10.27
-------------
SUBLEASE
THIS SUBLEASE dated as of __________, 2000 between Banyan Systems
Incorporated (the "Sublandlord") and Switchboard Incorporated (the "Subtenant").
ARTICLE I
REFERENCE DATA
1.1 Subjects Referred To.
--------------------
Each reference in this Sublease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section 1.1:
<TABLE>
<S> <C>
Date of Sublease: _____________, 2000
Sublandlord: Banyan Systems Incorporated, a Massachusetts corporation
Sublandlord's Address: 120 Flanders Road, Westboro, Massachusetts 01581
Subtenant: Switchboard Incorporated, a Delaware corporation
Subtenant's Address: 115 Flanders Road, Westboro, Massachusetts 01581
Headlandlord: BerTech Flanders, LLC
Headlandlord's Address: c/o Steve Brooks, Asset Manager
Berkley Investment Inc.
121 High Street
Boston, MA 02110
Headlease: Lease Agreement dated as of November 14, 1986 by and between Arthur DiMartino, Jr., Trustee of
Flanders Realty Trust, as landlord, and Sublandlord, as tenant., as amended by a Lease Addendum dated
August 28, 1987, a Lease Addendum dated January 5, 1988, a Lease Extension and Modification Agreement
effective as of January 1, 1992, a Lease Extension and Modification Agreement dated April 15, 1993,
and a Fifth Lease Extension and Modification Agreement dated as of October 15, 1997.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Headleased Premises: The premises situated at 115 Flanders Road, Westboro, Massachusetts, as described in the Headlease,
containing approximately 64,654 rentable square feet (constituting all of the rentable square feet in
the building) (the "Building").
Premises: The Premises are shown on Exhibit B attached hereto. Beginning on March 1, 2000 the Premises shall also
include space shown on Exhibit C attached hereto.
Rentable Floor Area
of Premises: 9,572 Rentable Square Feet on the first floor of the Building. Beginning on March 1, 2000 the rentable
floor area of the Premises shall increase to 18,089 rentable square feet. Exact square footage shall be
verified by an architect in accordance with BOMA standards.
Commencement Date: ___________________, 2000
Term Expiration Date: ___________________, 2002
Extension Option: Subtenant shall have option to extend term until
September 30, 2005.
Rent Commencement
Date: ___________________, 2000
Monthly Fixed Rent: Time Period Monthly Rent
----------- ------------
3/1/2000-12/31/2002 $25,551.00
Security Deposit: None
Permitted Uses: All permitted uses in the Headlease.
Parking Spaces: Subtenant shall be entitled to use 80 parking spaces. Subject to prior written approval of Headlandlord
under the terms of the Headlease, Subtenant, at Subtenant's expense, may install several visitor parking
spaces in front of the entrance to the Premises.
Signs: Subject to prior written approval and signage criteria of Headlandlord under the terms of the Headlease,
Subtenant, at Subtenant's expense, may place signage at the entrance to
</TABLE>
2
<PAGE>
the Premises. Subtenant shall have its name and suite number inserted
into the building directory.
1.2 Exhibits.
--------
The exhibits listed below in this section are incorporated in this Sublease
by reference and are to be construed as part of this Sublease:
EXHIBIT A Headlease
EXHIBIT B & C Floor Plan of Premises
3
<PAGE>
ARTICLE II
PREMISES AND TERM
2.1 Premises. Subject to and with the benefit of the provisions of this
--------
Sublease, Sublandlord hereby subleases the Premises to Subtenant, and Subtenant
subleases the Premises from Sublandlord.
The Premises are subleased in their condition "as is" on the Commencement
Date.
2.2 Term. To have and to hold beginning on the Commencement Date and
----
continuing until the Term Expiration Date (the "Term"), subject to earlier
termination as provided herein.
2.3 Early Access. Sublandlord shall allow Subtenant access to the Premises
------------
prior to the Commencement Date to install cabling, telephone systems, furniture
partitions and to perform other necessary tenant improvement s. Prior to
Subtenant's entry into the Premises as permitted hereunder, Subtenant shall
submit a schedule to Sublandlord (and Sublandlord's contractor, if so requested
by Sublandlord), for their reasonable approval, which schedule shall detail the
timing and purpose of Subtenant's entry. Subtenant shall hold Sublandlord
harmless from and indemnify and protect and defend Sublandlord against any loss
or damage to the Premises or the Building and against injury to any person
caused by Subtenant's actions as a result of such entry, to the extent such loss
or damage is not covered by insurance carried or required to be carried under
this Sublease.
ARTICLE III
RENT
3.1 Monthly Fixed Rent. Subtenant shall pay Sublandlord the Monthly Fixed
------------------
Rent in advance on the first calendar day of each month included in the Term,
commencing on the Rent Commencement Date; and for any portion of a calendar
month at the beginning of or end of the Term, the corresponding fraction of the
Monthly Fixed Rent in advance. Monthly Fixed Rent shall include HVAC, nightly
janitorial service, electricity for lights and plugs and one security guard from
4 p.m. to 8a.m. Monday through Friday.
3.2 Additional Rent. Pursuant to the Headlease, Sublandlord is required
---------------
to pay 100% of all operating, tax, maintenance and repair costs for the Building
(as such terms are defined in the Headlease), and such other amounts payable as
in the Headlease (collectively, the "Operating Costs"). Subtenant shall pay
Sublandlord as additional rent hereunder 14.8% (increasing to 28% on March 1,
2000) of any increase
4
<PAGE>
over the base year of all Operating Costs allocable to the periods of time
included in the Term (the "Additional Rent"). The base year for real estate
taxes is July 1, 1999 through June 30, 2000 with real estate taxes in the amount
of $68,345. The base year for all other operating costs is the 2000 operating
budget with an amount of $6.35 per rentable square foot. Subtenant shall pay
such amount within ten (10) days of billing by Sublandlord, which bills shall
include, where applicable, copies of the applicable statements from
Headlandlord. Any surplus shall be promptly refunded to Subtenant and any
deficit in such payment shall be promptly paid by Subtenant after the
Headlandlord finally determines the amounts payable by the Sublandlord under the
Headlease.
Capital repairs and replacements to the roof, structural elements and Building
systems shall be the sole responsibility of the Sublandlord and shall not be
included in the Operating Costs.
3.3 Payment. All payments of Monthly Fixed Rent and Additional Rent shall
-------
be made to Sublandlord at Sublandlord's Address set forth in Section 1.1 or to
such other address as Sublandlord may designate by notice to Subtenant from time
to time.
ARTICLE IV
SUBTENANT'S COVENANTS
Subtenant covenants during the Term and such further time as Subtenant
occupies any part of the Premises:
4.1 Subtenant's Payments. Subtenant shall pay all Monthly Fixed Rent,
--------------------
Additional Rent and any other amounts payable when due.
4.2 Maintenance and Repair. Subtenant shall maintain the Premises in the
----------------------
condition required by the Headlease.
4.3 Occupancy and Use. Subtenant shall not use the Premises for any uses
-----------------
other than the Permitted Uses, and shall not make any use of the Premises which
is prohibited by any applicable law, ordinance, code, regulation, license,
permit, variances or governmental order.
4.4 Alterations and Additions. Subtenant shall not make any improvements,
-------------------------
repairs, alterations, replacements, decorations and/or additions to the Premises
without first obtaining the written approval of Sublandlord, which approval
shall not be unreasonably withheld or delayed, and the written approval of the
Headlandlord on the terms and conditions set forth in the Headlease.
5
<PAGE>
All construction work required or permitted by this Sublease shall be done
in a good and workmanlike manner and in compliance with all applicable laws and
all lawful ordinances, regulations and orders of governmental authority and
insurers of the building.
4.5 Assignment and Subletting. Except with Sublandlord's prior written
-------------------------
consent, which consent shall not be unreasonably withheld or delayed, Subtenant
shall not assign, transfer, mortgage or pledge this Sublease, or sublease (which
term shall be deemed to include the granting of concessions and licenses and the
like) all or any part of the Premises, or suffer or permit this Sublease or the
leasehold estate hereby created or any other rights arising under this Sublease
to be assigned, transferred or encumbered, in whole or in part, whether
voluntarily, involuntarily or by operation of law, or permit the occupancy of
the Premises by anyone other than Subtenant. Any attempted assignment,
transfer, mortgage, pledge, sublease or encumbrance without such consent shall
be void.
In the event that any assignee or transferee of Subtenant pays to Subtenant any
amount in excess of the Monthly Fixed Rent, Additional Rent and any amounts
and/or charges then payable hereunder, Subtenant shall promptly pay one hundred
(100%) percent of said excess to Sublandlord as and when received by Subtenant.
If Subtenant shall receive from any assignee or transferee, either directly or
indirectly, any consideration for the assignment of this Sublease, either in the
form of cash, goods or services, Subtenant shall pay an amount equivalent to one
hundred (100%) percent of such consideration to Sublandlord as and when received
by Subtenant.
Notwithstanding the foregoing, any assignment, transfer, mortgage or pledge of
this Sublease is subject to and conditioned upon receipt of the prior written
consent of the Headlandlord as provided in the Headlease.
No assignment or subletting shall affect the continuing primary liability of
Subtenant (which, following assignment, shall be joint and several with the
assignee).
4.6 Indemnification. Subtenant shall indemnify Sublandlord and hold
---------------
Sublandlord harmless from and against any and all claims, demands, suits,
judgments, liabilities, costs and expenses, including reasonable attorneys'
fees, arising out of or in connection with Subtenant's use and possession of the
Premises and the exercise room, or arising out of the failure of Subtenant, its
agents, contractors or employees to perform any covenant, term or condition of
this Sublease or of the Headlease to be performed by Subtenant hereunder.
Sublandlord agrees to indemnify and hold Subtenant harmless from and against any
and all claims, demands, suits, judgments, liabilities, costs and expenses,
including reasonable attorneys' fees, arising out of the failure of Sublandlord,
its agents, contractors or employees to perform any covenant, term or condition
of this Sublease or of the Headlease to be performed by Sublandlord hereunder.
6
<PAGE>
4.7 Insurance. Subtenant shall maintain in responsible companies with a
----------
general policy rating of A or better and a financial class of VI or better by
A.M. Best, Inc. and qualified to do business and in good standing in
Massachusetts, comprehensive general liability insurance covering the premises
insuring Sublandlord and Headlandlord as well as Subtenant with limits which
shall, at the commencement of the Term, be at least $2,000,000 and from time to
time during the Term shall be for such higher limits, if any, as are customarily
carried in the Marlborough and Westboro areas with respect to similar properties
and worker's compensation insurance with statutory limits covering all of
Subtenant's employees working in the Premises. In addition, Subtenant shall be
responsible for insuring its personal property. Subtenant shall deposit
promptly with Sublandlord certificates for such insurance naming Sublandlord and
Headlandlord as additional insureds, and all renewals thereof bearing the
endorsement that the policies will not be canceled until after 30 days' written
notice to Sublandlord.
ARTICLE V
CASUALTY AND TAKING
5.1 Termination of Headlease. In the event that during the Term, all or
------------------------
any part of the Premises or the Headleased Premises are destroyed or damaged by
fire or other casualty or taken by eminent domain, and either Sublandlord or
Headlandlord terminates the Headlease pursuant to its terms because of such
damage, destruction or taking, then this Sublease shall likewise terminate on
the same date that the Headlease terminates. Sublandlord shall give Subtenant
prompt notice of such termination and the date on which it shall occur.
5.2 Repair and Restoration. In the event any such damage, destruction or
-----------------------
taking of the Premises occurs and this Sublease is not terminated pursuant to
Section 5.1 above, then Sublandlord shall use reasonable efforts to cause
Headlandlord to repair and restore the Premises to the extent required by the
terms of the Headlease.
5.3 Reservation of Award. Any and all rights to receive awards made for
--------------------
damages to the Premises and the leasehold hereby created accruing by reason of
exercise of eminent domain or by reason of anything lawfully done in pursuance
of public or other authority, are reserved to Sublandlord and Headlandlord.
Subtenant hereby releases and assigns to Sublandlord and Headlandlord all
Subtenant's rights to such award and covenants to deliver such further
assignments and assurances thereof as Sublandlord or Headlandlord may from time
to time request.
7
<PAGE>
ARTICLE VI
HEADLEASE
6.1 Sublease Subject to Headlease. This Sublease is subject to the
-----------------------------
Headlease. Subject to this Section 6.1, all terms and conditions of the
Headlease are incorporated into and made a part of this Sublease as if
Sublandlord were the landlord thereunder and Subtenant were the tenant. In case
of conflict between the incorporated provisions of the Headlease and the
remaining provisions of this Sublease, the latter shall control. Subtenant
assumes and agrees to perform the tenant's obligations under the Headlease
during the Term, except that the obligation to pay rent or other amounts to
Headlandlord under the Headlease shall not be an obligation of Subtenant, and
Subtenant shall instead pay the rent under this Sublease. Subtenant shall not
commit or suffer any act or omission that will violate any of the provisions of
the Headlease.
If the Headlease terminates as a result of a default or breach of
Subtenant under this Sublease and/or the Headlease, then the Subtenant shall be
liable to the Sublandlord for the direct damage suffered as a result of such
termination. Subtenant covenants not to commit or suffer any act or omission
that will violate the Headlease.
6.2 Excluded Obligations. Notwithstanding anything to the contrary
--------------------
herein, the incorporated provisions of the Headlease are amended or qualified as
follows:
i. Sublandlord shall not be liable under any circumstances for a loss of
or injury to property, or interference with Subtenant's business, however
occurring, incidental to any failure to furnish any utilities or services.
ii. Sublandlord shall have no responsibility to perform or construct (or
to pay the cost of performing or constructing) any repair, maintenance or
improvement in or to the Premises, except as specifically set forth in Section
2.1 of this Sublease.
iii. Rent shall be abated under this Sublease only to the extent that
Sublandlord receives a corresponding rent abatement under the Headlease.
iv. Wherever the Headlease grants to Sublandlord a grace or cure period,
the corresponding grace or cure period under this Sublease shall be two (2)
business days shorter in duration.
The parties acknowledge that Sublandlord's ability to satisfy certain of
its obligations to Subtenant under this Sublease is contingent upon the full and
timely performance of Headlandlord's obligations under the Headlease. The
parties further acknowledge that, while Sublandlord will use reasonable efforts
to cause Headlandlord to perform its obligations under the Headlease,
Sublandlord will not be liable to Subtenant for any breach of Sublandlord's
obligations under this Sublease, nor shall such breach diminish Sublandlord's
rights hereunder, where the same is caused by or attributable to the failure of
Headlandlord to perform its obligations under the Headlease.
8
<PAGE>
6.3 Headlandlord's Rights. Headlandlord shall have all rights with
---------------------
respect to the Premises which it has reserved to itself as landlord under the
Headlease.
6.4 Termination of Headlease. In the event that Headlandlord terminates
------------------------
the Headlease pursuant to its terms or the Headlease otherwise terminates or
expires, this Sublease shall likewise and simultaneously terminate.
ARTICLE VII
MISCELLANEOUS
7.1 Notices from One Party to the Other. All notices required or
-----------------------------------
permitted hereunder shall be in writing, duly signed by the party giving such
notice and transmitted by prepaid registered or certified mail, return receipt
requested, by telegram or telefax, or delivered by hand, and addressed as
follows:
to Sublandlord: Banyan Systems Incorporated
120 Flanders Road
Westboro, MA 01581
Fax No. (508) 366-6846
Attn: Legal Department
to Subtenant: Switchboard Incorporated
115 Flanders Road
Westboro, MA 01581
Fax No. (508) 870-2000
Attn: John P. Jewett
or to such other address as Sublandlord or Subtenant shall designate by written
notice to each other. Any notice shall be deemed duly given on the second
business day following the date of mailing, or when delivered to such address by
hand, or if transmitted by telefax or telegram, on the business day received.
7.2 Estoppel Certificate. Upon not less than twenty (20) days prior
--------------------
notice by the requesting party, either party shall execute, acknowledge and
deliver to the other a statement in writing, addressed to such person as the
requesting party shall designate, certifying (a) that this Sublease is
unmodified and in full force and effect, (b) the dates to which Monthly Fixed
Rent, Additional Rent have been paid, and (c) that the requesting party is not
in default hereunder (or, if in default, specifying the nature of such default
in reasonable detail). Any such certificate may be relied upon by the person to
which it is addressed as to the facts stated therein.
9
<PAGE>
7.3 Brokerage. Subtenant and Sublandlord mutually represent and warrant
---------
that they have dealt with no broker in connection with this transaction. Each
agrees to defend, indemnify and save the other harmless from and against any and
all cost, expense or liability for any compensation, commissions or charges
claimed by any broker or agent, with respect to the indemnifying party's
dealings in connection with this Sublease.
7.4 Applicable Law. This Sublease shall be governed by and construed in
--------------
accordance with the laws of the Commonwealth of Massachusetts.
7.5 Security Deposit. Upon execution of this Sublease, Subtenant shall
----------------
deliver to Sublandlord the Security Deposit, such sum to be held by Sublandlord
as security for the performance of Subtenant's obligations under this Sublease.
The Security Deposit shall be held by Sublandlord without interest and
Sublandlord shall be entitled to commingle the Security Deposit with its other
funds.
7.6 Construction. If any term, covenant, condition or provision of this
------------
Sublease or the application thereof to any person or circumstances shall be
declared invalid or unenforceable by the final ruling of a court of competent
jurisdiction having final review, the remaining terms, covenants, conditions and
provisions of this Sublease and their application to persons or circumstances
shall not be affected thereby and shall continue to be enforced and recognized
as valid agreements of the parties.
This Sublease constitutes the entire agreement between the parties hereto
with respect to the transactions contemplated herein, and it supersedes all
prior discussions, understandings or agreements, including without limitation
the Offer To Sublease, between the parties.
There are no oral or written agreements between Sublandlord and Subtenant
affecting this Sublease. This Sublease may be amended, and the provisions
hereof may be waived or modified, only by instruments in writing executed by
Sublandlord and Subtenant.
The titles of the several Articles and Sections contained herein are for
convenience only and shall not be considered in construing this Sublease.
Unless repugnant to the context, the words "Sublandlord" and "Subtenant"
appearing in this Sublease shall be construed to mean those named above and
their respective heirs, executors, administrators, successor and assigns, and
those claiming through or under them respectively. If there be more than one
tenant, the obligations imposed by this Sublease upon Subtenant shall be joint
and several.
7.7 Right of First Offer for Second Floor on 120 Flanders Road. Provided
----------------------------------------------------------
that Subtenant is not in default in the performance or observance of any of the
terms and
10
<PAGE>
provisions of this Sublease or the Headlease, if Sublandlord intends during the
Term of this Sublease, to market the Second Floor Space of 120 Flanders Road
consisting of approximately 18,111 rentable square feet when it becomes
available for leasing (the "Second Floor Space"), then Sublandlord will present
a term sheet (the "Offer") for the leasing of the Second Floor Space to
Subtenant. Except as otherwise set forth in the Offer, the lease of the Second
Floor Space shall be on the terms and conditions set forth in this Sublease.
Upon its receipt of the Offer, Subtenant shall have seven (7) business days to
accept or reject the Offer. If Subtenant accepts the Offer within said seven
day period, Sublandlord and Subtenant shall execute a lease for such Second
Floor Space on the terms set forth in the Offer within thirty (30) days of
Subtenant's acceptance of the Offer. In the event Subtenant does not accept the
Offer within said seven day period or Sublandlord and Subtenant do not execute a
lease on the terms set forth in the Offer within said thirty day period, then
Sublandlord shall have the right to lease the Second Floor Space on terms which
Sublandlord reasonably determines to be at least 90% as economically beneficial
to Sublandlord as those set forth in the Offer without reoffering the Second
Floor Space to Subtenant. If (i) Sublandlord wishes to lease the Second Floor
Space on terms less than 90% as economically beneficial to Sublandlord, or (ii)
Sublandlord does not enter into a lease for the Second Floor Space within 180
days of the submission of the Offer to Subtenant, then the Second Floor Space
shall first be subject to re-submission to Subtenant pursuant to the terms of
this Section prior to Sublandlord's leasing of the same.
In the event Subtenant accepts the Offer to lease the Second Floor Space,
Subtenant shall be solely responsible for any and all costs associated with
relocating or moving Subtenant from the Premises to the Second Floor Space.
7.8 Access and Security. Normal Building hours shall be from 7:00 a.m. to
-------------------
6:00 p.m. Monday through Friday. The Building has a twenty-four (24) hour card
access system. Subtenant shall be responsible for its own security card access
at the entrance to the Premises.
7.9 Cafeteria. Subtenant shall have the right to use the cafeteria at 120
---------
Flanders Road during the Term of this Sublease.
7.10 Option to Extend. Subtenant shall have the right and option to extend
----------------
the Term for an additional two (2) years and nine (9) months until September 30,
2005 (the "Extension Term") commencing upon the expiration of the original Term
referred to in Section 2.2 (the "Original Term"), provided that Subtenant shall
give Sublandlord notice of Subtenant's irrevocable exercise of such option at
least ninety (90) days prior to the expiration of the Original Term and provided
further that Subtenant shall not be in default at either the time of giving such
notice or at the time of the commencement of the Extension Term in the
performance or observance of any of the terms and
11
<PAGE>
provisions of this Sublease on the part of Subtenant to be performed or
observed. Prior to the exercise by Subtenant of such option, the expression
"Term" shall mean the Original Term, and after the exercise by Subtenant of such
option, the expression "Term" shall mean the Original Term as it has been
extended by the Extension Term. Except as expressly otherwise provided in the
following paragraph, all the terms, covenants, conditions, provisions and
agreements in the Sublease contained shall be applicable to the Extension Term.
If Subtenant shall give notice of its exercise of such option to extend in the
manner and within the time period provided aforesaid, the Term shall be extended
upon the giving of such notice without the requirement of any further action on
the part of either Subtenant or Sublandlord. If Subtenant shall fail to give
timely notice of the exercise of such option as aforesaid, Subtenant shall have
no right to extend the Term of this Sublease, time being of the essence of the
foregoing provisions.
The Monthly Fixed Rent payable during the Extension Term shall be the greater of
(i) the Monthly Fixed Rent in effect for the year immediately preceding the
commencement of the Extension Term or (ii) the Fair Market Rent for the
Premises, as determined below, as of the commencement of the Extension Term. If
for any reason the Monthly Fixed Rent payable during the Extension Term has not
been determined as of the commencement of the Extension Term, Subtenant shall
pay the Monthly Fixed Rent payable during the immediately preceding year until
the Monthly Fixed Rent for the Extension Term is determined, at which time, an
appropriate adjustment, if any, shall be made.
For purposes hereof, the Fair Market Rent shall mean the fair rent for the
Premises as of the commencement of the Extension Term under market conditions
then existing. Fair Market Rent shall be determined by agreement between
Sublandlord and Subtenant, but if Sublandlord and Subtenant are unable to agree
upon the Fair Market Rent at least two (2) months prior to the date upon which
the Fair Market Rent is to take effect, then the Fair Market Rent shall be
determined by appraisal made as hereinafter provided by a board of three (3)
reputable independent commercial real estate consultants, appraisers, or
brokers, each of whom shall have at least ten (10) years of experience in the
Westboro office rental market and each of whom is hereinafter referred to as
"Appraiser". Subtenant and Sublandlord shall each appoint one such Appraiser
and the two (2) Appraisers so appointed shall appoint the third Appraiser. The
cost and expenses of each Appraiser appointed separately by Subtenant and
Sublandlord shall be borne by the party who appointed the Appraiser. The cost
and expense of the Third Appraiser shall be shared equally by Subtenant and
Sublandlord. Sublandlord and Subtenant shall appoint their respective
Appraisers at least fifty-five (55) days prior to commencement of the Extension
Term and shall designate the Appraisers so appointed by notice to the other
party. The two Appraisers so appointed and designated shall appoint the third
Appraiser at least forty-five (45) days prior to the commencement of the
Extension Term and shall designate such Appraiser by notice to Sublandlord and
Subtenant. The board of three (3) Appraisers shall determine the Fair Market
Rent of
12
<PAGE>
the Premises as of the commencement of the Extension Term and shall notify
Sublandlord and Subtenant of their determinations at least thirty (30) days
prior to the commencement of the Extension Term. If the determination of the
Fair Market Rent of any two (2) or all three (3) Appraisers shall be identical
in amount, said amount shall be deemed to be the Fair Market Rent of the
Premises. If the determination of all three (3) Appraisers shall be different in
amount, the average of the two (2) values nearest in amount shall be deemed the
Fair Market Rent of the Premises. The Fair Market Rent of the Premises
determined in accordance with the provisions of this Section shall be binding
and conclusive on Subtenant and Sublandlord.
7.11 Consent of Headlandlord. Subtenant acknowledges that this Sublease is
-----------------------
subject to the consent of the Headlandlord. Within three (3) business days
after the execution of this Sublease, Sublandlord shall notify and forward an
originally executed copy of this Sublease to the Headlandlord and shall request
Headlandlord's consent thereto. Upon receiving Headlandlord's response,
Sublandlord shall notify Subtenant as to whether or not the Headlandlord
consented to the sublease. In the event the Headlandlord does not consent to
the sublease, this Sublease shall terminate and be of no further force or
effect.
THIS SUBLEASE is executed as a sealed instrument in two or more
counterparts on the day and year first above written.
SUBLANDLORD:
BANYAN SYSTEMS INCORPORATED
By: _____________________________
Name:
Title:
SUBTENANT:
SWITCHBOARD INCORPORATED
By: ____________________________
Name:
Title:
13
<PAGE>
Exhibit 10.28
-------------
October 8, 1999
Mr. Douglas J. Greenlaw
25 Collins Creek
Greenville, SC 29607
Dear Doug:
It is my pleasure to offer you the position of Chief Executive Officer of
Switchboard Incorporated ("Switchboard" or "Company") reporting to me. The
Executive Team and I believe your expertise will contribute significantly to
Switchboard's ability to attain our goals and realize its full potential.
The following items comprise the details of the offer.
A. Compensation
------------
The base salary will be $8,653.85 byweekly, or $225,000 annually.
B. Executive Bonus
---------------
You will be eligible to participate in an Executive Performance Bonus Plan
that is targeted at an annualized rate of $75,000 and will be prorated from
your date of hire. The major portion of this bonus will be paid quarterly
based on quarterly goal achievement with the balance paid based on annual
performance against goals at year end. Incentive Bonus Plan will be based
upon a combination of Company performance and your achievement of your
individual objectives and will be discussed and defined with you during
your first 60 days of employment.
C. Equity
------
Nonstatutory Stock Options
--------------------------
. You will receive 900,000 total shares of Switchboard Incorporated at
an option price of $9.00 per share which will vest in accordance with
the following schedule:
. 100,000 non-qualified stock options will vest upon the successful
completion of an Initial Public Offering of Switchboard Inc.
. 300,000 non-qualified stock options will vest in equal installments of
150,000 shares each after years one and two of your employment.
. 150,000 non-qualified stock options will vest when the Switchboard
market capitalization equals or exceeds $1.0 billion for 90
consecutive days or after year three of your employment.
<PAGE>
Mr. Douglas J. Greenlaw Page 2 October 8, 1999
. 150,000 non-qualified stock options will vest when the Switchboard
market capitalization equals or exceeds $1.5 billion for 90
consecutive days or after year four of your employment.
. 200,000 non-qualified stock options will vest when the Switchboard
market capitalization equals or exceeds $2.0 billion for 180
consecutive days or after year five of your employment.
D. Change in Control Provisions
----------------------------
. In the event of a Change in Control, (defined below), (a) each
outstanding option to purchase shares of Common Stock of the Company
held by you shall become immediately exercisable as to 50% of the then
unvested shares subject to such option, with such immediate vesting
applied ratably to the unvested shares.
. One year after a Change in Control, (a) each outstanding option to
purchase shares of Common Stock of the Company held by you shall
become immediately exercisable as to 100% of the then unvested shares
subject to such option.
. If terminated by the Company within 12 months of a Change in Control
or if your position, title, or responsibilities are materially reduced
from those in effect immediately prior to a Change in Control, (a)
each outstanding option to purchase shares of common Stock of the
Company held by you shall become immediately exercisable as to 100% of
the then unvested shares subject to such option.
All items in this agreement pertaining to Stock Options of the Company are
subject to the terms and conditions set forth in the Switchboard Incorporated
1996 Stock Incentive Plan.
E. Benefits
--------
You will be eligible for group medical, dental, disability and life
insurance through the Company. Coverage for you and your dependents will
commence on your first day of employment, subject to any insurers'
eligibility requirements and the payment of any applicable employee
contributions.
F. Protection in the Event of Termination
--------------------------------------
If your employment is terminated by Switchboard for any reason, except For
Cause, the Company will provide you with the following payments and
benefits:
. Switchboard will pay you on a biweekly basis your base salary and
bonus earned for a period of six months from the effective date of
your termination.
. Switchboard will provide up to six months of continued medical and
dental insurance coverage for you and your family from the effective
date of your termination, on terms substantially as in effect on the
date of termination, subject to the payment by you of any applicable
employee contributions.
<PAGE>
Mr. Douglas J. Greenlaw Page 3 October 8, 1999
G. Other
-----
You will receive individual term left insurance equal to five (5) times
your annual base salary at no cost to you, subject to any insurer's
eligibility requirements.
For purposes of this letter, the following terms shall have the following
respective meanings:
(1) Termination of employment for cause ("For Cause") shall mean
termination by reason of (a) any act or omission involving dishonesty,
gross negligence or serious misconduct, or (b) your conviction of, or
the entry of a pleading guilty or nolo contendere by you to, any crime
involving sexual harassment or any felony.
Termination of employment For Cause will be presented in writing,
accompanied by a written statement of reasons. A process of binding
arbitration will resolve disagreements.
(2) A change in control ("Change in Control") of the Company shall be
deemed to occur if and only if (a) any person or entity (other than
the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or any corporation owned
directly or indirectly by the stockholders of the Company is
substantially the same proportion as their ownership of stock of the
Company) is or becomes the "beneficial owner" (as defined in Rule 13d-
3 under the Securities and Exchange of 1934, as amended), directly or
indirectly, of securities of the Company representing more than 50% of
the combined voting power of the Company's then outstanding voting
securities (b) a merger or consolidation of the Company following
which the voting securities of the Company outstanding immediately
prior thereto do not continue to represent more than 50% of the
combined voting power of the voting securities of the Company or the
entity outstanding immediately after such merger or consolidation, or
(c) a sale of all or substantially all of the assets of the Company.
H. Contract Term
-------------
This contract is valid for the duration of your employment subject to a 60-
day notice period of cancellation by either party.
Please confirm your acceptance of this offer for employment by signing this
letter and providing your smart date where indicated below, and by signing the
enclosed Employee Patent and Confidential Information Agreement. Please return
both documents to me at your earliest convenience.
In addition, you will be required to provide proof of eligibility to work in the
United States per federal legislation. A listing of required documentation
(Form I-9) is also enclosed.
Per our earlier discussion and as outlined in your Offer Summary, employment
with Switchboard is contingent upon you and the CBS representatives(s) of
Switchboard mutually agreeing to a positive and collaborative working
arrangement.
<PAGE>
Mr. Douglas J. Greenlaw Page 4 October 8, 1999
Doug, I look forward with great expectation to you joining our Executive team
and leading Switchboard. I am confident you will be highly successful.
Sincerely,
/s/ William P. Ferry
-----------------------------------
William P. Ferry
Chairman
cc: Anthony J. Bellantuoni, Vice President of Human Resources, Banyan Worldwide
Attachments: Employee Patent and Confidential Information Agreement
Form I-9
Accepted:
/s/ Douglas J. Greenlaw 10-18-99
- -------------------------------- ------------------------------
Douglas J. Greenlaw Start Date
<PAGE>
Exhibit 10.29
-------------
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement"), made this 1st day of December
1999 is entered into by and between Switchboard Incorporated, a Delaware
corporation (the "Company"), and Dean Polnerow (the "Employee").
1. Title; Capacity. The Employee shall serve as President, or in such
---------------
other position as the Company or its Board of Directors (the "Board") may
determine from time to time. The Employee shall be subject to the supervision
of, and shall have such authority as is delegated to him by, the Board or such
officer of the Company as may be designated by the Board.
The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board or its designee shall from time to time reasonably
assign to him. The Employee agrees to devote his entire business time,
attention and energies to the business and interests of the Company while
employed by the Company.
2. At-Will Employment. The Employee shall be employed on an at-will
------------------
basis, which means either party may terminate the employment relationship at any
time, for any reason or no reason, and with or without notice.
3. Compensation and Benefits.
-------------------------
3.1 Salary. The Company shall pay the Employee a base salary at the
------
annualized rate of one-hundred and sixty-five thousand dollars ($165,000), in
equal bi-weekly
-1-
<PAGE>
installments, consistent with the Company's regular payroll procedures.
Employee's salary shall be subject to adjustment, as determined by the Board.
3.2 Bonus. The Employee shall be eligible to receive an annual bonus
-----
of up to sixty thousand dollars ($60,000) for the one-year period beginning on
January 1, 1999, in the event that Employee meets certain criteria as set forth
in the Employee's 1999 Executive Incentive Plan. The Employee shall also be
eligible to receive an additional annual bonus for the same one-year period of
up to thirty-five thousand dollars ($35,000) in the event that he substantially
surpasses achievement of the criteria, as set forth in the 1999 Executive
Incentive Plan. Such bonuses shall be subject to adjustment thereafter as
determined by the Board.
3.3 Benefits. The Employee shall be entitled to participate in all
--------
benefit programs that the Company establishes and makes available to its
employees, if any, to the extent that Employee's position, tenure, salary, age,
health and other qualifications make him eligible to participate. The Employee
shall also be entitled to receive life insurance coverage an amount equal to
five times Employee's base salary (or $825,000 as of the date hereof) with the
Company to pay all applicable premiums. All increases in the amount of life
insurance, based upon upward adjustments in Employee's salary, are subject to
the Company's ability to obtain additional coverage.
4. Change in Control.
-----------------
4.1 Stock Options. In the event of a Change in Control, fifty
-------------
percent (50%) of the Employee's outstanding unvested stock options shall
immediately vest and become exercisable in full, if:
(i) the Employee remains employed by the Company for a continuous
-2-
<PAGE>
period of six (6) months after the effective Change in Control date; or
(ii) the Employee elects to resign within six (6) months of the
effective Change in Control date because (a) the Employee's job is relocated
more than 35 miles from Westboro, Massachusetts or (b) the Employee's job title
and/or overall targeted cash compensation are materially reduced from levels in
effect immediately prior to the Change in Control.
4.2 Stock Options Upon Termination. If, within one year of the
-------------------------------
Change in Control Date, the Employee is terminated for any reason other than for
cause, one-hundred percent (100%) of the Employee's outstanding, unvested stock
options shall immediately vest and become exercisable in full.
4.3 "Change in Control" means an event or occurrence set forth in any
-----------------
one or more of subsections (a) through (d) below (including an event or
occurrence that constitutes a Change in Control under one of such subsections
but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person"), other than Banyan Worldwide
or CBS Corporation, of beneficial ownership of any capital stock of the Company
if, after such acquisition, such Person beneficially owns (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) 20% or more of either (i) the
then-outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then-outstanding
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company
-3-
<PAGE>
Voting Securities"); provided, however, that for purposes of this subsection
(a), the following acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Company (excluding an acquisition pursuant to
the exercise, conversion or exchange of any security exercisable for,
convertible into or exchangeable for common stock or voting securities of the
Company, unless the Person exercising, converting or exchanging such security
acquired such security directly from the Company or an underwriter or agent of
the Company), (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i) and (ii)
of subsection (c) of this Section; or
(b) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board (or, if applicable, the Board of Directors of
a successor corporation to the Company), where the term "Continuing Director"
means at any date a member of the Board (i) who was a member of the Board on
the date of the execution of this Agreement or (ii) who was nominated or elected
subsequent to such date by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (ii)
-------- -------
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or
-4-
<PAGE>
(c) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the Company or a sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), unless, immediately following such Business
Combination, each of the following two conditions is satisfied: (i) all or
substantially all of the individuals and entities who were the beneficial owners
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of the then-outstanding shares of common
stock and the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors, respectively, of the resulting
or acquiring corporation in such Business Combination (which shall include,
without limitation, a corporation which as a result of such transaction owns the
Company or substantially all of the Company's assets either directly or through
one or more subsidiaries) (such resulting or acquiring corporation is referred
to herein as the "Acquiring Corporation") in substantially the same proportions
as their ownership, immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
respectively; and (ii) no Person (excluding the Acquiring Corporation or any
employee benefit plan (or related trust) maintained or sponsored by the Company
or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the then-outstanding securities
of such corporation entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to the Business
Combination); or
-5-
<PAGE>
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
5. Circumstances Triggering Receipt of Termination Benefits.
--------------------------------------------------------
5.1 Termination by Switchboard. Switchboard shall provide the
--------------------------
Employee with the benefits set forth in Section 6 upon termination by
Switchboard of the Employee's employment at any time during the term of this
Agreement for reasons other than termination for "cause." For the purposes
hereof, "cause" shall be defined as the willful and repeated failure of the
Employee to perform substantially his duties, or action by the Employee
involving willful misfeasance, gross negligence or the commission of any
felonious action; provided, however, that termination for cause shall not be
effective unless the Employee shall have received written notice from
Switchboard of such failure (specifying in detail the facts and circumstances on
which Switchboard is relying) and a demand for substantial performance thirty
(30) days prior to such termination, and Switchboard determines that the
Employee shall have failed during such thirty (30) day period to resume the
diligent performance of his duties. If Employee, in good faith, disputes
Switchboard's determination that he has not so resumed the diligent performance
of his duties, the parties agree to submit such dispute to arbitration in
accordance with the provisions of Section 12 below.
5.2 Change in Control Termination. Switchboard shall provide the
------------------------------
Employee with the benefits set forth in Section 6 if the Employee is terminated
by the Employer for any reason other than for cause, if such termination occurs
within one (1) year of the effective Change in Control date.
-6-
<PAGE>
5.3 Termination by Employee. Switchboard shall provide the Employee
-----------------------
with the benefits set forth in Section 6 upon termination by the Employee of the
Employee's employment with Switchboard at any time during the term of this
Agreement if the Employee elects to resign within 90 days of either of the
following events:
(i) The Employee's job is relocated more than 35 miles from
Westboro, Massachusetts; or
(ii) The Employee's job title and/or overall targeted cash
compensation are materially reduced from levels in effect at the
commencement of the initial or any renewal term of this Agreement.
5.4 Notice of Termination. Any termination of the Employee's
---------------------
employment by Switchboard or by the Employee as referred to in this Section
shall be communicated by written notice of termination to the other party.
6. Termination Benefits. Subject to and in accordance with the
--------------------
provisions set forth in Section 5, and further subject to the execution of a
mutually agreeable release agreement, the following benefits (subject to any
applicable taxes required to be withheld) shall be paid to the Employee as
follows:
(a) Compensation. The Employee will be paid (i) his base salary;
------------
and (ii) a pro rated bonus based on assumed achievement of the requisite
criteria set forth in the 1999 Executive Incentive Plan for six months from the
effective date of his termination.
(b) Insurance Benefits, etc. The Employee's participation
------------------------
(including dependent coverage) in the life, health and dental insurance plans
(excluding further participation in the existing 401K Plan) of Switchboard in
effect immediately prior to the effective date of
-7-
<PAGE>
Employee's termination shall be continued, or equivalent benefits provided, by
Switchboard, at the Employee's then current contribution rate for such benefits
for a period of up to six months commencing on the effective date of Employee's
termination (the "Continuation Period") in the event that the Employee remains
unemployed during the Continuation Period. If Employee obtains other employment
during the Continuation Period, any continuing benefits will cease.
7. Continuing Obligations. In order to induce Switchboard to enter into
----------------------
this Agreement, the Employee hereby ratifies and confirms his Invention and Non-
Disclosure Agreement with Switchboard. Without limiting the generality of the
foregoing, the Employee agrees that all documents, records, techniques, business
secrets and other information which have come into his possession from time to
time during his employment hereunder shall be deemed to be confidential and
proprietary to Switchboard and he shall retain in confidence any confidential
information known to him concerning Switchboard and its parent and/or
subsidiaries and their respective businesses and such information shall not be
disclosed.
8. Other Agreements. Employee hereby represents that he is not bound by
----------------
the terms of any agreement with any previous employer or other party to refrain
from using or disclosing any trade secret or confidential or proprietary
information in the course of his employment with the Company or to refrain from
competing, directly or indirectly, with the business of such previous employer
or any other party. Employee further represents that his performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence proprietary information, knowledge or
data acquired by him in confidence or in trust prior to his employment with the
Company.
-8-
<PAGE>
9. Notices. All notices required or permitted under this Agreement shall
-------
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 8.
10. Pronouns. Whenever the context may require, any pronouns used in this
--------
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
11. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement,
including but not limited to the April 16, 1997 Offer Letter and the May 6, 1997
Senior Executive Termination Benefits Agreement, except as otherwise specified
in this Agreement. Employee's January 1, 1997 Invention and Non-Disclosure
Agreement; December 17, 1996 Incentive Stock Option Agreement; March 26, 1998
Incentive Stock Option Agreement; April 22, 1999 Incentive Stock Option
Agreement; and October 18, 1999 Stock Option Agreement will remain in full force
and effect, except that any provisions relating to adjustment of options upon a
change in control of the Company in the aforementioned stock option agreements
are hereby deleted and replaced by the language contained in Section 4 of this
Agreement. Employee's stock option agreements with Banyan Worldwide will remain
in full force and effect.
12. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement or the breach thereof shall be settled by arbitration to be
conducted in Boston, Massachusetts, in
-9-
<PAGE>
accordance with the rules of the American Arbitration Association, and judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
13. Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by both the Company and the Employee.
14. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Massachusetts.
15. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
16. Term. The initial term of this Agreement shall be for a period of
-----
twelve (12) months commencing on the effective date of this Agreement.
Thereafter, this Agreement shall be automatically renewed for successive twelve
(12) month periods unless either party indicates its intent not to renew by
giving at least sixty (60) days written notice prior to the expiration of the
then-current term.
17. Miscellaneous.
-------------
17.1 No delay or omission by the Company in exercising any right under
this Agreement shall operate as a waiver of that or any other right. A waiver
or consent given by the Company on any one occasion shall be effective only in
that instance and shall not be construed as a bar or waiver of any right on any
other occasion.
-10-
<PAGE>
17.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
17.3 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
SWITCHBOARD INCORPORATED
By: /s/ John P. Jewett
---------------------------------
Title: Vice President and CFO
------------------------------
DEAN POLNEROW
/s/ Dean Polnerow
------------------------------------
-12-
<PAGE>
Exhibit 10.31
-------------
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement"), made this 31 day of December
1999 is entered into by and between Switchboard Incorporated, a Delaware
corporation (the "Company"), and James M. Canon (the "Employee").
1. Title; Capacity. The Employee shall serve as Vice President of
---------------
Business Development, or in such other position as the Company or its Board of
Directors (the "Board") may determine from time to time. The Employee shall be
subject to the supervision of, and shall have such authority as is delegated to
him by, the Board or such officer of the Company as may be designated by the
Board.
The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board or its designee shall from time to time reasonably
assign to him. The Employee agrees to devote his entire business time,
attention and energies to the business and interests of the Company while
employed by the Company.
2. At-Will Employment. The Employee shall be employed on an at-will
------------------
basis, which means either party may terminate the employment relationship at any
time, for any reason or no reason, and with or without notice.
3. Compensation and Benefits.
-------------------------
3.1 Salary. The Company shall pay the Employee a base salary at the
------
annualized rate of one-hundred and thirty thousand dollars ($130,000), in equal
bi-weekly
<PAGE>
installments, consistent with the Company's regular payroll procedures.
Employee's salary shall be subject to adjustment, as determined by the Board.
3.2 Bonus. The Employee shall be eligible to receive an annual bonus
------
of up to thirty-two thousand and five-hundred dollars ($32,500) for the one-year
period beginning on January 1, 1999, in the event that certain criteria are met,
as specifically set forth in the Employee's 1999 Executive Incentive Plan. Such
bonus shall be subject to adjustment thereafter as determined by the Board.
3.3 Benefits. The Employee shall be entitled to participate in all
---------
benefit programs that the Company establishes and makes available to its
employees, if any, to the extent that Employee's position, tenure, salary, age,
health and other qualifications make him eligible to participate.
4. Change in Control.
-----------------
4.1 Stock Options. In the event of a Change in Control, fifty
-------------
percent (50%) of the Employee's outstanding unvested stock options shall
immediately vest and become exercisable in full, if:
(i) the Employee remains employed by the Company for a continuous
period of six (6) months after the effective Change in Control date; or
(ii) the Employee elects to resign within six (6) months of the
effective Change in Control date because (a) the Employee's job is relocated
more than 35 miles from Westboro, Massachusetts or (b) the Employee's job title
and/or overall targeted cash compensation are materially reduced from levels in
effect immediately prior to the Change in Control.
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4.2 "Change in Control" means an event or occurrence set forth in
-----------------
any one or more of subsections (a) through (d) below (including an event or
occurrence that constitutes a Change in Control under one of such subsections
but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person"), other than Banyan Worldwide or
CBS Corporation, of beneficial ownership of any capital stock of the Company if,
after such acquisition, such Person beneficially owns (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) 20% or more of either (i) the
then-outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then-outstanding
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
--------
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change in Control: (i) any acquisition directly from the Company
(excluding an acquisition pursuant to the exercise, conversion or exchange of
any security exercisable for, convertible into or exchangeable for common stock
or voting securities of the Company, unless the Person exercising, converting or
exchanging such security acquired such security directly from the Company or an
underwriter or agent of the Company), (ii) any acquisition by the Company, (iii)
any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i) and (ii) of subsection (c) of this Section 1.1; or
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(b) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board (or, if applicable, the Board of Directors of
a successor corporation to the Company), where the term "Continuing Director"
means at any date a member of the Board (i) who was a member of the Board on
the date of the execution of this Agreement or (ii) who was nominated or elected
subsequent to such date by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (ii)
-------- -------
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or
(c) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the Company or a sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), unless, immediately following such Business
Combination, each of the following two conditions is satisfied: (i) all or
substantially all of the individuals and entities who were the beneficial owners
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of the then-outstanding shares of common
stock and the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors, respectively, of the resulting
or acquiring corporation in such Business Combination (which shall include,
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without limitation, a corporation which as a result of such transaction owns the
Company or substantially all of the Company's assets either directly or through
one or more subsidiaries) (such resulting or acquiring corporation is referred
to herein as the "Acquiring Corporation") in substantially the same proportions
as their ownership, immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
respectively; and (ii) no Person (excluding the Acquiring Corporation or any
employee benefit plan (or related trust) maintained or sponsored by the Company
or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the then-outstanding securities
of such corporation entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to the Business
Combination); or
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
5. Circumstances Triggering Receipt of Termination Benefits.
--------------------------------------------------------
5.1 Termination by Switchboard. Switchboard shall provide the
--------------------------
Employee with the benefits set forth in Section 6 upon termination by
Switchboard of the Employee's employment at any time during the term of this
Agreement for reasons other than termination for "cause." For the purposes
hereof, "cause" shall be defined as the willful and repeated failure of the
Employee to perform substantially his duties, or action by the Employee
involving willful misfeasance, gross negligence or the commission of any
felonious action; provided, however, that termination for cause shall not be
effective unless the Employee shall have received written
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notice from Switchboard of such failure (specifying in detail the facts and
circumstances on which Switchboard is relying) and a demand for substantial
performance thirty (30) days prior to such termination, and Switchboard
determines that the Employee shall have failed during such thirty (30) day
period to resume the diligent performance of his duties. If Employee, in good
faith, disputes Switchboard's determination that he has not so resumed the
diligent performance of his duties, the parties agree to submit such dispute to
arbitration in accordance with the provisions of Section 12 below.
5.2 Termination by Employee. Switchboard shall provide the Employee
------------------------
with the benefits set forth in Section 6 upon termination by the Employee of the
Employee's employment with Switchboard at any time during the term of this
Agreement if the Employee elects to resign within 90 days of either of the
following events:
(i) The Employee's job is relocated more than 35 miles from
Westboro, Massachusetts; or
(ii) The Employee's job title and/or overall targeted cash
compensation are materially reduced from levels in effect at the
commencement of the initial or any renewal term of this Agreement.
5.3 Notice of Termination. Any termination of the Employee's
---------------------
employment by Switchboard or by the Employee as referred to in this Section
shall be communicated by written notice of termination to the other party.
6. Termination Benefits. Subject to and in accordance with the
--------------------
provisions set forth in Section 5, and further subject to the execution of a
mutually agreeable release agreement, the following benefits (subject to any
applicable taxes required to be withheld) shall be paid to the
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Employee as follows:
(a) Compensation. The Employee will be paid his base salary for a
------------
period of six months from the effective date of his termination (the
"Continuation Period"), in the event that the Employee remains unemployed during
the Continuation Period. If the Employee obtains other employment during the
Continuation Period, any salary continuation will cease unless the Employee's
new employment is at a base salary lower than his base salary under Section 3.1,
in which case the Company will pay the Employee the difference between his base
salary under Section 3.1 and his new base salary during the Continuation Period.
(b) Insurance Benefits, etc. The Employee's participation (including
------------------------
dependent coverage) in the life, health and dental insurance plans (excluding
further participation in the existing 401K Plan) of Switchboard in effect
immediately prior to the effective date of Employee's termination shall be
continued, or equivalent benefits provided, by Switchboard, at the Employee's
then current contribution rate for such benefits for a period of up to six
months commencing on the effective date of Employee's termination in the event
that the Employee remains unemployed during the Continuation Period. If
Employee obtains other employment during the Continuation Period, any continuing
benefits will cease.
7. Continuing Obligations. In order to induce Switchboard to enter into
----------------------
this Agreement, the Employee hereby ratifies and confirms his Invention and Non-
Disclosure Agreement with Switchboard. Without limiting the generality of the
foregoing, the Employee agrees that all documents, records, techniques, business
secrets and other information which have come into his possession from time to
time during his employment hereunder shall be deemed to be confidential and
proprietary to Switchboard and he shall retain in confidence any confidential
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information known to him concerning Switchboard and its parent and/or
subsidiaries and their respective businesses and such information shall not be
disclosed.
-8-
<PAGE>
8. Other Agreements. Employee hereby represents that he is not bound by
----------------
the terms of any agreement with any previous employer or other party to refrain
from using or disclosing any trade secret or confidential or proprietary
information in the course of his employment with the Company or to refrain from
competing, directly or indirectly, with the business of such previous employer
or any other party. Employee further represents that his performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence proprietary information, knowledge or
data acquired by him in confidence or in trust prior to his employment with the
Company.
9. Notices. All notices required or permitted under this Agreement shall
-------
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 8.
10. Pronouns. Whenever the context may require, any pronouns used in this
--------
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
11. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement,
including but not limited to the May 8, 1997 Senior Executive Termination
Benefits Agreement and any other employment-related agreements or benefits
agreements between the Employee and Switchboard, except as otherwise specified
in this Agreement. Employee's December 27, 1996 Invention and Non-Disclosure
Agreement;
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December 17, 1996 Incentive Stock Option Agreement, as amended; March 26, 1998
Incentive Stock Option Agreement; April 22, 1999 Incentive Stock Option
Agreement; and October 18, 1999 Incentive Stock Option Agreement will remain in
full force and effect, except that any provisions relating to adjustment of
options upon a change in control of the Company in the aforementioned stock
option agreements are hereby deleted and replaced by the language contained in
Section 4 of this Agreement. Employee's stock option agreements with Banyan
Worldwide will remain in full force and effect.
12. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement or the breach thereof shall be settled by arbitration to be
conducted in Boston, Massachusetts, in accordance with the rules of the American
Arbitration Association, and judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof.
13. Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by both the Company and the Employee.
14. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Massachusetts.
15. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
16. Term. The initial term of this Agreement shall be for a period of
-----
twelve (12) months commencing on the effective date of this Agreement.
Thereafter, this Agreement shall be automatically renewed for successive twelve
(12) month periods unless either party indicates its
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intent not to renew by giving at least sixty (60) days written notice prior to
the expiration of the then-current term.
17. Miscellaneous.
-------------
17.1 No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
17.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
17.3 In case any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
SWITCHBOARD INCORPORATED
/s/ John Jewett
By: John Jewett
----------------------------
Title: Vice President and CFO
-------------------------
JAMES M. CANON
/s/ James M. Canon
------------------------------
Vice President Business Development
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Exhibit 10.32
-------------
EXODUS COMMUNICATIONS, INC.
INTERNET DATA CENTER SERVICES AGREEMENT
THIS INTERNET DATA CENTER SERVICES AGREEMENT (this "Agreement") is made
effective as of the Submission Date (June 30, 1998) indicated in the initial
Internet Data Center Services Order Form accepted by Exodus, by and between
Exodus Communications, Inc. ("Exodus") and the customer identified below
("Customer").
PARTIES:
CUSTOMER NAME: SWITCHBOARD
ADDRESS: 115 FLANDERS ROAD
WESTBOROUGH, MA 01581
PHONE: 508-898-1775
FAX: 508-870-2000
EXODUS COMMUNICATIONS, INC.
2650 San Tomas Expressway
Santa Clara, CA 95051
Phone: (408) 346-2200
Fax: (408) 346-2206
1. INTERNET DATA CENTER SERVICES.
Subject to the terms and conditions of this Agreement during the term of
this Agreement, Exodus will provide to Customer the services described in the
Internet Data Center Services Order Form(s) ("IDC Services Order Form(s)")
accepted by Exodus ("Internet Data Center Services"). All IDC Services Order
Forms accepted by Exodus are incorporated herein by this reference, each as of
the Submission Date indicated in such form. The initial IDC Services Order Form
is set forth in Exhibit A. The parties hereby agree that the service
descriptions attached hereto as Exhibit B are hereby incorporated into the
initial IDC Services Form and thereby, into this Agreement. During the term of
this Agreement, Exodus shall provide support services in accordance with Exhibit
C. Exodus may modify its support procedures and Internet Data Center Services
during the term of this Agreement, provided that such changes do not materially
diminish the benefits afforded to Customer pursuant to Exhibit C.
2. FEES AND BILLING.
2.1 Fees. Customer will pay all fees due according to the IDC Services
Order Form(s).
2.2 Billing Commencement. Billing for Internet Data Center Services, other
than Setup Fees, indicated in the initial IDC Services Order Form shall commence
on the earlier to occur of (i) the "Installation Date" indicated in the initial
IDC Services Order Form, regardless of whether Customer has commenced use of the
Internet Data Center Services, unless Customer is unable to install the Customer
Equipment and/or use the applicable Internet Data Center Services by the
Installation Date due to the fault of Exodus, then billing will not begin until
the date Exodus has remedied such fault and (ii) the date the "Customer
Equipment" (Customer's computer hardware and other tangible equipment, as
identified in the Customer Equipment List which is incorporated herein by this
reference) is placed by Customer in the "Customer Area" (the portion(s) of the
Internet Data Centers, as defined in Section 3.1 below, made available to
Customer hereunder for the placement of Customer Equipment) and is operational.
All Setup Fees will be billed upon receipt of a Customer signed IDC Services
Order Form. In the event that Customer orders additional Internet Data Center
Services, billing for such services shall commence on the date Exodus first
provides such additional Internet Data Center Services to Customer or as
otherwise agreed to by Customer and Exodus.
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2.3 Billing and Payment Terms. Customer will be billed monthly in advance
of the provision of Internet Data Center Services, and payment of such fees will
be due within thirty (30) days of the date of each Exodus invoice provided that
Exodus has performed the billed Services. All payments will be made in U.S.
dollars. Late payments hereunder, other than amounts which are the subject of a
good faith dispute between the parties, will accrue interest at a rate of one
and one-half percent (1 1/2%) per month, or the highest rate allowed by
applicable law, whichever is lower.
2.4 Taxes. All payments required by this Agreement are exclusive of all
national, state, municipal or other governmental excise, sales, value-added,
use, personal property, and occupational taxes, excises, withholding taxes and
obligations and other levies now in force or enacted in the future, all of which
Customer will be responsible for and will pay in full, except for taxes based on
Exodus' net income.
3. CUSTOMER'S OBLIGATIONS.
3.1 Compliance with Law and Rules and Regulations. Customer agrees that
Customer will comply at all times with all applicable laws and regulations and
Exodus' general rules and regulations relating to its provision of Internet Data
Center Services, as updated by Exodus from time to time ("Rules and
Regulations") attached hereto as Exhibit E. Exodus will provide Customer with
prior notice of any changes to the Rules and Regulations. If Customer does not
agree to the modified Rules and Regulations, it may refuse to accept such
revised Rules and Regulations, in which case, Customer will not be subject to
such revisions. Customer acknowledges that Exodus exercises no control
whatsoever over the content of the information passing through its sites
containing the Customer Area and equipment and facilities used by Exodus to
provide Internet Data Center Services ("Internet Data Centers"), and that it is
the sole responsibility of Customer to ensure that the information it transmits
and receives complies with all applicable laws and regulations.
3.2 Customer's Costs. Customer agrees that it will be solely responsible,
and at Exodus's request will reimburse Exodus, for all costs and expenses (other
than those included as part of the Internet Data Center Services and except as
otherwise expressly provided herein) it incurs at Customer's specific request
provided Customer is advised that there is a charge associated with such
request. Any costs and expenses in excess of $500 per occurrence require prior
written consent by an authorized management Representative of Customer.
3.3 Access and Security. Except with the advanced written consent of
Exodus, Customer's access to the Internet Data Centers will be limited solely to
the individuals identified and authorized by Customer to have access to the
Internet Data Centers and the Customer Area in accordance with this Agreement,
as identified in the Customer Registration Form, as amended from time to time by
Customer, which is hereby incorporated by this reference ("Representatives").
3.4 No Competitive Services. Customer may not at any time resell any
Internet Data Center Services, without Exodus' prior written consent. The
foregoing shall not preclude Customer from hosting on Customer Equipment web
pages or applications which are Customer-branded, co-branded, or third-party
branded, or from serving any content whatsoever through Customer Equipment to
third party web sites or applications. Notwithstanding the foregoing, Customer's
customers may not have physical access to Exodus' Internet Data Center(s) except
as otherwise provided herein.
3.5 Insurance.
(a) Minimum Levels. Each party will keep in full force and effect
during the term of this Agreement: (i) comprehensive general liability insurance
in an amount not less than $5 million per occurrence for bodily injury and
property damage; (ii) employer's liability insurance in an amount not less than
$1 million per occurrence; and (iii) workers' compensation insurance in an
amount not less than that required by applicable law. Each party also agrees
that it will be solely responsible for ensuring that its agents (including
contractors and subcontractors) having access to the Internet Data Center in
which Customer Area is located, maintain insurance at levels no less than those
required by applicable law and customary in such agents' industries. Each party
agrees to notify the other party should the insurance levels of either party go
below the levels stated above or lapses or cancellation of coverages.
(b) Certificates of Insurance. Prior to installation of any Customer
Equipment in the Customer Area, each party will furnish the other party with
certificates of insurance which evidence the minimum levels of insurance set
forth above.
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(c) Intentionally Deleted.
4. CONFIDENTIAL INFORMATION.
4.1 Confidential Information. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's past, current or future business, plans, customers, business
partners, suppliers, personnel, software, hardware services, technology, and
products, including the terms and conditions of this Agreement ("Confidential
Information"). Each party agrees that it will not use in any way, for its own
account or the account of any third party, except as expressly permitted by this
Agreement, nor disclose to any third person (except as required by law) any of
the other party's Confidential Information, provided that the recipient party
hereunder may disclose such Confidential Information on a need-to-know basis for
the purpose of carrying out this Agreement or complying with such recipient
party's corporate fiduciary obligations, to its employees, directors or legal or
financial advisors, who are under a duty not to use or disclose the information,
other than for the purposes specifically permitted hereunder. The party
receiving the Confidential Information will use at least the same standard of
care it uses to protect the confidentiality of its own such information, which
shall in no event be less than a reasonable standard of care.
4.2 Exceptions. Information will not be deemed Confidential Information
hereunder if such information: (i) is known to the receiving party prior to
receipt from the disclosing party directly or indirectly from a source other
than one having an obligation of confidentiality to the disclosing party; (ii)
becomes known (independently of disclosure by the disclosing party) to the
receiving party directly or indirectly from a source other than one having an
obligation of confidentiality to the disclosing party; (iii) becomes publicly
known or otherwise ceases to be secret or confidential, except through a breach
of this Agreement by the receiving party; or (iv) is independently developed by
the receiving party without resort to the other party's Confidential
Information.
5. REPRESENTATIONS, DISCLAIMERS AND WARRANTIES.
5.1 Warranties by Customer.
(a) Customer Equipment. Customer represents and warrants that it owns
or has the legal right and authority, and will continue to own or maintain the
legal right and authority during the term, of this Agreement, to place and use
the Customer Equipment as contemplated by this Agreement. Customer further
represents and warrants that its placement, arrangement, and use of the Customer
Equipment in the Internet Data Centers complies with the Customer Equipment
Manufacturer's environmental and other specifications.
(b) Customer's Business. Customer represents and warrants that
Customer's services, products, materials, data, information and Customer
Equipment, used by Customer in connection with this Agreement as well as
Customer's and its permitted customers' and users' use of the Internet Data
Center Services ( (collectively, "Customer's Business") does not as of the
Installation Date, and will not during the term of this Agreement operate in any
manner that would violate any applicable law or regulation.
(c) Rules and Regulations. Customer has read the Rules and
Regulations and represents and warrants that Customer and Customer's Business
are currently in full compliance with the Rules and Regulations, and will remain
so at all times during the term of Agreement.
(d) Breach of Warranties. Intentionally Deleted.
(e) EXCEPT FOR THE EXPRESS WARRANTIES SET OUT IN SUBSECTIONS (a),
(b), and (c) ABOVE, CUSTOMER DOES NOT MAKE, AND HEREBY DISCLAIMS, ANY AND ALL
OTHER EXPRESS AND/OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT
AND TITLE, AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE
PRACTICE.
5.2 Warranties and Disclaimers by Exodus.
(a) Service Level Warranty. In the event Customer experiences any of
the following due to causes which are attributable to Exodus or Exodus Third
Parties, and not as a result of any actions of Customer (including Customer
Equipment) or third parties other than Exodus Third Parties, Exodus will, upon
Customer's request in accordance with paragraph (iii) below, credit Customer's
account as described below. For
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Confidential materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(b) the purposes of this Agreement, "Exodus Third Parties" shall mean
third parties from which Exodus procured services or equipment in the delivery
of the Internet Data Center Services.
(i) Inability to Access the Internet (Downtime). If Customer is
unable to transmit and receive information from Exodus' Internet Data Centers
(i.e., Exodus' LAN and WAN) to other portions of the Internet for more than
[**]due to causes which are attributable to Exodus or Exodus Third Parties
(excluding causes attributable to Customer or other third parties, other than
Exodus Third Parties, Exodus will credit Customer's account the pro-rata total
service charges for [**] of service. If such event continues for an additional
[**], Exodus will credit Customer's account the pro-rata total service charges
for [**] of service, and for each additional [**] of service, up to an aggregate
maximum credit of total service charges for [**] of service in any [**]. Exodus'
scheduled maintenance of the Internet Data Centers and Internet Data Center
Services shall not be deemed to be an event for which a remedy is available
pursuant to this Section 5.2(a)(i). For purposes of the foregoing, unable to
transmit and receive" shall mean sustained packet loss averaging in excess of
[**] over such [**] or [**] period, as applicable, based on Exodus'
measurements. Exodus will, upon Customer's request provide Customer with
evidence of measurements reasonably acceptable to Customer to demonstrate the
existence and amount of any packet loss incurred by Customer and caused by
Exodus or Exodus Third Parties.
(ii) Packet Loss and Latency. Exodus does not proactively
monitor the packet loss or transmission latency of specific customers. Exodus
does, however, proactively monitor the aggregate packet loss and transmission
latency within its LAN and WAN. In the event that Exodus discovers (either from
its own efforts or after being notified by Customer) that Customer is
experiencing packet loss in excess of [**] percent ([**]) ("Excess Packet Loss")
or transmission latency in excess of [**] round trip time (based on Exodus' good
faith measurements) between any two Internet Data Centers within Exodus' U.S.
network (collectively, "Excess Latency", and with Excess Packet Loss "Excess
Packet Loss Latency"), and in the case where Customer discovers such condition,
Customer notifies Exodus, Exodus will take all actions necessary to determine
the source of the Excess Packet Loss/Latency.
(A) Time to Discover Source of Excess Packet Loss/Latency;
Notification of Customer. Within [**] of discovering the existence of Excess
Packet Loss/Latency, Exodus will determine whether the source of the Excess
Packet Loss/Latency is limited to the Customer Equipment and the Exodus
equipment connecting the Customer Equipment to Exodus' LAN ("Customer Specific
Packet Loss Latency"). If the Excess Packet Loss/Latency not a Customer Specific
Packet Loss/Latency, Exodus will determine the source of the Excess Packet
Loss/Latency within [**] after determining that it is not a Customer Specific
Packet Loss/Latency. In any event, Exodus will notify Customer of the source of
the Excess Packet Loss/Latency within [**] after identifying the source.
In addition to the foregoing, Exodus shall (1) notify Customer of any
Excess Packet Loss or Excess Latency discovered within Exodus' LAN or WAN
tenable Customer to determine whether same is affecting the Customer Equipment,
if Exodus reasonably believes that the problem uniquely affects Customer; and
(2) if Customer reasonably believes that it is entitled to a credit pursuant to
Sections 5.2(a)(i) or (ii) and requests such information in writing, Exodus
shall provide a written analysis of network performance to the extent same is
tracked b, Exodus and is relevant to validating the applicability and amount of
such credit.
(B) Remedy of Excess Packet Loss/Latency. If the Excess
Packet Loss/Latency remedy is due to causes attributable to Exodus or Exodus
Third Parties (excluding causes attributable to Customer or other third parties
other than Exodus Third Parties), Exodus will remedy the Excess Packet
Loss/Latency within [**] of determining the source of the Excess Packet
Loss/Latency. If the Excess Packet Loss/Latency is partly or wholly within the
control of third parties other than Exodus Third Parties, Exodus will notify
Customer and will use commercially reasonable efforts to notify the party(ies)
responsible for the source and cooperate with it (them) to resolve the problem
as soon as possible.
(C) Failure to Determine Source and/or Resolve Problem. In
the event that Exodus is unable to determine the source of and remedy the Excess
Packet Loss/Latency within the time periods described above (other than for
causes which are attributable to third parties other than Exodus Third Parties),
Exodus will credit Customer's account the pro-rata total service charges for
[**] of service for every [**] after the time periods described above that it
takes Exodus to resolve the problem, up to an aggregate maximum credit of total
service charges for [**] of service in any [**].
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(iii) Customer Must Request Credit. To receive any of the credits
described in this section 5.2(a), Customer must notify Exodus within [**] from
the time Customer becomes eligible to receive a credit. Failure to comply with
this requirement will forfeit Customer's right to receive a credit.
(iv) Remedies Shall Not Be Cumulative; Maximum Credit. In the
event that Customer is entitled to credits pursuant to both Sections 5.2(a)(i)
and 5.2(a)(ii) arising from the same event, such credits shall not be cumulative
and Customer shall be entitled to receive only the maximum single credit
available for such event. In no event will Exodus be required to credit Customer
in any one (1) calendar month total service charges in excess of [**] of
service. Customer shall not be eligible to receive any credits for periods in
which Customer received any Internet Data Center Services free of charge (not as
a result of a credit under this Section 5.2).
(v) Termination Option for Chronic Problems. If, in any single
calendar month, Customer would be able to receive credits totaling [**]
resulting from [**] or more events during such calendar month or, if any single
event entitling Customer to credits under paragraph 5.2(a)(i) exits for a period
of [**], then Customer may terminate this Agreement for cause and without
penalty by notifying Exodus within five (5) days following the end of such
calendar month. Such termination will be effective in not less than ten (10)
days and not more than sixty (60) days after receipt of such notice by Exodus.
THIS WARRANTY DOES NOT APPLY TO ANY INTERNET DATA CENTER SERVICES THAT EXPRESSLY
EXCLUDE THIS WARRANTY (AS DESCRIBED IN THE SPECIFICATION SHEETS FOR SUCH
PRODUCTS).
(c) Exodus represents and warrants that: (i) it owns and has
legal right and authority, and will continue to own and maintain the legal right
and authority during the term of this Agreement, to allow the placement and use
of the Customer Equipment in the Customer Area of the Internet Data Center and
to perform the Internet Data Center Services from such location as contemplated
by this Agreement; (ii) it has full right, power and authority to enter into
this Agreement and to perform the acts required of it hereunder; (iii) the
execution of this Agreement by Exodus and the performance by Exodus of its
obligations and duties hereunder, does not and will not violate any agreement to
which Exodus is a party or by which it is otherwise legally bound; and (iv)
Exodus' Internet Data Center Services, and facilities used by Customer pursuant
to this Agreement (A) do not as of the Installation Date, and will not during
the term of this Agreement be provided or operate in any manner that would
violate any applicable law or regulation; and (B) as of the submission date,
comply with the description of the facility systems attached hereto as Exhibit
D. Exodus covenants that during the term of this Agreement Exodus will not alter
the facilities systems it uses such that Customer would receive materially
reduced benefits (as reasonably determined by Customer in consultation with
Exodus) from Exodus facilities systems as described in Exhibit D. If Exodus
breaches the warranties and covenants in this Section 5.2(b) and fails to cure
any such breach within the time period provided in Section 8, below, Customer's
sole remedy shall be its ability to terminate this Agreement effective in not
less than ten (10) days and not more than sixty (60) days after (receipt of
written notification from Customer. The foregoing limitation shall not release
Exodus of any of its obligation pursuant to Section 7.1 (Indemnification),
below.
(d) No Other Warranty. EXCEPT FOR THE EXPRESS WARRANTY SET OUT
IN SUBSECTIONS (a) AND (b) ABOVE, THE INTERNET DATA CENTER SERVICES ARE PROVIDED
ON AN "AS IS" BASIS, AND CUSTOMER'S USE OF THE INTERNET DATA CENTER SERVICES IS
AT ITS OWN RISK. EXODUS DOES NOT MAKE, AND HEREBY DISCLAIMS, ANY AND ALL OTHER
EXPRESS AND/OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE,
AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE.
EXODUS DOES NOT WARRANT THAT THE INTERNET DATA CENTER SERVICES WILL BE
UNINTERRUPTED, ERROR-FREE, OR COMPLETELY SECURE.
(e) Disclaimer of Actions Caused by and/or Under the Control of
Third Parties . EXODUS DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM
EXODUS' INTERNET DATA CENTERS AND OTHER PORTIONS OF THE INTERNET. SUCH FLOW
DEPENDS IN LARGE PART ON THE PERFORMANCE OF INTERNET SERVICES PROVIDED OR
CONTROLLED BY THIRD PARTIES. AT TIMES, ACTIONS OR INACTIONS CAUSED BY THESE
THIRD PARTIES CAN PRODUCE SITUATIONS IN WHICH EXODUS' CUSTOMERS' CONNECTIONS TO
THE INTERNET (OR PORTIONS THEREOF) MAY BE IMPAIRED OR DISRUPTED. ALTHOUGH EXODUS
-5-
<PAGE>
(f) WILL USE COMMERCIALLY REASONABLE EFFORTS TO REMEDY AND
AVOID SUCH EVENTS, EXODUS CANNOT GUARANTEE THAT THEY WILL NOT OCCUR.
ACCORDINGLY, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, EXODUS
DISCLAIMS ANY AND ALL LIABILITY RESULTING FROM OR RELATED TO SUCH EVENTS.
SERVICE INTERRUPTIONS OR PROBLEMS RESULTING FROM EQUIPMENT OR TELECOMMUNICATIONS
FACILITIES CONTROLLED AND OPERATED BY EXODUS ARE EXPRESSLY EXCLUDED FROM THIS
DISCLAIMER.
6. LIMITATIONS OF LIABILITY
6.1 Personal Injury. EACH REPRESENTATIVE AND ANY OTHER PERSONS VISITING
THE INTERNET DATA CENTERS DOES SO AT ITS OWN RISK AND EXODUS ASSUMES NO
LIABILITY WHATSOEVER FOR ANY HARM TO SUCH PERSONS RESULTING FROM ANY CAUSE OTHER
THAN EXODUS' NEGLIGENCE OR WILLFUL MISCONDUCT RESULTING IN PERSONAL INJURY TO
SUCH PERSONS DURING SUCH A VISIT.
6.2 Damage to Customer Equipment or Business. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS AGREEMENT, EXODUS ASSUMES NO LIABILITY FOR ANY
DAMAGE TO, OR LOSS RELATING TO CUSTOMER'S BUSINESS RESULTING FROM ANY CAUSE
WHATSOEVER. EXODUS ASSUMES NO LIABILITY FOR ANY DAMAGE TO, OR LOSS OF, ANY
CUSTOMER EQUIPMENT RESULTING FROM ANY CAUSE OTHER THAN EXODUS' NEGLIGENCE,
WILLFUL MISCONDUCT OR MATERIAL BREACH OF THIS AGREEMENT. TO THE EXTENT EXODUS IS
LIABLE FOR ANY DAMAGE TO, OR LOSS OF, THE CUSTOMER EQUIPMENT FOR ANY REASON,
SUCH LIABILITY WILL BE LIMITED SOLELY TO THE REPLACEMENT VALUE OF THE CUSTOMER
EQUIPMENT.
6.3 Exclusions. EXCEPT AS SPECIFIED IN SECTIONS 6.1, 6.2, AND 7.1, IN NO
EVENT WILL EXODUS BE LIABLE TO CUSTOMER, ANY REPRESENTATIVE, OR ANY THIRD PARTY
FOR ANY LOST REVENUE, LOST PROFITS, LOSS OF DATA, LOSS OF SERVICES, EXCEPT AS
OTHERWISE PROVIDED HEREIN, INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL
DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER UNDER
THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
6.4 Maximum Liability. Intentionally Deleted.
6.5 Customer's Insurance. Intentionally Deleted.
6.6 Basis of the Bargain; Failure of Essential Purpose. Customer
acknowledges that Exodus set its prices and entered into this Agreement in
reliance upon the limitations of liability and disclaimers of warranties and
damages set forth herein, and that the same form an essential basis of the
bargain between the parties. The parties agree that the limitations and
exclusions of liability and disclaimers specified in this Agreement will survive
and apply even if found to have failed of their essential purpose.
6.7 EXCEPT AS SET FORTH IN 7.2, IN EVENT WILL CUSTOMER BE LIABLE HEREUNDER
TO EXODUS, ANY REPRESENTATIVE OR THIRD PARTY FOR ANY LOST REVENUE, LOST PROFITS,
LOSS OF SERVICE, ( LOSS OF DATA, INCIDENTIAL, PUNITIVE, INDIRECT OR
CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
EITHER UNDER THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY
OR OTHERWISE.
7. INDEMNIFICATION.
7.1 Exodus' Indemnification of Customer. Exodus will indemnify, defend and
hold Customer, its employees, parent and/ or subsidiaries harmless from and
against any and all costs, liabilities, losses, and expenses (including, but not
limited to, reasonable attorneys' fees) (collectively, "Losses") resulting from
or arising out of any third party claim, suit, action, or proceeding (each, an
"Action") brought against Customer, its employees, parents and/or subsidiaries
alleging or arising out of (i) the infringement or misappropriation of any
intellectual property rights, resulting from the provision of Internet Data
Center Services pursuant to this Agreement (but excluding any infringement
contributorily caused by Customer's Business of Customer
-6-
<PAGE>
Equipment); (ii) personal injury to Customer's Representatives from Exodus's
negligence or willful misconduct, or (iii) Exodus' material breach of Sections
5.2(b)(i), (ii) or (iv), provided that the indemnification obligation hereunder
shall not apply to the extent that such Losses were caused by the negligence,
breach or willful misconduct of Customer.
7.2 Customer's Indemnification of Exodus. Customer will indemnify, defend
and hold Exodus and its affiliates harmless from and against any and all Losses
resulting from or arising out of any Action brought by or against Exodus or its
affiliates alleging or arising out of: (a) with respect to the Customer's
Business: (i) infringement or misappropriation of any intellectual property
rights; (ii) defamation, libel, slander, obscenity, pornography, or violation of
the rights of privacy or publicity; or (iii) spamming, or any other offensive,
harassing or illegal conduct or violation of the Rules and Regulations; (b) any
damage or destruction to the Customer Area, the Internet Data Centers or the
equipment of Exodus or any other customer by Customer or Representative(s) or
Customer's designees; or (c) any material breach of Customer's obligation under
this Agreement, provided however, that the indemnification obligation hereunder
shall not apply to the extent that such Losses were caused by the negligence,
breach, or willful misconduct of Exodus.
7.3 Notice. Each party will provide the other party prompt written notice
upon of the existence of any such event of which it becomes aware, and an
opportunity to participate in the defense thereof at such other party's sole
cost and expense.
8. TERM AND TERMINATION.
8.1 Term. This Agreement will be effective for a period of fourteen (14)
months from the first Installation Date on the initial IDC Services Order Form,
unless earlier terminated according to the provisions of this Section 8
("Initial Term"). Following the Initial Term, the Agreement will automatically
continue indefinitely until terminated in accordance with Section 8.2, below.
During the Initial Term, Exodus may not change prices for any services ordered
by Customer. Thereafter, Exodus may only change prices annually and shall give
Customer at least 120 days' advance written notice of any price change.
8.2 Termination.
(a) For Convenience.
(i) By Customer During First Thirty Days. Customer may
terminate this Agreement convenience by providing written notice to Exodus any
time during the thirty (30) day period beginning on either Installation Date in
the Initial IDC Services Order Form or the Installation Date in any subsequent
IDC Services Order Forms, if any, provided that, with respect to any subsequent
IDC Services Order Form, Customer's right to terminate this Agreement
convenience hereunder shall apply to this Agreement only as it relates to the
Internet Data Services set forth in such IDC Services Order Form.
(ii) By Either Party. Either party may terminate this Agreement
for convenience at any time effective after the Initial Term by providing one
hundred twenty (120) days' prior written notice to the other party at any time
thereafter.
(b) For Cause. Either party will have the right to terminate this
Agreement if: (i) the other party breaches any material term or condition of
this Agreement and fails to cure such breach within fifteen (15) days after
receipt of written notice of same, (ii) the other party becomes the subject of a
voluntary petition in bankruptcy or any voluntary proceeding relating to
insolvency, receivership liquidation, or composition for the benefit of
creditors; or (iii) the other party becomes the subject of an involuntary
petition in bankruptcy or any involuntary proceeding relating to insolvency
receivership, liquidation, or composition for the benefit of creditors, if such
petition or proceeding is not dismissed within sixty (60) days of filing.
8.3 No Liability for Termination. Neither party will be liable to the
other for any termination expiration of this Agreement in accordance with its
terms.
8.4 Effect of Termination. With respect to termination by Customer in
accordance with its rights under this Agreement (other than under Section
8.2(a)(ii)) Customer shall have the right to determine the effective date of
such termination, provided that such effective date is not less than ten (10)
days and not more than sixty (60) days after the date of notice of termination
to Exodus. During such period between notice of
-7-
<PAGE>
termination and its effective date each party shall perform its obligations
pursuant to this Agreement. Customer may remove Customer Equipment at any time,
provided that Customer shall remain obligated to pay for services through the
effective date of termination of the Agreement. Upon the effective date of
expiration or termination of this Agreement: (a) Exodus will immediately cease
providing the Internet Data Center Services; (b) within thirty (30) days after
such expiration or termination, upon request by the other party, each party will
return all Confidential Information of the other party in its possession at the
time of expiration or termination and will not make or retain any copies of such
Confidential Information except as reasonably deemed necessary by such party to
carry out its internal legal or accounting responsibilities to comply with any
applicable legal or accounting record keeping requirement; and (c) Customer will
remove from the Internet Data Centers all Customer Equipment and any of its
other property within the Internet Data Centers within five (5) days of the
effective date of such expiration or termination and return the Customer Area to
Exodus in the same condition as it was on the Installation Date, normal wear and
tear excepted. If Customer does not remove such property within such five-day
period, Exodus will have the option to (i) move any and all such property to
secure storage and charge Customer for the reasonable and actual cost of such
removal and storage.
8.5 Intentionally Deleted.
8.6 Survival. The following provisions will survive any expiration or
termination of the Agreement: Sections 2, 4, 6, 7, 8 and 9 (other than 9.3).
9. MISCELLANEOUS PROVISIONS.
9.1 Force Majeure. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this Agreement
due to an act of war, acts of God, earthquake, flood, embargo, riot, sabotage,
labor shortage or dispute, governmental act, failure of the Internet or failure
to provide services for reasons beyond its reasonable control that could not and
should not (given the state of the industry) have been reasonably anticipated
and planned for, provided that the delayed party: (a) gives the other party
prompt notice of such cause, and (b) uses its reasonable commercial efforts to
correct promptly such failure or delay in performance.
9.2 No Lease. This Agreement is a services agreement and is not intended
to and will not constitute a lease of any real or personal property. Customer
acknowledges and agrees that (i) it has been granted only a license to occupy
the Customer Area and use the Internet Data Centers and any equipment provided
by Exodus in accordance with this Agreement, (ii) Customer has not been granted
any real property interest in the Customer Area or Internet Data Centers, and
(iii) Customer has no rights as a tenant or otherwise under any real property or
landlord/tenant laws, regulations, or ordinances. For good cause and upon
written notice to Customer, Exodus may suspend the right of any specific
Representative or other person to visit the Internet Data Centers in which case
Customer shall designate substitutes.
9.3 Marketing. Exodus may, upon Customer's prior written consent on a
case-by-case basis, which shall not be unreasonably withheld, refer to Customer
by trade name and trademark, and may briefly describe Customer's Business, in
Exodus' marketing materials and web site. Notwithstanding anything the contrary,
Exodus may list Customer in a generalized list of all or a representative group
Exodus' customers.
9.4 Government Regulations. Neither party will export, re-export,
transfer, or make available, whether directly or indirectly, any regulated item
or information to anyone outside the U.S. in connection with this Agreement
without first complying with all export control laws and regulations which may
be imposed by the U.S. Government and any country or organization of nations
within whose jurisdiction Customer operates or does business.
9.5 Non-Solicitation. During the period beginning on the Installation Date
and ending on the first anniversary of the termination or expiration of this
Agreement in accordance with its terms, neither party will, and each party will
ensure that its affiliates do not, directly or indirectly, solicit or attempt
solicit for employment any persons employed by the other party during such
period.
9.6 Governing Law; Dispute Resolution, Severability; Waiver. This
Agreement is made under and will be governed by and construed in accordance with
the laws of the State of California (except that body of law controlling
conflicts of law) and specifically excluding from application to this Agreement
that law known as the United Nations Convention on the International Sale of
Goods. Any dispute relating to the terms, interpretation
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<PAGE>
or performance of this Agreement (other than claims for preliminary injunctive
relief or other pre-judgment remedies) will be resolved at the request of either
party through binding arbitration. Arbitration will be conducted under the rules
and procedures of the American Arbitration Association ("AAA"). Each party will
appoint a single arbitrator and the two arbitrators shall appoint a third
arbitrator. In the event any provision of this Agreement is held by a tribunal
of competent jurisdiction to be contrary to the law, the remaining provisions of
this Agreement will remain in full force and effect. The waiver of any breach or
default of this Agreement will not constitute a waiver of any subsequent breach
or default, and will not act to amend or negate the rights of the waiving party.
9.7 Assignment; Notices. Neither party may assign its rights or delegate
its duties under this Agreement either in whole or in part without the prior
written consent of the other party, except that this Agreement may be assigned
in whole as part of a corporate reorganization, consolidation, merger, or sale
of substantially all of its assets. Any attempted assignment or delegation
without such consent will be void. This Agreement will bind and inure to the
benefit of each party's successors and permitted assigns. Any notice or
communication required or permitted to be given hereunder may be delivered by
hand, deposited with an overnight courier, sent by confirmed facsimile, or
mailed by registered or certified mail, return receipt requested, postage
prepaid, in each case to the address of the receiving party indicated on the
signature page hereof, or at such other address as may hereafter be furnished in
writing by either party hereto to the other. Such notice will be deemed to have
been given as of the date it is delivered, mailed or sent, whichever is earlier.
Exodus may assign this Agreement in whole or in part in connection with a senior
secured credit facility as long as Exodus remains obligated to Customer to
perform its obligations under this Agreement.
9.8 Relationship of Parties. Exodus and Customer are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between Exodus and
Customer. Neither Exodus nor Customer will have the power to bind the other or
incur obligations on the other's behalf without the other prior written consent,
except as otherwise expressly provided herein.
9.9 Entire Agreement; Counterparts. This agreement, including all Exhibits
and documents, which are incorporated herein by reference, constitutes the
complete and exclusive agreement between the parties with respect to the subject
matter hereof, and supersedes and replaces any and all prior contemporaneous
discussions, negotiations, understandings and agreements, written and or
regarding such subject matter. This Agreement may be executed in two or more
counterparts, each which will be deemed an original, but all of which together
shall constitute one and the same instrument.
Customer's and Exodus' authorized representatives have read the foregoing and
all documents incorporated therein and agree and accept such terms effective as
of the date first above written.
CUSTOMER EXODUS COMMUNICATIONS, INC.
Signature: /s/ Dean Polnerow Signature: /s/ Adam Wegner
---------------------- --------------------------------
Print Name: Dean Polnerow Print Name: Adam Wegner
--------------------- -------------------------------
Title: President Title: Vice President and General Counsel
-------------------------- ------------------------------------
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EXODUS COMMUNICATIONS, INC.
INTERNET DATA CENTER SERVICES AGREEMENT
EXHIBITS
Exhibit A Initial IDC Services Order Form
Exhibit B Service Descriptions
Exhibit C Support Services
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXODUS COMMUNICATIONS, INC.
INTERNET DATA CENTER SERVICES
ORDER FORM
EXHIBIT A
---------
Customer Name: Switchboard Corporation
Form Date: June 14, 1999
Form No.: sharper6.14.99
Installation Site(s): Waltham
Type of Service(s): New Upgrade
---------------
Additional Cancellation
Original Services Agreement Date: _______________________
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Internet Data Brief Description Extended Extended Monthly
Center Services (Detailed description attached) Qty Unit Price Non-Recurring Fees Fees
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EXO-VDC Virtual Data Center (7' x 8') 1 [**] [**]
- --------------------------------------------------------------------------------------------------------------------
EXO-VDC-SU Virtual Data Center Setup 1 [**] [**]
- --------------------------------------------------------------------------------------------------------------------
EXO-VDC Virtual Data Center (7' x 8') 1 [**] [**]
- --------------------------------------------------------------------------------------------------------------------
EXO-VDC-SU Virtual Data Center Setup 1 [**]
- --------------------------------------------------------------------------------------------------------------------
EXO-FAST-US 5 Mbps base Fast Ethernet with 1 [**] [**]
100 Mbps burstability
- --------------------------------------------------------------------------------------------------------------------
EXO-FAST-SU Setup - Fast Ethernet Network 1 [**] [**]
- --------------------------------------------------------------------------------------------------------------------
EXO-XCON-TI-SU Setup for TI remote access 1 [**] [**]
(cross-connect)
- --------------------------------------------------------------------------------------------------------------------
EXO-XCON-RTI Recurring charge for TI remote 1 [**] [**]
access (cross-connect)
- --------------------------------------------------------------------------------------------------------------------
EXO-MMS-BAS Managed Monitoring Service Basic 40 [**] [**]
- --------------------------------------------------------------------------------------------------------------------
EXO-BCMM-SU Setup - Tape Media Management 1 [**] [**]
- --------------------------------------------------------------------------------------------------------------------
EXO-RCMMW Tape Media Management (weekly 1 [**] [**]
backup)
- --------------------------------------------------------------------------------------------------------------------
Total: [**] [**]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES: This order replaces the existing order.
- -----------------------------------------------
COMPLETE THE FOLLOWING PAGE BEFORE SUBMITTING
CUSTOMER'S INITIALS WR
------
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EXODUS COMMUNICATIONS, INC.
INTERNET DATA CENTER SERVICES
ORDER FORM
Customer Name: Switchboard
Form Date.: June 14, 1999
Form No.: sharper6.14.99
IMPORTANT INFORMATION:
- ---------------------
1. By submitting this Internet Data Center Services Order Form (Form) to
Exodus Communications, Inc. (Exodus), Customer hereby places an order for
the Internet Data Center Services described herein pursuant to the terms
and conditions of the Internet Data Center Services Agreement between
Customer and Exodus (IDC Agreement).
2. Billing, with the exception of Setup Fees, will commence on the earlier of
the Installation Date indicated below or the date Customer actually
installs its equipment or Exodus begins providing Internet Data Center
Services. All Setup Fees will be billed upon receipt of a Customer signed
IDC Service Order Form.
3. Exodus will provide the Internet Data Center Services pursuant to the terms
and conditions of the IDC Agreement, which incorporates this Form. The
terms of this Form supersede, and by accepting this Form Exodus hereby
rejects any conflicting or additional terms provided by Customer in
connection with Exodus' provision of Internet Data Center Services. If
there is a conflict between this Form and any other Form provided by
Customer and accepted by Exodus, the Form with the latest date will
control.
4. Exodus will not be bound by or required to provide Internet Data Center
Services pursuant to this Form or the IDC Agreement until each is signed by
an authorized representative of Exodus.
Customer to complete:
- --------------------
CUSTOMER HAS READ, UNDERSTANDS AND HEREBY SUBMITS THIS ORDER.
Installation Dated: 7/28/99
-------------
Submitted By: /s/ Wayne Robison Submission Date: 7/22/99
--------------------------- ----------
(Authorized Signature) (Effective Date of IDC Agreement)
Print Name: Wayne Robison
------------------------
Title: Director Product Development
-----------------------------------
Exodus Communications, Inc. Acceptance
- ---------------------------------------
/s/ Sallie J. McGleam Date: 10/26/99
- ---------------------------------- -------------------------
(Authorized Signature)
CUSTOMER'S INITIALS WR
------
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EXHIBIT B
VIRTUAL DATA CENTER
Description
The Virtual Data Center (VDC product is a secured private area within the Exodus
Communications Data Center. It is designed with steel mesh walls and a key lock
sliding access door. The VDC provides ultimate space flexibility for customers
with non-rack mountable equipment and/or with a large number of servers. The
VDC is designed to house computer and networking equipment (see below for
specifications).
Specifications
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Equipment Power Dimensions
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Virtual Data Center -- Secure Area 4 dedicated 20 Amp Circuits 7' W x 8, D
EXO-VDC -- 4 Racks
-- 16 Shelves
-- Wiring Channels
-- Wiring Patch Panel
-- Power Distribution Bars
-- 3 Customer Access Cards
-- I POTS line cross-connect
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Exodus Operations will review customer equipment inventory list and determine
type of rack (19" or 23") to be used during installation phase.
All customers have access to temporary remote phones while visiting Exodus
Internet Data Centers. Phones will allow free local calling ONLY. Long
distance calling will require calling card.
Services Included
Managed Services
All CyberRack products include the following basic services for ONE web server.
Please refer to their individual specification sheets for detailed information.
. 24 x 7 Network Monitoring
. 24 x 7 URL Monitoring
. 24 x 7 Reboot Service
DNS
. Exodus will setup or transfer up to two domain names. First years InterNIC
charges will be billed back to the customer. InterNIC will bill all
subsequent domain name charges directly to the customer.
. Exodus will provide primary DNS support for up to two domain names and an
unlimited number under secondary DNS.
Project Management
Each new Exodus customer will be assigned a Project Manager to coordinate and
manage the installation process. The Exodus Project Manager works closely with
customer personnel to ensure that the installation is successful. Some of the
key tasks performed by the Project Manager include:
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<PAGE>
. Development of the Installation Plan
. Design of the Space Layout Plan
. Coordinate space build out, domain registration and/or DNS transfer
. Coordinate and assist with the installation of customer's equipment
. Collect key customer data including contacts and operating procedures to be
supported by Exodus
. Customer setup in the Exodus Network Control Center for on-going monitoring
and technical support
VDC Setup
Setup charges include all of the following:
. Infrastructure equipment setup
. Power wiring and circuit setup
. POTS line cross connect installation
Power
All Exodus Internet Data Centers are facilitized with 20 Amp circuits. All
circuits provide in-line UPS and diesel generator backup in the event of grid
power failure. To conform to electrical code for peak power use, maximum power
usage is limited to 75% of circuit value (i.e. 15 amps for a 20 Amp circuit).
Exodus reserves the right to audit customer circuits at random to verify power
usage.
Custom circuit configurations can be accommodated, however, depending on exact
customer requirements additional charges and lead times may apply. Please refer
to the below chart regarding power specifications for standard product
configurations.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Number of 20 Amp Maximum Power Additional Purchasable
Circuits Included Usage (Amps) Power Increments
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Virtual Data Center
EXO-VDC 4 60 20 Amp Circuits
- --------------------------------------------------------------------------------------------
</TABLE>
Services Not Included
Customer equipment installation and wiring
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<PAGE>
TAPE MEDIA MANAGEMENT
Part Number
EXO-BCMM-SU Setup - Tape Media Management
EXO-BCMM Tape Media Management
EXO-BCMMW Tape Media Management - Weekly Backup
Description
Exodus Communications operations personnel will remove and insert backup tapes
from a customer provided tape or jukebox type. Exodus personnel can conduct
this procedure according to a predefined schedule or on an on-demand basis, but
not more often than 1 tape per drive per day.
Services Included
. All services are provided during the 8am-10pm timeframe
. Insert new or recycled tapes into a jukebox or tape device on a (once)
daily (Tape Media Management) or (once) weekly basis (Tape Media
Management- Weekly Backup).
. Remove tapes from a jukebox or tape device
. Catalog and place removed tapes in on-site customer designated or Exodus-
provided tape storage container
. Coordinate weekly off-site storage. (Note: Third party storage is not
currently part of the Exodus tape backup service.) Customer must contract
directly with a third party off-site storage facility. Exodus has an
existing relationship with Arcus/Iron Mountain for these services.
Services Not Included
. Troubleshooting and problem resolution of tape or jukebox device
. Troubleshooting and problem resolution of backup scripts or programs
. Backup strategy design
. Tape media or backup device
. Offsite storage
Response Times for On-Demand Tape Exchange
. 1 hour response for tape insertion or removal requests of tapes located
in customer co-location space. Up to two hours for customers not resident
in data center locations.
Reporting
Exodus administrators will provide a monthly on-line backup report. The
following items will be included in the report:
. Tape management log of what tapes have been inserted or removed.
. Tape management procedures.
Customer Escalation
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<PAGE>
Exodus will notify customers via phone and e-mail of any problem conditions that
occur in the tape exchange process.
BANDWIDTH REPORTS
Part Number
EXO-SRBW
Description
Exodus Bandwidth Reports provide customers with graphical and tabular statistics
of their bandwidth usage. Reports are accessible via the web and show traffic
volumes between the customer's equipment and the network In addition to
providing the traffic volume at a particular instance in time, the reports
include summary statistics of maximum, minimum, and 95% loading. This
information offers customer a way to monitor usage trends and assist with the
capacity planning of server and network resources.
Reports
Monthly
Monthly reports are included with each network service purchased. Monthly
reports are produced on the 16th and 1st of the month. On the 16th of the month
the report lists usage for each of the prior 15 days. On the 1st of the month,
the report provides bandwidth usage for the prior month.
Daily
Daily reports are made available each day of the month. Reports for the
previous day are available by 4:00 AM PDT the following morning. Daily Reports
are ordered as an optional service using the part number shown above.
Both the Monthly and Daily Reports feature:
. A summary table which gives overall traffic statistics (e.g., max and min
throughput) for the period covered
. Graphical plots of bandwidth statistics
. Data detail shown in a tabular format
The Monthly Reports are archived and available for 12 months.
Media
Bandwidth reports are published on the web. To ensure confidentiality of
customer data, access to individual customer information requires the user to
enter a user-id and password. Report data can also be downloaded from a
browser, allowing the customer to use a spreadsheet to do customized
calculations or graphs.
Measured Statistics
For each network line, the Bandwidth Reports capture statistics on the output,
input, and total data flow. Output is defined as the amount of data passing
from the server to the network. Input is the volume of traffic from the network
to the server. Total is the sum of the input and output. Below is a list of
the reported statistics for data output, input, and total:
. Bandwidth -The volume of data in Kbits/sec
. Minimum - The lowest measured bandwidth
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. Maximum - This highest measured bandwidth
. 95% Value -Network bandwidth is lower than or equal to this value 95% of the
time. This statistic is only reported for customers with usage based billing
(not flat rate).
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<PAGE>
USAGE BASED BANDWIDTH POLICY
Part Number
<TABLE>
- ------------------------------------------------------------------------------------------------------------
<S> <C>
EXO-ETHER-U1 1 Mbps base Ethernet with 10 Mbps burstability
- ------------------------------------------------------------------------------------------------------------
EXO-ETBER-U2 2 Mbps base Ethernet with 10 Mbps burstability
- ------------------------------------------------------------------------------------------------------------
EXO-ETBER-UV Variable Usage Cost per Megabit Above Base Amount ($/megabit) for Ethernet
- ------------------------------------------------------------------------------------------------------------
EXO-ETHER-SU Setup - Ethernet Network
- ------------------------------------------------------------------------------------------------------------
EXP-FAST-U10 10 Mbps base Fast Ethernet with 100 Mbps burstability
- ------------------------------------------------------------------------------------------------------------
EX0-FAST-UV10 Variable Usage Cost Per Megabit Above Base Amount ($/megabit) for 10 Mbps Base Fast
Ethernet
- ------------------------------------------------------------------------------------------------------------
EXO-FAST-U50 50 Mbps base Fast Ethernet with 100 Mbps burstability
- ------------------------------------------------------------------------------------------------------------
EXO-FAST-UV50 Variable Usage Cost Per Megabit Above Base Amount ($/megabit) for 50 Mbps Base Fast
Ethernet
- ------------------------------------------------------------------------------------------------------------
EX0-FAST-SU Setup - Fast Ethernet Network
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Usage Based Billing
Exodus Communications will bill the customer monthly for the base bandwidth
amount that has been purchased. For bandwidth used above the base amount there
will be an additional per megabit used charge (refer to the quote), which will
be billed at the end of the month. Exodus uses the 95th percentile measurement
rule to calculate the additional bandwidth used above the base amount.
95th Percentile Measurement Rule
The Exodus Bandwidth measurement system collects five minute averages of the
total (input + output) line usage of your co-location network connection. This
data is collected seven days a week, twenty-four hours a day for each month. At
the end of each month or billing cycle the top five percent of these data points
are discarded. The highest remaining data point (five minute average) is
referred to as the 95th percentile. The 95th percentile value less the base
bandwidth purchased determines the additional bandwidth used. The additional
usage charge is calculated as follows:
Additional usage charge = additional bandwidth used X additional per megabit
used charge
Decimal fractions of a megabit are included with the additional bandwidth used
measurement
Example
Assume a usage based 10Mbps Ethernet connection with the following parameters:
. The monthly 95th percentile utilization is 4.6 Mbps
. Base bandwidth purchased at $2000 per month for 2 Mbps
. Additional per megabit charge for bandwidth used above 2 Mbps at $1300 per
megabit
Pricing Example for a sample month:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
95/th/ Base Additional Standard Additional Total Monthly
Percentile Value Band-width Bandwidth Used Monthly Charge Monthly Charge Bandwidth charge
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4.6 Mbps 2 Mbps 2.6 Mbps $2,000 2.6x1,300=$3,380 $5,380
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
-18-
<PAGE>
EXHIBIT C
- --------------------------------
Installation _______________________________________________
Responsibilities
- --------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Task Exodus Responsibilities Customer Responsibilities
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
[_] 1. Installation Planning . Establish Meeting . Confirm Requirements
Meeting . Prepare Agenda
. Review Customer Requirements
. Develop Pre-
Installation Plan
- ------------------------------------------------------------------------------------------------
[_] 2. Customer Gather Information and Put into Provide Requested
Profile Customer Information
Database
- ------------------------------------------------------------------------------------------------
[_] 3. Installation Document Final Plan Confirm Final Plan
Plan
- ------------------------------------------------------------------------------------------------
[_] 4. Communication Plan Assist Customer in Order Customer-
Communication Lines Provided
Coordination Lines Communication
- ------------------------------------------------------------------------------------------------
[_] 5. Equipment Procure Exodus- Procure Customer-
Provided Equipment Provided Equipment
- ------------------------------------------------------------------------------------------------
[_] 6. Assign IP Assign from Exodus Load New IPs into
Addresses Block at Time of Move Customer Equipment
- ------------------------------------------------------------------------------------------------
[_] 7. DNS Move* Move DNS to Exodus, with Request DNS Move
When Required/ Internic, When Required
Approved
- ------------------------------------------------------------------------------------------------
[_] 8. Prepare LAN and Space Set up and Test LAN
Rack/Cabinet/VDC Connection and Shelf/
- ------------------------------------------------------------------------------------------------
[_] 9. Physical . Change DNS Install and Test
Installation . Initiate System Equipment, Application
. Stand-by Support And LAN Connection
- ------------------------------------------------------------------------------------------------
[_] 10. Establish Set-up Procedures Review and Confirm
System Health Parameters and
Monitoring Procedures
Parameters and
Procedures**
- ------------------------------------------------------------------------------------------------
[_] 11. Customer Review with Customer Review with Exodus
Manual Project Manager
- ------------------------------------------------------------------------------------------------
</TABLE>
* When DNS moves from ISP to Exodus
** When Customer selects SystemHealth Services
-19-
<PAGE>
- --------------------------------
Customer Support _______________________________________________
- --------------------------------
<TABLE>
<S> <C>
How to Contact When you have a technical problem, our objective is to solve it
Exodus Communications as quickly as possible.
When You have a
Technical Problem Contact the Exodus Network Control Center by:
Phone..........1-888-2-EXODUS -(888)239-6387
[email protected]
Availability...The Network Control Center (NCC) is staffed
24-hours-a-day, seven days/week
- --------------------------------------------------------------------------------------------------
What Happens When When your call is received the Network Control Center (NCC)
The Network Control Engineer:
Center (NCC) Receives . Gathers the pertinent information relating to your problem
Your Call? report or request.
. Assigns a priority to your request (see Five Priorities below).
. Opens a trouble ticket in our Help Desk System and notifies
customer of the ticket number.
. Begins to work the problem or re-assigns the problem to
another Exodus support person, if necessary.
. Keeps you informed on problem resolution.
- --------------------------------------------------------------------------------------------------
Exodus Each Customer Request is assigned a priority (Request Priority),
Communications had based on the following guidelines:
Five Request
----------------------------------------------------------------------
Priorities Priority Description
----------------------------------------------------------------------
1. ................. Size is not operational.
2 .................. Size is operational, but highly degraded.
3 .................. Size is operational, but slightly degraded.
4 .................. Non-critical change request.
5 .................. For information only.
The assigned Request Priority is then used by the Network
Control Center (NCC) to:
. Determine the order that Customer Requests are processed.
. Assign a method and frequency for informing you of the Customer
Request status.
. Escalate your request inside Exodus, as required.
</TABLE>
Note: Customers can log their call via e-mail at:
[email protected] or via phone at: 1-888-2EXODUS.
If you have a Priority 1 or 2 problem, please open
your call via 1-888-2EXODUS.
-20-
<PAGE>
- --------------------------------
Customer Support _______________________________________________
- --------------------------------
<TABLE>
<S> <C>
Problem Resolution When a Network Control Center Engineer is unable to resolve a
Prices network problem within a specified time period, based on the
Request Priority, she forwards the problem to the Network
Engineering group for resolution.
When the Network Engineering group is unable to resolve a network
problem, they escalate the problem to the Exodus Backbone Engineering
Department. The Backbone Engineers are responsible for the design,
development, and implementation of the Exodus backbone network and
network infrastructure.
When a NCC Engineer is unable to resolve a system problem
within a specified time period, based on the Request Priority,
she forwards the problem to the System Administration group for
resolution.
- -------------------------------------------------------------------------------------------------------------
Escalation - In addition to escalating problems for technical resolution, Exodus
Exodus Management has a management escalation procedure to ensure that all possible
resources are being applied to resolve critical customer problems.
This escalation path includes the following people:
. Lead NCC Engineer
. NCC Manager
. Internet Data Center Manager
. Manager, Customer Advocacy
. Vice President, Customer Service
. President of Exodus
- -------------------------------------------------------------------------------------------------------------
Escalation - While we make every effort to ensure that problems area being resolved as
Initiated by quickly as possible, we understand that at certain times, you may want us
The Customer to go faster.
At any point during the problem resolution process, you can ask the person
you are talking with to escalate the problem to the next level.
Example: If you are talking to a NCC Engineer, you can ask to escalate the
problem to the Lead NCC Engineer. You may also ask to escalate a
problem to the people in the management escalation process
described above.
- -------------------------------------------------------------------------------------------------------------
Standard Requests Requests for configuration changes, additional services or information are
most efficiently made by E-mail so that any requirements are documented.
Exodus established a set of Service Level Commitments for these standard
requests, which are described in the next section.
Customer Satisfaction When each Customer Request Call Ticket is closed after resolution, we
Survey E-mail you a short survey form, asking for your feedback on how well we did
in resolving your request.
We thank you in advance for completing and returning these surveys, which
are used to evaluate how well we respond to your requests and to identify
opportunities to improve our services.
-------------------------------------------------------------------------------
</TABLE>
-21-
<PAGE>
- --------------------------------------------------
Network Services - Service Level Commitments _____________________________
- --------------------------------------------------
<TABLE>
<S> <C>
Overview This section outlines Exodus Communications' service level commitments for Network Services
Special commitments may be completed earlier than the time tables given in each section.
Some services must be purchased from Exodus before work can begin.
Unless otherwise noted, these services are performed during normal business hours, 8 AM to 6
PM Monday through Friday.
- ------------------------------------------------------------------------------------------------------------------
Engineering DNS Host, Add One Host Four (4) Business Hours*
------------------------------------------------------------------------------------------------
Add New Domain
(includes Internic Filing) Five (5) Business Days
------------------------------------------------------------------------------------------------
Move One Domain
From Another Provider Ten (10) Business Days
------------------------------------------------------------------------------------------------
Enter All Hosts for the Domain One (1) Business Day
------------------------------------------------------------------------------------------------
Change 24 x 7 Network Monitoring One (1) Business Day
Requests Switch/Router Administration Five (5) Business Days
24 x 7 URL Monitoring One (1) Business Day
- ------------------------------------------------------------------------------------------------------------------
News Feed News Feed:
Must Supply Group One (1) Business Day
List and Server Name
------------------------------------------------------------------------------------------------
Support E-mail Open ticket within Four (4) Hours
------------------------------------------------------------------------------------------------
Problem Calls Five (5) minutes max before call answered
Twenty (20) minutes to verify problem and open ticket
------------------------------------------------------------------------------------------------
Proactive Notification Ten to Thirty (10 to 30) minutes after event
------------------------------------------------------------------------------------------------
Reboot Requests Fifteen (15) minutes from the time the call is answered a reboot
will be initiated
------------------------------------------------------------------------------------------------
Information Requests One (1) Business Day (either with specific information or
timeframe to provide)
- ------------------------------------------------------------------------------------------------------------------
Network Router New Filter List One (1) Business Day
Managed Configuration New (Access) Customer One (1) Business Day
Services
Assign New Subnet: One (1) Business Day
(with Network Map)
Network Checkpoint Implementation Fifteen (15) Business Days
Security Raptor Implementation Fifteen (15) Business Days
*DNS Note: Server only reset twice a day.
</TABLE>
-22-
<PAGE>
- --------------------------------------------------
Managed Services - Service Level Commitments ______________________________
- --------------------------------------------------
<TABLE>
<S> <C>
Overview This section contains the response time for Managed Services.
All services are provided within standard Exodus product specifications
during normal business hours. Some services must be purchased from Exodus
before work can begin.
Unless otherwise noted, these services are performed during normal business
hours.
- ----------------------------------------------------------------------------------------------------------------
Installation After Hour Customer Installs Must be coordinated with
the Project Manager.
--------------------------------------------------------------------------------
Standard Facility/Buildout Five (5) Business Days
Additional Power Standard (110V 20 AMP
Circuit)
--------------------------------------------------------------------------------
Additional Shelves One (1) Business Day
--------------------------------------------------------------------------------
Custom Configurations Ten (10) Business Days
(Including Moves, Additional Racks
and Customer Cross Cabling)
- ----------------------------------------------------------------------------------------------------------------
System OS Installation One (1) Business Day
--------------------------------------------------------------------------------
Administration OS Patch Installation One (1) Business Day
System Management Bandwidth Reports New Customer or One (1) Business Day
Change in
Frequency
- ----------------------------------------------------------------------------------------------------------------
Monitoring Changes SystemHealth One (1) Business Day
Monitoring
</TABLE>
-23-
<PAGE>
- ----------------------------------------------
Rules for Accessing Internet Data Centers __________________________________
- ----------------------------------------------
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------
Identification . Only individuals identified as Exodus Customers and their
representatives, contractors, agents or users of an Exodus Customers'
online facilities may access the Internet Data Centers (IDCs).
- --------------------------------------------------------------------------------------------------------------
Logging In and Out . All Exodus Customers and their representatives, contractors, agents and
users of an Exodus Customers' online facilities are required to log in and
out of the IDCs with proper ID (government issued driver's license or
picture ID).
- --------------------------------------------------------------------------------------------------------------
Unauthorized . Exodus Customers cannot allow any unauthorized persons to access the
Persons IDCs without prior approval.
- --------------------------------------------------------------------------------------------------------------
If an Exodus Customer . Exodus Customers must notify Exodus Communications in writing using
Representative Changes their company's letterhead, e-mail or fax if there are any Exodus Customer
personnel changes.
- --------------------------------------------------------------------------------------------------------------
Internet Data Centers . Exodus Customers must agree to security measures that are established by
Security exodus to protect the IDCs, its equipment and its Customers' equipment.
- --------------------------------------------------------------------------------------------------------------
Accessing IDC . Exodus Customers must keep their areas clean at all time.
Facilities
. Exodus Customers may not store any paper products or materials of any
kind in the Exodus Customer Area (other than equipment manuals).
- --------------------------------------------------------------------------------------------------------------
. Exodus Customers may not bring in or use any of the following items in
the facility:
- Food or drink
- Tobacco products (including chewing)
- Weapons
- Chemicals
- Illegal drugs
- Alcohol or other intoxicant
- Electromagnetic devices
- Radioactive materials
- Photographic or recording equipment of any kind (other than tape back-up
equipment
- Corrosives or corrosive devices
- Explosives
</TABLE>
-24-
<PAGE>
- ----------------------------------------------
Rules for Accessing Internet Data Centers __________________________________
- ----------------------------------------------
<TABLE>
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Card Key Access . If substitute Exodus Customer personnel is sent:
If there are any Customer personnel substitutes, then the authorized Exodus
Customer must notify Exodus Communications in writing describing the
activity the visitor is to perform while in the IDC. This description must
be signed by a Exodus Customer Representative.
------------------------------------------------------------------------------
. If removal of equipment is involved please identify equipment in e-mail
or in writing.
------------------------------------------------------------------------------
. If a representative is sent, the following procedure is followed to gain
IDC access:
- The NCC engineers on duty asks to see the visitor's company ID and/or
government issued ID.
- All visitors are required to sign a Log-in Sheet.
- Be prepared with a state or federally issued photo ID.
- If we have no prior notification that a representative is arriving,
the NCC engineers will not allow access. The NCC engineers asks the
company representative to wait in the lobby.
- The Exodus engineers then attempts to contact the authorized company
representative for access approval.
- If an authorized contact is unavailable, access to the IDC is denied.
Note: In some locations these functions may be performed by a guard
instead of the NCC engineer.
</TABLE>
-25-
<PAGE>
- ----------------------------------------------
Rules for Using Internet Data Centers __________________________________
- ----------------------------------------------
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------
Equipment . All Exodus Customers' equipment must be clearly labeled with a Customer
And Connections name (or code name provided to Exodus) and individual component
identification.
------------------------------------------------------------------------------
. All connections to and from Exodus Customer's equipment must be clearly
labeled.
------------------------------------------------------------------------------
. Exodus Customers' equipment must be configured and run at all times in
compliance with the manufacturer's specifications, including power outlet,
power consumption and clearance requirements.
------------------------------------------------------------------------------
. Exodus makes certain equipment such as monitors, keyboards, and laptops,
available for temporary use at its IDCs by Exodus Customers.
------------------------------------------------------------------------------
. The equipment is provided on an "AS IS" basis without any warranties of
any kind.
------------------------------------------------------------------------------
. An Exodus Customer may borrow and/or use any Exodus property or
equipment, at his or her own risk, after receiving permission from Exodus.
------------------------------------------------------------------------------
. Exodus Customers must return equipment when they leave the Exodus IDCs.
------------------------------------------------------------------------------
. All Customer equipment must be labeled with server name and IP address.
------------------------------------------------------------------------------
Scheduled . Exodus performs weekly routine scheduled maintenance of its Internet
Maintenance Data Centers and Network from 1 am to 3 am (local time) each Thursday.
------------------------------------------------------------------------------
. Exodus uses its best efforts to notify Customers in advance whenever we
anticipate that this maintenance will have a material impact on the service
we provide to Exodus Customers.
------------------------------------------------------------------------------
. Exodus and Customer Personnel cooperate to minimize the impact of any
maintenance activity.
------------------------------------------------------------------------------
</TABLE>
-26-
<PAGE>
- ----------------------------------------------
Rules for Using Internet Data Centers __________________________________
- ----------------------------------------------
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------
Equipment . Exodus Customers need to update their records at Exodus on a regular
Procedure and basis.
Contact Updates
------------------------------------------------------------------------------
. As equipment is added or modified, please notify the Project Manager
and include:
- Type of equipment, serial numbers
- Software, power requirements
- IP address, physical dimensions, shelves or rack mounts
------------------------------------------------------------------------------
. With each new or modified piece of equipment, procedures need to be
created or updated.
------------------------------------------------------------------------------
. The NCC does not honor requests for funning procedures not on file.
------------------------------------------------------------------------------
. Procedure forms can be obtained from the Project Manager based on
managed service requirements, such as rebooting, tape backup,
confirmation updating, and OS updating.
------------------------------------------------------------------------------
. Customers must schedule and coordinate the installation of all new
equipment with their Project Manager, to ensure the availability of all
required facilities, including power, air conditioning and network access.
------------------------------------------------------------------------------
. Customers may remove equipment at any time by following the standard
Exodus Facility Access and Security Rules.
------------------------------------------------------------------------------
Scheduled . The delivery and installation of all equipment in the IDC must be
Equipment Delivery coordinated 24 hours in advance with the assigned Project Manager.
------------------------------------------------------------------------------
. If packages or equipment need to be delivered to the IDC, address the
package(s) or equipment as follows:
COMPANY NAME
c/o Exodus Communications
Project Manager Name
IDC Address
. Please provide the assigned Project Manager with the make/model/serial
number(s) (if applicable) of ALL equipment to be delivered to the IDC.
Note: A form is available from the Exodus Project Manager at the
Pre-installation Meeting.
------------------------------------------------------------------------------
. Customer equipment deliveries which require storage outside the customer
cage, more than 48 hours, will incur additional charges.
- --------------------------------------------------------------------------------------------------------------
Equipment Removal . In order for anyone to remove packages or equipment from the building,
an Exodus Material Pass MUST be completed by the Exodus Customer or Exodus
Customer Representative and must be approved by an IDC employee.
</TABLE>
-27-
<PAGE>
- ----------------------------------------------
Rules for Using Internet Data Centers __________________________________
- ----------------------------------------------
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
Online Conduct . Exodus Customers will not permit any Customer personnel using their
online facilities (including but not limited to the Exodus Customer's Web
site(s) and transmission capabilities), to do any of the following:
- Send SPAM (unsolicited commercial messages or communications) in any
form.
- Infringe or misappropriate the intellectual property rights of others.
Important: This includes posting copyrighted materials, using existing
trademarks and posting or distributing the trade secret information of
others in violation of confidentiality.
- Violate the personal privacy rights of others. This includes collecting
and distributing information about Internet users without their permission,
except as permitted by applicable law.
- Send, post or host harassing, abusive, libelous or obscene materials or
take any similar actions.
- Intentionally omit, delete, forge or misrepresent transmission
information, including headers, return addressing information and IP
addresses.
- Take any actions intended to cloak Exodus Customers on their users'
identity or contact information.
- Use the Exodus Communication IDC's online facilities for any illegal
purposes.
- Allow any person to engage in any of the activities described above.
</TABLE>
-28-
<PAGE>
- ----------------------------------------------
Rules for Using Internet Data Centers __________________________________
- ----------------------------------------------
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
Misconduct . While on Exodus property or in connection with the IDC Services, Exodus
Customers or Customer Representatives may not:
- Improperly use or abuse any Exodus property or equipment.
- Interfere with or make any unauthorized use of property or equipment of
any other Exodus Customer
- Harass any individual, including Exodus personnel and representatives of
other Exodus Customers.
- Engage in any activity that is in violation of the law or aid in
criminal activity while on Exodus property or in connection with the IDC
Services.
----------------------------------------------------------------------------------
. If Exodus Customers become aware of any such inappropriate activities,
Exodus Customers must use their best efforts to stop such activities
immediately and notify Exodus personnel.
</TABLE>
-29-
<PAGE>
- ----------------------------------------------
Security, Emergency, Health, Safety __________________________________
- ----------------------------------------------
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
Exodus Customer . While inside the IDC, the Exodus Customer is responsible for maintaining
Security control of the cage/cabinet key and access badge and for keeping the
Responsibilities cage/cabinet door closed and locked.
-----------------------------------------------------------------------------------
. When Exodus Customers exit the IDC, the cage key or access badge must be
returned.
- -------------------------------------------------------------------------------------------------------------------
Physical Security . An Exodus Customer wishing to access the IDC cage must present a valid
Procedures state or federally issued picture ID. The on-site staff examines the valid
State or Federally issued picture ID and requests the company affiliate to
find the appropriate cage key.
-----------------------------------------------------------------------------------
. The access badge provides access to the data center door and all the
areas where unescorted customer access is allowed.
-----------------------------------------------------------------------------------
. When the Exodus Customer wishes to leave the premises, the staff will
collect the cage key and access card and return the Exodus Customer's ID.
- -------------------------------------------------------------------------------------------------------------------
Emergency . The NCC staff is trained in emergency management procedures and will
Management assist personnel in the IDC in the event of an emergency.
- -------------------------------------------------------------------------------------------------------------------
Fire . The IDC is protected from fire by a non-toxic fire suppression system.
Smoke and heat sensors in the ceiling and under the raised floor activate
the fire suppression system.
-----------------------------------------------------------------------------------
. There is a visual strobe and audible DAXON alarm 30 seconds before the
system discharges.
-----------------------------------------------------------------------------------
. When the alarm sounds, leave the area by the main route. The NCC staff
secures the area and ensures that everyone evacuates the area.
-----------------------------------------------------------------------------------
. If the fire suppression discharges while personnel are in the area,
there is no need for panic. There is always sufficient oxygen to maintain
life, even though the area must be evacuated immediately.
-----------------------------------------------------------------------------------
. Fire extinguishers are located throughout all IDCs.
</TABLE>
-30-
<PAGE>
- ----------------------------------------------
Security, Emergency, Health, Safety __________________________________
- ----------------------------------------------
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
Building Fire Alarm . The building has another fire alarm system covering the areas of the
building outside the IDC. If that alarm sounds, secure the cage door and
evacuate the building.
- -------------------------------------------------------------------------------------------------------------------
Sprinkler System . There is a water sprinkler system as the last measure of fire
suppression. The sprinkler system remains dry until the IDC fire
suppression system discharges and then it is charged with water. Any fire
that survives the fire suppression system triggers the sprinkler system.
- -------------------------------------------------------------------------------------------------------------------
Natural Disasters . All Customer equipment must be property restrained against an earthquake
when applicable. Exodus provides earthquake restraints that must be
attached to all non-rack mounted equipment.
-----------------------------------------------------------------------------------
. In the event of an earthquake, take cover until the shaking stops. The
NCC staff determines if the facility must be evacuated.
-----------------------------------------------------------------------------------
. Exodus has an Emergency Management/Contingency Plan to facilitate a
rapid recovery from a disaster. The NCC staff controls the recovery
procedures and coordinates access to the facility to clean up and restore
systems.
- -------------------------------------------------------------------------------------------------------------------
. In the event of a local disaster, the Exodus Customer Advocate is the
prime contact for information and recovery coordination.
- -------------------------------------------------------------------------------------------------------------------
Health and Safety . It is the Customers' responsibility to maintain safe work habits and a
safe work area in the IDC. However, Exodus has a first aid kit available
to Exodus Customers (see NCC staff).
-----------------------------------------------------------------------------------
. In case of a major injury or life-threatening emergency, contact the NCC
staff to quickly summon help.
</TABLE>
-31-
<PAGE>
EXHIBIT D
THE EXODUS SOLUTION
Internet Data Center Services
Companies who have built or enhanced their businesses around the Internet
require a new level of IT service Not only do they need real estate to house
their Web servers and reliable, scalable network access, but they need
specialized Internet systems management services to keep pace with their complex
Web operation requirements.
Exodus Internet Data Centers allow customers to enjoy all the benefits of the
Internet without the headache designing, installing, maintaining or securing an
Internet site.
Secure Co-location Services
Exodus provides scalable networking and facility solutions in different
configurations. Co-location space is available in a Fortune- 100-class data
center environment, with options including Virtual Data Centers for customers
with more than 10 servers, CyberCabinets housing four to ten servers and
CyberRacks for less than four servers.
The Exodus Internet Data Centers are built for continuous Internet operations by
offering:
. Power Management System - 1.6 Megawatts; customer-dedicated power
backed-up by multiple Uninterruptible Power Supplies (UPS)
. UPS - High-capacity diesel generator; customer-dedicated circuit breaker
protection; scalable customer power
. Fire Suppression System - State-of-the-art, gas-based fire protection
system; separate fire zones below floor and above the ceiling;
specialized heat/smoke sensors and automatic local fire department
notification
. Mainframe-Style Construction - Raised floor, HVAC and separate cooling
zones; seismically-braced racks
. Facility Security System - Motion sensors; secured access; video camera
surveillance; security breach alarm; 24 x 7 automatic local police
department notification
. Personal Security System - 24 x 7 card key customer access to Internet
Data Centers; 24 x 7 monitoring by on-site personnel
Unsurpassed Network Services
The Exodus network is scalable, fault-tolerant and based on open technologies,
providing customers with the reliable Internet access they need to conduct
business over the Web. Our network configuration, 60 percent headroom policy
and unprecedented peering agreements help avoid congestion, providing better
response time for customers. For example, not only is the Santa Clara Internet
Data Center facility the most redundant networking facility that exists today,
it also has more bandwidth connected to the Internet than any other facility -
more than 1 Gbps per second.
Because Exodus uses redundant fiber paths from different vendors, there is no
single point of failure anywhere in the Exodus network. And network power is
localized and matched to customers' equipment requirements, offering seamless
integration and a flexible growth path for their Internet sites.
-32-
<PAGE>
Managed Services
For companies who rely on the Internet but who would rather focus time and
energy on expanding their businesses instead of managing Web operations, Exodus
can handle the demands of Internet computing and provide a solid foundation for
e-commerce.
While management of Internet infrastructure is critical to operating a
successful Internet site, it can account for as much as 90% of the time and
resources allotted to site maintenance. That's why Exodus has a team of
dedicated Internet management professionals to administer customers' Internet
technologies, ensuring that they interact with legacy systems and keeping
Internet sites at top performance. Exodus customers are thus given the freedom
and flexibility they need to focus on their core businesses.
Exodus has deployed Computer Associates' Unicenter TNG enterprise management
solution across our globally distributed network of Internet Data Centers to
help provide customers with the following managed services 24 x 7:
. Network and Equipment Management/Setup - Administration, monitoring and
report generation
. Data Traffic Management - Bandwidth monitoring, load balancing,
marketing analysis and report generation
. Telco Line Management-Provisioning - Installation, tracking, monitoring,
fault analysis and disaster recovery
. System and Equipment Management - Setup, installation, performance
monitoring, traffic analysis, administration data backup and recovery
. Facilities Management - Scalable power management, fire suppression,
systems management and personnel security administration
. Application Systems Management - Internet application-to-database
integration, performance monitoring, backup/recovery, automatic
application restart, selective application systems maintenance and
upgrading
. Enterprise-Class Security - Design, setup, monitoring, notification,
maintenance and report generation
In addition to our internal management, Exodus also offers services specifically
designed to help you better manage your Internet network resources. These
services include:
. Internet site installation, administration and change management
. Internet service-level monitoring and reporting
. Internet business continuity services
. Internet event hosting
. Internet site security services
. Internet mirrored site management
. Internet site consulting services
EXODUS INFRASTRUCTURE
Part of the Exodus Solutions strategy is engineering and maintaining a superior
infrastructure to support continuous Internet operations. To achieve this goal,
we have made heavy investments in the infrastructure of both our facilities and
our network. Exodus' infrastructure consists of two major components:
nationwide
-33-
<PAGE>
Internet Data Centers and a high-speed Internet backbone. Our infrastructure
design is based upon two key principles:
1. Engineer each Internet Data Center to eliminate any single point of failure
2. Reduce the distance from the Web surfer to the information on the Web by
combining world-class Internet Data Centers with a reliable high-speed Internet
backbone engineered solely for distribution of data.
Internet Data Center Description
Our state-of-the-art Internet Data Centers provide the reliable, redundant and
high-performance infrastructure demanded by today's mission-critical Internet
systems.
Exodus maintains a virtually endless stream of power through our Redundant Power
Management System (RPMS). Under this system, all co-location customers and
critical systems receive clean, conditioned power from the UPS batteries. The
RPMS UPS consists of multiple UPS systems maintained at a load not to exceed
75%; in the event one fails, the remainder can take on the load without
exceeding capacity. The batteries are charged either by utility power or by an
on-site backup generator. Additionally, we have a secondary generator on site
to provide backup to the primary generator. It can be hooked via umbilical cord
feed to supply the UPS systems. On a more specific level, all our customers
receive dedicated circuit breaker protection.
If the utility power fails, our generator maintenance contractors dispatch
generator technicians, spare parts and diesel fuel to replenish the generators,
giving Exodus the ability to run our Internet Data Centers indefinitely. By
implementing the power management system, we can move from utility to generator
power without observing any spike or fluctuation of electricity to our co-
located customers.
Each Exodus facility is built on raised floors and has seismically-braced racks,
cabinets and cages for protection against earthquakes. Furthermore, all
Internet Data Centers have high-volume, zoned temperature control systems. As
with the redundant power systems, Exodus has multiple Liebert 15-ton air
conditioning units, for a combined total of 75 tons of air condition output to
ensure proper heat dissipation. In the event one system fails, the other units
are able to assume the full load of cooling the co-located equipment.
In addition, Exodus has built a Redundant Fire Suppression System consisting of
smoke and heat sensors that trigger automatic fire department notification. The
primary system - an environmentally safe, gas-based Fire Master (FM200) fire
extinguishing system - is designed to eliminate a fire disaster but be harmless
to the systems co-located at the Internet Data Centers. As a backup, the
secondary system is a dry-pipe sprinkler system.
Each Internet Data Center also has a "nerve center" called the Network Control
Center (NCC). The entire facility, network and customer systems are carefully
monitored and managed by the NCC staff, available on a 24-hour basis via the
Exodus 1-800 Support Line. The NCC staff is assisted by expert network and
system engineers who can provide escalation support when needed.
To monitor the activity on each system in our Internet Data Centers, we have
implemented Computer Associates' Unicenter(TM) TMG network management platform
to facilitate the monitoring of our complete LAN and WAN. Unicenter TNG allows
us to monitor specific server processes at an 0/S network and application level
and take action on events created by these processes. Such actions might
include the start and restart of a process or even the sending of a page alert
to a customer.
In each Internet Data Center, Exodus has installed fiber optic cable from
various providers such as PacBell, TCG, ICG, MFS and Brooks Fiber, allowing
redundant fiber connections out to the IXPs. In this way, we eliminate any
single point of failure between our Internet Data Centers and the Internet.
The security and integrity of each Internet Data Center is maintained by video
surveillance cameras and security breach alarms with automatic police
notification and 24-hour personnel. There are several cameras mounted inside
and outside the facility and monitored by on-site personnel.
As a co-location customer, you are allowed 24-hour access to the facility
through a secure card key access system. This system allows only designated
company personnel physical access to our Internet Data Centers.
-34-
<PAGE>
The physical environment of the Internet Data Centers allows for flexibility of
space depending upon how many servers customers wish to co-locate at our
facilities. For example, you can purchase a Virtual Data Center, a seven-by-
eight foot cage, for large applications. An alternative option for those not
requiring a large block of space but needing added security is an enclosed,
dedicated cabinet. The cabinet provides a full rack's worth of space and is
also under lock and key. If you are unsure of anticipated growth and looking
for an entry point, Exodus provides space in quarter-rack increments in our
common co-location area where multiple servers are housed on racks in a single
cage.
No matter what amount of space you require, Exodus is committed to helping you
manage your transition into our facility. Our Project Managers advise on and
facilitate the logistics involved in moving to our facility, such as ordering
new DNS registration, IP address allocation or DNS transition from another
provider.
In addition to the standard services, our support team can provide various
levels of system-related services, from tape backup to full systems and
applications management.
THE EXODUS NETWORK: PROVIDING THE FOUNDATION FOR
INFORMATION DISTRIBUTION
Fundamental to our ability to provide the shortest and most reliable paths from
Web users to our customers' Internet sites is our Open Peering Policy, which
drives us to seek peering agreements with as many providers as possible. In
fact, we peer with over 80 National and Regional Internet Providers at the
Internet Exchange Points (IXPs)-such as PB-NAP, MAE-West, MAE-East, MAE-LA and
CIX- more than any other Internet service company. We have recently established
private multi-location peering with three National Backbone Providers, so we can
balance Internet traffic between IXPs and private peering links.
Exodus' network model can guarantee uninterrupted Internet operations, unlike
Inter-net Service Providers' (ISPs) networks, which aren't designed for Internet
commerce. Our distributed network design is crucial to businesses who rely on
the Web, such as online service providers, information publishers, entertainment
outlets and transaction processing providers, as well as electronic storefronts.
For these companies and others like them, continuous Internet access is mission-
critical to best serve their customers.
Traditional ISPs cannot effectively or efficiently support the needs of these
businesses. Why? Because their networks are designed around end-user Internet
access- which means the data being distributed is not always located near the
user and may therefore need to travel a significant distance over networks to
reach its destination. Exodus' network, on the other hand, is designed for
content distribution and pushes data out to major Internet Exchange Points
(IXPs), where it is interchanged between networks in order to get to end-users
faster and more reliably.
To complement our network design, we established our first Internet Data Center
in Northern California, where three of the six major IXPs in the United States
are located. This Internet Data Center has set the standards by which all of
our subsequent Internet Data Centers are modeled. Not surprisingly, our second
Internet Data Center was founded in Jersey City, New Jersey, close to the
second-largest concentration of IXPs in the United States. To keep up with
customer demand, Internet Data Centers have been built and opened in Seattle,
Irvine, Washington D.C. and Boston. Future facilities are also planned for
Europe and the Pacific Rim.
Beyond providing high-availability Internet connections, the Exodus network also
offers reliable and scalable bandwidth options. In contrast to ISPs, who
commonly over-subscribe their networks by nearly four times their overall
capacities, the Exodus network is under-subscribed by 50%, allowing room for
unanticipated bursts in demand. Systems are in place so that if at any time
traffic on the Exodus network exceeds 40% of its maximum volume, we add more
bandwidth to our network capacity. By using a dual connection into and out of
every Internet Data Center, 50% of network traffic is programmed over one line,
while the other 50% travels over a separate line, leaving a large percentage of
headroom on either line to handle spikes in demand. In the unlikely event that
one line fails, traffic is automatically re-routed to the other line. In
addition, private exchange peering and shortest-path routing ensure customers
are always securely connected to Exodus' DS3 WAN backbone.
-35-
<PAGE>
Exodus' network will grow in step with its customers' needs. To keep up with
customer demand, Exodus will continue to peer with every ISP connecting to an
IXP. In addition, Exodus is continuing R&D efforts to stay on top of all new
quality-of-service technologies as they become available, including Tag
Switching, IP Switching, RSVP and VPN technologies.
EXHIBIT E
EXODUS COMMUNICATIONS, INC.
RULES AND REGULATIONS
All Exodus Customers and their Representatives, employees, contractors,
customers, agents and users of Customers' online facilities are subject to these
Rules and Regulations in connection with their use of Exodus' Internet Data
Center Services.
ACCESS TO INTERNET DATA CENTERS
Only those individuals identified by Customer as its Representatives may
access the Internet Data Centers. Customer may not allow any unauthorized
persons to access the Internet Data Centers.
. Customer will notify Exodus in writing of any change in Customer's
Representatives.
. Customer agrees to adhere at all times to security measures that have been
established by Exodus to protect the Internet Data Centers, its equipment
and its customers' equipment.
USE OF INTERNET DATA CENTER FACILITY
Customer must keep the Customer Area clean at all times. Customer may not
store any paper products or materials of any kind in the Customer Area (other
than equipment manuals).
Customer may not bring, or make use of, any of the following into the
Facility:
Food or Drink.
. Tobacco products.
. Explosives.
. Weapons.
. Chemicals.
. Illegal drugs.
. Alcohol or other intoxicants.
. Electro-magnetic devices.
. Radioactive materials.
. Photographic or recording equipment of any kind (other than tape back-up
equipment).
EQUIPMENT AND CONNECTIONS
All Customer Equipment must be clearly labeled with Customer's name (or
code name provided to Exodus) and individual component identification.
-36-
<PAGE>
. Customers may not connect or disconnect any Customer Equipment or other
equipment except as specifically pre-approved by an authorized employee of
Exodus, at least 48 hours in advance of proposed installation, except as
otherwise approved by Exodus.
. All connections to rom Customer Equipment must be clearly labeled.
. Customer Equipment must be configured and run at all times in compliance
with the manufacturer's specifications, including power outlet, power
consumption and clearance requirements.
. Exodus makes available at its Data Centers certain equipment for the
temporary use by Customers at the Internet Data Centers. This equipment is
provided on an "AS IS" basis without any warranties of any kind. Customer
may borrow and/or use any Exodus property or equipment, at its own risk,
after receiving permission from Exodus.
SCHEDULED MAINTENANCE
Periodically, Exodus will conduct routine scheduled maintenance of its
Internet Data Centers and Internet Data Center Services pursuant to a schedule
posted on Exodus' World Wide Web site
(http://www.exodus.ne+/techbackbone/maintenance.html). During such time,
- ----------------------------------------------------
Customer's Equipment may be unable to transmit and receive data and Customer may
be unable to access its Equipment. Customer agrees to cooperate with Exodus
during the scheduled maintenance so that Exodus may keep such period or time to
a minimum.
MISCONDUCT
Customer and its Representatives may not:
Misuse or abuse any Exodus property or equipment;
. Make any unauthorized use or interfere with any property or equipment of
any other Exodus customer;
. Harass any individual, including Exodus personnel and representatives of
other customers of Exodus; or
. Engage in any activity that is in violation of the law, or aid in criminal
activity while on Exodus property or in connection with the Internet Data
Center Services.
ONLINE CONDUCT
Customer will not, and will not permit any persons using Customer's online
facilities (including but not limited to Customer's Web site(s) and transmission
capabilities), to do any of the following:
Send Spam (unsolicited commercial messages or communications in any form).
. Infringe or misappropriate the intellectual property rights of others. This
includes posting copyrighted materials without appropriate permission,
using trademarks of others without appropriate permission or attribution,
and posting or distributing trade secret information of others in violation
of a duty of confidentiality.
. Violate the personal privacy rights of others. This includes collecting and
distributing information about Internet users without their permission,
except as permitted by applicable law.
. Send, post or host harassing, abusive, libelous or obscene materials or
take any similar actions.
. Intentionally omit, delete, forge or misrepresent transmission information,
including headers, return addressing information and IP addresses or take
any other actions intended to cloak Customer's or its users' identity or
contact information.
. Use the online facilities for any illegal purposes.
-37-
<PAGE>
. Assist or permit any persons in engaging in any of the activities described
above.
If Customer becomes aware of any such activities, Customer will use best efforts
to stop such activities immediately, including, if necessary, terminating
Customer's user's access to Customer's online facilities.
MODIFICATION OF RULES AND REGULATIONS
Exodus reserves the right to change these Rules and Regulations at any
time. Customer is responsible for regularly reviewing these Rules and
Regulations. Continued use of the Internet Data Center Services following any
such changes shall constitute the Customer's acceptance of such changes.
-38-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXODUS COMMUNICATIONS, INC.
SERVICES ORDER FORM
- -------------------------------------------------
Customer Name: Switchboard.com
- -------------------------------------------------
Billing Address: 115 Flanders Road
Westboro, MA
- -------------------------------------------------
Form Date: August 30, 1999
- -------------------------------------------------
Form No: Sharper8.30.99
- -------------------------------------------------
Installation Site(s): Waltham, (Boston)
- -------------------------------------------------
Type of Service(s): Additional
- -------------------------------------------------
Original Service
Agreement Date:
- -------------------------------------------------
INITIAL TERM: One year
- -------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Services Brief Description IDC Qty Unit Price Extended Extended
Non-Recurring Monthly Fees
Fees
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EXO-VDC Virtual Data Center (7 x 8') BOS 2 [**] [**]
- ----------------------------------------------------------------------------------------------------------------------
EXO-VDC-SU Virtual Data Center Setup 2 [**] [**]
- ----------------------------------------------------------------------------------------------------------------------
EXO-POWER-20 20Amp Power Circuit (110v) 2 [**] [**]
- ----------------------------------------------------------------------------------------------------------------------
EXO-POWER-SU Power Circuit Setup 2 [**] [**]
- ----------------------------------------------------------------------------------------------------------------------
EXO-RACK-19 Additional 19" Rack 2 [**] [**]
- ----------------------------------------------------------------------------------------------------------------------
EXO-FAST-US 5 Mbps base Fast Ethernet 1 [**] [**]
with 100 Mbps burstability
- ----------------------------------------------------------------------------------------------------------------------
EXO-FAST-OV10 Variable Usage Cost Per 1 [**]
Megabit Above Base Amount
- ----------------------------------------------------------------------------------------------------------------------
EXO-FAST-SU Setup - Fast Ethernet Network 1 [**] [**]
- ----------------------------------------------------------------------------------------------------------------------
EXO-MMS-BAS Managed Monitoring Service 30 [**] [**]
Basic
- ----------------------------------------------------------------------------------------------------------------------
Total: [**] [**]
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
COMPLETE THE FOLLOWING PAGE BEFORE SUBMITTING
* More detailed descriptions of the Services are contained in the specification
sheets and/or Statement of Work for each service, which are incorporated herein
by this reference.
CUSTOMER'S INITIALS DP
-------
-39-
<PAGE>
EXODUS COMMUNICATIONS, INC.
SERVICES ORDER FORM
- ----------------------------------------------------
Customer Name: Switchboard.com
- ----------------------------------------------------
Form Date: August 30, 1999
- ----------------------------------------------------
Form No.: Sharper8.30.99
- ----------------------------------------------------
Requested Service Date: September 30, 1999
- ----------------------------------------------------
ORDER FORM TERMS AND CONDITIONS:
- --------------------------------
(1) Customer hereby orders and Exodus Communications, Inc. (Exodus) agrees to
provide the Services described in the Order Form.
(2) The Customer representative signing below hereby acknowledges and agrees
that in the event that the Customer does not issue a purchase order prior
to the Requested Service Date, this Order shall serve as Customer's
purchase order. Customer further acknowledges that any additional or
conflicting terms and conditions contained in Customer's purchase order
shall not be applicable to the Services to be provided hereunder, even if
Exodus uses such purchase order for invoicing purposes.
(3) Neither Customer nor Exodus will be bound by this Order Form until an
authorized representative of each party has signed the Order Form.
(4) Changes or modifications to this Order Form will not be accepted.
THERE ARE SIGNIFICANT ADDITIONAL TERMS AND CONDITIONS, WARRANTY DISCLAIMERS AND
LIABILITY LIMITATIONS CONTAINED I N THE SERVICE AGREEMENT (EITHER THE MASTER
SERVICES AGREEMENT, INTERNET DATA CENTER SERVICES AGREEMENT AND/OR PROFESSIONAL
SERVICES AGREEMENT) BETWEEN CUSTOMER AND EXODUS. THERE ARE ALSO DETAILED
DESCRIPTIONS OF EACH SERVICE, AND SPECIFIC TERMS APPLICABLE TO EACH SERVICE,
CONTAINED IN THE SPECIFICATION SHEETS AND/OR STATEMENTS OF WORK FOR EACH
SERVICE.
DO NOT SIGN THIS ORDER FROM BEFORE YOU HAVE READ ALL OF THE PROVISIONS OF THE
SERVICE AGREEMENT AND SPECIFICATIONS SHEETS AND/OR STATEMENT OF WORK. YOUR
SIGNATURE BELOW IDICATES THAT YOU HAVE READ THE SERVICES AGREEMENT AND THE
SPECIFICATION SHEETS AND/OR STATEMENTS OF WORK AND AGREE TO BE BOUND BY THEIR
PROVISIONS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
CUSTOMER EXODUS COMMUNICATIONS, INC.
- ----------------------------------------------------------------------------------------
<S> <C>
Signature: /s/ Dean Polnerow Signature:
- ----------------------------------------------------------------------------------------
Print Name: Dean Polnerow Print Name:
- ----------------------------------------------------------------------------------------
Title: President Title:
- ----------------------------------------------------------------------------------------
Date: 9/17/99 Date:
- ----------------------------------------------------------------------------------------
</TABLE>
* More detailed descriptions of the Services are contained in the specifications
above and/or Statement of Work for each service, which are incorporated herein
by this reference.
CUSTOMER'S INITIALS________
-40-
<PAGE>
Exhibit 10.33
-------------
SWITCHBOARD INCORPORATED
Nonstatutory 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 October 13, 1999 (the "Grant Date") to Douglas
J. Greenlaw, 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 7,000 shares (the "Shares")
of common stock, $0.01 par value per share, of the Company ("Common Stock") at
$9.00 per Share. Unless earlier terminated, this option shall expire on October
13, 2009 (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.
----------------
(a) This option will become exercisable ("vest") as to 100% of the original
number of Shares on the earlier of (a) the effective date of the initial
registration of the Company's Common Stock under the Securities Act of 1933, as
amended or (B) five (5) years from the date of grant.
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) Early Exercise Alternative. Notwithstanding the exercisability
--------------------------
schedule set forth in paragraph (a), the Participant may elect to exercise this
option as to the unvested Shares (in addition to the vested Shares) if
simultaneously with such exercise the Participant enters into a Stock
Restriction Agreement with the Company in the form attached hereto as Exhibit A
---------
(the "Stock Restriction Agreement"). The Stock Restriction Agreement provides
that the unvested Shares shall be subject to a right of repurchase (the
"Purchase Option") in favor of the Company at the $9.00 exercise price (as
adjusted pursuant to the terms hereof) in the event that the Participant ceases
to be employed by the Company.
<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 consulting agreement with the Company, a material breach
of such agreement by the
2
<PAGE>
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. Proxy. The Participant hereby appoints Banyan Worldwide, a Massachusetts
-----
corporation, and/or its designee(s) ("Banyan"), as the Participant's attorney-
in-fact and proxy, with full power of substitution, for and in the Participant'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 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 4, 5 and 6 hereof, the
"Option 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 Participant 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
Option Shares, or impair such Option Shares, in each case unless, and as a
condition precedent thereto, the transferee of such Option Shares executes and
delivers to Banyan an agreement to be bound by the terms of this Section 4. Any
purported transfer in violation of this Section 4 shall be null and void and
shall not be recognized by the Company or reflected on the stock records of the
Company. The Participant shall cause the Company to require any certificates
representing any and all Option Shares issued upon any exercise of this option
to bear a legend referencing the restrictions on transfer set for in this
Section 4, 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 4 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
3
<PAGE>
Act").
5. Repurchase of Option Shares Upon Termination of Employment. The following
----------------------------------------------------------
repurchase provisions shall apply to any and all Option Shares;
(a) Repurchase Rights. If the Participant 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 5(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 Participant, to repurchase all or any portion of the Option
Shares, at a price per share equal to the fair market value of such Option
Shares as of the close of business on the date of termination of the
Participant's employment. Such fair market value shall be determined by mutual
agreement of the Company and the Participant. Failing such agreement between
the Participant and the Company within 30 days of the date of the Company's
notice electing to repurchase such Option Shares, the fair market value of such
Option Shares shall be determined by three appraisers, one designated within
five days after the termination of said 30-day period by the Participant or his
or her legal representatives (which appraiser shall not be the Participant 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 Participant,
shall be paid by the Company. Said appraisers shall proceed promptly to
determine the fair market value of said Share or Option Shares by agreement of
any two of the appraisers, which shall be conclusive upon all parties in
interest in such Option Shares. Promptly following such determination, the
appraisers shall mail or deliver such notice of such determination to the
Participant and the Company.
(b) Repurchase Procedure. Upon notice from the Company of exercise of its
--------------------
rights under this Section 5 and determination of the purchase price for the
Option Shares so repurchased, the Participant shall transfer the Option 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 Participant's termination of employment the Company shall have failed to
elect to repurchase all of
4
<PAGE>
the Option Shares, the repurchase rights with respect to the Option Shares not
so elected to be repurchased imposed by this Section 5 shall terminate, and the
Participant or his or her legal representatives may thereafter transfer such
Option Shares. The Participant or his or her legal representatives may in no
event transfer any Option Shares prior thereto, other than to the Company.
(c) Failure of Participant to Comply. If the Participant fails to comply
--------------------------------
with any of the provisions of this Section 5, the Company, at its option and in
addition to its other remedies, may suspend the rights of the Participant to
vote and to receive dividends on the Option Shares, or may refuse to register on
its books any transfer or change in the ownership of the Option Shares or in the
right to vote thereon, until the provisions of this Section 5 are complied with
to the satisfaction of the Company.
(d) Expiration. The restriction contained in this Section 5 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 Participant acknowledges that the Company may, in its
-----------
discretion, retain for safekeeping stock certificates representing all Option
Shares purchased hereunder by the Participant. The Participant further
acknowledges that the Company may, to insure that the Participant complies with
the restriction of this Section 5, continue to retain such stock certificates
until the earlier of the Expiration Date or the date of expiration of these
repurchase rights under Section 5(b) above. At the time of any exercise of this
option, in whole or in part, the Participant shall execute such further
agreement as the Company may require to implement the foregoing.
6. Right of First Refusal.
----------------------
(a) General. The Participant shall not sell, assign, pledge, or in any
-------
manner transfer any of the Option 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 6.
(b) Restrictions on Transfer. If at any time or from time to time the
------------------------
Participant intends to sell or transfer any Option Shares to a third party, the
Participant 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 Participant's notice to purchase such Option Shares on
the terms upon which the Option Shares were to be purchased by or transferred to
the third party by the Participant. If the Company does not exercise its right
of first refusal under this Section
5
<PAGE>
6(b) with respect to such proposed sale or transfer within such 30-day period,
the Participant shall be free to sell or transfer such Option Shares to the
third party identified in the Participant's notice for a period of 45 days after
the expiration of the 30-day period following the date of receipt of the
Participant's notice. Such sale or transfer must be on terms no more favorable
to the recipient than those set forth in the Participant's notice. In no event
may Option Shares be sold or transferred to any then-current competitor of the
Company. Any transfer or sale of Option Shares by the Participant will be
conditional upon the recipient acknowledging in writing the option set forth in
this Section 6(b) and the other restrictions to which the Option Shares are
subject.
(c) Failure of Participant to Comply. If the Participant's notice in
--------------------------------
respect of any Option Shares is not received by the Company as provided in
Section 6(b) above, or if the Participant fails to comply with the provisions of
Section 6(b) above in respect of any such Option 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 Option Shares, or may refuse to
register on its books any transfer or change in ownership of said Option Shares
or in the right to vote thereon, until the provisions of Section 6(b) are
complied with to the satisfaction of the Company; and if the required
Participant's notice is not received by the Company after written demand by the
Company, the Company may also independently proceed as though a proper
Participant's notice has been received at the expiration of ten days after
mailing such demand, and, if the Company exercises its rights under Section 6(b)
with respect to said Option Shares or any of them, the Option Shares specified
shall be transferred accordingly.
(d) Expiration. The Company's right of first refusal contained in this
----------
Section 6 with respect to any sale or transfer of Option Shares shall expire
upon the Expiration Date.
7. 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.
8. 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
6
<PAGE>
or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
9. 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.
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: October 13, 1999 By: /s/ Douglas J. Greenlaw
--------------------------------------------
Name: Douglas J. Greenlaw
Title: Chief Executive Officer
7
<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:
/s/ Douglas J. Greenlaw
-----------------------------------
Print Name: Douglas J. Greenlaw
Address: __________________________
__________________________
8
<PAGE>
Exhibit 10.34
-------------
SWITCHBOARD INCORPORATED
NONSTATUTORY STOCK OPTION AGREEMENT
1. Grant of Option. Switchboard Incorporated, a Delaware Corporation
----------------
(the "Company"), hereby grants to Douglas J. Greenlaw (the "Optionee"), an
option, pursuant to the Company's 1996 Stock Incentive Plan (the "Plan"), to
purchase an aggregate of 893,000 shares of Common Stock, $.01 par value per
share, of the Company ("Common Stock"), at a price of $9.00 per share,
purchasable as set forth and subject to the terms and conditions of this option
and the Plan. The date of grant of this option is October 13, 1999. 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 ("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 "Final Exercise 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 below.
(i) Ninety-three thousand (93,000) shares will vest on the
earlier of (A) the effective date of the initial
registration of the Company's Common Stock under the
Securities Act of 1933, as amended or (B) five (5) years
from the date of grant;
(ii) Two hundred thousand (200,000) shares will vest on the
earlier of (A) the date that the Company's Market
Capitalization equals or exceeds two billion dollars for a
period of one-hundred and eighty (180) consecutive calendar
days or (B) five (5) years from the date of grant
(iii) One hundred fifty thousand (150,000) shares will vest on
the earlier of (A) the date that the Company's Market
Capitalization equals or exceeds one and a half billion
dollars for a period of ninety (90) consecutive calendar
days or (B) four (4) years from the date of grant;
(iv) One hundred fifty thousand (150,000) shares will vest on
the earlier of (A) the date that the Company's Market
Capitalization equals or exceeds one billion dollars for a
period of ninety (90) consecutive calendar days or (B)
three (3) years from the date of grant;
(v) One hundred fifty thousand (150,000) shares will vest two
(2) years from the date of grant;
(vi) One hundred fifty thousand (150,000) will vest one (1) year
from 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 Final Exercise Date or the earlier termination of this
option. This option may not be exercised at any time on or after the Final
Exercise Date.
For the purposes of this provision 3(a), "Market Capitalization" means the
number of outstanding shares of Common Stock of the Company multiplied by the
"fair market value" of a share of Common Stock as of a particular date (the
"Determination Date"). The "fair market value" shall mean: (i) if shares of
Common Stock are traded on a national securities exchange (an "Exchange"), the
average of the closing prices of a share of the Common Stock of the Company on
the last twenty (20) trading days prior to the Determination Date reported on
such Exchange as reported in The Wall Street Journal or comparable reporting
service; or (ii) if shares of Common Stock are not traded on an Exchange but
trade in the over-the-counter market and such shares are quoted on the Nasdaq
National Market System or the Nasdaq Small-Cap Market (either, "NASDAQ"), (A)
the average of the last sale prices reported on NASDAQ or (B) if such shares are
an issue for which last sale prices are not reported on NASDAQ, the average of
the closing bid and ask prices, in each case on the last twenty (20) trading
days (or if the relevant price or quotation did not exist on any of such days,
the relevant price or quotation on the next preceding business day on which
there was such a price or quotation) prior to the Determination Date as reported
in The Wall Street Journal or comparable reporting service; or (iii) if no price
can be determined on the basis of the above methods of valuation, then the
judgment of valuation shall be determined in good faith by the Board of
Directors of the Company, which determination shall be described in a duly
adopted board resolution certified by the Company's Clerk or Assistant Clerk.
(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.
(e) Early Exercise Alternative. Notwithstanding the exercisability
--------------------------
schedule set forth in paragraph (a), the Optionee may elect to exercise this
option as to the unvested shares (in addition to the vested shares) if
simultaneously with such exercise the Optionee enters into a Stock
Restriction Agreement with the Company in the form attached hereto as Exhibit A
---------
(the "Stock Restriction Agreement"). The Stock Restriction Agreement provides
that the unvested shares shall be subject to a right of repurchase (the
"Purchase Option") in favor of the Company at the $9.00 exercise price (as
adjusted pursuant to the terms hereof) in the event that the Optionee ceases to
be employed by the Company.
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,
-2-
<PAGE>
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.
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.
-3-
<PAGE>
7. Proxy. The Optionee hereby appoints Banyan Worldwide, 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 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 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
-4-
<PAGE>
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 of 1933, as amended (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
-5-
<PAGE>
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.
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.
-6-
<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.
-7-
<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 State of Delaware.
-8-
<PAGE>
SWITCHBOARD INCORPORATED
By: /s/ Douglas J. Greenlaw
----------------------------------
Title: Chief Executive Officer
Address: 115 Flanders Road
Westboro, Massachusetts 01581
-9-
<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
/s/ Douglas J. Greenlaw
------------------------------
Address: ____________________
____________________
-10-
<PAGE>
Exhibit 10.35
-------------
SWITCHBOARD INCORPORATED
INCENTIVE STOCK OPTION AGREEMENT
1. Grant of Option. Switchboard Incorporated, a Delaware Corporation
----------------
(the "Company"), hereby grants to Dean Polnerow (the "Optionee"), an option,
pursuant to the Company's 1996 Stock Incentive Plan (the "Plan"), to purchase an
aggregate of 145,000 shares of Common Stock, $.01 par value per share, of the
Company ("Common Stock"), at a price of $9.00 per share, purchasable as set
forth and subject to the terms and conditions of this option and the Plan. The
date of grant of this option is October 13, 1999. 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. To the extent permitted by applicable law,
-----------------------
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 "Final Exercise 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 below.
(i) Twenty-five thousand (25,000) shares will vest on the
earlier of (A) the effective date of the initial
registration of the Company's Common Stock under the
Securities Act of 1933, as amended or (B) five (5) years
from the date of grant;
(ii) Fifty thousand (50,000) shares will vest on the earlier of
(A) the date that the Company's Market Capitalization
equals or exceeds two billion dollars for a period of one-
hundred and eighty (180) consecutive calendar days or (B)
four (4) years from the date of grant;
(iii) Thirty-five thousand (35,000) shares will vest on the
earlier of (A) the date that the Company's Market
Capitalization equals or exceeds one and a half billion
dollars for a period of ninety (90) consecutive calendar
days or (B) three (3) years from the date of grant;
(iv) Thirty-five thousand (35,000) shares will vest on the
earlier of (A) the date that the Company's Market
Capitalization equals or exceeds one billion dollars for a
period of ninety (90) consecutive calendar days or (B) two
(2) years from the date of grant.
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 Final Exercise Date or the earlier termination of this
option. This option may not be exercised at any time on or after the Final
Exercise Date.
<PAGE>
For the purposes of this provision 3(a), "Market Capitalization" means the
number of outstanding shares of Common Stock of the Company multiplied by the
"fair market value" of a share of Common Stock as of a particular date (the
"Determination Date"). The "fair market value" shall mean: (i) if shares of
Common Stock are traded on a national securities exchange (an "Exchange"), the
average of the closing prices of a share of the Common Stock of the Company on
the last twenty (20) trading days prior to the Determination Date reported on
such Exchange as reported in The Wall Street Journal or comparable reporting
service; or (ii) if shares of Common Stock are not traded on an Exchange but
trade in the over-the-counter market and such shares are quoted on the Nasdaq
National Market System or the Nasdaq Small-Cap Market (either, "NASDAQ"), (A)
the average of the last sale prices reported on NASDAQ or (B) if such shares are
an issue for which last sale prices are not reported on NASDAQ, the average of
the closing bid and ask prices, in each case on the last twenty (20) trading
days (or if the relevant price or quotation did not exist on any of such days,
the relevant price or quotation on the next preceding business day on which
there was such a price or quotation) prior to the Determination Date as reported
in The Wall Street Journal or comparable reporting service; or (iii) if no price
can be determined on the basis of the above methods of valuation, then the
judgment of valuation shall be determined in good faith by the Board of
Directors of the Company, which determination shall be described in a duly
adopted board resolution certified by the Company's Clerk or Assistant Clerk.
(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 90 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 Optionee was entitled to exercise this option on the date of
such cessation.
(e) Early Exercise Alternative. Notwithstanding the exercisability
--------------------------
schedule set forth in paragraph (a), the Optionee may elect to exercise this
option as to the unvested shares (in addition to the vested shares) if
simultaneously with such exercise the Optionee enters into a Stock
Restriction Agreement with the Company in the form attached hereto as Exhibit A
---------
(the "Stock Restriction Agreement"). The Stock Restriction Agreement provides
that the unvested shares shall be subject to a right of repurchase (the
"Purchase Option") in favor of the Company at the $9.00 exercise price (as
adjusted pursuant to the terms hereof) in the event that the Optionee ceases to
be employed by the Company.
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
-2-
<PAGE>
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.
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 Worldwide, 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
-3-
<PAGE>
such manner (including pursuant to written consent) and upon such matters as
Banyan 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 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.
-4-
<PAGE>
(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 of 1933, as amended (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.
-5-
<PAGE>
(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.
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
-6-
<PAGE>
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.
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
-7-
<PAGE>
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:
"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.
-8-
<PAGE>
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
---------------------------------
Title: President
Address: 115 Flanders Road
Westboro, Massachusetts 01581
-9-
<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
/s/ Dean Polnerow
-------------------------------
Address: _____________________
_____________________
-10-
<PAGE>
Exhibit 10.36
-------------
SWITCHBOARD INCORPORATED
INCENTIVE STOCK OPTION AGREEMENT
1. Grant of Option. Switchboard Incorporated, a Delaware Corporation
----------------
(the "Company"), hereby grants to John P. Jewett (the "Optionee"), an option,
pursuant to the Company's 1996 Stock Incentive Plan (the "Plan"), to purchase an
aggregate of 50,000 shares of Common Stock, $.01 par value per share, of the
Company ("Common Stock"), at a price of $9.00 per share, purchasable as set
forth and subject to the terms and conditions of this option and the Plan. The
date of grant of this option is October 13, 1999. 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. To the extent permitted by applicable law,
-----------------------
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 "Final Exercise 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 below.
(i) Ten thousand (10,000) shares will vest on the earlier of
(A) the effective date of the initial registration of the
Company's Common Stock under the Securities Act of 1933, as
amended or (B) five (5) years from the date of grant;
(ii) Fifteen thousand (15,000) shares will vest on the earlier
of (A) the date that the Company's Market Capitalization
equals or exceeds two billion dollars for a period of one-
hundred and eighty (180) consecutive calendar days or (B)
four (4) years from the date of grant;
(iii) Twelve thousand five hundred (12,500) shares will vest on
the earlier of (A) the date that the Company's Market
Capitalization equals or exceeds one and a half billion
dollars for a period of ninety (90) consecutive calendar
days or (B) three (3) years from the date of grant;
(iv) Twelve thousand five hundred (12,500) shares will vest on
the earlier of (A) the date that the Company's Market
Capitalization equals or exceeds one billion dollars for a
period of ninety (90) consecutive calendar days or (B) two
(2) years from the date of grant.
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 Final Exercise Date or the earlier termination of this
option. This option may not be exercised at any time on or after the Final
Exercise Date.
<PAGE>
For the purposes of this provision 3(a), "Market Capitalization" means the
number of outstanding shares of Common Stock of the Company multiplied by the
"fair market value" of a share of Common Stock as of a particular date (the
"Determination Date"). The "fair market value" shall mean: (I) if shares of
Common Stock are traded on a national securities exchange (an "Exchange"), the
average of the closing prices of a share of the Common Stock of the Company on
the last twenty (20) trading days prior to the Determination Date reported on
such Exchange as reported in The Wall Street Journal or comparable reporting
service; or (ii) if shares of Common Stock are not traded on an Exchange but
trade in the over-the-counter market and such shares are quoted on the Nasdaq
National Market System or the Nasdaq Small-Cap Market (either, "NASDAQ"), (A)
the average of the last sale prices reported on NASDAQ or (B) if such shares are
an issue for which last sale prices are not reported on NASDAQ, the average of
the closing bid and ask prices, in each case on the last twenty (20) trading
days (or if the relevant price or quotation did not exist on any of such days,
the relevant price or quotation on the next preceding business day on which
there was such a price or quotation) prior to the Determination Date as reported
in The Wall Street Journal or comparable reporting service; or (iii) if no price
can be determined on the basis of the above methods of valuation, then the
judgment of valuation shall be determined in good faith by the Board of
Directors of the Company, which determination shall be described in a duly
adopted board resolution certified by the Company's Clerk or Assistant Clerk.
(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 90 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 Optionee was entitled to exercise this option on the date of
such cessation.
(e) Early Exercise Alternative. Notwithstanding the exercisability
--------------------------
schedule set forth in paragraph (a), the Optionee may elect to exercise this
option as to the unvested shares (in addition to the vested shares) if
simultaneously with such exercise the Optionee enters into a Stock
Restriction Agreement with the Company in the form attached hereto as Exhibit A
---------
(the "Stock Restriction Agreement"). The Stock Restriction Agreement provides
that the unvested shares shall be subject to a right of repurchase (the
"Purchase Option") in favor of the Company at the $9.00 exercise price (as
adjusted pursuant to the terms hereof) in the event that the Optionee ceases to
be employed by the Company.
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
-2-
<PAGE>
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.
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 Worldwide, 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
-3-
<PAGE>
such manner (including pursuant to written consent) and upon such matters as
Banyan 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 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.
-4-
<PAGE>
(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 of 1933, as amended (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.
-5-
<PAGE>
(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.
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
-6-
<PAGE>
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.
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
-7-
<PAGE>
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:
"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.
-8-
<PAGE>
SWITCHBOARD INCORPORATED
By: /s/ John P. Jewett
---------------------------------
Title: Vice President and Chief Financial Officer
Address: 115 Flanders Road
Westboro, Massachusetts 01581
-9-
<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
/s/ John P. Jewett
-------------------------------
Address: _____________________
_____________________
-10-
<PAGE>
Exhibit 10.37
-------------
SWITCHBOARD INCORPORATED
INCENTIVE STOCK OPTION AGREEMENT
1. Grant of Option. Switchboard Incorporated, a Delaware Corporation
----------------
(the "Company"), hereby grants to James M. Canon (the "Optionee"), an option,
pursuant to the Company's 1996 Stock Incentive Plan (the "Plan"), to purchase an
aggregate of 50,000 shares of Common Stock, $.01 par value per share, of the
Company ("Common Stock"), at a price of $9.00 per share, purchasable as set
forth and subject to the terms and conditions of this option and the Plan. The
date of grant of this option is October 13, 1999. 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. To the extent permitted by applicable law,
-----------------------
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 "Final Exercise 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 below.
(i) Ten thousand (10,000) shares will vest on the earlier of
(A) the effective date of the initial registration of the
Company's Common Stock under the Securities Act of 1933, as
amended or (B) five (5) years from the date of grant;
(ii) Fifteen thousand (15,000) shares will vest on the earlier
of (A) the date that the Company's Market Capitalization
equals or exceeds two billion dollars for a period of one-
hundred and eighty (180) consecutive calendar days or (B)
four (4) years from the date of grant;
(iii) Twelve thousand five hundred (12,500) shares will vest on
the earlier of (A) the date that the Company's Market
Capitalization equals or exceeds one and a half billion
dollars for a period of ninety (90) consecutive calendar
days or (B) three (3) years from the date of grant;
(iv) Twelve thousand five hundred (12,500) shares will vest on
the earlier of (A) the date that the Company's Market
Capitalization equals or exceeds one billion dollars for a
period of ninety (90) consecutive calendar days or (B) two
(2) years from the date of grant.
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 Final Exercise Date or the earlier termination of this
option. This option may not be exercised at any time on or after the Final
Exercise Date.
<PAGE>
For the purposes of this provision 3(a), "Market Capitalization" means the
number of outstanding shares of Common Stock of the Company multiplied by the
"fair market value" of a share of Common Stock as of a particular date (the
"Determination Date"). The "fair market value" shall mean: (I) if shares of
Common Stock are traded on a national securities exchange (an "Exchange"), the
average of the closing prices of a share of the Common Stock of the Company on
the last twenty (20) trading days prior to the Determination Date reported on
such Exchange as reported in The Wall Street Journal or comparable reporting
service; or (ii) if shares of Common Stock are not traded on an Exchange but
trade in the over-the-counter market and such shares are quoted on the Nasdaq
National Market System or the Nasdaq Small-Cap Market (either, "NASDAQ"), (A)
the average of the last sale prices reported on NASDAQ or (B) if such shares are
an issue for which last sale prices are not reported on NASDAQ, the average of
the closing bid and ask prices, in each case on the last twenty (20) trading
days (or if the relevant price or quotation did not exist on any of such days,
the relevant price or quotation on the next preceding business day on which
there was such a price or quotation) prior to the Determination Date as reported
in The Wall Street Journal or comparable reporting service; or (iii) if no price
can be determined on the basis of the above methods of valuation, then the
judgment of valuation shall be determined in good faith by the Board of
Directors of the Company, which determination shall be described in a duly
adopted board resolution certified by the Company's Clerk or Assistant Clerk.
(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 90 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 Optionee was entitled to exercise this option on the date of
such cessation.
(e) Early Exercise Alternative. Notwithstanding the exercisability
--------------------------
schedule set forth in paragraph (a), the Optionee may elect to exercise this
option as to the unvested shares (in addition to the vested shares) if
simultaneously with such exercise the Optionee enters into a Stock
Restriction Agreement with the Company in the form attached hereto as Exhibit A
---------
(the "Stock Restriction Agreement"). The Stock Restriction Agreement provides
that the unvested shares shall be subject to a right of repurchase (the
"Purchase Option") in favor of the Company at the $9.00 exercise price (as
adjusted pursuant to the terms hereof) in the event that the Optionee ceases to
be employed by the Company.
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
-2-
<PAGE>
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.
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 Worldwide, 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
-3-
<PAGE>
such manner (including pursuant to written consent) and upon such matters as
Banyan 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 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.
-4-
<PAGE>
(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 of 1933, as amended (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.
-5-
<PAGE>
(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.
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
-6-
<PAGE>
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.
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
-7-
<PAGE>
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:
"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.
-8-
<PAGE>
SWITCHBOARD INCORPORATED
By: /s/ James M. Canon
--------------------------------
Title: Vice President, Business Development
Address: 115 Flanders Road
Westboro, Massachusetts 01581
-9-
<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
/s/ James M. Canon
-------------------------------
Address: _____________________
_____________________
-10-
<PAGE>
Exhibit 10.38
-------------
Non-Statutory Stock Option Agreement
1. Grant of Option. Switchboard Incorporated, a Delaware corporation (the
---------------
"Company"), hereby grants to William Ferry (the "Optionee") an option, pursuant
-------------
to the Company's 1996 Stock Incentive Plan (the "Plan"), to purchase an
aggregate of 40,000 shares of Common Stock, $.01 par value per share, of the
------
Company ("Common Stock"), at a price of $8.50 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 September 14, 1999. 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 tenth anniversary of the date of grant
(hereinafter the "Final Exercise 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Percentage of
Shares as to which
Exercise Period Option is Exercisable
- --------------------------------------------------------------------------------
<S> <C>
Prior to 12 months after the date of grant -0%-
- --------------------------------------------------------------------------------
From and after 12 months after the date of -25%-
grant but prior to 24 months after the date
of grant
- --------------------------------------------------------------------------------
From and after 24 months after the date of -50%-
grant but prior to 36 months after the date
of grant
- --------------------------------------------------------------------------------
From and after 36 months after the date of -75%-
grant but prior to 48 months after the date
of grant
- --------------------------------------------------------------------------------
From and after 48 months after date of grant -100%-
- --------------------------------------------------------------------------------
</TABLE>
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 Final Exercise Date or the earlier termination of this
option. This option may not be exercised at any time on or after the Final
Exercise Date.
<PAGE>
Notwithstanding anything to the contrary in this option or in the
Plan, this option will vest as to 100% of the then-unvested shares upon the
occurrence of a Change of Control (as defined herein). For the purposes of this
option, a "Change of Control" shall mean an event or occurrence set forth in any
one or more of clauses (i) through (iv) below (including an event or occurrence
that constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):
(i) the acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person"), other than Banyan Worldwide or
CBS Corporation, of beneficial ownership of any capital stock of the
Company if, after such acquisition, such Person beneficially owns (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more
of either (A) the then-outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the combined voting power
of the then-outstanding securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this clause (i), the
--------
following acquisitions shall not constitute a Change in Control: (I) any
acquisition directly from the Company (excluding an acquisition pursuant to
the exercise, conversion or exchange of any security exercisable for,
convertible into or exchangeable for common stock or voting securities of
the Company, unless the Person exercising, converting or exchanging such
security acquired such security directly from the Company or an underwriter
or agent of the Company), (II) any acquisition by the Company, (III) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(IV) any acquisition by any corporation pursuant to a transaction which
complies with clauses (A) and (B) of clause (iii) of this Section 3(a); or
(ii) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term
"Continuing Director" means at any date a member of the Board (A) who was
a member of the Board on the date of the execution of this Agreement or (B)
who was nominated or elected subsequent to such date by at least a majority
of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Board was recommended or
endorsed by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election; provided, however,
-------- -------
that there shall be excluded from this clause (B) any individual whose
initial assumption of office occurred as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents, by or on behalf of a person other than the Board; or
(iii) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the Company or a
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), unless, immediately following such
Business Combination, each of the following two conditions is satisfied:
(A) all or substantially all of the individuals and entities who were the
<PAGE>
beneficial owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-
outstanding shares of common stock and the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination (which shall include, without limitation, a
corporation which as a result of such transaction owns the Company or
substantially all of the Company's assets either directly or through one or
more subsidiaries) (such resulting or acquiring corporation is referred to
herein as the "Acquiring Corporation") in substantially the same
proportions as their ownership, immediately prior to such Business
Combination, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, respectively; and (B) no Person (excluding the
Acquiring Corporation or any employee benefit plan (or related trust)
maintained or sponsored by the Company or by the Acquiring Corporation)
beneficially owns, directly or indirectly, 20% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such
corporation entitled to vote generally in the election of directors (except
to the extent that such ownership existed prior to the Business
Combination); or
(iv) approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
(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 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 of either the Company or Banyan Worldwide, 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 30 days after such cessation.
(e) Early Exercise Alternative. Notwithstanding the exercisability
--------------------------
schedule set forth in paragraph (a), the Optionee may elect to exercise this
option as to the unvested shares (in addition to the vested shares) if
simultaneously with such exercise the Optionee enters into a Stock Restriction
Agreement with the Company in the form attached hereto as Exhibit A
---------
(the "Stock Restriction Agreement"). The Stock Restriction Agreement provides
that the unvested shares shall be subject to a right of repurchase (the
"Purchase Option") in favor of the Company at the $8.50 exercise price (as
adjusted pursuant to the terms hereof) in the event that the Optionee
ceases to be employed by the Company.
4. Payment of Purchase Price.
-------------------------
<PAGE>
(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.
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
<PAGE>
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 Worldwide, 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 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 or Banyan Worldwide, or
providing services on behalf of the Company or Banyan Worldwide, prior to the
date specified in Section 8(d) below for the
<PAGE>
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.
(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").
<PAGE>
(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 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.
<PAGE>
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.
(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.
-----------------------------------
<PAGE>
(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 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
<PAGE>
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:
September 14, 1999
SWITCHBOARD INCORPORATED
By: /s/ John P. Jewett
-----------------------------
Title: Chief Financial Officer
-----------------------
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
/s/ William P. Ferry
-----------------------------
Address: _____________________
_____________________
<PAGE>
Exhibit 10.39
-------------
Non-Statutory Stock Option Agreement
1. Grant of Option. Switchboard Incorporated, a Delaware corporation (the
---------------
"Company"), hereby grants to William Ferry (the "Optionee") an option, pursuant
-------------
to the Company's 1996 Stock Incentive Plan (the "Plan"), to purchase an
aggregate of 60,000 shares of Common Stock, $.01 par value per share, of the
------
Company ("Common Stock"), at a price of $9.00 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 October 18, 1999. 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 tenth anniversary of the date of grant
(hereinafter the "Final Exercise 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.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Percentage of
Shares as to which
Exercise Period Option is Exercisable
--------------- ---------------------
- ----------------------------------------------------------------------------------------------
<S> <C>
Prior to 12 months after the date of grant -0%-
- ----------------------------------------------------------------------------------------------
From and after 12 months after the date of -50%-
grant but prior to 24 months after the date
of grant
- ----------------------------------------------------------------------------------------------
From and after 24 months after date of grant -100%-
- ----------------------------------------------------------------------------------------------
</TABLE>
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 Final Exercise Date or the earlier termination of this
option. This option may not be exercised at any time on or after the Final
Exercise Date.
Notwithstanding anything to the contrary in this option or in the Plan, this
option will vest as to 100% of the then-unvested shares upon the occurrence of a
Change of Control (as defined herein). For the purposes of this option, a
"Change of Control" shall mean an event or occurrence set forth in any one or
more of clauses (i) through (iv) below (including an event or occurrence that
constitutes a Change in Control under one of such subsections but is
specifically
<PAGE>
exempted from another such subsection):
(i) the acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person"), other than Banyan Worldwide or
CBS Corporation, of beneficial ownership of any capital stock of the
Company if, after such acquisition, such Person beneficially owns (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more
of either (A) the then-outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the combined voting power
of the then-outstanding securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this clause (i), the
--------
following acquisitions shall not constitute a Change in Control: (I) any
acquisition directly from the Company (excluding an acquisition pursuant to
the exercise, conversion or exchange of any security exercisable for,
convertible into or exchangeable for common stock or voting securities of
the Company, unless the Person exercising, converting or exchanging such
security acquired such security directly from the Company or an underwriter
or agent of the Company), (II) any acquisition by the Company, (III) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(IV) any acquisition by any corporation pursuant to a transaction which
complies with clauses (A) and (B) of clause (iii) of this Section 3(a); or
(ii) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term
"Continuing Director" means at any date a member of the Board (A) who was
a member of the Board on the date of the execution of this Agreement or (B)
who was nominated or elected subsequent to such date by at least a majority
of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Board was recommended or
endorsed by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election; provided, however,
-------- -------
that there shall be excluded from this clause (B) any individual whose
initial assumption of office occurred as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents, by or on behalf of a person other than the Board; or
(iii) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the Company or a
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), unless, immediately following such
Business Combination, each of the following two conditions is satisfied:
(A) all or substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-
outstanding shares of common stock and the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring
<PAGE>
corporation in such Business Combination (which shall include, without
limitation, a corporation which as a result of such transaction owns the
Company or substantially all of the Company's assets either directly or
through one or more subsidiaries) (such resulting or acquiring corporation
is referred to herein as the "Acquiring Corporation") in substantially the
same proportions as their ownership, immediately prior to such Business
Combination, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, respectively; and (B) no Person (excluding the
Acquiring Corporation or any employee benefit plan (or related trust)
maintained or sponsored by the Company or by the Acquiring Corporation)
beneficially owns, directly or indirectly, 20% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such
corporation entitled to vote generally in the election of directors (except
to the extent that such ownership existed prior to the Business
Combination); or
(iv) approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
(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 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 of either the Company or Banyan Worldwide, 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 30 days after such cessation.
(e) Early Exercise Alternative. Notwithstanding the exercisability
--------------------------
schedule set forth in paragraph (a), the Optionee may elect to exercise this
option as to the unvested shares (in addition to the vested shares) if
simultaneously with such exercise the Optionee enters into a Stock Restriction
Agreement with the Company in the form attached hereto as Exhibit A
---------
(the "Stock Restriction Agreement"). The Stock Restriction Agreement provides
that the unvested shares shall be subject to a right of repurchase (the
"Purchase Option") in favor of the Company at the $9.00 exercise price (as
adjusted pursuant to the terms hereof) in the event that the Optionee
ceases to be employed by the Company.
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
<PAGE>
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.
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
<PAGE>
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 Worldwide, 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 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 or Banyan Worldwide, or
providing services on behalf of the Company or Banyan Worldwide, 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
<PAGE>
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.
(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
<PAGE>
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 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.
<PAGE>
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.
(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
<PAGE>
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 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."
<PAGE>
"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:
October 18, 1999
SWITCHBOARD INCORPORATED
By: /s/ John P. Jewett
------------------------------
Title: Chief Financial Officer
-----------------------
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
/s/ William P. Ferry
-------------------------------
Address: _____________________
_____________________
<PAGE>
Exhibit 10.41
-------------
Non-Statutory Stock Option Agreement
1. Grant of Option. Switchboard Incorporated, a Delaware corporation (the
---------------
"Company"), hereby grants to Richard Spaulding (the "Optionee") an option,
-----------------
pursuant to the Company's 1996 Stock Incentive Plan (the "Plan"), to purchase an
aggregate of 40,000 shares of Common Stock, $.01 par value per share, of the
------
Company ("Common Stock"), at a price of $8.50 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 September 14, 1999. 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 tenth anniversary of the date of grant
(hereinafter the "Final Exercise 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.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Percentage of
Shares as to which
Exercise Period Option is Exercisable
--------------- ---------------------
- ----------------------------------------------------------------------------------------------
<S> <C>
Prior to 12 months after the date of grant -0%-
- ----------------------------------------------------------------------------------------------
From and after 12 months after the date of -25%-
grant but prior to 24 months after the date
of grant
- ----------------------------------------------------------------------------------------------
From and after 24 months after the date of -50%-
grant but prior to 36 months after the date
of grant
- ----------------------------------------------------------------------------------------------
From and after 36 months after the date of -75%-
grant but prior to 48 months after the date
of grant
- ----------------------------------------------------------------------------------------------
From and after 48 months after date of grant -100%-
- ----------------------------------------------------------------------------------------------
</TABLE>
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 Final Exercise Date or the earlier termination of this
option. This option may not be exercised at any time on or after the Final
Exercise Date.
<PAGE>
Notwithstanding anything to the contrary in this option or in the
Plan, this option will vest as to 100% of the then-unvested shares upon the
occurrence of a Change of Control (as defined herein). For the purposes of this
option, a "Change of Control" shall mean an event or occurrence set forth in any
one or more of clauses (i) through (iv) below (including an event or occurrence
that constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):
(i) the acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person"), other than Banyan Worldwide or
CBS Corporation, of beneficial ownership of any capital stock of the
Company if, after such acquisition, such Person beneficially owns (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more
of either (A) the then-outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the combined voting power
of the then-outstanding securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this clause (i), the
--------
following acquisitions shall not constitute a Change in Control: (I) any
acquisition directly from the Company (excluding an acquisition pursuant to
the exercise, conversion or exchange of any security exercisable for,
convertible into or exchangeable for common stock or voting securities of
the Company, unless the Person exercising, converting or exchanging such
security acquired such security directly from the Company or an underwriter
or agent of the Company), (II) any acquisition by the Company, (III) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(IV) any acquisition by any corporation pursuant to a transaction which
complies with clauses (A) and (B) of clause (iii) of this Section 3(a); or
(ii) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term
"Continuing Director" means at any date a member of the Board (A) who was
a member of the Board on the date of the execution of this Agreement or (B)
who was nominated or elected subsequent to such date by at least a majority
of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Board was recommended or
endorsed by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election; provided, however,
-------- -------
that there shall be excluded from this clause (B) any individual whose
initial assumption of office occurred as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents, by or on behalf of a person other than the Board; or
(iii) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the Company or a
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), unless, immediately following such
Business Combination, each of the following two conditions is satisfied:
(A) all or substantially all of the individuals and entities who were the
<PAGE>
beneficial owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-
outstanding shares of common stock and the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination (which shall include, without limitation, a
corporation which as a result of such transaction owns the Company or
substantially all of the Company's assets either directly or through one or
more subsidiaries) (such resulting or acquiring corporation is referred to
herein as the "Acquiring Corporation") in substantially the same
proportions as their ownership, immediately prior to such Business
Combination, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, respectively; and (B) no Person (excluding the
Acquiring Corporation or any employee benefit plan (or related trust)
maintained or sponsored by the Company or by the Acquiring Corporation)
beneficially owns, directly or indirectly, 20% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such
corporation entitled to vote generally in the election of directors (except
to the extent that such ownership existed prior to the Business
Combination); or
(iv) approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
(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 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 of either the Company or Banyan Worldwide, 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 30 days after such cessation.
(e) Early Exercise Alternative. Notwithstanding the exercisability
--------------------------
schedule set forth in paragraph (a), the Optionee may elect to exercise this
option as to the unvested shares (in addition to the vested shares) if
simultaneously with such exercise the Optionee enters into a Stock Restriction
Agreement with the Company in the form attached hereto as Exhibit A (the "Stock
---------
Restriction Agreement"). The Stock Restriction Agreement provides that the
unvested shares shall be subject to a right of repurchase (the "Purchase
Option") in favor of the Company at the $8.50 exercise price (as adjusted
pursuant to the terms hereof) in the event that the Optionee ceases to be
employed by the Company.
4. Payment of Purchase Price.
-------------------------
<PAGE>
(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.
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
<PAGE>
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 Worldwide, 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 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 or Banyan Worldwide, or
providing services on behalf of the Company or Banyan Worldwide, prior to the
date specified in Section 8(d) below for the
<PAGE>
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.
(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").
<PAGE>
(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 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.
<PAGE>
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.
(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.
-----------------------------------
<PAGE>
(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 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
<PAGE>
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:
September 14, 1999
SWITCHBOARD INCORPORATED
By: /s/ John P. Jewett
---------------------------
Title: Chief Financial Officer
-----------------------
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
/s/ Richard M. Spaulding
-------------------------------
Address: _____________________
_____________________
<PAGE>
Exhibit 10.42
-------------
Non-Statutory Stock Option Agreement
1. Grant of Option. Switchboard Incorporated, a Delaware corporation (the
---------------
"Company"), hereby grants to David Strohm (the "Optionee") an option, pursuant
------------
to the Company's 1996 Stock Incentive Plan (the "Plan"), to purchase an
aggregate of 40,000 shares of Common Stock, $.01 par value per share, of the
------
Company ("Common Stock"), at a price of $8.50 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 September 14, 1999. 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 tenth anniversary of the date of grant
(hereinafter the "Final Exercise 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.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Percentage of
Shares as to which
Exercise Period Option is Exercisable
--------------- ---------------------
- ----------------------------------------------------------------------------------------------
<S> <C>
Prior to 12 months after the date of grant -0%-
- ----------------------------------------------------------------------------------------------
From and after 12 months after the date of -25%-
grant but prior to 24 months after the date
of grant
- ----------------------------------------------------------------------------------------------
From and after 24 months after the date of -50%-
grant but prior to 36 months after the date
of grant
- ----------------------------------------------------------------------------------------------
From and after 36 months after the date of -75%-
grant but prior to 48 months after the date
of grant
- ----------------------------------------------------------------------------------------------
From and after 48 months after date of grant -100%-
- ----------------------------------------------------------------------------------------------
</TABLE>
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 Final Exercise Date or the earlier termination of this
option. This option may not be exercised at any time on or after the Final
Exercise Date.
<PAGE>
Notwithstanding anything to the contrary in this option or in the Plan,
this option will vest as to 100% of the then-unvested shares upon the occurrence
of a Change of Control (as defined herein). For the purposes of this option, a
"Change of Control" shall mean an event or occurrence set forth in any one or
more of clauses (i) through (iv) below (including an event or occurrence that
constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):
(i) the acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person"), other than Banyan Worldwide or
CBS Corporation, of beneficial ownership of any capital stock of the
Company if, after such acquisition, such Person beneficially owns (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more
of either (A) the then-outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the combined voting power
of the then-outstanding securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this clause (i), the
--------
following acquisitions shall not constitute a Change in Control: (I) any
acquisition directly from the Company (excluding an acquisition pursuant to
the exercise, conversion or exchange of any security exercisable for,
convertible into or exchangeable for common stock or voting securities of
the Company, unless the Person exercising, converting or exchanging such
security acquired such security directly from the Company or an underwriter
or agent of the Company), (II) any acquisition by the Company, (III) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(IV) any acquisition by any corporation pursuant to a transaction which
complies with clauses (A) and (B) of clause (iii) of this Section 3(a); or
(ii) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term
"Continuing Director" means at any date a member of the Board (A) who was
a member of the Board on the date of the execution of this Agreement or (B)
who was nominated or elected subsequent to such date by at least a majority
of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Board was recommended or
endorsed by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election; provided, however,
-------- -------
that there shall be excluded from this clause (B) any individual whose
initial assumption of office occurred as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents, by or on behalf of a person other than the Board; or
(iii) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the Company or a
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), unless, immediately following such
Business Combination, each of the following two conditions is satisfied:
(A) all or substantially all of the individuals and entities who were the
<PAGE>
beneficial owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-
outstanding shares of common stock and the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination (which shall include, without limitation, a
corporation which as a result of such transaction owns the Company or
substantially all of the Company's assets either directly or through one or
more subsidiaries) (such resulting or acquiring corporation is referred to
herein as the "Acquiring Corporation") in substantially the same
proportions as their ownership, immediately prior to such Business
Combination, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, respectively; and (B) no Person (excluding the
Acquiring Corporation or any employee benefit plan (or related trust)
maintained or sponsored by the Company or by the Acquiring Corporation)
beneficially owns, directly or indirectly, 20% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such
corporation entitled to vote generally in the election of directors (except
to the extent that such ownership existed prior to the Business
Combination); or
(iv) approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
(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 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 of either the Company or Banyan Worldwide, 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 30 days after such cessation.
(e) Early Exercise Alternative. Notwithstanding the exercisability
--------------------------
schedule set forth in paragraph (a), the Optionee may elect to exercise this
option as to the unvested shares (in addition to the vested shares) if
simultaneously with such exercise the Optionee enters into a Stock Restriction
Agreement with the Company in the form attached hereto as Exhibit A
---------
(the "Stock Restriction Agreement"). The Stock Restriction Agreement provides
that the unvested shares shall be subject to a right of repurchase (the
"Purchase Option") in favor of the Company at the $8.50 exercise price (as
adjusted pursuant to the terms hereof) in the event that the Optionee ceases to
be employed by the Company.
4. Payment of Purchase Price.
-------------------------
<PAGE>
(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.
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
<PAGE>
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 Worldwide, 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 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 or Banyan Worldwide, or
providing services on behalf of the Company or Banyan Worldwide, prior to the
date specified in Section 8(d) below for the
<PAGE>
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.
(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").
<PAGE>
(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 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.
<PAGE>
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.
(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.
-----------------------------------
<PAGE>
(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 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
<PAGE>
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:
September 14, 1999
SWITCHBOARD INCORPORATED
By: /s/ John P. Jewett
---------------------------
Title: Chief Financial Officer
-----------------------
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
/s/ David N. Strohm
-------------------------------
Address: _____________________
_____________________
<PAGE>
Exhibit 10.43
-------------
Non-Statutory Stock Option Agreement
1. Grant of Option. Switchboard Incorporated, a Delaware corporation (the
---------------
"Company"), hereby grants to Robert Wadsworth (the "Optionee") an option,
----------------
pursuant to the Company's 1996 Stock Incentive Plan (the "Plan"), to purchase an
aggregate of 40,000 shares of Common Stock, $.01 par value per share, of the
------
Company ("Common Stock"), at a price of $8.50 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 September 14, 1999. 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 tenth anniversary of the date of grant
(hereinafter the "Final Exercise 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.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Percentage of
Shares as to which
Exercise Period Option is Exercisable
--------------- ---------------------
- ----------------------------------------------------------------------------------------------
<S> <C>
Prior to 12 months after the date of grant -0%-
- ----------------------------------------------------------------------------------------------
From and after 12 months after the date of -25%-
grant but prior to 24 months after the date
of grant
- ----------------------------------------------------------------------------------------------
From and after 24 months after the date of -50%-
grant but prior to 36 months after the date
of grant
- ----------------------------------------------------------------------------------------------
From and after 36 months after the date of -75%-
grant but prior to 48 months after the date
of grant
- ----------------------------------------------------------------------------------------------
From and after 48 months after date of grant -100%-
- ----------------------------------------------------------------------------------------------
</TABLE>
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 Final Exercise Date or the earlier termination of this
option. This option may not be exercised at any time on or after the Final
Exercise Date.
<PAGE>
Notwithstanding anything to the contrary in this option or in the
Plan, this option will vest as to 100% of the then-unvested shares upon the
occurrence of a Change of Control (as defined herein). For the purposes of this
option, a "Change of Control" shall mean an event or occurrence set forth in any
one or more of clauses (i) through (iv) below (including an event or occurrence
that constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):
(i) the acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person"), other than Banyan Worldwide or
CBS Corporation, of beneficial ownership of any capital stock of the
Company if, after such acquisition, such Person beneficially owns (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more
of either (A) the then-outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the combined voting power
of the then-outstanding securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this clause (i), the
--------
following acquisitions shall not constitute a Change in Control: (I) any
acquisition directly from the Company (excluding an acquisition pursuant to
the exercise, conversion or exchange of any security exercisable for,
convertible into or exchangeable for common stock or voting securities of
the Company, unless the Person exercising, converting or exchanging such
security acquired such security directly from the Company or an underwriter
or agent of the Company), (II) any acquisition by the Company, (III) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(IV) any acquisition by any corporation pursuant to a transaction which
complies with clauses (A) and (B) of clause (iii) of this Section 3(a); or
(ii) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term
"Continuing Director" means at any date a member of the Board (A) who was
a member of the Board on the date of the execution of this Agreement or (B)
who was nominated or elected subsequent to such date by at least a majority
of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Board was recommended or
endorsed by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election; provided, however,
-------- -------
that there shall be excluded from this clause (B) any individual whose
initial assumption of office occurred as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents, by or on behalf of a person other than the Board; or
(iii) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the Company or a
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), unless, immediately following such
Business Combination, each of the following two conditions is satisfied:
(A) all or substantially all of the individuals and entities who were the
<PAGE>
beneficial owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-
outstanding shares of common stock and the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination (which shall include, without limitation, a
corporation which as a result of such transaction owns the Company or
substantially all of the Company's assets either directly or through one or
more subsidiaries) (such resulting or acquiring corporation is referred to
herein as the "Acquiring Corporation") in substantially the same
proportions as their ownership, immediately prior to such Business
Combination, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, respectively; and (B) no Person (excluding the
Acquiring Corporation or any employee benefit plan (or related trust)
maintained or sponsored by the Company or by the Acquiring Corporation)
beneficially owns, directly or indirectly, 20% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such
corporation entitled to vote generally in the election of directors (except
to the extent that such ownership existed prior to the Business
Combination); or
(iv) approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
(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 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 of either the Company or Banyan Worldwide, 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 30 days after such cessation.
(e) Early Exercise Alternative. Notwithstanding the exercisability
--------------------------
schedule set forth in paragraph (a), the Optionee may elect to exercise this
option as to the unvested shares (in addition to the vested shares) if
simultaneously with such exercise the Optionee enters into a Stock Restriction
Agreement with the Company in the form attached hereto as Exhibit A
---------
(the "Stock Restriction Agreement"). The Stock Restriction Agreement provides
that the unvested shares shall be subject to a right of repurchase (the
"Purchase Option") in favor of the Company at the $8.50 exercise price (as
adjusted pursuant to the terms hereof) in the event that the Optionee ceases to
be employed by the Company.
4. Payment of Purchase Price.
-------------------------
<PAGE>
(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.
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
<PAGE>
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 Worldwide, 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 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 or Banyan Worldwide, or
providing services on behalf of the Company or Banyan Worldwide, prior to the
date specified in Section 8(d) below for the
<PAGE>
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.
(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").
<PAGE>
(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 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.
<PAGE>
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.
(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.
-----------------------------------
<PAGE>
(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 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
<PAGE>
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:
September 14, 1999
SWITCHBOARD INCORPORATED
By: /s/ John P. Jewett
---------------------------
Title: Chief Financial Officer
-----------------------
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
/s/ Robert M. Wadsworth
----------------------------------
Address: ________________________
________________________
<PAGE>
Exhibit 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Amendment No. 3 to the Registration
Statement on Form S-1 of our report dated January 14, 2000, except for
paragraph 2 of Note F and Note O for which the date is February 4, 2000,
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
February 7, 2000
<PAGE>
Exhibit 24.2
------------
POWER OF ATTORNEY
I, Russell I. Pillar, a director of Switchboard Incorporated, hereby
constitute and appoint Douglas J. Greenlaw, Dean Polnerow, John P. Jewett and
Virginia K. Kapner, and each of them singly, my true and lawful attorneys with
full power to them, and each of them singly, to sign for me and in my name in
the capacity indicated below, Amendment No. 3 to the Registration Statement on
Form S-1, File No. 333-90013 (the "Registration Statement"), and any and all
other 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 my name
and on my behalf in my capacity as a director 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 my signature as it may be signed by my said attorney, or any of them,
to said Amendment No. 3 and any and all other amendments to the Registration
Statement or to any subsequent registration statement for the same offering
which may be filed under Rule 462(b).
Dated January 28, 2000
/s/ Russell I. Pillar
-----------------------------
Name: Russell I. Pillar
Title: Director
