<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1999 Commission File Number 000-20364
BANYAN SYSTEMS INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
MASSACHUSETTS 04-2798394
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
120 FLANDERS ROAD
WESTBORO, MASSACHUSETTS 01581
(Address of Principal Executive Offices) (Zip Code)
(508) 898-1000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------- --------
Number of shares outstanding of each of the issuer's classes of Common Stock as
of July 31, 1999:
Class Number of Shares Outstanding
- -------------------------------------- ----------------------------
Common Stock, par value $.01 per share 24,307,378
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BANYAN SYSTEMS INCORPORATED
INDEX
<TABLE>
<CAPTION>
Page Number
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998 3
Consolidated Statements of Operations
Three and Six months ended June 30, 1999 and 1998 4
Consolidated Statements of Cash Flows
Six months ended June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risks 17
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 20
EXHIBIT INDEX 21
</TABLE>
This Quarterly Report on Form 10-Q contains forward-looking statements,
including information with respect to the Company's plans and strategy for its
business and the Company's liquidity and capital resources for the next 12
months. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes", "anticipates", "plans",
"expects" and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause actual
events or the Company's actual results to differ materially from those indicated
by such forward-looking statements. These factors include, without limitation,
those set forth below under the caption "Factors Affecting Future Operating
Results" included under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Part I, Item 2 of this Quarterly Report
on Form 10-Q.
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
--------------------
BANYAN SYSTEMS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 19,960 $ 15,160
Marketable securities 36,987 4,052
Accounts receivable, less allowances of $3,102 and $2,917 14,911 21,392
Inventories 950 890
Other current assets 4,715 3,808
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Total current assets 77,523 45,302
Property and equipment:
Computers and peripherals 24,530 24,859
Equipment 10,789 10,455
Furniture and fixtures 2,675 2,659
Leasehold improvements 2,639 2,586
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Total 40,633 40,559
Less accumulated depreciation and amortization (36,105) (35,609)
-------- -----------
Property and equipment, net 4,528 4,950
Marketable securities 5,639 3,076
Other assets, net of accumulated amortization of $1,482 and $2,669 2,115 2,882
-------- -----------
Total assets $ 89,805 $ 56,210
======== ===========
LIABILITIES
Current liabilities:
Accounts payable $ 4,030 $ 3,861
Accrued compensation 4,337 4,137
Accrued expenses 7,030 6,741
Accrued costs for restructuring and other charges 451 710
Other current liabilities 1,164 626
Long-term debt-current portion 608 548
Deferred revenue 13,722 18,430
-------- -----------
Total current liabilities 31,342 35,053
Software licenses payable, non-current - 150
Long-term debt - 600
Minority interest in consolidated subsidiary 3,571 2,008
STOCKHOLDERS' EQUITY
Convertible preferred stock, $.01 par value;
authorized 1,000,000 shares;
none and 263,158 issued and outstanding - 3
Common stock, $.01 par value;
authorized 35,000,000 shares;
issued 24,192,412 and 20,818,982 shares 242 208
Accumulated deficit (26,666) (31,585)
Additional paid in capital 88,398 79,485
Unearned compensation (815) (1,326)
Treasury stock at cost; 1,848,000 shares (28,564) (28,564)
Accumulated other comprehensive income 22,297 178
-------- -----------
Total stockholders' equity 54,892 18,399
-------- -----------
Total liabilities and stockholders' equity $ 89,805 $ 56,210
======== ===========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
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BANYAN SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
1999 1998 1999 1998
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Software $ 7,258 $10,792 $15,529 $22,510
Services 9,991 5,638 19,144 10,593
Internet advertising 2,010 1,706 3,612 2,786
------- ------- ------- -------
Total revenues 19,259 18,136 38,285 35,889
Cost of revenues:
Software 1,057 1,331 2,561 2,618
Services 6,911 3,603 12,918 6,736
Internet advertising 321 556 671 1,028
------- ------- ------- -------
Total cost of revenues 8,289 5,490 16,150 10,382
------- ------- ------- -------
Gross profit 10,970 12,646 22,135 25,507
Operating expenses:
Sales and marketing 6,484 7,664 12,801 15,860
Product development 2,319 2,915 4,839 5,762
General and administrative 1,757 1,597 3,567 3,078
Other charges - 1,400 - 1,400
------- ------- ------- -------
Total operating expenses 10,560 13,576 21,207 26,100
Income/(loss) from operations 410 (930) 928 (593)
Other income/(expense):
Gain on sale of investment 4,043 - 4,043 -
Interest income 259 195 532 345
Interest expense (36) (11) (66) (33)
Other, net (124) 129 (292) 108
------- ------- ------- -------
Total other income/(expense) 4,142 313 4,217 420
------- ------- ------- -------
Income/(loss) before income taxes 4,552 (617) 5,145 (173)
Provision for income taxes 90 156 226 223
------- ------- ------- -------
Net income/(loss) $ 4,462 $ (773) $ 4,919 $ (396)
======= ======= ======= =======
Net income/(loss) per common share:
Basic $0.22 $(0.04) $0.25 $(0.02)
======= ======= ======= =======
Diluted $0.17 $(0.04) $0.19 $(0.02)
======= ======= ======= =======
Weighted average number of common shares:
Basic 20,236 18,055 19,714 17,863
======= ======= ======= =======
Diluted 25,668 18,055 25,554 17,863
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
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BANYAN SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------
1999 1998
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ 4,919 $ (396)
Adjustments to reconcile net income/(loss)
to net cash provided by operating activities:
Gain on sale of investments (4,043) -
Depreciation and amortization 1,742 2,447
Other charges - 1,400
Amortization of unearned compensation 511 -
Changes in operating assets and liabilities:
Decrease in accounts receivable 6,333 3,434
(Increase) in inventories (56) (59)
(Increase) in other current assets (3) (341)
(Decrease) in other liabilities (674) (566)
(Decrease) in accounts payable and accrued
compensation and expenses (552) (1,299)
(Decrease) in accrued costs for restructuring
and other charges (259) (328)
(Decrease) in software licenses payable, net (150) -
Decrease in other non current assets 146 -
(Decrease) in deferred revenue (4,702) (2,862)
-------- -------
Net cash provided by operating activities 3212 1,430
Cash flows from investing activities:
Capital expenditures (1,067) (921)
Sale of equity in subsidiary 4,298 -
Proceeds from investment 4,743 -
(Purchases of)/proceeds from marketable
securities, net (11,782) 4,083
Acquisition of technology - (500)
-------- -------
Net cash (used in)/provided by investing
activities (3,808) 2,662
Cash flows from financing activities:
Net proceeds from issuance of convertible
preferred stock - 9,500
Net proceeds from issuance of warrants 2,832 -
Proceeds from stock plan purchases and
stock options 2,751 1,849
-------- -------
Net cash provided by financing activities 5,583 11,349
Effect of exchange rate changes on cash and
cash equivalents (187) 126
-------- -------
Net increase in cash and cash equivalents 4,800 15,567
Cash and cash equivalents at beginning of
the period 15,160 6,674
-------- -------
Cash and cash equivalents at end of the period $ 19,960 $22,241
======== =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
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<PAGE>
BANYAN SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements include the
accounts of Banyan Systems Incorporated ("Banyan Worldwide") and its
subsidiaries as of June 30, 1999, and have been prepared by the Company in
accordance with generally accepted accounting principles. In the opinion of
management, the accompanying unaudited consolidated financial statements
contain all adjustments, consisting only of those of a normal recurring
nature, necessary for a fair presentation of the Company's financial
position, results of operations and cash flows at the dates and for the
periods indicated. While the Company believes that the disclosures
presented are adequate to make the information not misleading, these
consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes included in the
Company's 1998 Annual Report to Stockholders and Annual Report on
Form 10-K.
The results of operations for the three-month period ended June 30, 1999
are not necessarily indicative of the results expected for the full fiscal
year or any future interim period.
B. REPORTABLE SEGMENTS:
Banyan Systems Incorporated has two reportable segments: Network software
and services, and Internet advertising. The Company's network software and
services segment designs, develops and markets standards-based networking
directory and messaging solutions that help people communicate across
enterprise networks, intranets and the Internet. In addition, the network
software and services segment delivers professional services including
technical support, education and consulting, including network performance,
integration and Year 2000 compliance services. The Company's Internet
advertising segment is organized as a majority-owned subsidiary,
Switchboard Incorporated, and generates advertising revenue from major
domestic corporations and local businesses through its Internet people-to-
people and business directory services. The Company's reportable segments
are managed separately because they market and distribute distinct products
and services.
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<PAGE>
SEGMENT INFORMATION FOR THE SIX-MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Network Internet Total
Software & Services Advertising Company
------------------- ------------ --------
<S> <C> <C> <C>
Revenues
Network software $15,529 $ - $15,529
Network services 19,144 - 19,144
Internet advertising - 3,612 3,612
------- ------- -------
Total revenue 34,673 3,612 38,285
Cost of revenues 15,479 671 16,150
------- ------- -------
Gross margin 19,194 2,941 22,135
Operating expenses 17,721 3,486 21,207
------- ------- -------
Operating income/(loss) $ 1,473 $ (545) $ 928
======= ======= =======
Total assets $78,622 $11,183 $89,805
======= ======= =======
</TABLE>
C. BASIC AND DILUTED EARNINGS PER SHARE:
Basic earnings per share is based upon the weighted average number of
common shares outstanding during the period. Diluted earnings per share
includes the dilutive effect of potential common stock outstanding during
the period. Potential common stock results from the assumed exercise of
outstanding stock options and warrants, the proceeds of which are then
assumed to have been used to repurchase outstanding common stock shares
using the treasury stock method, and the conversion of preferred stock
using the "if-converted" method. The following table reconciles the
numerator and denominator of the basic and diluted earnings per share
computations shown on the Consolidated Statements of Operations:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
(in thousands, except per share data)
Basic earnings per share
Numerator:
Net income/(loss) $ 4,462 $ (773) $ 4,919 $ (396)
Denominator:
Weighted average common shares outstanding 20,236 18,055 19,714 17,863
------- ------- ------- -------
Basic earnings per share $ 0.22 $ (0.04) $ 0.25 $ (0.02)
======= ======= ======= =======
Diluted earnings per share
Numerator:
Net income/(loss) 4,462 $ (773) $ 4,919 $ (396)
Denominator:
Weighted average common shares outstanding 20,236 18,055 19,714 17,863
Dilutive potential common stock 5,432 - 5,840 -
------- ------- ------- -------
Total shares 25,668 18,055 25,554 17,863
------- ------- ------- -------
Diluted earnings per share $ 0.17 $ (0.04) $ 0.19 $ (0.02)
======= ======= ======= =======
</TABLE>
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<PAGE>
Options and warrants to purchase 98,000 shares of common stock outstanding
during the three-months and six-months ended June 30, 1999, were excluded
from the calculation of diluted net income per share because the exercise
price of those options and warrants exceeded the average market price of
the Company's common stock during the respective periods. Options and
warrants to purchase 2,629,000 shares of outstanding common stock during
both the three-months and six-months ended June 30, 1998 were excluded from
the calculation of diluted net loss per share as the effect of their
inclusion would have been anti-dilutive.
D. COMPREHENSIVE INCOME
Other comprehensive income includes unrealized gains or losses on the
Company's available-for-sale investments and foreign currency translation
adjustments.
<TABLE>
<CAPTION>
Six months ended
---------------------------------
June 30, 1999 June 30, 1998
----------------- --------------
(in thousands)
<S> <C> <C>
Net income/(loss) $ 4,919 $(396)
Other comprehensive income/(loss):
Unrealized gains on available-
for-sale investments 22,215 8
Foreign currency translation
adjustment (96) 42
------- -----
Total other comprehensive income 22,119 50
------- -----
Comprehensive income/(loss) $27,038 $(346)
======= =====
</TABLE>
E. SALE OF INVESTMENT
In 1996, the Company made an equity investment of approximately $2,001,000
in Software.com, a company which supplies Internet messaging solutions to
service providers (ISPs, telcos, cable companies, and Web portals). In the
second quarter of 1999, as part of Software.com's initial public offering,
the Company sold 339,985 shares of common stock of Software.com resulting
in net proceeds of $4,743,000 and a realized net gain of approximately
$4,043,000. Additionally, the Company held 1,021,202 shares of common
stock of Software.com at June 30, 1999 which were valued at $23.188 per
share, with a total value of $23,680,000. The net unrealized gain of
approximately $22,200,000 is included in other comprehensive income within
stockholders' equity. These remaining shares of common stock of
Software.com held by the Company are subject to a six-month trading
restriction which ends in December 1999.
F. CBS PARTNERSHIP
On June 30, 1999, the Company and CBS consummated their agreement for CBS
to acquire a 35% equity stake in Switchboard. In exchange, Switchboard
received $5,000,000 in cash and will receive promotion and branding over
terms of seven and ten years, respectively, across the full range of CBS
media properties, as well as those of its radio and outdoor subsidiary,
Infinity Broadcasting Corporation. CBS, the Company and Switchboard
Incorporated entered into an Advertising and Promotion Agreement dated as
of June 30, 1999, which provides advertising to Switchboard over seven
years as part of payment for common stock and warrants provided by CBS
under the Common Stock and Warrant Purchase Agreement by and among
Switchboard Incorporated, the Company and CBS. The net present value of the
advertising has been recorded as a subscription receivable and an
offsetting amount as paid in capital in the Switchboard equity accounts.
The subscription equity account will be amortized as marketing expense over
the advertising period. The objectives of the Advertising and Promotion
Agreement include (i) the
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<PAGE>
promotion through CBS of the Switchboard site to be accessed via the domain
name www.cbs.switchboard.com or www.switchboard.com; (ii) the establishment
----------------------- -------------------
of co-branded interfaces between CBS sites and the Switchboard site; (iii)
the development of vertical guides for CBS sites and CBS associated sites
and (iv) the utilization of CBS's cross-media sales group, CBS PLUS, in
selling Switchboard advertisements and e-commerce services. Switchboard
will be required to pay CBS a commission on the net advertising revenues
derived from the sale of advertising on the co-branded interfaces or
vertical guides during the term of the agreement. CBS received warrants to
purchase an additional 5% of Switchboard at a per share exercise price of
$1.00, which would increase its ownership position in the subsidiary 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. CBS and Switchboard Incorporated entered into a License
Agreement dated as of June 30, 1999 which provides a ten year license to
Switchboard for the utilization of the CBS Marks in achieving the
objectives of the Advertising and Promotion Agreement. Two representatives
of CBS will join Switchboard's Board of Directors. Additionally, the
Company issued a common stock purchase warrant to CBS on June 30, 1999,
whereby CBS received warrants to purchase 250,000 shares of the Company's
common stock at $11.17 per share.
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<PAGE>
BANYAN SYSTEMS INCORPORATED
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
Total revenues for the three-month period ended June 30, 1999 were
$19.3 million, which represented a 6% increase when compared to the
corresponding period in 1998. Total revenues for the six-month period ended June
30, 1999 were $38.3 million, which represented a 7% increase when compared to
the corresponding period in 1998. These increases were due to incremental
revenues from services and Internet advertising offset in part by a decrease in
software revenues. The Company's software revenues for the three-month period
ended June 30, 1999 decreased by $3.5 million, or 33%, when compared to the
corresponding period in 1998. The Company's software revenues in the six-month
period ended June 30, 1999, decreased by $7.0 million, or 31%, when compared to
the corresponding period in 1998. The decline in software revenues in 1999 was
attributable primarily to lower levels of sales of the Company's VINES and
messaging products, primarily as a result of competitive product offerings. The
Company expects that software revenues will continue to decline for the
foreseeable future. Services revenues increased by $4.4 million, or 77%, and
$8.6 million, or 81%, for the three-month and six-month periods ended June 30,
1999, when compared to the corresponding periods in 1998. The increase in
services revenues in 1999 was attributable primarily to additional revenues
generated from consulting services and technical support services. Internet
advertising revenues increased by $0.3 million, or 18%, and $0.8 million, or 30%
for the three and six month periods ended June 30, 1999 when compared to the
corresponding periods in 1998. The increase in Internet advertising revenues in
1999 was due to an increase in third-party license fees for directory services
and local advertising revenues generated by the Company's majority-owned
subsidiary, Switchboard Incorporated's ("Switchboard") Web site. The increase
was partially offset by declines in national advertising revenues as a result of
the termination of Switchboard's marketing relationship with AOL.
International revenues for the three-month and six-month periods ended June 30,
1999 were $6.6 million and $12.3 million, respectively, compared with
$5.7 million and $11.2 million for the corresponding periods in 1998.
The increases for both the three-month and six-month periods ended June 30, 1999
were primarily due to additional revenues from consulting services offset in
part by a decline in software revenues. International revenues accounted for 34%
and 32% for the three and six month periods ended June 30, 1999, compared with
32% and 31% for the corresponding periods in 1998.
Gross profits for software were 85%, or $6.2 million, and 84%, or $13.0 million,
for the three-month and six-month periods ended June 30, 1999, respectively,
compared with 88%, or $9.5 million, and 88%, or $19.9 million, for the
corresponding periods in 1998. The decrease in both gross profit dollars and
percentage for the three-month and six-month periods ended June 30, 1999 when
compared to the corresponding periods last year was primarily due to the impact
of lower sales volumes being spread over fixed costs and a higher mix of lower
margin third-party product sales.
Gross profits for services were 31%, or $3.1 million, and 33%, or $6.2 million,
for the three-month and six-month periods ended June 30, 1999, respectively,
compared with 36%, or $2.0 million,
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<PAGE>
and 36%, or $3.9 million, for the corresponding periods in 1998. The increase in
gross profit dollars was primarily due to an increase in revenues from
consulting services and technical support, offset in part by an increase in
delivery personnel and related costs to expand consulting services. The decrease
in gross profit percentage was primarily due to the hiring of additional
delivery personnel and related costs to expand consulting services.
Gross profits for Internet advertising were 84% or $1.7 million, and 81%, or
$2.9 million for the three-month and six-month periods ended June 30, 1999,
respectively, compared with 67%, or $1.2 million and 63%, or $1.8 million, for
the corresponding periods in 1998. The increase in gross dollars and percentage
was due to an increase in revenues.
Sales and marketing expenses of $6.5 million and $12.8 million for the three-
month and six-month periods ended June 30, 1999, respectively, represented
decreases of 15% and 19% compared to the corresponding periods in 1998. The
decreases were primarily due to redeployment of staff into the Company's
expanding consulting service activities as well as a cessation of promotional
fees paid to America Online, Inc. ("AOL") under the Company's former marketing
relationship between Switchboard and AOL. Sales and marketing expenses as a
percentage of revenues were 34% and 33% for the three-month and six-month
periods ended June 30, 1999, as compared to 42% and 44% for the corresponding
periods in 1998.
Product development expenses of $2.3 million and $4.8 million for the three-
month and six-month periods ended June 30, 1999, respectively, represented
decreases of 20% and 16%, respectively, over the corresponding periods in 1998.
These decreases were primarily due to lower headcount committed to the Company's
traditional products and less costs associated with Year 2000 compliance when
compared to the corresponding periods in 1998. The Company had modified and
tested its current product offerings for Year 2000 compliance issues as of
December 31, 1998. The Company continues to focus its product development
resources on Internet-related product initiatives, Switchboard technology and
services and enhancing its existing product offerings. Product development
expenses as a percentage of revenues were approximately 12% and 13% for the
three-month and six-month periods ended June 30, 1999, respectively, as compared
to 16% for both the corresponding periods in 1998. There were no software
development amounts capitalized during the six-month periods ended June 30, 1999
and 1998.
General and administrative expenses of $1.8 million and $3.6 million for the
three-month and six-month periods ended June 30, 1999, respectively, represented
increases of 10% and 16% when compared to the corresponding periods in 1998.
The increases were due primarily to an increase in staffing related to the
Switchboard business segment. General and administrative expenses as a
percentage of revenues were 9% for both the three-month and six-month periods
ended June 30, 1999, as well as for the corresponding periods in 1998.
On June 24, 1999, the Company sold 339,985 shares of common stock of
Software.com as part of Software.com's initial public offering. As a result of
the transaction, the Company recorded a net gain of approximately $4.0 million.
Interest income was $259,000 and $532,000 for the three-month and six-month
periods ended June 30, 1999, respectively, and represented increases of 33% and
54% from the corresponding periods in 1998. These increases were due to higher
levels of available funds invested in marketable securities.
No tax provision, other than that required for foreign income or foreign
withholding taxes, was recorded for the three-month and six month periods ended
June 30, 1999 and 1998, respectively.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from $10.2 million at December 31, 1998 to
$46.2 million June 30, 1999. At June 30, 1999, cash and cash equivalents
combined with marketable securities were $62.6 million, compared with
$22.3 million at December 31, 1998. Cash and cash equivalents increased
$4.8 million resulting in a cash balance of $20.0 million June 30, 1999.
This increase was primarily due to a decrease in accounts receivable of
$6.3 million, $5.9 million in cash received from Microsoft Corporation,
$4.7 million in net proceeds from the sale of an investment, $4.3 million in
cash net of related expenses received from CBS Corporation for an investment in
the Company's Switchboard subsidiary, $2.8 million in proceeds from stock plan
purchases and stock options and other various operating, financing and investing
activities. This was offset in part by $11.8 million in net purchases of
marketable securities, and a $7.6 million decrease in VINES related
deferred revenues.
On June 30, 1999, the Company and CBS consummated their agreement for CBS to
acquire a 35% equity stake in Switchboard. In exchange, Switchboard received
$5.0 million in cash and will receive $130 million of promotion and branding
over terms of seven and ten years, respectively, across the full range of CBS
media properties, as well as those of its radio and outdoor subsidiary, Infinity
Broadcasting Corporation. CBS also received warrants to purchase an additional
5% of Switchboard, which would increase its ownership position to 40%.
Two representatives of CBS will join Switchboard's Board of Directors.
Additionally, CBS received warrants to purchase 250,000 shares of the Company's
common stock at $11.27 per share.
In the second quarter of 1999, as part of Software.com's initial public
offering, the Company sold 339,985 shares of Software.com's common stock
resulting in net proceeds of approximately $4.7 million and a realized net gain
of approximately $4.0 million. Additionally, the Company held 1,021,202 of
Software.com's common stock shares at June 30, 1999 which were marked to market
at $23.188 per share with a total value of $23.7 million. The net unrealized
gain of $22.2 million is included in other comprehensive income within
stockholder's equity. The remaining shares of Software.com's common stock held
by the Company are subject to a six-month lock-up period.
On January 11, 1999, the Company announced a strategic alliance with Microsoft.
As part of the agreement, Microsoft has committed to contributing $10.0 million
to the Company over a three-year period to fund the training of at least 500
professionals, marketing and development costs as well as the purchase of a
warrant to purchase 1.75 million shares of the Company's common stock.
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<PAGE>
The first of three payments to be made by Microsoft to the Company was received
in January 1999 in the amount of $5.9 million. The remaining two payments
totaling $4.1 million are scheduled to be received on or before December 31,
1999 and 2000.
On September 4, 1997, the Company entered into a $15.0 million line of credit
agreement (the "Credit Agreement") with Foothill Capital Corporation
("Foothill"). In general, the Company's obligations under the Credit Agreement
bear interest at the variable base rate per annum of Norwest Bank Minnesota,
National Association. The Credit Agreement has a three-year initial term.
Foothill was granted warrants to purchase 75,000 and 50,000 and will be granted
warrants to purchase 25,000 shares of the Company's common stock at the then
current fair market value on September 4, 1997, 1998 and 1999, respectively.
On January 13, 1999, Foothill exercised its warrants to purchase 75,000 shares
of the Company's common stock pursuant to a "cashless" exercise resulting in the
issuance of 58,603 shares to Foothill. On May 14, 1999, Foothill exercised its
warrants to purchase 50,000 shares of the Company's common stock pursuant to a
"cashless" exercise resulting in the issuance of 32,098 shares to Foothill.
There were no amounts outstanding under the line of credit agreement during the
period ended June 30, 1999.
The Company believes that existing cash and marketable securities, combined with
cash expected to be generated from operations and the available line of credit,
will be sufficient to fund the Company's operations through at least the next
twelve months.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Certain of the information contained in this Form 10-Q, including information
with respect to the Company's plans and strategy for its business, statements
relating to the sufficiency of cash and cash equivalent balances, anticipated
expenditures and the intended effects of the Company's restructuring, sales and
marketing, and product development efforts, consists of forward-looking
statements. Any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "expects," "anticipates," "plans,"
and similar expressions are intended to identify forward-looking statements.
Important factors that could cause actual results to differ materially from the
forward-looking statements include the following factors:
In 1998 and the first six months of 1999, a majority of the Company's network
sales were to existing customers for upgrade, expansion of their networks, or
consulting delivery. The Company's results will depend on its ability both to
continue to sell products for use in networks of existing customers and to
attract new customers for the Company's products and services. There can be no
assurance that the Company will be successful in its sales and marketing
efforts. In addition, in 1998 and the first six months of 1999, the Company
experienced extended selling cycles due to competitive products introduced by
other vendors, an increase in multi-year customer agreements and to longer
evaluation of operating systems and hardware platforms by potential customers.
The Company expects that extended selling cycles will continue to affect the
Company's operating results for the foreseeable future.
The Company continues to evolve its strategic focus, seeking to decrease its
reliance on its traditional networking software products while devoting
additional resources to its network services and Internet business initiatives.
On June 21, 1999, the Company announced it will begin doing business under the
new name, "Banyan Worldwide", and that a new division had been formed, Banyan
Worldwide Services, to support the further development of its services
businesses. Banyan Worldwide is organized as Banyan World Wide Services, a
division that provides consulting, systems integration and technical support
services; Switchboard Incorporated, the Company's majority-owned Internet
subsidiary; and Banyan Technology Group, which focuses on the development of
traditional Banyan software products, as well as leading edge Internet
technologies.
As part of its strategic focus on network services, on January 11, 1999, the
Company announced a global alliance with Microsoft to deliver integrated
messaging, networking and Internet solutions and the collaboration on the design
and implementation of packaged services, solutions and support offerings based
on Microsoft's enterprise platform. The agreement contains various obligations
and milestones that must be met by the Company, including the certification of
500 Microsoft-trained professionals. The failure of the Company to meet such
obligations and milestones could result in a termination of the agreement, which
could have a material adverse effect on the Company. In addition, the Company's
future success will depend in part upon its ability to continue to grow its
network services business, acquire additional network services customers and
adapt to changing technologies and customer requirements. Any failure to do so
could have a material adverse effect on the Company. There can be no assurance
the Company will be successful in its new strategic focus.
- 13 -
<PAGE>
The Company's results are partially dependent on its ability to enhance existing
products and introduce new products on a timely basis, and to achieve market
acceptance for such enhanced new products. The Company has invested significant
resources to develop products and services to bring the Company's directory and
messaging capabilities to Internet users. The Internet market space is
increasingly competitive and rapidly changing. Any delay in developing
additional or enhanced products and services for the Internet or failure of its
Internet products and services to achieve increase market acceptance could have
a material adverse effect on the Company's future results of operations.
In 1999, the Company entered into agreements with Oblix, Incorporated ("Oblix"),
and Check Point Software Technologies Limited ("Check Point") to resell Oblix
and Check Point products. On May 2, 1999, the Company introduced Worktop, a
browser-based productivity tool that helps organizations maximize the value of
their intranets by providing employees with a highly personalized start page to
organize and monitor key Web-accessible information. Failure of these products
and the Company's other recently released products to achieve market acceptance
could have a material adverse effect on the Company's future results of
operations.
In 1996, the Company, through a majority-owned subsidiary, introduced
Switchboard, a directory service for Internet users. A substantial percentage
of the traffic on the Switchboard Internet Web site in 1998 was attributable to
the Company's marketing arrangements with AOL, a minority owner of Switchboard
Incorporated. Accordingly, a substantial percentage of Switchboard Internet
advertising revenues in 1998 were dependent on the marketing arrangements with
AOL. In August 1998, the Company announced that the White Pages contract between
Switchboard and AOL would not be renewed at the end of November 1998. On
December 10, 1998, the Company announced that the Yellow Pages contract between
Switchboard and AOL would not be renewed at the end of 1998. The Company
estimates that AOL's customers accounted for approximately 45 percent of its
overall traffic and 30 percent of its total advertising revenues in 1998.
There can be no assurance that termination of these arrangements with AOL will
not have any further material adverse effect on the Company.
In February 1999, Switchboard launched its "local merchant strategy" to
substantially increase its business with local merchants through display
advertising, Web site hosting and other on-line services. This launch included
strategic partnerships with Discover Financial Services, Comcast Online
Communications, Qwest Communications International, Inc., Cox Interactive Media
and Advance Internet Inc. In March 1999, Switchboard entered into an agreement
with the At Hand Network Yellow Pages which calls for Switchboard to fulfill the
yellow page searches conducted primarily in the Northeast region of the United
States on the At Hand Network Yellow Pages and provide e-mail address searches
for the entire At Hand Network. The success of the Company will depend in part
on the success of this and the Company's other strategic alliances and the
Company's ability to enter into new strategic alliances with other Internet
providers.
On June 30, 1999, CBS acquired a 35% equity stake in Switchboard in exchange for
$5.0 million in cash and $130.0 million of promotion and branding to be
delivered over terms of seven and ten years, respectively, across the full range
of CBS media properties, as well as those of its radio and outdoor subsidiary,
Infinity Broadcasting Corporation. CBS also received warrants to purchase an
additional 5% of Switchboard at a per share exercise price of $1.00, which would
increase its ownership position in the subsidiary to 40%. Two representatives of
CBS will join Switchboard's Board of Directors. Additionally, CBS received
warrants to purchase 250,000 shares of the Company's common stock at $11.17 per
share. In connection with CBS' investment in Switchboard, CBS and Switchboard
entered into a license agreement under which CBS licenses the "CBS" trademark
and "Eye" design to Switchboard which include broad restrictions on use and
implementation. Switchboard's failure to effectively utilize these promotional
and branding capabilities could have a material adverse impact on the Company's
future operations. Moreover, a breach by Switchboard of any of its agreements
with CBS could result in the termination of CBS' obligations to provide these
promotional and branding capabilities. In the event of such a termination, CBS
would retain its Switchboard securities.
- 14 -
<PAGE>
In the six months ended June 30, 1999, international revenues accounted for 32%
of the Company's total revenues. The Company's results of operations in 1998
and the first six months of 1999 were adversely affected by the global economic
uncertainty, and in particular, the financial market instability in Asia. There
can be no assurance such uncertainty will not continue to adversely affect the
Company's operating results.
The Company currently owns 1,021,202 shares of Software.com . The Company is
restricted from trading these shares until December 25, 1999. Any devaluation
of the market price of Software.com's common stock prior to this date could have
a material adverse effect on the Company's liquidity and capital resources.
See "Year 2000 Readiness Disclosure" below.
EURO CONVERSION DISCLOSURE
On January 1, 1999, the participating member countries of the European Union
adopted the Euro as the common legal currency and fixed conversion rates between
their existing sovereign currencies and the Euro. The Company does not believe
that the Euro conversion will have a material impact on the Company's
operations.
Because of the foregoing factors and the factors incorporated herein by
reference, the Company believes that period-to-period comparisons of its
financial results are not necessarily meaningful and it expects that its results
of operations may fluctuate from period-to-period in the future.
YEAR 2000 READINESS DISCLOSURE
The following statement shall be considered a Year 2000 readiness disclosure to
the maximum extent allowed under the Year 2000 Information and Readiness
Disclosure Act. This Year 2000 readiness disclosure does not constitute a
warranty of any kind, or extend the terms of any existing warranty.
In the past, many information technology products were designed with two digit
year codes that did not recognize century and millenium fields. As a result,
these hardware and software products may not function or may give incorrect
results beginning in the Year 2000. In order to address this issue, such
hardware and software products may need to be upgraded or replaced in order to
correctly process dates beginning in the Year 2000.
The Company has created a Company-wide Year 2000 team to identify and address
Year 2000 issues. The Company's Year 2000 compliance program has identified
three potential areas of impact for review: (i) the software, information and
non-information systems used in the Company's internal business systems; (ii)
the Company's software offered to customers; and (iii) third-party vendors,
manufacturers and suppliers of products used in the Company's internal systems
or distributed with the Company's products. The Company has identified and is
testing its main internal systems and expects to complete testing by September
30, 1999. Currently, the testing is approximately 90% complete. During 1999,
the Company expects to complete implementation of any needed Year 2000-related
modifications to its critical information systems.
- 15 -
<PAGE>
The Company has completed a process of communicating with its main suppliers of
technology products and services used in its internal systems regarding the
Year 2000 status of such products or services. Based upon these communications,
the Company has considered the suppliers' Year 2000 preparedness in the
Company's decision to continue to deploy or migrate from these technology
products or services. In addition, the Company has assessed its internal non-
information technology systems, and expects to complete testing and any needed
modifications to these systems by September 30, 1999. To date, the Company has
not developed a comprehensive contingency plan to address situations that may
result if the Company is unable to achieve Year 2000 readiness of its critical
operations. By September 30, 1999, the Company expects to finalize its
assessment of and, if deemed appropriate, contingency planning for potential
operational or performance problems related to Year 2000-related issues with its
information systems.
The Company's total cost relating to these activities has not been and is not
expected to be material to the Company's financial position, results of
operations, or cash flows. The Company's current assessment is that the cost of
completing the Company's Year 2000 compliance program will be approximately
$250,000, which does not include amounts related to the diversion of internal
resources including, without limitation, employee salaries, which amount the
Company is not separately tracking. The Company has and expects to continue to
fund its Year 2000 compliance program from operating cash flows and does not
expect to separately account for these costs. There can be no assurance that
there will not be a delay in, or increased costs associated with, the
implementation of any necessary modifications, or that the Company's suppliers
will adequately prepare for the Year 2000 issue. It is possible that any such
delays, increased costs, or supplier failures could have a material adverse
impact on the Company's operations and financial results, by, for example,
impacting the Company's ability to deliver products or services to its
customers.
The Company's Year 2000 effort has included testing products currently or
recently on the Company's price list for Year 2000 issues. Products have been
and are expected to continue to be tested internally. Generally, for products
that were identified as needing updates to address Year 2000 issues, the Company
has prepared or is preparing updates, or has discontinued or will discontinue
the product. Currently, this testing is approximately 99% complete. Some of the
Company's customers are using product versions that the Company will not support
for Year 2000 issues. The Company has completed a process of notification to
its customers of these Year 2000 issues and has encouraged these customers to
migrate to current product versions that are Year 2000 ready. There can be no
assurance the Company will be successful in migrating these customers to the
Year 2000-compliant products of the Company. For third-party products that the
Company distributes with its products, the Company has sought information from
the product manufacturers regarding the products' Year 2000 readiness status.
Customers who use the third-party products are directed to the product
manufacturer for Year 2000 status information. On its Year 2000 Web site at
www.banyan.com, the Company provides information regarding which of its products
have been tested to be Year 2000 ready and other general information related to
the Company's Year 2000 efforts. The Company's total costs relating to these
activities has not been and is not expected to be material to the Company's
financial position or results of operations.
The Company believes its current products, with any applicable updates, are
Year 2000 ready when used in a system and with other components that are
Year 2000 compliant. However, there can be no guarantee that one or more of the
Company's products do not contain Year 2000 date issues. The most reasonably
likely worst case scenarios would include (i) corruption of data contained in
the Company's information systems, (ii) hardware failure and (iii) the failure
of infrastructure services provided by third parties (e.g. electricity, phone
service, etc.)
- 16 -
<PAGE>
Because the Company is in the business of selling software products, the
Company's risk of being subjected to lawsuits relating to Year 2000 issues with
its software products is likely to be greater than that of companies in other
industries. Because computer systems may involve different hardware, firmware
and software components from different manufacturers, it may be difficult to
determine which component in a computer system may cause a Year 2000 issue. As a
result, the Company may be subjected to Year 2000-related lawsuits independent
of whether its products and services are Year 2000 ready. The outcome of any
such lawsuit and the impact on the Company cannot be predicted. Any Year 2000
problems in the Company's products could also result in delay or loss of
revenue, diversion of development resources, damage to the Company's reputation
or increased service or warranty costs, any of which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The foregoing discussion of the Company's Year 2000 readiness contains forward-
looking statements, including estimates of the timeframes and costs for
addressing the known Year 2000 issues confronting the Company, and is based on
management's current estimates, which were derived using numerous assumptions.
There can be no assurance that these estimates will be achieved, and actual
events and results could differ materially from those anticipated. Specific
factors that might cause such material differences include, but are not limited
to, the availability of personnel with required remediation skills, the ability
of the Company to identify and correct all relevant computer code and the
success of third parties with whom the Company does business in addressing their
Year 2000 issues.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risks
-----------------------------------------------------------
Not applicable.
- 17 -
<PAGE>
BANYAN SYSTEMS INCORPORATED
PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Foothill Warrant Exercise
On April 19, 1999, the Company issued to Foothill 32,098 shares of the
Company's common stock (the "Foothill Stock") at a per share price of
$5.0296875, upon Foothill's exercise of a warrant to purchase
75,000 shares of the Company's common stock. The aggregate purchase
price of $161,442.91 for the Foothill Stock was paid by Foothill be
means of the cancellation of the remaining 17,902 shares of common
stock subject to the warrant, pursuant to the "cashless" exercise
provision of the warrant. As the issuance of the Foothill Stock did
not involve any public offering, it was exempt from registration under
the Securities Act pursuant to Section 4(2) thereof. No underwriters
were utilized in connection with the issuance of the Foothill Stock,
and no underwriting discounts or commissions were paid or incurred
thereby.
CBS Warrant Issue
On June 30, 1999, the Company issued to CBS Corporation a warrant to
purchase 250,000 shares of the Company's common stock at a per share
exercise price of $11.27. CBS has notified the Company in accordance
with its agreement with the Company that as consideration for the
issuance of the warrant, it will purchase from the Company an amount
of information technology services sufficient for the Company to
realize a margin of $250,000. As the issuance of the warrant did not
involve any public offering, it was exempt from registration under the
Securities Act pursuant to Section 4(2) thereof. No underwriters were
utilized in connection with the issuance of the warrant, and no
underwriting discounts or commissions were paid or incurred thereby.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the Company's Annual Meeting of proposals were adopted by the
Stockholders held on May 13, 1999, vote specified below:
<TABLE>
<CAPTION>
Against or Broker
Proposal For Withheld Abstain Non-votes
-------- --- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
1. Election of two Class I Directors:
G. Leonard Baker, Jr. 17,968,543 1,337,954 --- ---
David C. Mahoney 18,193,361 1,113,136 --- ---
2. Ratification and approval of 16,495,651 2,349,719 40,358 420,769
amendment to the Company's
1992 Stock Incentive Plan
3. Ratification of the selection of 18,765,872 94,720 25,136 420,769
PricewaterhouseCoopers LLP
as the Company's independent accountants
</TABLE>
In addition to the Directors elected at the Annual Meeting, the term
of office of the following Directors also continued following the
meeting: William P. Ferry, John F. Burton, Fontaine K. Richardson,
David N. Strohm and Robert M. Wadsworth.
- 18 -
<PAGE>
ITEM 5. Other Information
-----------------
On June 21, 1999, the Company announced that it would begin doing
business under the name "Banyan Worldwide." The Company's corporate
name, and the name under which it will file annual, quarterly and
special reports, proxy statements and other information with the
Securities and Exchange Commission, will remain "Banyan Systems
Incorporated".
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) The exhibits listed in the Exhibit Index filed as part of this
report are filed as part of or are included in this report.
(b) The Company filed no reports on Form 8-K during the fiscal
quarter for which this report is filed.
- 19 -
<PAGE>
BANYAN SYSTEMS INCORPORATED
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANYAN SYSTEMS INCORPORATED
Date: August 16, 1999 By: /s/ Richard M. Spaulding
------------------------
Richard M. Spaulding
Vice President and Chief Financial Officer,
Treasurer and Clerk
(Principal Financial Officer and Principal
Accounting Officer)
- 20 -
<PAGE>
EXHIBIT INDEX
Exhibit Number TITLE OF DOCUMENT
- -------------- -----------------
10.1 Common Stock and Warrant Purchase Agreement dated as of June 1, 1999 by
and among Switchboard Incorporated, the Company and CBS Corporation, as
amended.
10.2 Common Stock Purchase Warrant issued by Switchboard Incorporated to CBS
Corporation on June 30, 1999.
10.3* Advertising and Promotion Agreement dated as of June 30, 1999 by and
among CBS Corporation, the Company and Switchboard Incorporated.
10.4* License Agreement dated as of June 30, 1999 by and between CBS
Corporation and Switchboard Incorporated.
10.5 Warrant Purchase Agreement dated as of June 1, 1999 by and between the
Company and CBS Corporation.
10.6 Common Stock Purchase Warrant issued by the Company to CBS Corporation on
June 30, 1999.
27 Financial Data Schedule.
- -------------------
* - Confidential treatment has been requested as to certain portions, which
portions have been omitted and filed separately with the Commission.
<PAGE>
EXHIBIT 10.1
------------
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
-------------------------------------------
This Common Stock and Warrant Purchase Agreement (this "Agreement") dated
as of June 1, 1999 is entered into by and among Switchboard Incorporated, a
Delaware corporation (the "Company"), Banyan Systems Incorporated, a
Massachusetts corporation ("Banyan") and CBS Corporation, a Pennsylvania
corporation (the "Purchaser").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Sale of Securities; Authorization.
---------------------------------
(a) Subject to the terms and conditions of this Agreement, at the
Closing (as defined below), the Company will sell and issue to the Purchaser,
and the Purchaser will purchase from the Company, (i) 7,321,314 shares (the
"Shares") of Common Stock (as defined in Section 3.2), (ii) a warrant to
purchase 1,045,902 shares of Common Stock, in the form attached hereto as
Exhibit A-1 (the "Warrant"), and (iii) one share of Series E Special Voting
- -----------
Preferred Stock, $.01 par value per share, of the Company (the "Voting Share"),
for the aggregate purchase price of (x) $5,000,000 (the "Cash Purchase Price"),
which shall be paid in cash at the Closing, and (y) $95,000,000 (the "Non-Cash
Purchase Price"), which shall be paid through the provision by the Purchaser to
the Company of advertising services in accordance with the Advertising and
Promotion Agreement (as defined herein). The Cash Purchase Price and the Non-
Cash Purchase Price are sometimes referred to herein together as, the "Purchase
Price." Subject to the provisions of the License Agreement (as defined herein)
and the Advertising and Promotion Agreement, the obligation of the Purchaser to
pay the Non-Cash Purchase Price is a binding obligation of the Purchaser. The
Purchase Price shall be allocated among the Shares, the Warrant and the Voting
Share as set forth on Schedule 1.2 hereto.
------------
(b) Before the Closing (as defined in Section 2) the Company will have
adopted and filed a Certificate of Designation with the Secretary of State of
the State of Delaware setting forth the rights, restrictions, privileges and
preferences of the Voting Share, as set forth in the Certificate of Designation
attached hereto as Exhibit A-2 (the "Certificate of Designation").
-----------
2. The Closing.
-----------
(a) The closing (the "Closing") of the sale and purchase of the
Shares, the Warrant and the Voting Share under this Agreement shall take place
at the offices
<PAGE>
of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, at 10:00 a.m. on
the second business day after the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions hereby (other than
the delivery of the closing certificates, opinions, Ancillary Documents (as
defined in Section 3.1) and other instruments and documents referred to in
Section 7), or at such other time, date and place as are mutually agreeable to
the parties. The date of the Closing is hereinafter referred to as the "Closing
Date."
(b) At the Closing:
(i) the Company and Banyan, as the case may be, shall deliver
(or cause to be delivered) to the Purchaser the various certificates,
instruments and documents referred to in Section 7.2
(ii) the Purchaser shall deliver (or cause to be delivered) to
the Company and Banyan, as the case may be, the various certificates,
instruments and documents referred to in Section 7.3
(iii) the Company shall deliver to the Purchaser a certificate
for the Shares and the Voting Share and the Warrant being purchased at the
Closing by the Purchaser, registered in the name of the Purchaser, against
payment to the Company of the Cash Purchase Price, by wire transfer of
immediately available funds to an account designated by the Company in
writing to the Purchaser at least two days prior to the Closing.
3. Representations of the Company. Except as disclosed by the Company in
Exhibit B hereto, the Company hereby represents and warrants to the Purchaser
- ---------
that the statements contained in this Section 3 are true, complete and correct
as of the date of this Agreement. Exhibit B shall be organized into sections
---------
corresponding with the sections of this Section 3 and the disclosure in any
section of Exhibit B shall be deemed to qualify (1) the corresponding section of
---------
this Section 3 and (2) other sections of this Section 3 to the extent it is
clearly apparent (notwithstanding the absence of a specific cross reference)
from a reading of such disclosure that such disclosure is applicable to such
other sections.
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 the corporate power and authority to conduct its business as
presently conducted and as presently proposed to be conducted by it and to enter
into
-2-
<PAGE>
and perform this Agreement and the Registration Rights Agreement, the Right of
First Refusal Agreement, the Participation Agreement, the Stockholders' Voting
Agreement, the Advertising and Promotion Agreement and the License Agreement
(collectively, 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 so to qualify would have a material adverse effect on the business,
assets or financial condition of the Company (a "Company Material Adverse
Effect"). The Company has furnished to the Purchaser true and complete copies of
its Certificate of Incorporation, as amended to date and presently in effect
(the "Certificate of Incorporation," which term shall, where appropriate be
deemed to refer to and include the Certificate of Designation) and By-Laws, as
amended to date and presently in effect.
3.2 Capitalization. The authorized capital stock of the Company
(immediately prior to the Closing) will consist of 30,000,000 shares of common
stock, $.01 par value per share (the "Common Stock"), of which 7,171,999 shares
are issued and outstanding as of the date of this Agreement and 10,000,000
shares of Preferred Stock, $.01 par value per share, of which (i) 750,000 shares
have been designated as Series A Convertible Preferred Stock, all of which
shares are issued and outstanding as of the date of this Agreement, (ii)
1,500,000 shares have been designed as Series B Convertible Preferred Stock,
none of which are issued or outstanding as of the date of this Agreement, (iii)
4,000,000 shares have been designed as Series C Convertible Preferred Stock,
none of which are issued or outstanding as of the date of this Agreement, (iv)
1,500,000 shares have been designed as Series D Convertible Preferred Stock,
none of which are issued or outstanding as of the date of this Agreement and (v)
one share will be designated as Series E Special Voting Preferred Stock, which
share is not issued or outstanding as of the date of this Agreement. All of the
issued and outstanding shares of Common Stock and Series A Convertible Preferred
Stock have been, and any shares of Series C Preferred Stock and Series D
Preferred Stock issued prior to the Closing as contemplated by Section 7.2(f)
will be, duly authorized and validly issued and are, or will be, fully paid and
nonassessable and were, or will be, issued in compliance with all applicable
state and federal securities laws. Except as provided in this Agreement, (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 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, (iii) the
Company has no 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, and (iv)
there are no outstanding or authorized stock appreciation, phantom stock or
similar rights with respect to the Company.
-3-
<PAGE>
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 Securityholder Lists and Agreements. Included on Exhibit B is a
---------
true and complete list of the securityholders of the Company as of the date of
this Agreement, showing the number of shares of Common Stock or other securities
of the Company held by each securityholder as of the date of this Agreement and,
in the case of options, warrants and other convertible securities, the exercise
price thereof and the number and type of securities issuable thereunder. Except
as provided in this Agreement, there are no agreements, written or oral, between
the Company and any holder of its securities, or, to the Company's knowledge,
among any holders of its securities, relating to the acquisition (including
without limitation rights of first refusal, anti-dilution or pre-emptive
rights), disposition, registration under the Securities Act of 1933, as amended
(the "Securities Act"), or voting of the capital stock of the Company.
3.5 Issuance of Shares. The issuance, sale and delivery of the
Shares, the Warrant and the Voting Share in accordance with this Agreement, and
the issuance and delivery of the shares of Common Stock (i) issuable upon
exercise of the Warrant (the "Warrant Shares") and (ii) issuable upon conversion
of the Voting Share (the "Conversion Share"), 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 and the Voting Share when so
issued, sold and delivered against payment therefor in accordance with the
provisions of this Agreement, the Warrant Shares, when issued upon such exercise
following payment of the exercise price therefor, and the Conversion Share, when
issued upon conversion of the Voting Share, will be duly and validly issued,
fully paid and nonassessable.
3.6 Authority for Agreement; No Conflict. The execution, delivery
and performance by the Company of this Agreement and the Ancillary Agreements,
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, when executed at the Closing, will be
duly executed and delivered by the Company and will constitute valid and binding
obligations of the Company enforceable in accordance with their respective
terms, subject as to enforcement of remedies to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar laws
affecting generally the enforcement of creditors' rights, subject to a court's
discretionary authority with respect to the granting of a decree ordering
specific performance or other equitable remedies and, with respect
-4-
<PAGE>
to the indemnification provisions in the Registration Rights Agreement attached
as Exhibit C (the "Registration Rights Agreement"), subject to public policy.
---------
The execution of and performance of the transactions contemplated by this
Agreement and the Ancillary Agreements and compliance with their respective
provisions by the Company will not (a) conflict with or violate any provision of
the Certificate of Incorporation or By-laws of the Company, (b) other than as
may be required by the Hart-Scott-Rodino Antitrust Improvements Act ("HSR Act"),
require on the part of the Company any filing with, or any permit,
authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency (each of the foregoing is hereafter referred to as a
"Governmental Entity"), (c) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest (as
defined below) or other arrangement to which the Company is a party or by which
the Company is bound or to which its assets are subject, (d) result in the
imposition of any Security Interest upon any assets of the Company or (e)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its properties or assets, other than any of
the foregoing events listed in clause (c), (d) or (e) of this Section 3.6 that
would not have a Company Material Adverse Effect. For purposes of this
Agreement, "Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien (whether arising by contract or by operation
of law) other than (i) mechanic's, materialmen's, and similar liens, (ii) liens
arising under worker's compensation, unemployment insurance, social security,
retirement, and similar legislation, (iii) liens on goods in transit incurred
pursuant to documentary letters of credit, and (iv) statutory liens with respect
to current taxes not yet due and payable.
3.7 Governmental Consents. Except as may be required by the HSR Act,
no consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any Governmental Entity is required on
the part of the Company in connection with the execution and delivery by the
Company of this Agreement or the Ancillary Agreements, the offer, issuance, sale
and delivery of the Shares, the Warrant and the Voting Share, the issuance and
delivery of the Warrant Shares or the Conversion Share or the other transactions
to be consummated at the Closing, as contemplated by this Agreement and the
Ancillary Agreements, except such filings as shall have been made prior to and
shall be effective on and as of the Closing and such filings required to be made
after the Closing under applicable federal and state securities laws, and except
any filings that, if not made as required, would not have a Company Material
Adverse Effect. Based on the representations made by the Purchaser in Section 4
of this Agreement, the offer and sale of the Shares, the Warrant and the Voting
Share to the Purchaser will be in compliance with applicable federal and state
securities laws.
-5-
<PAGE>
3.8 Litigation. There is no action, suit or legal proceeding, or
governmental inquiry or investigation, pending against the Company. To the
Company's knowledge, there is no action, suit or legal proceedings, or
governmental inquiry or investigation, threatened against the Company which
questions the validity of this Agreement or the right of the Company to enter
into this Agreement, or which would, individually or in the aggregate, have a
Company Material Adverse Effect.
3.9 Financial Statements. The Company has furnished to the Purchaser
a complete and correct copy of (1) the unaudited balance sheet of the Company at
December 31, 1998 and the related statements of operations and cash flow for the
year then ended and (2) the unaudited balance sheet of the Company (the "Interim
Balance Sheet") at March 31, 1999 (the "Balance Sheet Date") and the related
statements of operations and cash flow for the three months then ended, (the
financial statements referred to in clauses (1) and (2) are collectively
referred to herein as the "Financial Statements"). The Financial Statements
fairly present, in all material respects, the financial condition and results of
operations of the Company, at the dates and for the periods indicated, and have
been prepared in accordance with U.S. generally accepted accounting principles
("GAAP") consistently applied, except that the Financial Statements are not in
accordance with GAAP because of the absence of footnotes normally contained
therein and the interim Financial Statements are subject to normal year-end
audit adjustments.
3.10 Undisclosed Liabilities. The Company has no liability (whether
absolute, accrued, contingent or otherwise) of a nature required by GAAP to be
shown on a balance sheet which is material to the Company, except for (i)
liabilities shown on the Interim Balance Sheet, (ii) liabilities which have
arisen since the Balance Sheet Date in the ordinary course of business and (iii)
contractual liabilities incurred in the ordinary course of business.
3.11 Taxes.
-----
(a) For purposes of this Agreement:
"Tax" means (i) any tax, including without limitation, any tax imposed
---
under Subtitle A of the Code and any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding tax on amounts paid, payroll,
employment, excise, severance, stamp, capital stock, occupation, property,
environmental or windfall profit tax, premium, customs, duty or other tax,
together with any interest, penalty, addition to tax or other additional amount,
imposed by any Governmental Entity (domestic or
-6-
<PAGE>
foreign) responsible for the imposition of any such tax, (ii) any liability for
the payment of any amount of the type described in clause (i) above as a result
of a party to this Agreement being a member of an affiliated, consolidated or
combined group with any other corporation at any time on or prior to the date
hereof and (iii) any liability of any person with respect to the payment of any
amounts of the type described in clause (i) or (ii) above as a result of any
express or implied obligation of such person to indemnify any other person.
"Code" means the Internal Revenue Code of 1986, as amended.
----
(b) The Company, and any affiliated group, within the meaning of
Section 1504 of the Code, of which the Company is or has been a member, has
filed or caused to be filed in a timely manner (within any applicable extension
periods) all material Tax returns, reports and forms required to be filed by the
Code or by applicable state, local or foreign Tax laws. All Taxes shown to be
due on such returns, reports and forms have been timely paid in full or will be
timely paid in full by the due date thereof. No Tax Liens have been filed and
no claims are being asserted in writing with respect to any Taxes.
(c) Neither the Company nor any of its affiliates has made with
respect to the Company, or any assets of the Business, any consent under Section
341 of the Code. None of the Company Assets is "tax exempt use property" within
the meaning of Section 168(h) of the Code. None of the Company assets is a
lease made pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954.
(d) The Company is not a "foreign person" within the meaning of
Section 1445 of the Code.
3.12 Proprietary Rights.
------------------
(a) The Company owns or has the valid right to use all patents, patent
applications, trademarks, trademark applications, trade secrets, service marks,
service mark applications, logos, trade names, domain names, corporate names,
copyrights, inventions, drawings, designs, customer lists, computer software (in
both source code and object code form, excluding commercially available
software), and proprietary know-how or information that are currently used in
the business or operations of the Company and that are material to the business
or operations of the Company (collectively, the "Proprietary Rights").
(b) The Company has not received written notice of, or been named in,
any pending suit, action or legal proceedings with respect to any Proprietary
Rights which involve a claim of infringement of any intellectual property rights
of any third
-7-
<PAGE>
party. To the Company's knowledge, the operation of the Company's business as
now conducted does not infringe any valid intellectual property rights of any
third party.
(c) To the knowledge of the Company, the Proprietary Rights are not
being infringed by others.
(d) Exhibit B identifies each item of Proprietary Rights (other than
---------
items which are generally commercially available) that is owned by a party other
than the Company and the license or other agreement pursuant to which the
Company uses such item of Proprietary Rights.
(e) Exhibit B identifies each license or other agreement pursuant to
---------
which the Company has granted (i) exclusive rights to any third party with
respect to any item of Proprietary Rights or (ii) other than pursuant to
customer contracts in the ordinary course of business, any material rights to
any item of Proprietary Rights.
(f) The Company is in the process of conducting a hardware and
software inventory for the purpose of identifying hardware and software systems,
running within the Company, which are not free of malfunctions or other usage
problems resulting from or in connection with the "Year 2000 Problem" (i.e., the
year 2000 (and later years) as distinct from the years 1900 through 1999 (and
earlier years)). The Company's Year 2000 compliance review is continuing. Based
upon such review to date, to the Company's knowledge, the Switchboard Site (as
defined in the Advertising and Promotion Agreement) is free of defects which
would interrupt or interfere with the intended purpose thereof, including
without limitation, (A) any malfunctions or other usage problems resulting from
or in connection with the "Year 2000 Problem," and (B) "bugs" or "viruses." For
the purposes of this paragraph, defects will be deemed to "interrupt or
interfere with the intended purpose" of the Switchboard Site if they result in
the failure to respond to user queries in a manner consistent with the normal
operation of the Switchboard Site.
3.13 Tangible Personal Property. The Company has good and valid title
to or, in the case of leased properties or properties held under license, good
and valid leasehold or license interests in, all of the material tangible
personal property of the Company, including all such property reflected on the
Interim Balance Sheet (other than property sold, consumed or otherwise disposed
of in the ordinary course of business since the Balance Sheet Date), free and
clear of all Security Interests, except for (i) liens for taxes not yet due and
payable or due but not delinquent or being contested in good faith by
appropriate proceedings and, (ii) Security Interests not included in clause (i)
above and relating to capitalized lease financing or indebtedness for borrowed
money in an aggregate amount of less than $150,000. Such items of tangible
personal property, taken as a whole (w) have been maintained in accordance with
normal industry practice, (x) are in good operating condition and repair (normal
wear
-8-
<PAGE>
and tear excepted), (y) are suitable for the purposes for which they are
presently used and (z) are sufficient for the continued conduct of the business
of the Company in substantially the same manner as the business of the Company
is conducted as of the date of this Agreement, except where such failures to
maintain, failures to be in good operating condition and repair, failures to be
suitable and failures to be sufficient would not have a Company Material Adverse
Effect.
3.14 Real Property Owned and Leased.
------------------------------
(a) The Company does not own any real property.
(b) Exhibit B lists all material real property leased or subleased by
or to the Company. Each such lease or sublease is a legal, valid and binding
contract and is in full force and effect. Neither the Company nor, to the
knowledge of the Company, any other party to such lease or sublease is in breach
or violation of, or default under, any such lease or sublease.
(c) The real properties leased or subleased by the Company are
sufficient for the continued conduct of the business of the Company in
substantially the same manner as currently conducted.
3.15 Contracts.
---------
(a) Exhibit B lists each of the following contracts to which the
---------
Company is a party or is bound (the "Company Contracts"):
(i) an employment agreement with any employee whose annual
base salary exceeds $150,000 or collective bargaining
agreement;
(ii) a covenant not to compete;
(iii) a contract with (A) any shareholder of the Company, (B)
any current or former executive officer or director of
the Company or (c) current employee of the Company whose
annual base salary exceeds $150,000;
(iv) a contract under which the Company has borrowed any money
from, or issued any note, bond, debenture or other
evidence of indebtedness to, any person or (B) any other
note, bond, debenture or other evidence of indebtedness
issued by the Company to any person;
-9-
<PAGE>
(v) a contract (including any so-called take-or-pay or
keepwell agreement) under which (A) any person has
directly or indirectly guaranteed indebtedness of the
Company or (B) the Company has directly or indirectly
guaranteed indebtedness of any other person (in each case
other than endorsements for the purpose of collection in
the ordinary course of business);
(vi) a contract for the acquisition by the Company of any
operating business or the capital stock of any other
person;
(vii) any contract for the disposition of a material portion of
the Company's assets (other than in the ordinary course of
business);
(viii) a contract for any joint venture, partnership, limited
liability company or similar arrangement;
(ix) a contract not made in the ordinary course of business,
under which the consequence of a default or termination
would reasonably be expected to have a Company Material
Adverse Effect;
(x) a contract involving payments to be made by the Company
after the date of this Agreement in excess of $200,000
which is not terminable by the Company by notice of not
more than 60 days; and
(xi) a contract providing for indemnification of any person
with respect to liabilities relating to any business sold
by the Company or any sale by the Company of a substantial
amount of assets outside the ordinary course of business;
provided, however, that no contract referred to above need be disclosed unless
- -----------------
the Company currently has, or may in the future have, any rights or obligations
thereunder.
(b) Each Company Contract is a valid, binding and enforceable
obligation of the Company and, to the Company's knowledge, of each other party
thereto, except as the foregoing may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or similar laws affecting
generally the enforcement of creditors' rights and subject to a court's
discretionary authority with respect to the granting of a decree ordering
specific performance or other equitable
-10-
<PAGE>
remedies. The Company has performed all material obligations required to be
performed by it to date under the Company Contracts and the Company is not (with
or without the lapse of time or the giving of notice, or both) in material
breach or default thereunder and, to the knowledge of the Company, no other
party to any of the Company Contracts is (with or without the lapse of time or
the giving of notice, or both) in material breach or default thereunder. As of
the date of this Agreement, the Company has not received notice of the intention
of any party to terminate any Company Contract. Complete and correct copies of
the Company Contracts, together with all modifications and amendments thereto,
have been delivered to or made available for inspection by Purchaser.
3.16 Compliance. The Company has, in all material respects,
complied with all laws, regulations and orders applicable to its business as
currently conducted and has all material permits and licenses ("Permits")
required thereby. The Company has not received any written notice from a
Governmental Entity that (1) alleges that the Company is not in compliance in
any material respect with any applicable laws or (2) any investigation or review
by any Governmental Entity with respect to any of the Company's assets or
business is pending or that any such investigation or review is contemplated.
The Permits are validly held by the Company and the Company has complied in all
material respects with all terms and conditions thereof. The Company has not
received notice of any proceedings relating to the revocation or modification of
any Permit. None of the Permits will be subject to suspension, modification,
revocation or nonrenewal as a result of the execution and delivery of this
Agreement.
3.17 Absence of Changes. Since the Balance Sheet Date, there has
been no material adverse change in the business, assets or financial condition
of the Company, other than changes occurring in the ordinary course of business.
3.18 Insurance. The Company currently maintains the policies of
insurance with respect to its business which are set forth on Exhibit B. All
---------
such policies are in full force and effect, all premiums due and payable thereon
have been paid, and no notice of cancellation or termination has been received
with respect to any such policy which has not been replaced on substantially
similar terms prior to the date of such cancellation.
3.19 Benefit Plans.
-------------
(a) Exhibit B lists each "employee pension benefit plan" (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), maintained or contributed to by the Company for the benefit
of any officers or employees of the business or "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), bonus, stock option, stock purchase,
deferred compensation plans or arrangements and other employee fringe benefit
plans maintained, or
-11-
<PAGE>
contributed to, by the Company or any of its affiliates for the benefit of any
officers or employees of the business.
(b) Each "employee pension benefit plan" has been operated in
accordance with applicable law (including ERISA and the Code), the plan
documents and collective bargaining agreements, if any, except as would not have
a Company Material Adverse Effect. There are no material undisclosed
liabilities in respect of any "employee pension benefit plans."
(c) No employee or former employee of the business will become
entitled to any bonus, retirement, severance, job security or similar benefit or
any enhanced benefit solely as a result of the transactions contemplated by this
Agreement.
3.20 Labor Matters. The Company is not the subject of any suit,
action or proceeding which is pending or, to the knowledge of the Company,
threatened with respect to the business or operations of the Company, asserting
that the Company has committed an unfair labor practice (within the meaning of
the National Labor Relations Act or applicable state statutes) or seeking to
compel the Company to bargain with any labor organization as to terms and
conditions of employment. No strike, lockout or other work stoppage or material
labor dispute involving the Company is pending or, to the knowledge of the
Company, threatened, and there is no current petition, proceeding or other
similar activity involving any employees of the Company seeking to certify a
collective bargaining unit or engaging in any other organizational activity. The
Company is not a party to, or bound by, any collective bargaining agreement or
other contract with labor union or labor organization relating to employees of
the Company. The Company has complied in all material respects with all laws
relating to wages, hours, collective bargaining and the payment of social
security and similar Taxes, and no Person has asserted that the Company is
liable in any material amount for any arrears of wages or any Taxes or penalties
for failure to comply with any of the foregoing.
3.21 Books and Records. The books of account, stock record books and
minute books and other corporate records of the Company, copies of which have
been made available to the Purchaser, are in all material respects complete and
correct and have been maintained in accordance with good business practices and
the matters contained therein are accurately reflected, to the extent
appropriate, on the Financial Statements.
3.22 Disclosure. No representation or warranty of the Company
contained in this Agreement, in any Ancillary Agreement or in the certificate to
be delivered at the Closing pursuant to Section 7.2(a) of this Agreement
contains any untrue statement of a material fact, or omits or will omit to state
any material fact
-12-
<PAGE>
necessary, in light of the circumstances under which it was or will be made, in
order to make the statements herein or therein not misleading.
3A. Representations of Banyan. Except as disclosed by Banyan in
Exhibit B-2 hereto, Banyan hereby represents and warrants to the Purchaser that
- -----------
the statements contained in this Section 3A are true, complete and correct as of
the date of this Agreement. Exhibit B-2 shall be organized into sections
-----------
corresponding with the sections of this Section 3A and the disclosure in any
section of Exhibit B-2 shall be deemed to qualify (i) the corresponding section
-----------
of this Section 3A and (ii) other sections of this Section 3A to the extent it
is clearly apparent (notwithstanding the absence of a specific cross reference)
from a reading of such disclosure that such disclosure is applicable to such
other sections.
3A.1 Organization and Standing. Banyan is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has the corporate power and authority to
conduct its business as presently conducted by it and to enter into and perform
this Agreement and the Ancillary Agreements to which it is a party (the "Banyan
Other Agreements") and to carry out the transactions contemplated by this
Agreement and the Banyan Other Agreements.
3A.2 Authority for Agreement; No Conflict. The execution, delivery
and performance by Banyan of this Agreement and the Banyan Other Agreements, and
the consummation by Banyan of the transactions contemplated hereby and thereby,
have been duly authorized by all necessary corporate action. This Agreement and
the Banyan Other Agreements, when executed at the Closing, will be duly executed
and delivered by Banyan and will constitute valid and binding obligations of
Banyan enforceable in accordance with their respective terms, subject as to
enforcement of remedies to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws affecting generally the
enforcement of creditors' rights and subject to a court's discretionary
authority with respect to the granting of a decree ordering specific performance
or other equitable remedies. The execution of and performance of the
transactions contemplated by this Agreement and the Banyan Other Agreements and
compliance with their respective provisions by Banyan will not (a) conflict with
or violate any provision of the Articles of Organization or By-laws of Banyan,
(b) other than as may be required by the HSR Act, require on the part of Banyan
any filing with, or any permit, authorization, consent or approval of any
Governmental Entity, (c) conflict with, result in a breach of, constitute (with
or without due notice or lapse of time or both) a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice, consent or waiver under, any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest or
other arrangement to which Banyan is a party or by
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<PAGE>
which Banyan is bound or to which its assets are subject, (d) result in the
imposition of any Security Interest upon any assets of Banyan or (e) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Banyan or any of its properties or assets, other than any of the foregoing
events listed in clause (c), (d) or (e) of this Section 3A.2 that would not have
a material adverse effect on the ability of Banyan to perform its obligations
under this Agreement and the Banyan Other Agreements (a "Banyan Material Adverse
Effect").
3A.3 Governmental Consents. Except as may be required by the HSR Act,
no consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any Governmental Entity is required on
the part of Banyan in connection with the execution and delivery by Banyan of
this Agreement or the Banyan Other Agreements, except such filings as shall have
been made prior to and shall be effective on and as of the Closing, and except
any filings that, if not made as required, would not have a Banyan Material
Adverse Effect.
3A.4 Litigation. There is no action, suit or legal proceeding, or
governmental inquiry or investigation, pending against Banyan, or, to Banyan's
knowledge, threatened against, Banyan which questions the validity of this
Agreement or the Banyan Other Agreements or the right of Banyan to enter into
this Agreement or the Banyan Other Agreements or which would have a Banyan
Material Adverse Effect.
4. Representations of the Purchaser. Except as disclosed by the
Purchaser in Exhibit B-3 hereto, the Purchaser hereby represents and warrants to
-----------
the Company and Banyan that the statements contained in this Section 4 are true,
complete and correct as of the date of this Agreement. Exhibit B-3 shall be
-----------
organized into sections corresponding with the sections of this Section 4 and
the disclosure in any section of Exhibit B-3 shall be deemed to qualify (i) the
-----------
corresponding section of this Section 4 and (ii) other sections of this Section
4 to the extent it is clearly apparent (notwithstanding the absence of a
specific cross reference) from a reading of such disclosure that such disclosure
is applicable to such other sections.
4.1 Investment. The Purchaser is acquiring the Shares, the Warrant
and the Voting Share, and, upon exercise of the Warrant, will be acquiring the
Warrant Shares, and, upon conversion of the Voting Share, will be acquiring the
Conversion Share, 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 Ancillary Agreements hereto, the Purchaser has no present
or contemplated agreement, undertaking, arrangement, obligation, indebtedness or
commitment providing for the disposition thereof. The Purchaser is an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
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<PAGE>
4.2 Experience. The Purchaser is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Shares, the Warrant and the Voting
Share and, upon exercise of the Warrant, the Warrant Shares, and, upon
conversion of the Voting Share, the Conversion Share. Purchaser has been
furnished with and has had access to such information as the Purchaser
considered necessary to make a determination as to the purchase of the Shares,
the Warrant and the Voting Share, and, upon exercise of the Warrant, the Warrant
Shares, and, upon conversion of the Voting Share, the Conversion Share.
4.3 Organization and Standing. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the corporate power and authority to
conduct its business as presently conducted by it and to enter into and perform
this Agreement and the Ancillary Agreements and to carry out the transactions
contemplated by this Agreement and the Ancillary Agreements.
4.4 Authority for Agreement; No Conflict. The execution, delivery
and performance by the Purchaser of this Agreement and the Ancillary Agreements,
and the consummation by the Purchaser of the transactions contemplated hereby
and thereby, have been duly authorized by all necessary corporate action. This
Agreement and the Ancillary Agreements, when executed at the Closing, will be
duly executed and delivered by the Purchaser and will constitute valid and
binding obligations of the Purchaser enforceable in accordance with their
respective terms, subject as to enforcement of remedies to applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
similar laws affecting generally the enforcement of creditors' rights and
subject to a court's discretionary authority with respect to the granting of a
decree ordering specific performance or other equitable remedies. The execution
of and performance of the transactions contemplated by this Agreement and the
Ancillary Agreements and compliance with their respective provisions by the
Purchaser will not (a) conflict with or violate any provision of the Articles of
Incorporation or By-laws of the Purchaser, (b) other than as may be required by
the HSR Act, require on the part of the Purchaser any filing with, or any
permit, authorization, consent or approval of, any Governmental Entity, (c)
conflict with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or other arrangement to
which the Purchaser is a party or by which the Purchaser is bound or to which
its assets are subject, (d) result in the imposition of any Security Interest
upon any assets of the Purchaser or (e) violate any order, writ, injunction,
decree, statute, rule or regulation
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<PAGE>
applicable to the Purchaser or any of its properties or assets, other than any
of the foregoing events listed in clause (c), (d) or (e) of this Section 4.4
that would not have a material adverse effect on the ability of the Purchaser to
perform its obligations under this Agreement and the Ancillary Agreements (a
"Purchaser Material Adverse Effect").
4.5 Governmental Consents. Except as may be required by the HSR
Act, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental Entity
is required on the part of the Purchaser in connection with the execution and
delivery by the Purchaser of this Agreement or the Ancillary Agreements, except
such filings as shall have been made prior to and shall be effective on and as
of the Closing, and except any filings that, if not made as required, would not
have a Purchaser Material Adverse Effect.
4.6 Litigation. There is no action, suit or legal proceeding, or
governmental inquiry or investigation, pending against the Purchaser or, to the
Purchaser's knowledge, threatened against the Purchaser which questions the
validity of this Agreement or the Ancillary Agreements or the right of the
Purchaser to enter into this Agreement or the Ancillary Agreements, or which
would have a Purchaser Material Adverse Effect.
5. Affirmative Covenants of the Company.
------------------------------------
5.1 Financial Statements. The Company shall deliver to the
--------------------
Purchaser:
(a) 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
(b) within 45 days after the end of each fiscal quarter of the Company
(other than the fourth 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.
5.2 Directors. The Company shall reimburse each director of the
Company who is not an employee of the Company and who was elected as a director
of the Company at the designation of the Purchaser pursuant to the Stockholders'
Voting Agreement attached as Exhibit D ("Stockholders' Voting Agreement") or
--------- ------------------------------
pursuant to the voting rights granted to the Voting Share, for all of his or her
reasonable out-of-pocket expenses incurred in attending each meeting of the
Board of Directors of the Company or any committee thereof.
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<PAGE>
5.3 Reservation of Common Stock. The Company shall reserve and
maintain a sufficient number of shares of Common Stock for issuance upon
exercise of the Warrant and upon conversion of the Voting Share.
5.4 Termination of Covenants. The covenants of the Company
contained in Section 5.1 shall terminate, and be of no further force or effect,
upon the closing of the Company's initial underwritten public offering of Common
Stock pursuant to an effective registration statement under the Securities Act.
5.5 Pre-Closing Covenants. Except as expressly contemplated by this
Agreement, during the period between the date of this Agreement and ending on
the Closing Date or the earlier termination of this Agreement, without the prior
written consent of the Purchaser, which consent will not be unreasonably
withheld, the Company shall not (and Banyan shall cause the Company not to):
(i) amend the certificate of incorporation or by-laws of the
Company;
(ii) incur or assume any liabilities, obligations, or
indebtedness for borrowed money other than in the ordinary
course of business or from Banyan pursuant to borrowings
which will be capitalized prior to the Closing in
accordance with Section 7.2(f).
(iii) acquire by merging or consolidating with, or by purchasing
a material portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint
stock company, limited liability company, association or
other business organization or division thereof;
(iv) sell, lease or mortgage, pledge or otherwise dispose of, or
grant preferential rights to, any of its assets (other than
Proprietary Rights) in any single transaction for payment
in excess of $200,000 or in the aggregate, for payment in
excess of $300,000, which are material, individually or in
the aggregate, to the business taken as a whole;
(v) sell, assign, license or transfer any Proprietary Rights,
other than in the ordinary course of business in connection
with the sale, license, or other distribution of products
or services of the business;
-17-
<PAGE>
(vi) enter into any equity joint venture or partnership;
(viii) permit any material Proprietary Rights to lapse;
(vi) sell or agree to sell any shares of capital stock in the
Company in excess of 200,000 shares other than pursuant to
obligations existing on the date of this Agreement or the
grant or exercise of stock options under plans described
in Exhibit B;
---------
(ix) declare or pay any dividends or make any distributions on
the Company's capital stock; or
(x) agree, whether in writing or otherwise, to do any of the
foregoing.
6. Transfer of Shares.
------------------
6.1 Restricted Shares. "Restricted Shares" means (i) the Shares,
(ii) the Warrant Shares, (iii) the Voting Share, (iv) the Conversion Share, and
(v) any other shares of capital stock of the Company issued in respect of the
shares of Common Stock referred to in (i), (ii), (iii) and (iv) (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 (x) upon any sale pursuant to a
registration statement under the Securities Act, Section 4(1) of the Securities
Act or Rule 144 under the Securities Act or (y) at such time as they become
eligible for sale under Rule 144(k) under the Securities Act.
6.2 Limitations on and Requirements for Transfer.
--------------------------------------------
(a) None of the Shares, or the Warrant or, upon exercise of the
Warrant, the Warrant Shares, upon conversion of the Voting Share, the Conversion
Share (or any other shares of capital stock of the Company issued in respect of
the Shares, or the Warrant or, upon exercise of the Warrant, the Warrant Shares,
or, upon conversion of the Voting Share, the Conversion Share) nor any interest
in such securities may be sold, assigned, pledged, or otherwise transferred
until the earlier of (i) the second anniversary of the Closing Date and (ii) the
closing of the Company's initial underwritten public offering of Common Stock
registered under the Securities Act pursuant to an effective registration
statement. Neither the Voting Share, nor any interest therein may be sold,
assigned, pledged or otherwise transferred, at any time. Notwithstanding the
foregoing, the Purchaser may transfer all (but not less than all) of the Shares,
the Warrant or, upon exercise of the Warrant, the Warrant Shares, and the Voting
Share, and upon conversion of the Voting Share, the Conversion Share, to any
-18-
<PAGE>
entity controlling, controlled by or under common control of the Purchaser if
(1) written notice of such action is provided to the Company and Banyan, (2) the
transferee agrees in writing as part of such notice to be bound by this
Agreement and (3) CBS Corporation remains primarily responsible for the
performance of all of the obligations of the Purchaser hereunder. The Shares,
the Warrant and, upon exercise of the Warrant, the Warrant Shares (or any other
shares of capital stock of the Company issued in respect of the Shares, the
Warrant or, upon exercise of the Warrant, the Warrant Shares) are also subject
to the restrictions on transfer and other provisions of the Ancillary
Agreements.
(b) In addition, 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.
6.3 Legend. Each certificate representing Restricted Shares shall
bear legends 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 such shares are registered under such
Act or an opinion of counsel satisfactory to the Company is
obtained to the effect that such registration is not required."
"The shares represented by this certificate are subject to the
restrictions on transfer set forth in the Common Stock and Warrant
Purchase Agreement between the Company and the holder hereof, a
copy of which is available for inspection of the office of the
Secretary of the Company."
7. Conditions to Closing.
---------------------
7.1 Conditions to Each Party's Obligation. The obligation of
Purchaser to purchase the Shares, the Warrant and the Voting Share and the
obligation of Company to sell and issue the Shares, the Warrant and the Voting
Share shall be subject to the satisfaction prior to the Closing of the following
conditions:
(a) HSR Act Waiting Period. Any waiting period (and any extension
thereof) under the HSR Act applicable to any of the transactions contemplated
hereby shall have expired or been earlier terminated.
-19-
<PAGE>
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other legal restraint or prohibition
preventing or materially restricting or altering the consummation of the
transactions contemplated by this Agreement shall be in effect; provided,
--------
however, that the provisions of this Section 7.1(b) shall not be available to
- -------
any party that has directly or indirectly solicited or encouraged any such
order, injunction or other restraint or prohibition.
(c) Government Action. There shall not be any pending action by or
before any governmental authority challenging or seeking to restrain or prohibit
or materially alter the consummation of the transactions contemplated by this
Agreement in any material respect or seeking to obtain any damages from
Purchaser, the Company or Banyan in connection with the transactions
contemplated by this Agreement; provided, however, that the provisions of this
-----------------
Section 7.1(c) shall not be available to any party that has directly or
indirectly solicited or encouraged any such action.
7.2 Additional Conditions to Purchaser's Obligations.niN The
obligations of Purchaser to purchase the Shares, the Warrant and the Voting
Share at the Closing are subject to the fulfillment to its satisfaction, on or
prior to the Closing Date, of the following conditions, any of which may be
waived by Purchaser in its sole discretion:
(a) Representations and Warranties Correct; Performance of
------------------------------------------------------
Obligations.
- -----------
(i) The representations and warranties of the Company set forth in
Section 3 shall be true and correct in all respects as of the
Closing Date as though made as of the Closing Date (other than
those made as of a particular date, which shall be true and
correct in all respects as of such date), except in each case
for such failures of representations and warranties to be true
and correct (i) as the result of changes expressly
contemplated by this Agreement, and (ii) that would not have a
Company Material Adverse Effect (it being agreed that the
clause (ii) shall be inapplicable to any portion of a
representation and warranty which already contains a Company
Material Adverse Effect or other materiality qualification or,
if an entire representation and warranty is so qualified, to
all of such representation and warranty), and the Purchaser
shall have received a certificate signed by an authorized
officer of the Company attesting to the foregoing. The Company
shall have performed or complied in all material respects with
all obligations and conditions herein required to be performed
or observed by it.
-20-
<PAGE>
(ii) The representations and warranties of Banyan set forth in Section
3A shall be true and correct in all respects as of the Closing
Date as though made as of the Closing Date (other than those made
as of a particular date, which shall be true and correct in all
respects as of such date), except in each case for such failures
of representations and warranties to be true and correct (i) as
the result of changes expressly contemplated by this Agreement,
and (ii) that would not have a Banyan Material Adverse Effect (it
being agreed that the clause (ii) shall be inapplicable to any
portion of a representation and warranty which already contains a
Banyan Material Adverse Effect or other materiality qualification
or, if an entire representation and warranty is so qualified, to
all of such representation and warranty), and the Purchaser shall
have received a certificate signed by an authorized officer of
Banyan attesting to the foregoing.
(b) Consents and Waivers. The Company and Banyan shall have obtained
in a timely fashion any and all consents, permits and waivers necessary for
consummation of the transactions contemplated by this Agreement, other than any
which if not obtained or effected would not have a Company Material Adverse
Effect or a Banyan Material Adverse Effect.
(c) Ancillary Agreements
--------------------
(i) The Registration Rights Agreement shall have been executed
and delivered by each of the parties thereto other than the
Purchaser.
(ii) The Right of First Refusal Agreement attached hereto as
Exhibit E shall have been executed and delivered by each of
---------
the parties thereto other than the Purchaser.
(iii) The Participation Agreement attached hereto as Exhibit F
---------
shall have been executed and delivered by each of the
parties thereto other than the Purchaser.
(iv) The Stockholders' Voting Agreement shall have been executed
and delivered by each of the parties thereto other than the
Purchaser.
-21-
<PAGE>
(v) The Advertising and Promotion Agreement attached hereto as
Exhibit G shall have been executed and delivered by each of
---------
the parties thereto other than the Purchaser.
(vi) The License Agreement attached hereto as Exhibit H shall
---------
have been executed and delivered by each of the parties
thereto other than the Purchaser.
(d) Certificates and Documents. The Company shall have delivered to
the Purchaser:
(i) the Certificate of Incorporation of the Company, as amended
and in effect as of the Closing Date, certified as of a
recent date by the Secretary of State of the State of
Delaware;
(ii) certificates, as of a recent date, 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;
(iii) by-laws of the Company, certified by its Secretary or
Assistant Secretary as of the Closing Date; and
(iv) copies of the resolutions of the Company's Board of
Directors authorizing the transactions contemplated by this
Agreement, certified by its Secretary or Assistant
Secretary as of the Closing Date.
(e) Opinion of Counsel. Purchaser shall have received an opinion from
the Company's counsel in form and substance of Exhibit I.
---------
(f) Conversion of Indebtedness. Prior to the Closing, Banyan shall
have exercised its right to convert all outstanding indebtedness under
Convertible Secured Notes, pursuant to a loan arrangement with the Company, into
shares of Series C and Series D Convertible Preferred Stock, Banyan shall have
terminated its Security Agreements relating to such loan arrangement and the
Purchaser shall have received a certificate signed by an authorized officer of
the Company attesting to the foregoing.
(g) Banyan Warrant Purchase Agreement. The closing of the
transactions contemplated by the Warrant Purchase Agreement dated as of the date
hereof between Banyan and the Purchaser shall occur simultaneously with the
Closing.
-22-
<PAGE>
(h) Certificate of Designations Filed. At or prior to the Closing,
the Company shall have filed the Certificate of Designations with the Secretary
of State of the state of Delaware.
7.3 Additional Conditions to the Company's Obligations.nN The
obligations of the Company to sell and issue the Shares, the Warrant and the
Voting Share at the Closing are subject to the fulfillment to its satisfaction
on or prior to the Closing Date, of the following conditions, any of which may
be waived by the Company in its sole discretion:
(a) Representations and Warranties Correct. The representations and
warranties of Purchaser set forth in Section 4 shall be true and correct in all
respects as of the Closing Date as though made as of the Closing Date (other
than those made as of a particular date, which shall be true and correct in all
respects as of such date), except in each case for such failures of
representations and warranties to be true and correct (i) as the result of
changes expressly contemplated by this Agreement, and (ii) that would not have a
Purchaser Material Adverse Effect (it being agreed that the clause (ii) shall be
inapplicable to any portion of a representation and warranty which already
contains a Purchaser Material Adverse Effect or other materiality qualification
or, if an entire representation and warranty is so qualified, to all of such
representation and warranty), and the Company shall have received a certificate
signed by an authorized officer of the Purchaser attesting to the foregoing.
The Purchaser shall have performed or complied in all material respects with all
obligations and conditions herein required to be performed or observed by it.
(b) Ancillary Agreements.
--------------------
(i) The Registration Rights Agreement shall have been executed
and delivered by the Purchaser.
(ii) The Right of First Refusal Agreement shall have been
executed and delivered by the Purchaser.
(iii) The Participation Agreement shall have been executed and
delivered by the Purchaser.
(iv) The Stockholders' Voting Agreement shall have been executed
and delivered by the Purchaser.
(v) The Advertising and Promotion Agreement shall have been
executed and delivered by the Purchaser.
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<PAGE>
(vi) The License Agreement shall have been executed and
delivered by the Purchaser.
(c) Opinion of Counsel. Company shall have received an opinion from
Purchaser's counsel substantially in form and substance of Exhibit J.
---------
(d) Termination of Certain Agreement. Prior to the Closing, the
Purchaser shall have exercised its right to terminate the agreement referred to
as Item 1 of the Purchaser's Disclosure Schedule and the Company shall have
received a certificate signed by an authorized officers of the Purchaser
attesting to the foregoing.
8. Indemnification.
---------------
8.1 Indemnification by Company and Banyan. The Company and, subject
to the limitation set forth in Section 8.4(b), Banyan, jointly and severally,
shall indemnify Purchaser and its affiliates and their respective officers,
directors, employees, agents and representatives against, and hold them harmless
from, any loss, liability, claim, damage or expense (including reasonable legal
fees and expenses) ("Losses"), actually incurred by them, as incurred (payable
promptly upon written request), arising from, in connection with or otherwise
with respect to:
(a) with respect to (x) the Company, any breach of any representation
or warranty of the Company contained in this Agreement, in any Ancillary
Agreement (other than the Advertising and Promotion Agreement and the License
Agreement) or in the closing certificate delivered at the Closing pursuant to
Section 7.2(a) and (y) Banyan, any breach of any representation or warranty of
the Company or Banyan contained in this Agreement, in any Ancillary Agreement
(other than the Advertising and Promotion Agreement and the License Agreement)
or in the closing certificate delivered at the Closing pursuant to Section
7.2(a);
(b) any breach of any covenant of the Company contained in this
Agreement or in any Ancillary Agreement (other than the Advertising and
Promotion Agreement and the License Agreement); and
(c) the matters identified on Schedule 8.1(c).
8.2 Indemnification by Purchaser. Purchaser shall indemnify the
Company and Banyan and each of their respective officers, directors, employees,
agents and representatives against, and hold them harmless from, any Losses,
actually incurred by them, as incurred (payable promptly upon written request),
arising from, in connection with or otherwise with respect to:
-24-
<PAGE>
(a) any breach of any representation or warranty of Purchaser
contained in this Agreement, in any Ancillary Agreement (other than the
Advertising and Promotion Agreement and the License Agreement) or in the closing
certificate delivered at the Closing pursuant to Section 7.3(a); and
(b) any breach of any covenant of Purchaser contained in this
Agreement or in any Ancillary Agreement (other than the Advertising and
Promotion Agreement and the License Agreement).
8.3 Calculation of Losses. The amount of any Loss for which
indemnification is provided under this Section 8 shall be calculated net of any
amounts actually recovered by the indemnified party under insurance policies
with respect to such Loss and shall be (i) increased to take account of any net
tax cost incurred by the indemnified party arising from the receipt of indemnity
payments hereunder (grossed up for such increase) and (ii) reduced to take
account of any net tax benefit realized by the indemnified party arising from
the incurrence or payment of any such Loss. In computing the amount of any such
tax cost or tax benefit, the indemnified party shall be deemed to recognize all
other items of income, gain, loss deduction or credit before recognizing any
item arising from the receipt of any indemnity payment hereunder or the
incurrence or payment of any indemnified Loss.
8.4 Termination of Indemnification.
------------------------------
(a) The obligations to indemnify and hold harmless any party, pursuant
to Sections 8.1(a) or 8.2(a), shall terminate upon the second anniversary of the
Closing Date; provided, however, that such obligations to indemnify and hold
-----------------
harmless shall not terminate with respect to any item as to which the person to
be indemnified shall have, before such anniversary date, previously made a claim
by delivering a notice of such claim (stating in reasonable detail the basis of
such claim) pursuant to Section 8.5 to the party to be providing the
indemnification.
(b) Notwithstanding anything to the contrary in this Agreement,
Banyan's indemnification obligations hereunder with respect to the covenants of
the Company and Banyan and the representation and warranty in Section 3.12(f)
shall terminate upon the earlier to occur of:
(x) the first business day after the second anniversary of the
Closing Date when Banyan beneficially owns or controls,
directly or indirectly, shares of capital stock of the
Company representing less than a majority of the total voting
power; and
-25-
<PAGE>
(y) the first business day after any person or entity
beneficially owns or controls, directly or indirectly, shares
of the capital stock of the Company representing more voting
power (based on then-outstanding shares) than those
beneficially owned or controlled, directly or indirectly, by
Banyan.
; provided, however, that Banyan's indemnification obligations shall not
-----------------
terminate pursuant to this provision with respect to an item as to which the
Purchaser has, before the occurrence of either of the events set forth above,
previously made a claim by delivering a notice of such claim (stating in
reasonable detail the basis for such claim) pursuant to Section 8.5 to Banyan.
For purposes of performing the calculation of beneficial ownership and control
referred to in the preceding sentence, neither Banyan nor the Purchaser shall be
deemed to beneficially own or control shares solely as a result of the existence
of the Stockholders' Voting Agreement.
8.5 Procedures.
----------
(a) In order for a party (the "indemnified party"), to be entitled to
-----------------
any indemnification provided for under this Agreement in respect of, arising out
of or involving a claim made by any person against the indemnified party (a
"Third Party Claim"), such indemnified party must notify the indemnifying party
-----------------
in writing of the Third Party Claim promptly following receipt by such
indemnified party of written notice of the Third Party Claim; provided, however,
-----------------
that failure to give such notification shall not affect the indemnification
provided hereunder except to the extent the indemnifying party shall have been
actually prejudiced as a result of such failure. Thereafter, the indemnified
party shall deliver to the indemnifying party, promptly following the
indemnified party's receipt thereof, copies of all notices and documents
(including court papers) received by the indemnified party relating to the Third
Party Claim and not also addressed to the indemnifying party.
(b) If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party; provided, however, that such counsel is not reasonably
-----------------
objected to by the indemnified party. Should the indemnifying party so elect to
assume the defense of a Third Party Claim, the indemnifying party shall not be
liable to the indemnified party for any legal expenses subsequently incurred by
the indemnified party in connection with the defense thereof. If the
indemnifying party assumes such defense, the indemnified party shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the indemnifying party, it being
understood that the indemnifying party shall control such defense. The
indemnifying party shall be liable for the fees and expenses of counsel employed
by the indemnified party for any period during which the indemnifying
-26-
<PAGE>
party has not assumed the defense thereof. If the indemnifying party chooses to
defend or prosecute a Third Party Claim, all the indemnified parties shall
cooperate in the defense or prosecution thereof. Such cooperation shall include
the retention and (upon the indemnifying party's request) the provision to the
indemnifying party of records and information that are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. Whether or not the indemnifying party assumes the defense of a Third
Party Claim, the indemnified party shall not admit any liability with respect
to, or settle, compromise or discharge, such Third Party Claim without the
indemnifying party's prior written consent (which consent shall not be
unreasonably withheld). If the indemnifying party assumes the defense of a Third
Party Claim, the indemnified party shall agree to any settlement, compromise or
discharge of a Third Party Claim that the indemnifying party may recommend and
that by its terms obligates the indemnifying party to pay the full amount of the
liability in connection with such Third Party Claim, which releases the
indemnified party completely in connection with such Third Party Claim and that
would not otherwise adversely affect the indemnified party. Notwithstanding the
foregoing, the indemnifying party shall not be entitled to assume the defense of
any Third Party Claim (and shall be liable for the fees and expenses of counsel
incurred by the indemnified party in defending such Third Party Claim) if the
Third Party Claim seeks an order, injunction or other equitable relief or relief
for other than money damages against the indemnified party that the indemnified
party reasonably determines, after conferring with its outside counsel, would
reasonably be expected to have a material adverse effect on the assets,
business, financial condition of results of operations of the indemnified party
and cannot be separated from any related claim for money damages; provided,
--------
however, that the indemnifying party will not be bound by any determination in
- -------
such Third Party Claim so defended by the indemnified party, or any compromise
or settlement effected without its consent. If such equitable relief or other
relief portion of the Third Party Claim can be so separated from that for money
damages, the indemnifying party shall be entitled to assume the defense of the
portion relating to money damages.
(c) Other Claims. In the event any indemnified party has a claim
against any indemnifying party under Section 8.1 or 8.2 that does not involve a
Third Party Claim being asserted against or sought to be collected from such
indemnified party, the indemnified party shall deliver notice of such claim with
reasonable promptness to the indemnifying party. The failure by any indemnified
party so to notify the indemnifying party shall not relieve the indemnifying
party from any liability that it may have to such indemnified party under
Section 8.1 or 8.2, except to the extent the indemnifying party shall have been
actually prejudiced as a result of such failure. If the indemnifying party does
not notify the indemnified party within 30 calendar days following its receipt
of such notice that the indemnifying party disputes its liability to the
indemnified party under Section 8.1 or 8.2, such claim
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<PAGE>
specified by the indemnified party in such notice shall be conclusively deemed a
liability of the indemnifying party under Section 8.1 or 8.2 and the
indemnifying party shall pay the amount of such liability to the indemnified
party on demand or, in the case of any notice in which the amount of the claim
(or any portion thereof) is estimated, on such later date when the amount of
such claim (or such portion thereof) becomes finally determined. If the
indemnifying party has timely disputed its liability with respect to such claim,
as provided above, the indemnifying party and the indemnified party shall
proceed in good faith to negotiate a resolution of such dispute and, if not
resolved through negotiations, any party may commence litigation in an
appropriate court of competent jurisdiction.
(d) Payment of Amounts Due. Notwithstanding any other provision in
this Agreement to the contrary, all or part of any claim by an indemnified party
to recover Losses under Section 8.1 may be settled by the issuance or transfer
by an indemnified party of securities of the Company having a fair market value
(as agreed to in good faith by the parties involved) equal to the portion of
such claim to be so satisfied.
8.6 Survival of Representations. The representations and warranties
contained in this Agreement, in any Ancillary Agreement (other than the
Advertising and Promotion Agreement and the License Agreement, which shall
survive in accordance with their terms) and in the closing certificates
delivered at the closing pursuant to Sections 7.2(a) and 7.3(a) shall survive
the Closing and shall terminate at the close of business two years following the
Closing Date.
8.7 Limitations.
-----------
(a) Except with respect to claims based on actual fraud, from and
after the Closing, the rights of the indemnified parties under this Section 8
shall be the sole and exclusive remedies of the indemnified parties and their
respective affiliates with respect to claims resulting from or relating to any
actual or alleged breach of representation or warranty or failure to perform any
covenant contained in this Agreement or otherwise relating to the transactions
that are the subject of this Agreement. Without limiting the generality of the
foregoing, in no event shall the Company, Banyan or the Purchaser, their
successors or permitted assigns, be entitled to claim or seek rescission of the
transactions consummated under this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement, but subject to the provisos set forth below in this Section 8.7(b),
the aggregate liability of the Company and Banyan for the sum of all Losses
under this Section 8 and under the Advertising and Promotion Agreement shall be
limited to the amount specified in the following table:
-28-
<PAGE>
<TABLE>
<S> <C>
Prior to the first anniversary of the
Closing Date $25m
On or after the first anniversary of the
Closing Date and prior to the second
anniversary of the Closing Date $34.5m
On or after the second anniversary of
the Closing Date and prior to the third
anniversary of the Closing Date $44.0m
On or after the third anniversary of the
Closing Date and prior to the fourth
anniversary of the Closing Date $58m
On or after the fourth anniversary of
the Closing Date and prior to the fifth
anniversary of the Closing Date $72m
On or after the fifth anniversary of the
Closing Date and prior to the sixth
anniversary of the Closing Date $86m
On or after the sixth anniversary of the
Closing Date $100m
</TABLE>
; provided, however, that if parties entitled to indemnification under Section
8.1 suffer Losses as a result of a breach of any representation or warranty of
the Company or Banyan contained in this Agreement or in the closing certificate
delivered at the Closing pursuant to Section 7.2(a) in an amount which exceeds
the applicable limitation on liability set forth in the preceding table, then
such indemnified parties shall be entitled to recover such excess Losses in
future years (in each case up to the applicable limitation on liability set
forth in the preceding table for each such future year); provided, further,
however, that the aggregate liability of the Company and Banyan for the sum of
all Losses under this Section 8 and under the Advertising and Promotion
Agreement in a circumstance where the immediately foregoing proviso clause
applies shall in no circumstance exceed the sum of $5 million plus the aggregate
amount of Non-Cash Purchase Price actually received by the Company.
(c) In no event shall any indemnifying party be responsible and liable
for any Losses or other amounts under this Section 8 that are consequential,
incidental, in the nature of lost profits, diminution in value, damage to
reputation or the like, special or punitive or otherwise not actual Losses.
-29-
<PAGE>
(d) For the avoidance of doubt, the parties acknowledge that in no
circumstance shall the Company be liable with respect to claims resulting from
or relating to any actual or alleged breach of representation or warranty
contained in Section 3A of this Agreement.
8.8 Indemnification of Banyan by the Company. The Company shall
indemnify Banyan and its affiliates (other than the Company) and their
respective officers, directors, employees, agents and representatives against,
and hold them harmless from, any Losses, actually incurred by them, as incurred
(payable promptly upon written request), arising from, in connection with or
otherwise with respect to any indemnification obligation of Banyan to the
Purchaser under this Agreement or any Ancillary Agreement (other than (1) with
respect to the representations and warranties of Banyan contained in Section 3A
of this Agreement or (2) a breach by Banyan of its covenant in Section 5.5).
9. Termination.
-----------
9.1 Termination of Agreement. The parties may terminate this
Agreement prior to the Closing as provided below:
(a) the parties may terminate this Agreement by mutual written
consent;
(b) the Purchaser may terminate this Agreement by giving written
notice to the Company if the Closing shall not have occurred on or before the
60th day after the date of this Agreement by reason of the failure of any
condition precedent under Sections 7.1 or 7.2 hereof (unless the failure results
primarily from a breach by the Purchaser of any representation, warranty or
covenant contained in this Agreement); and
(c) the Company or Banyan may terminate this Agreement by giving
written notice to the Purchaser if the Closing shall not have occurred on or
before the 60th day after the date of this Agreement by reason of the failure of
any condition precedent under Sections 7.1 or 7.3 hereof (unless the failure
results primarily from a breach by one or both of the Company and Banyan of any
representation, warranty or covenant contained in this Agreement).
9.2 Effect of Termination.
---------------------
(a) If any party terminates this Agreement pursuant to Section 9.1,
all obligations of the parties hereunder shall terminate without any liability
of any party to the other parties.
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<PAGE>
(b) Notwithstanding any other provision contained in this Agreement to
the contrary, the Nondisclosure Agreement, dated May 17, 1999 among the parties
(the "Nondisclosure Agreement"), shall survive the termination of this Agreement
-----------------------
for any reason and continue to be in full force and effect until it expires by
its terms.
10. Miscellaneous.
-------------
10.1 HSR Act Filings. Each of the parties shall promptly file (or
cause to be filed) any Notification and Report Forms and related material that
it may be required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the HSR Act, shall use
commercially reasonable efforts to obtain an early termination of the applicable
waiting period, and shall make any further filings or information submissions
pursuant thereto that may be necessary, proper or advisable; provided, however,
-----------------
that no party shall be required to divest any of their respective businesses or
assets, or to take or agree to take any other action or agree to any limitation
that would reasonably be expected to have a material adverse effect on such
party's business, assets or financial condition.
10.2 Confidentiality. The Purchaser agrees that it will keep
confidential and will not disclose, divulge or use for any purpose other than to
monitor its investment in the Company any confidential, proprietary or secret
information which the Purchaser obtained pursuant to the Nondisclosure
Agreement, may obtain from the Company pursuant to financial statements and
other materials submitted by the Company to the Purchaser pursuant to this
Agreement, or pursuant to any rights granted hereunder or under the Ancillary
Agreements ("Confidential Information"), unless such Confidential Information
(I) is already known or becomes known to the Purchaser by means of a source
other than Banyan or the Company, which source, to the knowledge of the
Purchaser, is not subject to a confidentiality obligation; or (II) is or becomes
publicly known through no wrongful act of the Purchaser, including, without
limitation, a breach of this Section 10.2; or (III) is rightfully received from
a third party without restriction and without breach of this Agreement; or (IV)
is independently developed by the Purchaser; or (V) is approved for release by
prior written authorization of Banyan or the Company, as appropriate; or (VI) is
disclosed pursuant to a court order or the order of a Government Entity,
provided that prior written notice of such disclosure is delivered to Banyan or
the Company, as appropriate, and reasonable measures are taken to avoid and/or
minimize the extent of such disclosure; provided, however, that the Purchaser
-----------------
may disclose Confidential Information (i) to its attorneys, accountants,
consultants, and other professionals to the extent necessary to obtain their
services in connection with monitoring its investment in the Company, or (ii) as
may otherwise be required by law, provided that the Purchaser takes reasonable
steps to minimize the extent of any such required disclosure.
-31-
<PAGE>
10.3 Expenses. Each party shall pay its own fees and expenses in
connection with the preparation and evaluation of this Agreement and the other
agreements contemplated hereby and the closing of the transactions contemplated
hereby and thereby.
10.4 Brokers. The Company and Banyan, on the one hand, and the
Purchaser, on the other hand, will indemnify and save each other 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 by this Agreement asserted by any person on the
basis of any agreement, statement or representation alleged to have been made by
such indemnifying party.
10.5 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.
10.6 Specific Performance. In addition to any and all other
remedies that may be available at law in the event of any breach of this
Agreement, each party shall be entitled to specific performance of the
agreements and obligations hereunder and to such other injunctive or other
equitable relief as may be granted by a court of competent jurisdiction.
10.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York (without
reference to the conflicts of law provisions thereof).
10.8 Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed
delivered (i) two business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth
below:
If to the Company, at 115 Flanders Road, Westboro, MA 01581, Attention:
Chief Financial Officer, or at such other address or addresses as may have been
furnished in writing by the Company to the other parties, with a copy to the
Company at the foregoing address, Attention: General Counsel, and with a copy
to Hale and Dorr LLP, 60 State Street, Boston, MA 02109 Attention: Mark G.
Borden, Esq.;
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 in writing by Banyan to the other parties, with a copy to Hale and
Dorr LLP, 60 State Street, Boston, MA 02109 Attention: Mark G. Borden, Esq.;
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<PAGE>
If to the Purchaser, at CBS Corporation, 51 West 52nd Street, New York, NY
10019, Attention: Chief Financial Officer, or at such other address or addresses
as may have been furnished in writing by the Purchaser to the other parties,
with a copy to CBS Corporation, 51 West 52nd Street, New York, NY 10019,
Attention: General Counsel.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
10.9 Complete Agreement. This Agreement (including its Exhibits),
the Banyan Warrant Purchase Agreement and the Ancillary Agreements constitute
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.
10.10 Amendments and Waivers. Except as otherwise expressly set
forth in this Agreement, 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 each of the parties to this Agreement. 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.
10.11 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.
10.12 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 shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.
10.13 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.
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<PAGE>
10.14 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. No party may assign its respective rights or obligations
under this Agreement without the prior written consent of the other parties
hereto.
[signatures on following page]
-34-
<PAGE>
Executed as of the date first written above.
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
-----------------------
Name: Dean Polnerow
Title: President
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
-----------------------------
Name: Richard M. Spaulding
Title: Vice President and Chief Financial
Officer
CBS CORPORATION
By: /s/ Frederic G. Reynolds
-----------------------------
Name: Frederic G. Reynolds
Title: Executive VP and Chief Financial
Officer
(signature page to common stock and warrant purchase agreement)
-35-
<PAGE>
AMENDMENT NO. 1
TO
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
-------------------------------------------
This Amendment No. 1 (the "Amendment") to the Common Stock and Warrant
Purchase Agreement dated as of June 1, 1999 (the "Agreement"), by and among
Switchboard Incorporated, a Delaware corporation (the "Company"), Banyan Systems
Incorporated, a Massachusetts corporation ("Banyan") and CBS Corporation, a
Pennsylvania corporation (the "Purchaser"), is entered into as of the 30th day
of June, 1999. Capitalized terms used herein and not otherwise defined shall
have the same meaning as in the Agreement.
WHEREAS, the number of shares being issued to CBS pursuant to the Agreement
and the number of shares subject to the Warrant being issued to CBS pursuant to
the Agreement were determined by reference to the Company's fully-diluted
capitalization, based in part on certain assumptions regarding the number of
shares of Series C Preferred Stock and/or Series D Preferred Stock that would be
outstanding on the Closing Date;
WHEREAS, the actual number of shares of Series C Preferred Stock and/or
Series D Preferred Stock that are outstanding on the Closing Date is higher than
was previously assumed;
WHEREAS, the Parties desire to amend the Agreement to adjust the number of
shares being issued to CBS pursuant to the Agreement and the number of shares
subject to the Warrant being issued to CBS pursuant to the Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Section 1(a) of the Agreement is hereby amended and restated in its
entirety to read as follows:
1. Sale of Securities; Authorization.
---------------------------------
(a) Subject to the terms and conditions of this Agreement, at the
Closing (as defined below), the Company will sell and issue to the Purchaser,
and the Purchaser will purchase from the Company, (i) 7,463,216 shares (the
"Shares") of Common Stock (as defined in Section 3.2), (ii) a warrant to
purchase 1,066,174 shares of Common Stock, in the form attached hereto as
Exhibit A-1 (the "Warrant"), and (iii) one share of Series E Special Voting
- -----------
Preferred Stock, $.01 par value per share, of the
<PAGE>
Company (the "Voting Share"), for the aggregate purchase price of (x) $5,000,000
(the "Cash Purchase Price"), which shall be paid in cash at the Closing, and (y)
$95,000,000 (the "Non-Cash Purchase Price"), which shall be paid through the
provision by the Purchaser to the Company of advertising services in accordance
with the Advertising and Promotion Agreement (as defined herein). The Cash
Purchase Price and the Non-Cash Purchase Price are sometimes referred to herein
together as, the "Purchase Price." Subject to the provisions of the License
Agreement (as defined herein) and the Advertising and Promotion Agreement, the
obligation of the Purchaser to pay the Non-Cash Purchase Price is a binding
obligation of the Purchaser. The Purchase Price shall be allocated among the
Shares, the Warrant and the Voting Share as set forth on Schedule 1.2 hereto.
------------
2. This Amendment 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 Amendment may be executed by facsimile signature.
3. Except as amended hereby, the Agreement shall remain in full force and
effect in accordance with its terms. If there are any conflicts between the
terms of the Agreement and this Amendment, then this Amendment shall control.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date set forth above.
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
----------------------
Name: Dean Polnerow
Title: President
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
------------------------
Name: Richard M. Spaulding
Title: Vice President and Chief Financial
Officer
CBS CORPORATION
By: /s/ Louis J. Briskman
--------------------------
Name: Louis J. Briskman
Title: Executive Vice President and General
Counsel
-3-
<PAGE>
EXHIBIT 10.2
------------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE (THE "WARRANT
SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED
UNDER THE ACT. THE WARRANT SHARES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT (I) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT, (II) IN COMPLIANCE WITH THE LIMITATIONS
OF RULE 144 UNDER THE ACT, OR (III) PURSUANT TO AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION OR COMPLIANCE IS NOT
REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS EXERCISE ARE ALSO
SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT.
Warrant No. SB-CBS-#1 Number of Shares: 1,066,174
(subject to adjustment)
Date of Issuance: June 30, 1999
SWITCHBOARD INCORPORATED
Common Stock Purchase Warrant
-----------------------------
Switchboard Incorporated, a Delaware corporation (the "Company"), for value
received, hereby certifies that CBS Corporation, a Pennsylvania corporation, or
its permitted transferees (the "Registered Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company, at any time or from time to
time on or after the earlier of (i) June 30, 2001 and (ii) the closing of the
Company's initial underwritten public offering of Common Stock registered under
the Securities Act of 1933, as amended (the "Securities Act"), and on or before
the earlier of (a) the second anniversary of the closing of the Company's
initial underwritten public offering of Common Stock registered under the
Securities Act and (b) June 30, 2004, at not later than 5:00 p.m. (Boston,
Massachusetts time), 1,066,174 shares of Common Stock, $.01 par value per share,
of the Company, at a purchase price of $1.00 per share. The shares purchasable
upon exercise of this Warrant, and the purchase price per share, each as
adjusted from time to time pursuant to the provisions of this Warrant, are
hereinafter referred to as the "Warrant Shares" and the "Purchase Price,"
respectively.
<PAGE>
1. Exercise.
--------
(a) This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the purchase form appended hereto
as Exhibit I duly executed by the Registered Holder or by the Registered
Holder's duly authorized attorney, at the principal office of the Company, or at
such other office or agency as the Company may designate, accompanied by payment
(by wire transfer) in full, in lawful money of the United States, of the
Purchase Price payable in respect of the number of Warrant Shares purchased upon
such exercise.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day (the "Exercise
Date") on which this Warrant shall have been surrendered to the Company as
provided in Section 1(a) above. At such time, the Registered Holder shall be
deemed to have become the holder of record of the Warrant Shares.
(c) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 15 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder (upon payment by the Registered Holder of any applicable
transfer taxes):
(i) a certificate or certificates for the whole number of duly
authorized, validly issued, fully paid and non-assessable Warrant Shares to
which the Registered Holder shall be entitled upon such exercise plus, in lieu
of any fractional share to which the Registered Holder would otherwise be
entitled, cash in an amount determined pursuant to Section 3 hereof; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the number of such shares purchased by the Registered
Holder upon such exercise.
2. Adjustments.
-----------
(a) General. The Purchase Price shall be subject to adjustment from
time to time pursuant to the terms of this Section 2.
(b) Diluting Issuances.
------------------
(i) Definitions. For purposes of this Section 2, the following
-----------
definitions shall apply:
-2-
<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 Section 2(b)(i)(D) below.
(B) "Original Issue Date" shall mean the date on which this Warrant
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, but excluding Options.
(D) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or, pursuant to Section 2(b)(iii) below, deemed to be
issued) by the Company after the Original Issue Date, other than shares of
Common Stock issued or issuable:
(I) upon conversion or exchange of any Convertible Securities
or exercise of any Options outstanding on the Original
Issue Date, each of which is listed on Schedule A attached
hereto;
(II) by reason of a dividend, stock split, split-up or other
distribution on shares of Common Stock that are covered by
Sections 2(c) or 2(d) below;
(III) up to 4,000,000 shares of Common Stock (or options with
respect thereto) to employees or directors of, or
consultants or advisors to, the Company pursuant to a plan,
agreement or arrangement adopted by the Board of Directors
of the Company;
(IV) in the Company's initial public offering pursuant to a
registration statement under the Securities Act;
(V) pursuant to the Stock Warrant Agreement by and among the
Company, Ameritech Interactive Media, Inc., Intelligent
Media Ventures, Inc., SBC Interactive and U.S. West Dex,
Inc., dated March 31, 1999, as it may be amended from time
to time;
(VI) pursuant to any past and present lending or line of credit
arrangement between the Company and Banyan Systems
Incorporated;
-3-
<PAGE>
(VII) pursuant to the Technology Development and Marketing
Agreement between the Company and Continuum Software,
Inc., dated November 7, 1997, as it may be amended from
time to time; or
(VIII) pursuant to any future borrowing, loan, line of credit,
leasing or similar financing arrangement with a bank,
commercial lender, leasing company or other person or for
any other purpose (provided that the shares issuable under
this clause (VIII) shall be limited to a maximum of
100,000).
The share number references in (III) and (VIII) are subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar event affecting such shares.
(ii) No Adjustment of Purchase Price. No adjustments to the
Purchase Price shall be made unless the consideration per share (determined
pursuant to Section 2(b)(v)) for an Additional Share of Common Stock issued or
deemed to be issued by the Company is less than $16.00 (subject to adjustment in
the same manner as the Purchase Price pursuant to Sections 2(c) and 2(d) below)
(the "Adjustment Price").
(iii) Issue of Securities Deemed Issue of Additional Shares of Common
Stock. If the Company at any time or from time to time after the Original Issue
Date shall issue (whether by sale or grant) 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 Section 2(b)(v) hereof) of such Additional Shares of Common Stock
would be less than the Adjustment 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 Purchase 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;
-4-
<PAGE>
(B) If such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase or decrease in the
consideration payable to the Company, then upon the exercise, conversion or
exchange thereof, the Purchase 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 or decrease
becoming effective, be recomputed to reflect such increase or decrease 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 such unexercised Option,
the Purchase Price shall not be readjusted, but 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 Purchase
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 such Option or
Convertible Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Purchase Price then in effect shall
forthwith be readjusted to such Purchase Price as would have obtained had the
adjustment which was made upon the issuance of such Option or Convertible
Security not exercised, converted or exchanged prior to such change been made
upon the basis of such change; and
(E) No readjustment pursuant to clause (B) or (D) above shall have the
effect of increasing the Purchase Price to an amount which exceeds the lower of
(i) the Purchase Price on the original adjustment date, or (ii) the Purchase
Price that would have resulted from any issuances of Additional Shares of Common
Stock between the original adjustment date and such readjustment date.
(iv) Adjustment of Purchase Price Upon Issuance of Additional
Shares of Common Stock. In the event the Company 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 Section
2(b)(iii), but excluding shares issued as a dividend or distribution or upon a
stock split or combination as provided in Section 2(c)), without consideration
or for a consideration per share less than the Adjustment Price in effect on the
date of and immediately prior to such issue, then and in such event, the
Purchase Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Purchase Price
by a fraction, (A) the numerator of which shall be (1) the number of shares of
Common
-5-
<PAGE>
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 Company for the total number of Additional Shares of Common
Stock so issued would purchase at the Adjustment 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 Section 2(b)(iv), all shares
of Common Stock issuable upon exercise, conversion or exchange of Options or
Convertible Securities outstanding immediately prior to such issue shall be
deemed to be outstanding, and (ii) the number of shares of Common Stock deemed
issuable upon exercise, conversion or exchange of such outstanding Options and
Convertible Securities shall not give effect to any adjustments to the exercise
or conversion price or rate of such Options or Convertible Securities resulting
from the issuance of Additional Shares of Common Stock that is the subject of
this calculation. For the avoidance of doubt, any shares of Common Stock held
by the Company as treasury shares shall not be deemed to be outstanding.
Notwithstanding the foregoing, the applicable Purchase Price shall not
be so reduced at such time if the amount of such reduction would be an amount
less than $.05, but any such amount shall be carried forward and reduction with
respect thereto made at the time of and together with any subsequent reduction
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate $.05 or more.
(v) Determination of Consideration. For purposes of this Section
2(b), the consideration received by the Company 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 of cash received by the Company, 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, 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 Company
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.
-6-
<PAGE>
(B) Options and Convertible Securities. The consideration per share
received by the Company for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 2(b)(iii), relating to Options and Convertible
Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the
Company 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 Company 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 Company 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 Purchase
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.
(vii) Limitation. Notwithstanding anything in this Warrant
to the contrary, in no event shall the Purchase Price be adjusted pursuant to
Section 2(b) to below $0.01 per share.
(c) Recapitalizations. If outstanding shares of the Company's Common
Stock shall be subdivided into a greater number of shares or a dividend in
Common Stock shall be paid in respect of Common Stock, the Purchase Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased.
-7-
<PAGE>
(d) Mergers, etc. If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a change in par value
or a subdivision or combination as provided for in Section 2(c) above), or any
consolidation or merger of the Company with or into another corporation, or a
transfer of all or substantially all of the assets of the Company, then, as part
of any such reorganization, reclassification, consolidation, merger or sale, as
the case may be, lawful provision shall be made so that the Registered Holder
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number of shares of Common Stock which
were then purchasable upon the exercise of this Warrant. In any such case,
appropriate adjustment (as reasonably determined in good faith by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of the
Registered Holder, such that the provisions set forth in this Section 2
(including provisions with respect to adjustment of the Purchase Price) shall
thereafter be applicable, as nearly as is reasonably practicable, in relation to
any shares of stock or other securities or property thereafter deliverable upon
the exercise of this Warrant.
(e) Adjustment in Number of Warrant Shares. When any adjustment is
required to be made in the Purchase Price pursuant to Section 2(c), the number
of Warrant Shares purchasable upon the exercise of this Warrant shall be changed
to the number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such adjustment,
by (ii) the Purchase Price in effect immediately after such adjustment.
(f) Certificate of Adjustment. When any adjustment is required to be
made pursuant to this Section 2, the Company shall promptly mail to the
Registered Holder a certificate setting forth the Purchase Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. Such certificate shall also set forth the kind and amount of stock
or other securities or property into which this Warrant shall be exercisable
following such adjustment.
3. Fractional Shares. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the fair market value per share of
Common Stock, as determined in good faith by the Board of Directors of the
Company.
4. Requirements for Transfer. Neither this Warrant nor any interest
herein is transferrable in any respect (other than to the Company or Banyan
Systems Incorporated); provided, however, that notwithstanding the foregoing,
-------- -------
the Registered
-8-
<PAGE>
Holder may transfer the entire Warrant (but not less than the entire Warrant) to
any entity controlling, controlled by or under common control of the Registered
Holder if (1) written notice of such action is provided to the Company, (2) the
transferee agrees in writing as part of such notice to be bound by this
Agreement and (3) CBS Corporation remains primarily responsible for the
performance of all of the obligations of the Registered Holder hereunder. The
Warrant and the Warrant Shares are also subject to the restrictions on transfer
set forth in the Common Stock and Warrant Purchase Agreement dated as of June 1,
1999 between the Company and the Registered Holder, which terms are incorporated
herein.
5. No Impairment. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate, including such action as may be necessary or
appropriate in order that the Company may validly and legally issue or sell
fully paid and non-assessable Warrant Shares upon exercise of this Warrant, in
order to protect the rights of the holder of this Warrant against impairment.
6. Notices of Record Date, etc. In case:
---------------------------
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right; or
(b) of any capital reorganization of the Company, any reclassification
of the Common Stock of the Company, any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the surviving entity), or any transfer of all or substantially
all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder a notice specifying, as the case may be, (i) the record date
for such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of
-9-
<PAGE>
Common Stock (or such other stock or securities at the time deliverable upon the
exercise of this Warrant) shall be entitled to exchange their shares of Common
Stock (or such other stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at
least ten (10) days prior to the record date or effective date for the event
specified in such notice.
7. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant. All Warrant
Shares shall be duly authorized and, when issued upon such exercise, shall be
validly issued, fully paid and non-assessable and free and clear of all
preemptive rights, and free from all taxes, liens and other charges with respect
to the issue thereof by the Company. The Company will take all actions as may
be necessary to assure that the Warrant Shares issued upon a valid exercise
hereof may be issued by the Company without violation of any law or regulation,
or of any requirement of any domestic securities exchange upon which any capital
stock of the Company may be listed.
8. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
9. Mailing of Notices, etc. All notices and other communications from
the Company to the Registered Holder shall be mailed by first-class certified or
registered mail, postage prepaid, to the address last furnished to the Company
in writing by the Registered Holder. All notices and other communications from
the Registered Holder or in connection herewith to the Company shall be mailed
by first-class certified or registered mail, postage prepaid, to the Company at
115 Flanders Road, Westboro, MA 01581, Attn: Chief Financial Officer, with
copies to the Company at the foregoing address, Attn: General Counsel, and to
Banyan Systems Incorporated, 120 Flanders Road, Westboro, MA 01581, Attn:
Chief Financial Officer and Hale and Dorr LLP, 60 State Street, Boston, MA
02109, Attn: Mark G. Borden, Esq. If the Company should at any time change the
location of its principal office to a place other than as set forth below, it
shall give prompt written notice to the Registered Holder and thereafter all
references in this Warrant to the location of its principal office at the
particular time shall be as so specified in such notice.
-10-
<PAGE>
10. No Rights as Stockholder. Until the exercise of this Warrant, the
Registered Holder shall not have or exercise any rights by virtue hereof as a
stockholder of the Company.
11. Change or Waiver. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
12. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the Registered Holder (in
the case of a breach by the Company), or the Company (in the case of a breach by
the Registered Holder), may proceed to protect and enforce its rights either by
suit in equity and/or by action at law, including, but not limited to, an action
for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Warrant.
13. Headings. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
14. Governing Law. This Warrant will be governed by and construed in
accordance with the laws of the State of Delaware (without reference to the
conflicts of law provisions thereof).
15. Waiver of Jury Trial. THE COMPANY AND THE REGISTERED HOLDER WAIVE THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON.
[signatures on following page]
-11-
<PAGE>
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
-----------------------
Name: Dean Polnerow
Title: President
ATTEST:
/s/ Richard M. Spaulding
- ------------------------
(signature page to Switchboard warrant)
-12-
<PAGE>
EXHIBIT I
---------
PURCHASE FORM
-------------
To: Switchboard Incorporated Date:
115 Flanders Road ------------
Westboro, MA 01581
Attn: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase _____ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________, representing the full purchase price for such shares at the price
per share provided for in such Warrant. Such payment takes the form of $______
in lawful money of the United States.
Signature:
----------------------------
Address:
----------------------------
----------------------------
<PAGE>
EXHIBIT 10.3
(Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.)
ADVERTISING AND PROMOTION AGREEMENT
-----------------------------------
AGREEMENT made as of the 30th day of June, 1999 (the "Effective Date"), by
and among CBS Corporation, 51 West 52nd Street, New York, New York 10019 (herein
called "CBS"), Banyan Systems Incorporated, 120 Flanders Road, Westboro,
Massachusetts 01581-5013 (herein called "Banyan") and Switchboard Incorporated,
115 Flanders Road, Westboro, Massachusetts 01581-5013 (herein called
"Switchboard" or the "Company").
1. GENERAL DEFINITIONS
1.1 "Above the Fold" shall mean that portion of any web page that is
designed to be visible by users upon first accessing such page, without
requiring users with standard configurations to scroll lower or horizontally
through such page.
1.2 "CBS Associated Sites" means any web sites other than CBS Sites in
which CBS holds an equity, but not controlling, interest. A list of CBS
Associated Sites current as of the Effective Date is set forth in Exhibit B.
---------
1.3 "CBS Competitor" shall mean any Person, other than CBS or an Affiliate
of CBS, who/which is engaged either directly, or indirectly through an
Affiliate, in radio or television programming or radio or television program
distribution (whether free over-the-air, cable, telephone, local, microwave,
direct broadcast satellite, via the Internet or otherwise) or billboard
advertising in North America. 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. A CBS Competitor shall not include any Person
engaged in television or radio program transmission or streaming through an
Internet web site, provided such Person or any Affiliate of such Person does not
represent more than five percent (5%) market share (based upon revenues,
viewership or reach) of the Internet television or radio business or television
or radio business.
1.4 "CBS PLUS" shall mean a corporation-wide, cross media sales unit that
designs customized, consumer-driven media and marketing programs for
advertisers. CBS PLUS media and marketing programs are executed in cooperation
with the sales organizations of the entire CBS organization, including: CBS
Television Network, the CBS Television Stations Group, CBS/Infinity Radio
Stations, CBS Cable and TDI, CBS's outdoor advertising business.
1.5 "CBS Sites" means any web sites that are wholly-owned or majority-
owned by CBS at any time during the Term of this Agreement. A list of CBS Sites
current as of the Effective Date is set forth on Exhibit C.
---------
1.6 "CBS Users" means individual users accessing Content from the
Switchboard Site through links on the CBS Sites and CBS Affiliated Sites.
<PAGE>
(Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.)
1.7 "Co-Branded Interface" means any and all pages of the user interface
through which CBS Users can initiate queries of, or access content from, the
Switchboard Site, which interface shall comply with the provisions of Section
3.4.
1.8 "Common Stock" means the common stock, $.01 par value per share, of
Switchboard and, unless otherwise indicated, shall include securities of
Switchboard which are or will be convertible or exchangeable into Common Stock.
1.9 "Content" shall mean text, graphics, photographs, video, audio and/or
other data or information, including, without limitation, Content broadcast on
television, relating to any subject and/or advertisements.
1.10 "Contract Year" shall mean the annual period beginning on the date of
commencement of the Term, and each subsequent annual period during the Term
beginning on the anniversary of that commencement date (as such year may be
suspended or extended, and those dates postponed, as provided herein).
1.11 "Display Ad" shall mean an advertisement displayed as a result of a
user search of the Yellow Pages Directory or a Vertical Guide which
advertisement is searchable by such criteria as category, name and geographic
location. An example of a Display Ad is set forth in Exhibit D.
---------
1.12 "Email Directory" shall mean the email address directory, as featured
on the Switchboard Site, which allows users to search for email addresses.
1.13 "Internet" shall mean a global network of interconnected computer
networks, each using the Transmission Control Protocol/Internet Protocol and/or
such other standard network interconnection protocols as may be adopted from
time to time, which is used to transmit Content that is directly of indirectly
delivered to a computer or other digital electronic device for display to an
end-user, whether such Content is delivered through on-line browsers, off-line
browsers, or through "push" technology, electronic mail, broadband distribution,
satellite, wireless or otherwise.
1.14 "License Agreement" shall mean the License Agreement, dated the date
hereof, by and between CBS and Switchboard.
1.15 "Net Advertising Revenues" shall mean the revenue derived by
Switchboard from the sale of advertising on the Co-Branded Interfaces and
Vertical Guides, less (a) all third-party payments actually made, including,
without limitation, sales representative commissions (provided that, for the
purposes of this definition, such sales representative commissions shall be
deemed not to exceed [**]% in each instance), (b) commissions paid to CBS
or its employees pursuant to Section 2.5, and (c) applicable sales taxes, if
any.
2
<PAGE>
1.16 "Person" shall mean individual, partnership, corporation or organized
group of persons, including agencies and other instrumentalities of governments
and states.
1.17 "Switchboard Site" shall mean the Internet web site owned by
Switchboard that: (a) provides an online, interactive directory which allows
users to search for, among other things, residential listing information,
business listing information and advertisements, email addresses and web sites
(it being understood that the web site is and shall remain principally and
predominantly a directory); and (b) is accessed via the domain name
www.switchboard.com and, upon consummation of this Agreement,
- -------------------
www.cbs.switchboard.com or www.cbsswitchboard.com (or a reasonable variation
- ----------------------- ----------------------
thereof to be mutually agreed on by the parties hereto).
1.18 "Term" shall have the meaning set forth in Section 6.1.
1.19 "Vertical Guide" shall mean a subject or category specific guide or
directory created by Switchboard pursuant to Section 4.2.
1.20 "Voting Agreement" means the Stockholders' Voting Agreement, dated
the date hereof, among CBS, Banyan and Switchboard.
1.21 "Web Site Services" shall mean the creation, hosting, support, and
distribution of merchants' web sites by Switchboard (or third parties under
agreements with Switchboard), as well as supplemental services or enhancements
which may be offered by Switchboard (or third parties under agreements with
Switchboard) to merchants from time to time.
1.22 "White Pages Directory" shall mean the residential directory as
featured on the Switchboard Site, which allows users to search for information
including names, addresses, and telephone numbers of individuals.
1.23 "Yellow Pages Directory" shall mean the business directory as
featured on the Switchboard Site, which allows users to search (by name,
category, and/or geographic location) browse, and download advertisements, web
sites, and listings of business information including names, addresses,
telephone numbers, and related maps and/or directions to business locations.
2. CBS ADVERTISING AND PROMOTION
2.1 (a) CBS shall arrange for the placement of advertising and promotion
of the Switchboard Site in the United States in the media category or type set
forth in the Advertising and Promotion placement schedule set forth on Exhibit A
---------
attached hereto, with an aggregate value of $95 million. CBS and Switchboard
will cooperate to endeavor to implement the advertising and promotional goals
set forth in the annual media plan presented to CBS by Switchboard (which may
address such goals as audience objectives, reach and frequency goals, geographic
preferences and special programming opportunities), to the extent that such plan
is consistent with Exhibit A attached hereto. Switchboard may, in its sole
---------
discretion and by
3
<PAGE>
(Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.)
written notice to CBS, elect to defer to any subsequent Contract Year, up to
thirty-five percent (35%) of the advertising and promotional value to which
Switchboard may be entitled in any current Contract Year; provided, however,
that CBS shall not be obligated, without its consent, to provide advertising and
promotional value aggregating more than eighteen million nine hundred thousand
dollars ($18,900,000) during any given Contract Year.
(b) (2.1 (b)) [**] all broadcast advertising and promotion provided
hereunder shall be based upon [**] purchased during the specific CBS Television
Network, CBS Owned and Operated Television Station, CBS Owned and Operated Radio
Station, or CBS Cable broadcast in which the advertising or promotion occurs.
Banner advertising on CBS Internet sites shall [**] in which [**]. The price of
the billboard ad concerned shall be based on [**] during the month previous to
the month in which such advertising is delivered. CBS shall [**]. CBS will
provide to Switchboard quarterly statements, or, if available, monthly
statements showing the advertising and promotional value [**] with respect to
the advertising and promotions purchased by Switchboard during the statement
period.
(c) Subject to the written consent of CBS, which consent may be
unreasonably withheld, Switchboard may elect to use a portion of the promotional
value described in Section 2.1(a) to promote, through radio spots or billboard
advertisements only, certain of Switchboard's significant third party business
partners.
2.2 CBS will maintain accurate books and records which report the
expenditure of the advertising and promotional value by Switchboard and
information from which the calculation can be derived. Switchboard may, at its
own expense, examine and copy those books and records, as provided in this
Section 2.2. Switchboard may make such an examination for a particular
statement provided pursuant to Section 2.1(b) within three (3) years after the
date such statement is sent by CBS to Switchboard. Switchboard may make those
examinations only during CBS's usual business hours, and at the place where it
keeps the books and records. Such books and records shall be kept at the
address set forth herein for the provision of notices to CBS, unless otherwise
notified. Switchboard will be required to notify CBS at least ten (10) days
before the date of planned examination.
2.3 CBS shall have the right to suspend and/or withdraw placement of all
advertising and promotion:
(a) (x) pending resolution of any claim covering use by the Company in
the United States of the tradename or trademark "Switchboard" either alone or in
combination with any other mark and/or (y) during such time as the Company is
enjoined from using the tradename or trademark "Switchboard" in the United
States on or in connection with the Switchboard Site and has not renamed the
Switchboard Site. (In connection with clause (x) of the foregoing sentence, CBS
shall use its reasonable judgment in suspending or withdrawing advertising,
taking into account the substance of the claim, the potential liabilities to
which CBS may be subject and the potential detriment to CBS's interests or
business.) The Company shall rename the Switchboard Site within thirty (30)
days following the issuance of any injunction or the resolution of any claim
which requires the Company to cease using the tradename or trademark
"Switchboard" in the United States on or in connection with the Switchboard Site
(the "Cessation Event"), it being understood, however, that CBS shall have the
sole right and power to approve the substitute tradename and/or trademark to be
used. In the event that CBS fails to approve the substitute tradename and/or
trademark within the 30-day period prescribed, then upon the expiration of such
30-day period, CBS shall submit a tradename proposal with three (3) alternate
tradenames which appear to be available for the Company's use on the Switchboard
Site in the United States based on trademark searches
4
<PAGE>
(Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.)
conducted by CBS, for the Company's approval, which approval is to be given
within ten (10) days of such submission. For the avoidance of doubt, CBS does
not and will not make any representation or warranty with respect to the
availability of any alternate name provided to Switchboard by CBS for use on the
Switchboard Site. Switchboard shall thereafter promptly apply for registration
of such trademark. In the event that during the application process, Switchboard
is advised in writing by its outside trademark counsel that such trademark does
not appear to be available for registration by Switchboard in connection with
the Switchboard Site or Switchboard is notified, in writing, that such
registration is denied, the foregoing process for determining a new trademark
shall begin again and the parties agree to work together in good faith to
endeavor to agree on a new trademark for the Switchboard Site in accordance with
this Section 2.3(a) or sooner, if reasonably practicable.
(b) in the event the Switchboard Site is not operational for a 48-hour
period until it becomes operational in a manner substantially consistent with
the normal operation of the Switchboard Site prior to the initial disruption of
service.
2.4 CBS will use its good faith efforts to suspend or withdraw advertising
and promotion upon receipt of a written request from Switchboard setting forth
Switchboard's reasonable belief that a continuation of such advertising and
promotion would be detrimental to CBS, Switchboard or the Switchboard Site.
2.5 CBS shall have the right, but not the obligation, to sell advertising
space on the Switchboard Site, any Co-Branded Interface and any Vertical Guide.
In connection with CBS's right to sell such advertising, CBS will (i) include
the Switchboard Site, Co-Branded Interfaces and Vertical Guides in its CBS PLUS
advertising sales programs, (ii) designate an individual or group of individuals
to (A) work with Switchboard, at Switchboard's request, to develop a commission
structure (payable by Switchboard) and plan designed to motivate CBS sales
personnel to sell advertising on the Switchboard Site, Co-Branded Interfaces and
Vertical Guides and (B) establish a process regarding allocation of available
advertising inventory on the Switchboard Site, Co-Branding Interface and
Vertical Guides, and (iii) comply with Switchboard's advertising content
policies, the current version of which is attached hereto as Exhibit E, as well
---------
as any applicable CBS advertising policies. In effecting ad sales, CBS will
have the right to bundle inventory relating to the Switchboard Site, Co-Branded
Interfaces and Vertical Guides with television, radio, cable and billboard
inventory. CBS will be entitled to receive from Switchboard a [**]%
commission with respect to advertising sold by CBS on the Switchboard Site, any
Co-Branded Interface and any Vertical Guide.
3. LINKS TO AND INTEGRATION OF SWITCHBOARD CONTENT
3.1 During the Term, hyperlinks to Co-Branded Interfaces for the purpose
of allowing CBS Users access to each of the Switchboard Directories shall be
placed on the home page of each of the CBS Sites. Such hyperlinks shall be in a
form as mutually agreed and shall be labeled, "find a person," "find a
business," and "find an e-mail address," or other mutually agreed designations.
Such hyperlinks shall be at least as large and prominently placed as any
5
<PAGE>
other third party hyperlink, logo, or icon on the web pages on which they
appear. In addition, hyperlinks shall be placed Above the Fold on each Co-
Branded Interface for the purpose of allowing users to access the CBS Site or
CBS Associated Site related to such Co-Branded Interface.
3.2 Notwithstanding anything to the contrary herein, Switchboard
acknowledges and agrees that the performance by CBS of any obligation pursuant
to this Agreement as it relates to any CBS Site is subject to any agreement or
condition existing as of the date hereof which could reasonably restrict or
prohibit CBS's ability to perform such obligation. CBS agrees that (i) it will
avail itself of any contractual right it may have to terminate such agreement or
condition without the incurrence of any penalty, interest or damages thereunder,
(ii) it will perform such obligation as soon as practicable upon the expiration
or termination of such agreement or condition and (iii) in no event will CBS
agree to modify, extend or renew such agreement or condition.
3.3 During the Term, CBS shall use good faith and commercially reasonable
efforts to try to obtain similar placement and implementation of hyperlinks on
each of the CBS Associated Sites to Co-Branded Interfaces for the purpose of
allowing CBS Users access to each of the Switchboard Directories, as set forth
in Section 3.1 with respect to CBS Sites.
3.4 On an ongoing basis throughout the Term, the parties shall work
together in good faith to evaluate and agree upon additional opportunities to
integrate features and functionality from the Switchboard Site into the CBS
Sites, including but not limited to the Switchboard Directories, through links
in appropriate areas of such CBS Sites. The goal of such mutual integration
effort shall be to enhance the content of the applicable CBS Sites and to
increase the traffic (page views) to the Switchboard Site. By way of example
and not limitation, the CBS Sites may provide links from their local content
areas to vertical business guides, local directories, or topical or local
message boards featured on the Switchboard Site. All traffic from links
established pursuant to this Section 3.4 shall be attributed to the Switchboard
Site. The parties may meet to evaluate and discuss such integration
opportunities on a regular basis, but no less frequently than every six (6)
months.
3.5 Through the hyperlinks referenced in Sections 3.1 3.3, CBS Users may
initiate queries to, and access content from, the Switchboard Site only through
a Co-Branded Interface. Each page of a Co-Branded Interface shall be subject to
the approval of CBS and shall feature equal co-branding of CBS and Switchboard.
Except for the co-branding, each page of a Co-Branded Interface shall have the
design and "look and feel" of the applicable CBS Site or CBS Associated Site,
and the features and content of the Switchboard Site, except to the extent that
such features or content are supplied by third parties pursuant to contracts
that preclude their display through the Co-Branded Interface. All pages of the
Co-Branded Interface shall be hosted on Switchboard's servers. CBS shall pay
Switchboard a co-branding fee of Two Thousand Dollars ($2,000) for the completed
development of Co-Branded Interfaces for each CBS Site up to a maximum of one
hundred and fifty (150) web sites. Fees for Co-Branded Interfaces for
additional web sites shall be as mutually agreed.
6
<PAGE>
4. DEVELOPMENT AND INTEGRATION BY SWITCHBOARD
4.1 On an ongoing basis throughout the Term, the parties shall work
together in good faith to evaluate and agree on opportunities to integrate local
content from the www.cbs.com web site into the Switchboard Site through links in
appropriate areas of the Switchboard Site. The goal of such mutual integration
effort shall be to enhance the content of the Switchboard Site and to increase
the traffic (page views) to the www.cbs.com web site. By way of example and not
limitation, the Switchboard Site may link to local content from the www.cbs.com
web site from the "What's Nearby(TM)," web-searching interfaces, or local or
topical bulletin boards of the Switchboard Site. All traffic from links
established pursuant to this Section 4.1 shall be attributed to the www.cbs.com
web site. The parties shall discuss and evaluate such integration opportunities
at meetings scheduled in accordance with Section 3.4.
4.2 The parties shall work together in good faith to identify appropriate
subject or category areas for the development by Switchboard of Vertical Guides
for CBS Sites and/or CBS Associated Sites. Switchboard will develop, activate
and maintain such Vertical Guides, in a form reasonably satisfactory to CBS, as
soon as practicable after the appropriate subject or category areas have been
identified. Such Vertical Guides shall include mutually agreed content and/or
features from the CBS Sites and from the Switchboard Site. Content or features
from the Switchboard Site are to include, without limitation, category-specific
business listings, Display Ads, topical web site listings, maps and directions,
and/or "What's Nearby(TM)" content. CBS shall assist Switchboard in integrating
any mutually agreed content from the CBS Sites into the Vertical Guides. All
Vertical Guides developed by Switchboard hereunder shall feature the equal co-
branding of CBS and Switchboard. All Vertical Guides shall be hosted on
Switchboard's servers.
4.3 Content from the Switchboard Site included in any Vertical Guide shall
be updated as such information is updated on the Switchboard Site, except that,
unless otherwise mutually agreed, Display Ads or web sites featured in the
Yellow Pages Directory may not appear in the Vertical Guide unless the
advertiser has purchased distribution in such Vertical Guide. Switchboard shall
not be responsible for updating content appearing in the Vertical Guides from
the CBS Sites or CBS Associated Sites except to the extent that such updates are
provided by CBS to Switchboard for such express purpose in a form reasonably
satisfactory to Switchboard.
4.4 CBS shall maintain links from the appropriate CBS Sites to the
applicable Vertical Guides. Switchboard may at its election provide links to
the Vertical Guides from the Switchboard Site.
4.5 Switchboard shall develop such mutually agreed Vertical Guides for CBS
Sites at no charge. Vertical Guides developed for CBS Associated Sites shall be
subject to mutually agreed terms that may include development or other fees and
mutually agreed branding.
7
<PAGE>
(Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.)
4.6 Switchboard shall retain all right, title and interest in the Vertical
Guides created by Switchboard hereunder, as the same may be updated from time to
time, and all content and intellectual property therein, except for content,
including without limitation, trademarks and logos, originating from the CBS
Sites or CBS Associated Sites.
4.7 As of the Effective Date, Switchboard is engaged in the business of
selling Web Site Services to merchants, including distribution of merchants' web
sites on the Switchboard Site as well as on certain third party web sites as
agreed to by the merchant. During the Term, for as long as Switchboard
continues to sell Web Site Services to new accounts, Switchboard shall market,
promote, and offer to "qualifying merchants" the right to purchase distribution
of links to their web sites from their Display Ads in the appropriate Vertical
Guides on the CBS Sites. Switchboard may elect to offer such distribution as
part of a package of options that may or may not include distribution on other
third party web sites. For the purposes of this Section, "qualifying merchants"
shall mean merchants within subjects or categories which are mutually agreed by
CBS and Switchboard to be appropriate for each Vertical Guide.
4.8 Notwithstanding anything to the contrary set forth in this Agreement,
the rights and obligations of Switchboard and CBS set forth herein, including,
without limitation, those set forth in Sections 3 and 4, shall be subject to and
governed by the terms and provisions of the License Agreement (specifically
excluding Section 1 (Definitions), Section 5 (Warranties; Representations;
Indemnities), Section 6.4 (Limitation of Liability), Section 6 (Remedies) and
Section 7 (General) of the License Agreement) which is incorporated herein by
reference as if fully set forth herein.
5. COMPENSATION
5.1 In consideration of the rights herein granted, Switchboard shall pay
CBS [**]% of the Net Advertising Revenues derived from the sale of
advertising on the Co-Branded Interfaces or Vertical Guides during the Term.
Payments made to CBS pursuant to this Section 5.1 shall be in addition to any
payments due or owing to CBS pursuant to Section 2.5.
5.2 Switchboard will compute Net Advertising Revenues as of each March 31,
June 30, September 30 and December 31 for the prior three (3) months. Within
forty-five (45) days after the calendar quarterly period concerned, Switchboard
will send CBS a statement covering those sums and will pay CBS any Net
Advertising Revenues due. Acceptance by CBS of any statement or payment shall
not preclude CBS from challenging the accuracy thereof.
5.3 Switchboard will maintain accurate books and records that report the
sales of advertising on the Co-Branded Interfaces or Vertical Guides. CBS may,
at its own expense, examine and copy those books and records, as provided in
this Section 5.3. CBS may make such an examination for a particular statement
within three (3) years after the date such statement is sent by Switchboard to
CBS. (Switchboard will be deemed conclusively to have sent CBS the statement
concerned on the date prescribed in Section 5.2, unless CBS notifies
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Switchboard otherwise with respect to any statement, within thirty (30) days
after that date.) CBS may make those examinations only during Switchboard's
usual business hours, and at the place where it keeps the books and records.
Such books and records shall be kept at the address set forth herein for the
provision of notices to Switchboard, unless otherwise notified. CBS will be
required to notify Switchboard at least ten (10) days before the date of planned
examination.
6. TERM
6.1 This Agreement shall commence on the Effective Date and shall remain
in full force and effect for an initial period of seven (7) years, unless
earlier terminated as provided herein. After the initial term, this Agreement
may be renewed for successive one-year periods upon the mutual written agreement
of the parties. The initial term and any renewal terms, including the extension
provided for in Section 6.2 below, shall be collectively referred to herein
as the "Term."
6.2 Notwithstanding the foregoing, upon the termination of the initial
period of this Agreement, this Agreement shall automatically be extended for one
additional year in the event that Switchboard elects to defer, in accordance
with Section 2.1(a), up to four million nine hundred thousand dollars
($4,900,000) of advertising and promotional value attributable to year seven (7)
of the initial period.
7. WARRANTIES, REPRESENTATIONS AND COVENANTS
7.1 (a) CBS represents and warrants that:
(i) it has full power and authority to enter into and fully
perform this Agreement; and
(ii) this Agreement has been duly authorized and is
enforceable in accordance with its terms.
(b) Each of Banyan and Switchboard represents and warrants that:
(i) it has full power and authority to enter into and fully
perform its obligations under this Agreement;
(ii) this Agreement has been duly authorized and is
enforceable in accordance with its terms; and
(iii) the Switchboard Site is free of defects which would
interrupt or interfere with the intended purpose thereof, including
without limitation, (A) any malfunctions or other usage problems
resulting from or in connection with the "Year 2000 Problem" (i.e.,
the year 2000 (and later years) as distinct from the years 1900
through 1999 (and earlier years)), and (B) "bugs" or "viruses."
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For the purposes of this paragraph, defects will be deemed to
"interrupt or interfere with the intended purpose" of the Switchboard
Site if they result in the failure to respond to user queries in a
manner consistent with the normal operation of the Switchboard Site
which shall have been maintained in a manner consistent with
Switchboard's performance standards with respect to the Switchboard
Site as set forth in Section 7.1(c)(iii).
(c) Switchboard covenants that:
(i) at all times during the Term, it will comply with all
applicable federal, state and local laws;
(ii) at all times during the Term, the Switchboard Site and
each Co-Branded Interface will be maintained in a professional manner
consistent with industry standards; and
(iii) it will use its reasonable best efforts to adhere to the
following performance standards:
(A) to maintain the availability of the Switchboard
Site and the Co-Branded Interfaces seven (7) days a week, twenty-
four (24) hours a day, except during periods of scheduled
maintenance;
(B) to maintain competitive standards of quality and
ease of use of its directory services with similar services
offered by the top two third-party leading Internet-based
directory services;
(C) there shall be a maximum five (5) second response
time for 90% of all directory searches of the Switchboard Site or
any Co-Branded Interface as measured by Switchboard's servers.
The response time measures the time a user request is received by
the Switchboard server to the time the response to such request
leaves the Switchboard server;
(D) the Switchboard Site and Co-Branded Interfaces as
displayed to users shall have at least 97% uptime over a twelve
(12) month period, excluding events of an extraordinary nature
which are beyond the control of Switchboard; and
(E) Switchboard shall provide CBS with a contact for
support of issues related to the Switchboard Site. Such contact
shall be available to CBS seven (7) days a week, twenty-four (24)
hours a day for emergency support.
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(iv) the Switchboard Site and each Co-Branded Interface
shall be free of defects which would interrupt or interfere with the
intended purpose thereof, including without limitation, (A) any
malfunctions or other usage problems resulting from or in connection
with the "Year 2000 Problem" (i.e., the year 2000 (and later years) as
distinct from the years 1900 through 1999 (and earlier years)), and
(B) "bugs" or "viruses." For the purposes of this paragraph, defects
will be deemed to "interrupt or interfere with the intended purpose"
of the Switchboard Site or Co-Branded Interface if they result in the
failure to respond to user queries in a manner consistent with the
normal operation of the Switchboard Site or Co-Branded Interface.
8. INDEMNIFICATION
8.1 Switchboard and, subject to Section 8.4, Banyan, shall, jointly and
severally, indemnify CBS and its respective affiliates and their respective
officers, directors, employees, stockholders, agents and representatives
against, and hold them harmless from, any loss, liability, claim, damage or
expense, including reasonable legal fees and expenses ("Losses") arising from,
in connection with or otherwise with respect to any breach of any representation
or warranty of Banyan or Switchboard or covenant of Switchboard contained in
this Agreement.
8.2 CBS shall indemnify Switchboard and its respective affiliates and
their respective officers, directors, employees, stockholders, agents and
representatives against, and hold them harmless from, any Losses arising from,
in connection with or otherwise with respect to any breach of any
representation, warranty or covenant of CBS contained in this Agreement.
8.3 The amount of any Loss for which indemnification is provided under
this Section 8 shall be calculated net of any amounts actually recovered by the
indemnified party under insurance policies with respect to such Loss and shall
be (i) increased to take account of net tax cost incurred by the indemnified
party arising from the receipt of indemnify payments hereunder (grossed up for
such increase) and (ii) reduced to take account of any net tax benefit realized
by the indemnified party arising from the incurrence or payment of any such
Loss. In computing the amount of any such tax cost or tax benefit, the
indemnified party shall be deemed to recognize all other items of income, gain,
loss deduction or credit before recognizing any item arising from the receipt of
any indemnity payment hereunder or the incurrence or payment of any indemnified
Loss.
8.4 Notwithstanding anything to the contrary in this Agreement, Banyan's
indemnification obligations hereunder with respect to the covenants of
Switchboard and the representation and warranty in Section 7.1(b)(iii) shall
terminate upon the earlier to occur of:
(a) the first business day after the second anniversary of the date of
this Agreement when Banyan beneficially owns or controls, directly or
indirectly, shares of Common Stock representing less than a majority of the
total voting power; and
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(Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.)
(b) the first business day after any person or entity beneficially
owns or controls, directly or indirectly, shares of the Common Stock
representing more voting power (based on then-outstanding shares) than those
beneficially owned or controlled, directly or indirectly, by Banyan
provided, however, that Banyan's indemnification obligations shall not terminate
pursuant to this Section with respect to an item as to which CBS has, before the
occurrence of either of the events set forth above, previously made a claim by
delivering a notice of such claim (stating in reasonable detail the basis for
such claim) pursuant to Section 8.5 to Banyan. For purposes of performing the
calculation of beneficial ownership and control referred to in the preceding
sentence, neither Banyan nor CBS shall be deemed to beneficially own or control
shares solely as a result of the existence of the Voting Agreement.
8.5 In order for the indemnified party to be entitled to any
indemnification provided for under this Agreement in respect of, arising out of
or involving a claim made by any person against the indemnified party, the
indemnified party shall: (i) promptly notify the indemnifying party of the
claim; (ii) allow the indemnifying party to direct the defense and settlement of
such claim with counsel of the indemnifying party's choosing; and (iii) provide
the indemnifying party, at the indemnifying party's expense, with information
and assistance that is reasonably necessary for the defense and settlement of
the claim. The indemnified party reserves the right to retain counsel, at the
indemnified party's sole expense, to participate in the defense of any such
claim. The indemnifying party shall not settle any such claim or alleged claim
without first obtaining the indemnified party's prior written consent, which
consent shall not be unreasonably withheld, if the terms of such settlement
would adversely affect the indemnified party's rights under this Agreement or
otherwise. If the indemnifying party assumes the defense and settlement of the
claim as set forth above, then the indemnifying party's only obligation is to
satisfy the claim, judgment or approved settlement.
8.6 (a) IN NO EVENT SHALL SWITCHBOARD OR BANYAN, ON THE ONE HAND, AND
CBS, ON THE OTHER HAND, BE LIABLE TO ONE ANOTHER, OR TO ANY PERSON CLAIMING
THROUGH SWITCHBOARD OR BANYAN, ON THE ONE HAND, OR CBS, ON THE OTHER HAND, FOR
ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL, OR INDIRECT DAMAGES, OR FOR ANY LOSS OF
PROFITS OR SALES OR LOSS OF OR DAMAGE TO DATA, REGARDLESS OF THE FORM OF SUCH
ACTION, WHETHER IN CONTRACT, TORT, OR OTHERWISE, EVEN IF ANY OF SWITCHBOARD OR
BANYAN, OR CBS, AS THE CASE MAY BE, HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES OR LOSS.
(b) EXCEPT FOR (1) SWITCHBOARD'S AND CBS'S OBLIGATIONS TO MAKE ANY
PAYMENT EXPRESSLY REQUIRED BY THE TERMS OF THIS AGREEMENT; OR (II) CBS'S
OBLIGATION TO PROVIDE [**] PROMOTIONAL VALUE IN ACCORDANCE WITH THIS AGREEMENT,
THE MAXIMUM LIABILITY OF CBS, ON THE ONE HAND, AND OF SWITCHBOARD AND BANYAN, IN
THE AGGREGATE, ON THE OTHER HAND, UNDER THIS AGREEMENT AND THE COMMON STOCK AND
WARRANT PURCHSE AGREEMENT SHALL BE LIMITED TO THE AMOUNT SPECIFIED IN THE
FOLLOWING TABLE, SUBJECT TO THE PROVISOS SET FORTH BELOW IN THIS SECTION 8.6(b):
PRIOR TO THE FIRST ANNIVERSARY OF
THE DATE OF THIS AGREEMENT [**]
ON OR AFTER THE FIRST ANNIVERSARY
OF THE DATE OF THIS AGREEMENT AND
PRIOR TO THE SECOND ANNIVERSARY OF
THE DATE OF THIS AGREEMENT [**]
ON OR AFTER THE SECOND ANNIVERSARY
OF THE DATE OF THIS AGREEMENT AND
PRIOR TO THE THIRD ANNIVERSARY OF
THE DATE OF THIS AGREEMENT [**]
ON OR AFTER THE THIRD ANNIVERSARY
OF THE DATE OF THIS AGREEMENT AND
PRIOR TO THE FOURTH ANNIVERSARY OF
THE DATE OF THIS AGREEMENT [**]
ON OR AFTER THE FOURTH ANNIVERSARY
OF THE DATE OF THIS AGREEMENT AND
PRIOR TO THE FIFTH ANNIVERSARY OF
THE DATE OF THIS AGREEMENT [**]
ON OR AFTER THE FIFTH ANNIVERSARY
OF THE DATE OF THIS AGREEMENT AND
PRIOR TO THE SIXTH ANNIVERSARY OF
THE DATE OF THIS AGREEMENT [**]
ON OR AFTER THE SIXTH ANNIVERSARY
OF THE DATE OF THIS AGREEMENT [**]
PROVIDED, HOWEVER, THAT IF PARTIES ENTITLED TO INDEMNIFICATION UNDER SECTION 8.1
OF THIS AGREEMENT SUFFER LOSSES AS A RESULT OF A BREACH OF ANY REPRESENTATION OR
WARRANRY OF SWITCHBOARD OR BANYAN CONTAINED HEREIN IN AN AMOUNT WHICH EXCEEDS
THE APPLICABLE LIMIATION ON LIABILITY SET FORTH IN THE PRECEDING TABLE, THEN
SUCH IDEMNIFIED PARTIES SHALL [**]; PROVIDED, FURTHER, HOWEVER, THAT THE
AGGREGATE LIABILITY OF SWITCHBOARD AND BANYAN FOR THE SUM OF ALL LOSSES UNDER
THIS SECTION 8 AND UNDER THE COMMON STOCK AND WARRANT PURCHASE AGREEMENT IN A
CIRCUMSTANCE WHRE THE IMMEDIATELY FOREGOING PROVISO CLAUSE APPLIES SHALL IN NO
CIRCUMSTANCE EXCEED THE SUM OF [**] RECEIVED BY THE SWITCHBOARD.
9. REMEDIES
9.1 CBS shall have the right to terminate this Agreement if (any of the
following occurs):
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(a) Either Switchboard or Banyan breaches any material term or
condition of:
(i) this Agreement and has failed to cure such breach within
thirty (30) days after written notice of such breach from CBS (the
foregoing cure period will not apply where a specific cure period is
provided herein); and/or
(ii) the Common Stock and Warrant Purchase Agreement, dated June
1, 1999, by and among Switchboard, Banyan and CBS (the "Common Stock and
Warrant Purchase Agreement") or any other Ancillary Agreement (as such term
is defined in the Common Stock and Warrant Purchase Agreement) and has
failed to cure such breach within thirty (30) days after written notice of
such breach from CBS (the foregoing cure period will not apply where a
specific cure period is provided herein);
provided, however, that CBS's right to terminate this Agreement pursuant to this
Section shall not apply to a breach by Switchboard or Banyan of the
representation and warranty set forth in Section 7(b)(iii) of this Agreement and
the representation and warranty set forth in Section 3.12(f) of the Common Stock
and Warrant Purchase Agreement.
(b) Switchboard: (i) becomes insolvent or unable to pay its debts as
they mature or makes an assignment for the benefit of its creditors; (ii) is the
subject of a voluntary petition in bankruptcy or any voluntary 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; (iii) becomes the subject of any 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; or
(iv) is liquidated or dissolved.
(c) Switchboard issues to a CBS Competitor or actively participates
in the acquisition by a CBS Competitor, in any one transaction or series of
transactions, of a number of voting securities of Switchboard such that after
such issuance or acquisition or series of issuances or acquisitions, such CBS
Competitor beneficially owns or controls, directly or indirectly, nine percent
(9%) or more of the outstanding shares of Common Stock or nine percent (9%) or
more of the total voting power of Switchboard.
(i) Notwithstanding the foregoing however, the provisions of this
Section 9.1(c) shall not apply to a stockholder of Switchboard who
beneficially owns or controls, directly or indirectly, nine percent (9%) or
more of the outstanding shares of Common Stock or nine percent (9%) or more
of the total voting power of Switchboard, on an "as converted" basis, on
the day prior to the date of this Agreement until such stockholder
beneficially owns or controls, directly or indirectly, fifteen percent
(15%) or more of the outstanding shares of Common Stock or fifteen percent
(15%) or more of the total voting power of Switchboard and such stockholder
is a CBS Competitor.
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(ii) The parties hereby agree that Switchboard or Banyan may give
CBS confidential written notice of its intent to enter into an agreement
which would cause a stockholder to beneficially own or control, directly or
indirectly, nine percent (9%) or more of the outstanding shares of Common
Stock or nine percent (9%) or more of the total voting power of
Switchboard, together with a description of the party with whom Switchboard
or Banyan intends to effect such a transaction, for the purpose of
ascertaining CBS's opinion whether, as of the date of the notice, such
party is a CBS Competitor. CBS shall have five (5) days from the receipt
of such notice to respond to Switchboard or Banyan. CBS's opinion shall be
based solely on the information provided to CBS in the notice and CBS shall
have no independent duty whatsoever to investigate or inquire further. No
opinion provided by CBS hereunder is or shall be deemed to be a waiver of
any right of CBS pursuant to this Section 9.
(d) Any CBS Competitor (other than a CBS Competitor who acquired
shares of Switchboard capital stock directly from CBS) beneficially owns or
controls, directly or indirectly, fifteen percent (15%) or more of the then-
outstanding shares of common stock of Switchboard or fifteen (15%) or more of
the total voting power of Switchboard.
(e) Switchboard discontinues using the "Switchboard" mark or another
mutually agreed upon trademark in the United States (for any reason other than a
Cessation Event, or for no reason) and, within a reasonable time thereafter,
Switchboard does not establish a substitute mark acceptable to CBS in its sole
discretion, provided that if the substitute mark proposed by Switchboard is not
acceptable to CBS, CBS shall have submitted for Switchboard's approval a list of
three (3) proposed alternate trademarks which appear to be available for
Switchboard's use on the Switchboard Site in the United States based on
trademark searches conducted by CBS, and Switchboard has failed to approve any
such proposed trademarks within ten (10) days of such submission. For the
avoidance of doubt, CBS does not and will not make any representation or
warranty with respect to the availability of any alternate name provided to
Switchboard by CBS for use on the Switchboard Site.
(f) The termination (other than by reason of a breach by CBS) or
expiration of the License Agreement.
(g) The Switchboard Site ceases to operate for (i) a consecutive
period of ten (10) days, or (ii) more than two (2) consecutive hours per week
over a sixty (60) day period; provided that such operational failure is not
attributable to failures beyond Switchboard's reasonable control which also
affect multiple third-party web sites on the Internet in a similar manner.
(h) For purposes of this Section 9.1: (i) the term "beneficial
ownership" shall have the meaning set forth in Section 13(d) of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder;
(ii) the term "total voting power" shall mean at any time, the total number of
votes that may be cast in the election of directors of Switchboard at any
meeting of the holders of voting securities at such time for such purpose; and
(iii) the
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(Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.)
term "voting securities" shall mean the Common Stock and any other securities
issued by Switchboard having the power to vote in the election of directors of
Switchboard, including without limitation any securities having such power only
upon the occurrence of a default or any other extraordinary contingency.
9.2 Switchboard shall have the right to terminate this Agreement if CBS
breaches any material term or condition of this Agreement or the License
Agreement, and has failed to cure such breach within thirty (30) days after
receipt of written notice from Switchboard of such breach.
9.3 Notwithstanding anything to the contrary set forth in this Agreement,
[**] in the event of a proposed termination of this Agreement pursuant to
Section 9.1(a) or Section 9.2, the terminating party shall not be entitled to
terminate this Agreement pursuant to Section 9.1(a) or Section 9.2 in the event
that the non-terminating party elects to commence an Arbitration Proceeding (as
defined below) unless (1) the sole arbitrator in such Arbitration Proceeding has
determined that (x) the non-terminating party is in breach of a term or
condition of this Agreement, (y) such breach has not been cured withing thirty
(30) days after written notice of such breach from the terminating party and (z)
the breached term or condition is a material term or condition (it being agreed
that a term or condition will not be found to be material unless the terminating
party has suffered, or would reasonably be expected to suffer more than an
insignificant amount of harm (except with respect to the use of the CBS Marks
(as defined in the License Agreement) in a manner which is not permitted under
the License Agreement which the parties agree shall always be material without
taking into consideration and degree of harm) as a result of breach of such term
or condition and (2) the non-terminating party fails to cure such breach within
five (5) business days after receipt of the arbitrator's finding referred to in
clause (1). "Arbitration Proceeding" shall mean a proceeding conducted in
accordance with the following rules:
(i) such proceeding is commenced by the non-terminating party,
within twenty (20) days of receipt by it of a written notice of breach from the
terminating party, by the non-terminating party giving written notice to the
other parties and requesting that the New York office of the American
Arbitration Association designate oen arbitrator (who is a retired federal or
state judge or a member of the CPC Panel of Distinguished Neutrals of the CPR
Institute for Dispute Resolution and who is not and has not been an afifliate,
employee, consultant, officer, director or stockholder of CBS, Banyan or
Switchboard) to conduct the proceeding;
(ii) within seven (7) days after the designation of the arbitrator,
the arbitrator and the parties shall meet, at which time each party shall be
required to set forth in writing al disputed issues, together with its proposed
resolution of the matter, all in reasonable and detail and containing such
supporting materials it may choose to submit;
(iii) the arbitrator shall set a date for a hearing, which shall be no
later than ten (10) days after the submission of written proposals pursuant to
clause (ii) above, to discuss each of the issues identified by the parties. Each
party shall have the right to be represented by counsel. The arbitration shall
be governed by the Commercial Arbitration Rules of the American Arbitration
Association, provided however, that the Federal Rules of Evidence shall apply
with regard to the admissibility of evidence;
(iv) arbitrator shall rule on each of the three (3) matters on which
a finding is to be made with respect to each claim made by the terminating
party within seven (7) days after the completion of the hearing described in
clause (iii) above. The arbitrator will resolve the dispute by choosing one of
the proposed resolutions for each matter, without modification. All rulings of
the arbitrator shall in writing, shall be delivered to the parties and shall be
final and conclusive as to any such matter;
(v) costs and expenses of the arbitration shall be borne by the
party against whom the arbitrator has ruled; and
(vi) the arbitration shall be conducted in New York City.
9.4 In the event of a Cessation Event as described in Section 2.3(a) and
Switchboard fails to approve one of CBS's proposed substitute tradenames within
ten (10) days following the submission to Switchboard of such substitute
tradenames, then the parties hereto will be deemed to have mutually agreed to
terminate this Agreement on the forty-first (41st) day following the date of the
Cessation Event and all rights and obligations of the parties hereunder shall
terminate.
9.5 Each party may exercise its right to terminate pursuant to this
Section 9 by sending each of the other parties hereto appropriate notice. No
exercise by CBS of its rights under this Section 9 will limit CBS's remedies by
reason of Switchboard's or Banyan's default, CBS's rights to exercise any other
rights under this Section 9, or any of CBS's other rights. No exercise by
Switchboard of its rights under this Section 9 will limit Switchboard's remedies
by reason of CBS's default, Switchboard's rights to exercise any other rights
under this Section 9, or any of Switchboard's or Banyan's other rights.
9.6 In the event of a termination of this Agreement:
(a) pursuant to Section 9.1, all rights and obligations of the parties
hereto shall terminate except those set forth in Section 8 (Indemnification),
Section 10 (Mandatory Transfer), Section 12 (Confidentiality), Section 13.1
(Permitted Assignments), Section 13.2 (Jurisdiction), Section 13.5 (Notice) and
Section 13.6 (Governing Law); or
(b) pursuant to Section 9.2, Switchboard's and Banyan's obligations
and CBS's rights and obligations (other than its obligation to provide
advertising and promotion in accordance with Section 2 and other provisions
related to the implementation thereof) shall terminate and, unless CBS makes the
election set forth in Section 9.6(b)(i), CBS's obligation to provide advertising
and promotion in accordance with Section 2 and such other related provisions
shall continue. Notwithstanding the foregoing, the rights and obligations of
the parties with respect to the following Sections shall not terminate: Section
8 (Indemnification), Section 10 (Mandatory Transfer), Section 12
(Confidentiality), Section 13.1 (Permitted Assignments), Section 13.2
(Jurisdiction), Section 13.5 (Notice) and Section 13.6 (Governing Law);
provided, however, that the rights and obligations set forth in Section 10
(Mandatory
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(Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.)
Transfer) will terminate when (i) CBS's obligation to provide advertising and
promotion in accordance with Section 2 and such other related provisions has
terminated or expired and (ii) all of the parties' rights and obligations under
the License Agreement (other than those which survive the expiration or
termination of the License Agreement) have terminated or expired.
(i) [**] Switchboard [**] shall pay Switchboard [**] the
difference, if any, between (x) [**] and (y) [**] as follows:
(A) within thirty (30) days after the end of each Contract
Year, [**] (X) [**] this Agreement [**] pursuant to this Agreement for such
Contract Year; and (Y) [**] during such Contract Year; if any; or
(B) [**], at any time [**] Switchboard [**], calculated
based on [**] during the prior twelve month period.
(C) All payments made pursuant to this Section 9.6(b)(i)
shall be made in immediately available, non-refundable funds [**].
10. MANDATORY TRANSFER
10.1 CBS shall have the right (but not the obligation) in its sole
discretion to purchase Banyan's shares of Common Stock or require that such
shares of Common Stock be transferred to an independent trustee, as provided in
Section 10.2, within sixty (60) days after a CBS 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 total voting power, of Banyan (or any parent entity
controlling Banyan), or all or substantially all of Banyan's assets (a "Banyan
Change of Control"), at a time when Banyan and its subsidiaries and parent
entities shall then own in the aggregate a number of shares of Common Stock
equal to at least ten percent (10%) of the outstanding shares of the Common
Stock, without the prior written consent of CBS (a "Triggering Event"). The
parties hereby agree that Banyan may give CBS confidential written notice of its
intent to enter into an agreement which would cause a Banyan Change of Control,
together with a description of the party with whom Banyan intends to effect such
a transaction. CBS shall have twenty (20) days from receipt of such notice to
respond to Banyan in writing as to whether it would elect to trigger the
provisions of this Section 10 with respect to such potential Banyan Change of
Control. If, and only if, CBS notifies Banyan in writing that it would not make
such election, CBS shall be deemed to have waived its right to trigger such
mandatory transfer provisions with respect to such potential Banyan Change of
Control.
10.2 Upon the occurrence of a Banyan Change of Control, CBS may elect one
of the following within forty-five (45) days after written notice from Banyan
that a Banyan Change of Control has occurred:
(a) (i) CBS may offer to purchase the shares of Common Stock then
held by Banyan and its subsidiaries and parent entities, and Banyan and its
subsidiaries and parent entities shall be required to sell to CBS, such
sale to occur no later than ten (10) days after Banyan's receipt of CBS's
written offer to purchase such shares of Common Stock, at a purchase price
for the shares of Common Stock held by Banyan and its subsidiaries and
parent entities equal to the Fair Market Value of the Common Stock on the
date of the Triggering Event.
(ii) Notwithstanding the foregoing provisions of Section
10.2(a)(i), if (y) any legal or regulatory requirements, including, without
limitation, those imposed by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, must be
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first satisfied prior to making such sale or (z) the Fair Market Value must
be determined according to the terms of subsection (b) of the definition of
Fair Market Value, then such sale shall be made within two (2) days of the
satisfaction of such legal requirements or of the determination of the Fair
Market Value of the Common Stock, as applicable.
(iii) Upon the date that payment is made for the shares of
Common Stock held by Banyan and its subsidiaries and parent entities,
Banyan and its subsidiaries and parent entities will have no further rights
as a holder of such shares of Common Stock and Banyan and its subsidiaries
and parent entities will forthwith cause all certificate(s) evidencing such
shares of Common Stock to be surrendered to Switchboard or its transfer
agent for cancellation and new certificates evidencing such shares of
Common Stock will be promptly delivered to CBS.
(b) CBS may require Banyan to transfer all shares of Common Stock then
held by Banyan and its subsidiaries and parent entities to an independent
trustee reasonably satisfactory to CBS, which trustee shall then dispose of such
shares of Common Stock formerly held by Banyan and its subsidiaries and parent
entities to purchaser(s) that is/are not CBS Competitor(s), subject to the
foregoing, in such a manner as such trustee shall determine with a view to
maximizing the sale price of the shares of Common Stock formerly held by Banyan
and its subsidiaries and parent entities, while disposing of such shares within
one year. Upon such transfer, such trustee shall have sole voting and
dispositive control over such shares of Common Stock. Banyan shall no longer be
entitled to nominate any directors to the Board of Directors of Switchboard and
Banyan shall cause all current directors nominated by Banyan who are directors
or officers or other employees of Banyan to resign from their positions as
members of Switchboard's Board of Directors and shall use its best efforts to
cause all current directors nominated by Banyan who are not directors or
officers or other employees of Banyan to resign from their positions as members
of Switchboard's Board of Directors. Unless otherwise agreed in writing by CBS,
any trustee appointed pursuant to this Section 10.2(b) shall be a bank or trust
company incorporated or otherwise organized under the laws of the United States
or a state thereof and having a combined capital and surplus of at least
$100,000,000. Any such trustee shall perform its duties upon customary terms
pursuant to documentation reasonably satisfactory to CBS, it being understood
and agreed that, without the prior written consent of CBS, no such trustee shall
vote any shares of Common Stock held by it at any meeting of the stockholders of
Switchboard or otherwise.
10.3 "Fair Market Value" of the shares of Common Stock shall mean (i), for
any shares that are listed on a national securities exchange or authorized for
trading on the Nasdaq Stock Market or other automated quotation system, the
average of the closing prices for the five-day period ending on the date of the
Triggering Event, and (ii), for any other shares of Common Stock, such price as
is determined by a panel of appraisers (each of which is, or is an employee of,
an investment banking firm or appraisal firm of national reputation which has at
least three (3) years of experience in valuing technology or Internet
companies), one (1) chosen by CBS, one (1) chosen by Banyan and the third to be
chosen by the first two (2) appraisers. If
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the appraisers cannot reach agreement within thirty (30) days of the date of the
Triggering Event, then each appraiser shall deliver its appraisal within forty
(40) days of the Triggering Event and the appraisal which is neither the highest
nor the lowest shall constitute the Fair Market Value. In the event either CBS
or Banyan fails to choose an appraiser within thirty (30) days of the date of
the Triggering Event, then the appraisal of the sole appraiser shall constitute
the Fair Market Value. Each party shall bear the cost of the appraiser selected
by it and the cost of the third appraiser shall be borne one-half by each of CBS
and Banyan. In the event either CBS or Banyan fails to choose an appraiser, the
cost of the sole appraiser shall be borne one-half by each CBS and Banyan.
11. INTELLECTUAL PROPERTY
11.1 CBS agrees and acknowledges that Switchboard, its licensors or
advertisers own all right, title and interest in and to all patents, copyrights,
trademarks, trade secrets and other intellectual property rights in the
Switchboard Site, or any content or data displayed therein (other than content
or data provided by CBS hereunder), and any software provided to CBS in
connection with this Agreement. Switchboard agrees and acknowledges that CBS,
its licensors or advertisers own all right, title and interest in and to all
patents, copyrights, trademarks, trade secrets and other intellectual property
rights in the CBS Sites, or any content or data displayed therein (other than
content or data provided by Switchboard hereunder). Neither CBS nor Switchboard
shall take any action inconsistent with the ownership of either party or its
licensors nor attempt to register any such intellectual property in any
jurisdiction.
12. CONFIDENTIALITY
12.1 Switchboard and CBS agree and acknowledge that they may be required
to disclose to each other certain confidential information, including but not
limited to information concerning the other party's online services and web
sites, technology, software, tools, business, or plans for the future in
connection with any of the foregoing, information concerning customers,
suppliers, personnel and other business relationships, sales and marketing
plans, financial information and other confidential information, all of which
shall be deemed "Confidential Information" for the purposes of this Section if,
with respect to such information disclosed in tangible form, it is marked
"Confidential" or its equivalent, and if disclosed orally or visually, it is
identified as confidential at the time of disclosure.
12.2 For a period of three (3) years from the date of receipt of any
Confidential Information hereunder, or in perpetuity with respect to source code
or related documentation, the receiving party agrees to protect the
confidentiality of the disclosing party's Confidential Information with at least
the same degree of care that it utilizes with respect to its own similar
proprietary information, but in no event less than a reasonable standard of
care, including without limitation agreeing:
(a) Not to disclose or otherwise permit any other person or entity
access to, in any manner, the Confidential Information, or any part thereof in
any form whatsoever,
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except that such disclosure or access shall be permitted to (i) an employee or
consultant of the receiving party requiring access to the Confidential
Information in the course of his or her employment or consulting services in
connection with this Agreement and who has agreed in writing to maintain the
confidentiality of the confidential information of third parties in the
receiving party's possession; or (ii) a director, legal advisor, or financial
advisor of the recipient party hereunder, provided that such parties are bound
to maintain the confidentiality of such information and provided further that
they are permitted to use such Confidential Information only for the purposes of
carrying out their fiduciary or other advisory responsibilities on behalf of the
party hereto from which it received such Confidential Information; and
(b) Not to use the Confidential Information for any purpose other than
to carry out the purposes of this Agreement.
12.3 Nothing in this Section 12 shall restrict the receiving party with
respect to information or date, whether or not identical or similar to that
contained in the Confidential Information, if such information or data: (i) was
rightfully possessed by the receiving party before it was received from the
disclosing party; (ii) is independently developed by the receiving party without
reference to the disclosing party's information or data; (iii) is subsequently
furnished to the receiving party by a third party not under any obligation of
confidentiality with respect to such information nor data, and without
restrictions on use or disclosure; or (iv) is or becomes public or available to
the general public otherwise than through any act or default of the receiving
party.
13. GENERAL
13.1 No party may assign this Agreement, or their respective rights and
obligations hereunder, in whole or in part, without each other party's prior
written consent. Any attempt to assign this Agreement without such consent
shall be void and of no effect. Notwithstanding the foregoing, a party hereto
may assign this Agreement or any of its rights and obligations hereunder to any
entity controlling, controlled by or under common control with such party, or to
any entity that acquires such party by purchase of stock or by merger or
otherwise, or by obtaining substantially all of such party's assets (a
"Permitted Assignee"), provided that any such Permitted Assignee, or any
division thereof, (i) is not a CBS Competitor and (ii) thereafter succeeds to
all of the rights and is subject to all of the obligations of the assigning
party under this Agreement.
13.2 Each party hereto irrevocably submits to the exclusive jurisdiction
of (a) the Supreme Court of the State of New York, New York County; and (b) the
United States District Court for the Southern District of New York, for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby or thereby. Each party hereto shall
commence any such action, suit or proceeding either in the United States
District Court for the Southern District of New York or if such suit, action or
other proceeding may not be brought in such court for jurisdictional reasons, in
the Supreme Court of the State of New York, New York County. Service of any
process, summons, notice or
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document by U.S. registered mail to a party's address set forth below shall be
effective service of process for any action, suit or proceeding in New York with
respect to any matters to which it has submitted to jurisdiction in this Section
13.2. Each party hereto irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in (i) the Supreme Court of
the State of New York, New York County; or (ii) the United States District Court
for the Southern District of New York, and hereby and thereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in any inconvenient forum.
13.3 Each party shall comply in all material respects with all laws and
regulations applicable to its activities under this Agreement.
13.4 If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any Person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other Persons or circumstances.
13.5 All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or sent, postage
prepaid, by registered, certified or express mail or reputable overnight courier
service and shall be deemed given when so delivered by hand, or if mailed, three
days after mailing (one business day in the case of express mail or overnight
courier service), as follows:
(a) if to Switchboard,
Switchboard Incorporated
115 Flanders Road
Westboro, Massachusetts 01581
Fax: (508) 870-2000
Attention: President
with a copy to:
Switchboard Incorporated
115 Flanders Road
Westboro, Massachusetts 01581
Fax: (508) 870-2000
Attention: General Counsel
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(b) if to Banyan,
Banyan Systems Incorporated
120 Flanders Road
Westboro, Massachusetts 01581
Fax: (508) 836-3277
Attention: Chief Financial Officer
with a copy to:
Hale & Dorr LLP
60 State Street
Boston, Massachusetts 02109
Fax: (617) 526-5000
Attention: Mark G. Borden, Esq.
(c) if to CBS Corporation,
CBS Corporation
51 West 52nd Street
New York, New York 10019
Fax: (212) 975-9191
Attention: Chief Financial Officer
with a copy to:
CBS Corporation
51 West 52nd Street
New York, New York 10019
Fax: (212) 597-4031
Attention: General Counsel
13.6 The parties to this Agreement are independent contractors. There is
no relationship of partnership, joint venture, employment, franchise, or agency
between the parties. No party shall have the power to bind any other party or
incur obligations on any other party's behalf without such other party's prior
written consent.
13.7 The waiver by any party of a breach or default of any provision of
this Agreement by any other party shall not be construed as a waiver of any
succeeding breach of the same or any other provision, nor shall any delay or
omission on the part of any party to exercise or avail itself of any right,
power or privilege that it has, or may have hereunder, operate as a waiver of
any right, power or privilege by such party.
13.8 This Agreement, including any agreement incorporated herein by
reference, and any Exhibits hereto or thereto, contains 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. No party shall be liable or bound to any other
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party in any manner by any representations, warranties or covenants relating to
such subject matter except as specifically set forth herein.
13.9 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 entirely within such State, without regard to the conflicts of law
principles of such State.
13.10 This Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any Person, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.
13.11 This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each party and delivered
to each other party.
13.12 This Agreement may not be amended except by an instrument in writing
signed on behalf of each party hereto. By an instrument in writing CBS or
Switchboard, as the case may be, may waive compliance by the other party with
any term or provision of this Agreement that CBS or Switchboard, as the case may
be, was or is obligated to comply with or perform.
13.13 The headings contained in this Agreement hereto are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All Exhibits annexed hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein. Any capitalized terms used in any Exhibit but not otherwise defined
therein, shall have the meaning as defined in this Agreement. When a reference
is made in this Agreement to a Section or Exhibit, such reference shall be to a
Section of, or an Exhibit to, this Agreement unless otherwise indicated.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.
CBS CORPORATION
By: /s/ Frederic G. Reynolds
-----------------------------
Name: Fredric G. Reynolds
Title: Executive Vice
President and Chief
Financial Officer
SWITCHBOARD INCORPORATED
By: /s/ Dean Polnerow
-----------------------------
Name: Dean Polnerow
Title: President
The undersigned has executed this Agreement solely for the purpose of
becoming bound by the provisions set forth in Section 8, Indemnification, and
Section 10, Mandatory Transfer.
BANYAN SYSTEMS INCORPORATED
By: /s/ William P. Ferry
-----------------------------
Name: William P. Ferry
Title: Chairman of the Board
President and Chief
Executive Officer
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(Confidential Materials omitted and filed separately with the Securities
and Exchange Commission. Asterisks denote omissions.)
EXHIBIT A
Attached to and forming a part of the Agreement made as of June 30, 1999
by and among CBS Corporation, Banyan Systems Incorporated and
Switchboard Incorporated
_______________________________________________________________________
Placement Obligations:
CBS will be responsible for the placement of all advertising and promotion
of the Switchboard Site operated by Switchboard, as follows:
<TABLE>
<CAPTION>
<S> <C>
Contract Year Advertising Value
------------- -----------------
First $[**] million
Second $[**] million
Third $[**] million
Fourth $[**] million
Fifth $[**] million
Sixth $[**] million
Seventh $[**] million
</TABLE>
Placement Possibilities:
1. CBS Television Network programming
2. CBS Owned and Operated (a) Television and (b) Radio Stations programming
3. CBS outdoor billboards
4. CBS Internet Sites
5. CBS Cable
Available Placement types:
- -- 30 second units, where available
- -- 15 second units, where available
- -- 10 second units, where available
- -- URL Scrolls (5 seconds)
- -- On-air mention (15 or 30 seconds)
- -- Banner ads, buttons and sponsorships (measured on a daily, weekly or monthly
basis or as is otherwise appropriate)
- -- Credit rolls/sign-offs (5 seconds)
<PAGE>
CBS Associated Sites
--------------------
CBS.MarketWatch.com
CBS.SportsLine.com
CBS.StoreRunner.com
Office.com
ThirdAgeMedia.com
Webvan.com
<PAGE>
EXHIBIT C
CBS Sites
---------
CBS.com
Web sites of the CBS wholly-or majority-owned radio stations
Web sites of the CBS wholly-or majority-owned television stations
<PAGE>
EXHIBIT D
Display Ad
----------
(Shown below in right frame.)
[Switchboard Graphic]
<PAGE>
EXHIBIT E
ADVERTISING CONTENT POLICY
1. Switchboard reserves the right to reject any order for an advertisement,
or any advertisement, or to remove any advertisement which, contains
or links to content which Switchboard reasonably deems:
(a) Is grossly offensive, including with limitation, bigotry,
racism, discrimination, hatred or profanity; is pornographic,
obscene, or sexually explicit; is disparaging, defamatory or
libelous, results in an invasion of privacy; promotes online
or offshore gambling, promotes or provides instructional
information about illegal activities or physical harm or injury
to any group, individual, institution or property; or infringes
on a proprietary interest of any third party, including without
limitation, any copyright, trademark, domain registration right,
trade secret or patent right; or may violate any federal, state,
county, and municipal laws, regulations, governmental agency
orders, and court orders;
(b) States or implies that the advertisement was placed by Switchboard
or any third party web site, or owner thereof, which links to the
Switchboard web site, or that such parties endorse the advertiser's
products or services.
<PAGE>
EXHIBIT 10.4
Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
LICENSE AGREEMENT
-----------------
AGREEMENT made as of June 30, 1999, by and between CBS Corporation, 51
West 52nd Street, New York, New York 10019 (herein called "CBS"), and
Switchboard Incorporated, 115 Flanders Road, Westboro, Massachusetts 01581
(herein called "Switchboard").
1. DEFINITIONS
1.1 "CBS Competitor" means any Person, other than CBS or an Affiliate of
CBS, who/which is engaged either directly, or indirectly through an Affiliate,
in radio or television programming or radio or television program distribution
(whether free over-the-air, cable, telephone, local, microwave, direct broadcast
satellite, via internet or otherwise) or billboard advertising in North America.
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. A CBS Competitor shall [**] in television or radio program
transmission or streaming through an Internet website, provided such Person or
any Affiliate of such Person [**] of the Internet television or radio business
or television or radio business.
1.2 "CBS License Guidelines and Restrictions" or "CBS License Guidelines"
means the clearance, form, format and use restrictions and procedures set forth
in Exhibit "A" attached hereto which Switchboard shall adhere to in its use of
CBS Marks and Switchboard Site Content on the Switchboard Site and on any other
Switchboard Internet Site linked from the Switchboard Site.
1.3 "CBS Marks" means the following CBS registered trademarks, as shown in
Exhibit "B" attached hereto: CBS(R) and the CBS "Eye" design.
1.4 "Content" means text, graphics, photographs, video, audio and/or other
data or information relating to any subject and/or advertisements.
1.5 Intentionally deleted.
1.6 "Intellectual Property Rights" means all inventions, discoveries,
trademarks, patents, trade names, copyrights, jingles, know-how, intellectual
property, software, shop rights, licenses, developments, research data, designs,
technology, trade secrets, test procedures, processes, route lists, computer
programs, computer discs, computer tapes, literature, reports and other
confidential information, intellectual and similar intangible property rights,
whether or not patentable or copyrightable (or otherwise subject to legally
enforceable restrictions or protections against unauthorized third party usage),
and any and all applications for, registrations of and extensions, divisions,
renewals and reissuance of, any of the foregoing, and rights therein, including
without
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limitation (a) rights under any royalty or licensing agreements, and (b)
programming and programming rights, whether on film, tape or any other medium.
1.7 "Internet" means a global network of interconnected computer networks,
each using the Transmission Control Protocol/Internet Protocol and/or such other
standard network interconnection protocols as may be adopted from time to time,
which is used to transmit Content that is directly or indirectly delivered to a
computer or other digital electronic device for display to an end-user, whether
such Content is delivered through on-line browsers, off-line browsers, or
through "push" technology, electronic mail, broadband distribution, satellite,
wireless or otherwise.
1.8 "Internet Site" means any site or service delivering Content on or
through the Internet, including, without limitation, any on-line service such as
America Online, Compuserve, Prodigy and the Microsoft Network.
1.9 "Switchboard Content" means any Content owned or controlled by
Switchboard (but specifically excludes any Content provided by CBS or a CBS
Affiliate).
1.10 "Switchboard Site" means the Internet website owned by Switchboard
that: (a) provides an online, interactive directory which allows users to search
for, among other things, residential listing information, business listing
information and advertisements, email addresses and websites (it being
understood that the website is and shall remain principally and predominantly a
directory); and (b) is accessed via the domain name www.switchboard.com, and,
upon consummation of this Agreement, www.cbs.switchboard.com or
www.cbsswitchboard.com (or a reasonable variation thereof to be mutually agreed
on by the parties hereto).
1.11 "Person" means any natural person, legal entity, or other organized
group of persons or entities. (All pronouns whether personal or impersonal,
which refer to Persons include natural persons and other Persons.)
2. LICENSE
2.1 CBS grants to Switchboard, during the term of this Agreement and
subject to the terms and conditions contained herein, the non-exclusive right
and license to use the CBS Marks together with the SWITCHBOARD mark in
connection with identifying, marketing and promoting the Switchboard Site but
only to the extent that CBS has the right to use the CBS Marks. Nothing in this
Agreement grants Switchboard ownership or other rights in or to the CBS Marks,
except in accordance with and to the extent of this license.
2.2 Switchboard's exercise of the rights granted herein shall conform to
the restrictions or requirements set forth in the CBS License Guidelines
(attached hereto as Exhibit "A"), as such License Guidelines may be amended or
revised from time to time by CBS, to reflect any changes in the (a) rules or
regulations that govern CBS or Switchboard or (b) business, practice, procedures
or policies of CBS or Switchboard.
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2.3 During the term of this Agreement, any Content displayed on the
Switchboard Site shall be subject to any restrictions or requirements set forth
in the CBS License Guidelines. Notwithstanding the foregoing, CBS shall have
the right to demand the withdrawal from the Switchboard Site of any Content (or
any link to Content) which in CBS's sole opinion conflicts with, interferes with
or is detrimental to CBS's interests, reputation or business or which might
subject CBS to unfavorable regulatory action, violate any law, infringe the
rights of any Person, or subject CBS to liability for any reason. Upon notice
from CBS to withdraw the Content concerned, Switchboard shall cease using any
such Content on the Switchboard Site as soon as commercially and technically
feasible, but in any event within two (2) business days after the date of CBS's
notice.
2.4 During the term of this Agreement, Switchboard shall not, without
CBS's prior written approval advertise, promote or market in any media now known
or hereafter developed, including the Internet, any CBS Competitor, except that:
(a) Switchboard may display a Local Competitor Ad on the Switchboard
Site in response to a user's location-specific search for a business, provided
that: (i) such searched location is within the purview of a designated market
area ("DMA") which would permit the broadcast of such Local Competitor Ad; and
(ii) such Local Competitor Ad is displayed within the geographic parameters of
the user's search. "Local Competitor Ad", in this paragraph, means any
advertisement for the product(s) or service(s) of a CBS Competitor which,
pursuant to CBS policy may be broadcast on a local CBS owned or affiliated
television or radio station (i.e. broadcast to a local audience) but which may
not be broadcast on the CBS Television Network pursuant to CBS policy. If there
is no CBS owned or affiliated television or radio station in the DMA concerned,
then the applicable standard (with respect to the display of a Local Competitor
Ad on the Switchboard Site) shall be that of the nearest DMA to the searched
location.
(b) Switchboard may promote a CBS Competitor in printed (i.e. hard
copy) press releases or marketing or promotional materials solely in connection
with the solicitation of merchants on a Competitor Merchant Roster. "Competitor
Merchant Roster", in this paragraph, means the list of merchants targeted by a
CBS Competitor and Switchboard for the purpose of promoting the sale of local
merchant advertisements, websites and related services on the Switchboard Site.
(c) In connection with the directory feature/function of the
Switchboard Site, Switchboard may display/include the name, address, email
address or phone number of a CBS Competitor.
(d) In connection with the web search feature/function on the
Switchboard Site, Switchboard may display the website URL of a CBS Competitor.
2.5 Upon expiration or termination of this Agreement, Switchboard shall
immediately cease all use of the CBS Marks in connection with the name and
operation of the Switchboard Site or otherwise. In connection with the above,
Switchboard shall immediately remove or erase the CBS Marks from the Switchboard
Site as soon as commercially and technically practicable, given customary
Internet business practices, but in no event shall any such material remain on
the Switchboard Site more than five (5) days after expiration or termination, as
applicable, and at CBS's request, Switchboard shall furnish CBS with certified
evidence of such removal or erasure satisfactory to CBS.
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<PAGE>
3. TERM
3.1 The term of this Agreement shall begin on June 30, 1999 and shall
continue in full force and effect for a period of ten (10) consecutive years,
through and including June 30, 2009, unless it is terminated earlier in
accordance with the terms and conditions contained herein.
3.2 The parties shall discuss in good faith, for a period of three (3)
months, the extension of the term of this Agreement no later than immediately
prior to the end of the ninth year of the term (i.e. June 30, 2008, or
thereabouts).
4. PROCEDURES
4.1 (a) CBS shall deliver to Switchboard a copy of each CBS Mark in the
form in which such Mark may be used by Switchboard on the Switchboard Site.
Switchboard acknowledges that the CBS Marks are trademarks owned or controlled
by CBS Corporation or an Affiliate thereof and that all uses by Switchboard of
such CBS Marks shall inure to CBS's benefit. Switchboard shall maintain CBS
quality standards with respect to its use of the CBS Marks, and otherwise use
the CBS Marks subject to any restrictions or requirements disclosed by CBS
(including any requirements/restrictions delineated in the CBS License
Guidelines), reasonably deemed necessary by CBS to protect CBS's tradename,
Marks or reputation. All materials bearing the CBS Marks shall be subject to
CBS's prior written approval (subject to subparagraph 4.2(b) below).
(b) In the event that during the term of this Agreement Switchboard
shall create any proprietary right in any CBS Marks, as a result of the exercise
by Switchboard of any right granted to it hereunder, such proprietary right
(excluding any proprietary right in any mark owned by or licensed by third
parties to Switchboard) shall immediately vest in CBS and Switchboard shall be
authorized to use such new proprietary right as though same had specifically
been included in this Agreement.
(c) Notwithstanding anything to the contrary contained in subparagraph
4.1(b) above, CBS and Switchboard shall be joint owners and registrants of the
URLs cbsswitchboard.com or cbs.switchboard.com and/or other mutually agreed-on
URLs to be used on the Switchboard Site which incorporate the "CBS" and
"SWITCHBOARD" names (the "Joint URL(s)"). During the term of this Agreement,
the Joint URL(s) shall be used only in connection with the Switchboard Site,
including, without limitation, the identification, marketing and promotion
thereof. Upon expiration or termination of this Agreement, neither party shall
have the right to use or promote the Joint URL(s) or any other URL containing
the name or trademark of the other party.
(d) Following expiration of the term of this Agreement, provided that
this Agreement has not been earlier terminated by either party:
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<PAGE>
Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
(i) website users inputting a Joint URL which identified the
Switchboard Site during the term of this Agreement (the "Identifying URL")
will be routed (by Switchboard) automatically to the Switchboard Site;
and/or
(ii) (A) Switchboard shall pay CBS a royalty [**] during each
calendar quarter [**].
(B) "Gross Revenues", as used in this paragraph 4.1(d)(ii)(B),
shall mean gross operating revenues of Switchboard, its subsidiaries
and, to the extent of any dividends or other distributions paid to
Switchboard or its subsidiaries, any Person in which Switchboard or any
of its subsidiaries has an interest, derived from the Joint URL or
traffic therefrom, presented in accordance with generally accepted
accounting principles and, if applicable, based on revenues as reported
in the periodic quarterly and annual statements required by the
Securities and Exchange Commission, provided that Gross Revenues shall
not be reduced for royalties, commissions, fees or other expenses
incurred in generating such operating revenue. Sources of operating
revenue include, without limitation, advertising, sponsorship,
partnership/commerce, subscriptions and sales of products and services,
and shall include all monetary consideration and the fair market value
of non-monetary consideration. "Net Revenues" means Gross Revenues
after deduction of royalties, commissions, fees (paid to CBS, if
applicable, or to third parties unaffiliated with Switchboard or Banyan
Systems, Inc.), applicable taxes or other expenses in generating
operating revenue derived from the Joint URL or traffic which inputs
the Joint URL.
(e) Upon termination of this Agreement by either party in accordance
with its rights pursuant to Article 6, the following shall apply:
(i) For a period of thirty (30) days following termination,
Internet users who input the Identifying URL shall be automatically
forwarded (by Switchboard) to the Switchboard Site (the "Forwarding
Period"); and
(ii) Thereafter (i.e., after the Forwarding Period), Internet users
who input the Identifying URL will be automatically forwarded (by
Switchboard) to a screen (the "Splash Screen") that notifies the viewer
that: (i) CBS and Switchboard are no longer offering directory services on
a single website; (ii) directory services are currently available on the
Switchboard Site and a website identified by CBS; and (iii) Internet users
may choose the directory offered by Switchboard or the directory offered by
CBS. The parties shall mutually agree upon the copy, look and feel of the
Splash Screen.
4.2 (a) Switchboard shall not file any application in any country to
register a trademark which contains any CBS Marks, or is the same as, similar
to, or deceptive or misleading with respect to the CBS Marks or any other CBS
trademark in which CBS has prior rights. If any application for registration is
filed in any country by Switchboard in contravention of this paragraph 4.2, CBS
shall have the right to take appropriate action against Switchboard, including
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Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
seeking injunctive relief, to prohibit or otherwise restrain Switchboard's use
of the infringing party's use of the infringing mark.
(b) Switchboard shall furnish CBS proofs of all materials bearing any
CBS Marks (including, without limitation, advertising and publicity materials).
Switchboard will not authorize full scale production of any such material until
after obtaining CBS's written approval in each instance. Any changes in such
material shall also be subject to CBS's prior written approval. The preceding
three sentences will not apply to any press releases and/or promotional
literature the graphic and format of which have been previously approved.
(Notwithstanding the preceding sentence, any copy which identifies CBS and
describes the relationship between Switchboard and CBS, other than mutually
agreed-on tag language appearing at the end of each press release or the like
which language is non-contextual, shall be subject to CBS's prior approval.)
Any graphical variations to the Switchboard Site shall be subject to approval
only if or to the extent that such variations might affect the image/ integrity
of the CBS Marks. Approval by CBS shall not relieve Switchboard of any of its
warranties or obligations under this Agreement and, except as otherwise
expressly provided herein, all materials that bear any CBS Marks shall strictly
conform with the samples and proofs approved by CBS. Materials to be approved
by CBS shall be submitted to the Associate General Counsel, Contracts, Rights
and Development, CBS Law Department and/or such other person that may be
designated in writing by CBS. CBS will endeavor to respond to submission in a
timely manner, provided that Switchboard shall request CBS's approval in a
timely manner, i.e., reasonably in advance of the scheduled release date of the
material(s) concerned.
4.3 (a) Switchboard shall require any merchant included in the Switchboard
Site or with whom Switchboard establishes a link pursuant to a contract with
Switchboard, to represent and warrant that such merchant will abide/abides by
all applicable federal, state, local and foreign laws and regulations. The
foregoing shall apply only to merchant arrangements/ agreements entered into,
amended or extended (by action of either or both parties) on or after the
commencement date of the term hereof.
(b) If Switchboard becomes aware of any unauthorized or unlawful
activity by any merchant or advertiser linked to or exhibited on the Switchboard
Site, Switchboard will notify CBS of it and will take appropriate action
(including, without limitation, removing from the Switchboard Site, any Content
related to such activity as expeditiously as possible, in accordance with
paragraph 2.3 hereof).
4.4 In the event that Switchboard learns of any infringement, threatened
infringement, or passing off of the CBS Marks or that any Person claims or
alleges that the CBS Marks are liable to cause deception or confusion to the
public, then Switchboard shall notify CBS of the particulars thereof.
4A. [**]
4A.1 (a) During the term of this Agreement, [**] in the United States any
Internet Site that has as its primary function and theme the delivery of
directory information as follows: residential listings, business listings, email
addresses and/or websites.
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<PAGE>
Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
(b) For avoidance of doubt, the following are not within the express
terms of the prohibition described in subparagraph 4A.1(a) above:
(i) any activity [**] as of the execution date of this Agreement;
(ii) any activity [**] and [**] television or radio station;
(iii) any Internet services or websites [**] as of the execution
date of this Agreement;
(iv) any use of any [**] source of any content.
5. WARRANTIES; REPRESENTATIONS; INDEMNITIES
5.1 (a) CBS represents and warrants that:
(i) it has full power and authority to enter into this Agreement.
(ii) it is the sole and exclusive owner of the United States
trademark registrations attached hereto as Exhibit "C".
(iii) to the best of its knowledge, use of the CBS Marks in
accordance with the license granted herein will not infringe upon the rights
of any third party.
(b) Switchboard represents, warrants and covenants that:
(i) it owns, controls or has license to and will continue to own,
control or have license to all right, title, and interest in and to the
Switchboard Site, and all Intellectual Property Rights therein, necessary to
carry out its obligations hereunder.
(ii) it is has the full power and authority to enter into and fully
perform this Agreement.
(iii) the Switchboard Site, any Switchboard Site Content and any
Content developed or furnished by Switchboard hereunder and the use thereof
shall not violate any law or, to the best of Switchboard's knowledge and
belief, infringe upon or violate any rights (including, without limitation,
any database right) of any Person (provided that the forgoing representation
and warranty shall not apply to the trademarks listed on Exhibit B, Schedule
3.12, Subschedule (a) to the Common Stock and Warrant Purchase Agreement).
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<PAGE>
(iv) the Switchboard Site will be produced, advertised,
distributed, transmitted and licensed in accordance with all applicable
federal, state, local and foreign laws and regulations and in a manner that
will not adversely affect CBS's business in a material way.
5.2 Each party (the "Indemnifying Party") shall at all times indemnify,
hold harmless and defend the other party (collectively, the "Indemnified Party")
from and against any loss, cost, liability or expense (including court costs and
reasonable attorneys' fees) arising out of or resulting from any breach or
alleged breach by the Indemnifying Party of any representation, warranty,
covenant or agreement contained herein. In addition, Switchboard shall
indemnify, hold harmless and defend CBS from and against any loss, cost,
liability or expense (including court costs and reasonable attorneys' fees)
arising out of or resulting from third party claims of: (a) Switchboard's
withdrawal of Content from the Switchboard Site; and (b) Switchboard's
infringement (or alleged infringement) or violation (or alleged violation) of
any rights of any Person. In the event of any such claim, the Indemnified Party
shall: (i) promptly notify the Indemnifying Party of the claim; (ii) allow the
Indemnifying Party to direct the defense and settlement of such claim with
counsel of the Indemnifying Party's choosing; and (iii) provide the Indemnifying
Party, at the Indemnifying Party's expense, with information and assistance that
is reasonably necessary for the defense and settlement of the claim. The
Indemnified Party reserves the right to retain counsel, at the Indemnified
Party's sole expense, to participate in the defense of any such claim. The
Indemnifying Party shall not settle any such claim or alleged claim without
first obtaining the Indemnified Party's prior written consent, which consent
shall not be unreasonably withheld, if the terms of such settlement would
adversely affect the Indemnified Party's rights under this Agreement or
otherwise. If the Indemnifying Party assumes the defense and settlement of the
claim as set forth above, then the Indemnifying Party's only obligation is to
satisfy the claim, judgment or approved settlement.
5.3 Notwithstanding anything to the contrary contained herein, Switchboard
shall have no liability under this Agreement for Content provided by CBS or
Content owned by CBS and provided by a CBS affiliate (i.e., an independently
owned CBS television or radio station that carries CBS Television Network or CBS
Radio Network programming.)
6. REMEDIES
6.1 CBS shall have the right to terminate this Agreement if (any of the
following occurs):
(a) Switchboard breaches any material term or condition of this
Agreement and has failed to cure such breach within ten (10) business days after
written notice thereof. The foregoing cure period shall not apply where a
specific cure period is provided herein.
(b) Either Switchboard or Banyan Systems, Inc. ("Banyan") breaches any
material term or condition of:
(i) the Advertising and Promotion Agreement of even date by and
among Switchboard, Banyan Systems, Inc. ("Banyan") and CBS (the "Ad and
Promotion
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<PAGE>
Agreement") and has failed to cure such breach in accordance with the
applicable cure and arbitration provisions therein; and/or
(ii) the Common Stock and Warrant Purchase Agreement, dated June 1,
1999, by and among Switchboard, Banyan and CBS (the "Common Stock and
Warrant Purchase Agreement") or any other Ancillary Agreement (as such term
is defined in the Common Stock and Warrant Purchase Agreement) and has
failed to cure such breach in accordance with the applicable cure period
therein and the arbitration provisions in the Ad and Promotion Agreement.
provided, however, that
CBS's right to terminate this Agreement pursuant to this Section shall not
apply to a breach by Switchboard or Banyan of the representation and
warranty set forth in subsection 7(b)(iii) of the Ad and Promotion Agreement
and the representation and warranty set forth in subparagraph 3.12(f) of the
Common Stock and Warrant Purchase Agreement.
(c) Switchboard: (i) becomes insolvent or unable to pay its debts as
they mature or makes an assignment for the benefit of its creditors; (ii) is the
subject of a voluntary petition in bankruptcy or any voluntary 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, (iii) becomes the subject of any 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; or
(iv) is liquidated or dissolved.
(d) Switchboard issues to a CBS Competitor or actively participates in
the acquisition by a CBS Competitor, in any one transaction or series of
transactions, of a number of voting securities of Switchboard such that after
such issuance or acquisition or series of issuances or acquisitions, such CBS
Competitor beneficially owns or controls, directly or indirectly, nine percent
(9%) or more of the outstanding shares of Common Stock (as such term is defined
in the Ad and Promotion Agreement) or nine percent (9%) or more of the total
voting power of Switchboard.
(i) Notwithstanding the foregoing however, the provisions of this
subparagraph 6.1(d) shall not apply to a stockholder of Switchboard who
beneficially owns or controls, directly or indirectly, nine percent (9%) or
more of the outstanding shares of Common Stock or nine percent (9%) or more
of the total voting power of Switchboard, on an "as converted" basis, on the
day prior to the date of this Agreement until such stockholder beneficially
owns or controls, directly or indirectly, fifteen percent (15%) or more of
the outstanding shares of the Common Stock or fifteen percent (15%) or more
of the total voting power of Switchboard and such stockholder is a CBS
Competitor.
(ii) The parties hereby agree that Switchboard or Banyan may give
CBS confidential written notice of its intent to enter into an agreement
which would cause a stockholder to beneficially own or control, directly or
indirectly, nine percent (9%) or more of the outstanding shares of Common
Stock or nine percent (9%) or more of the total
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<PAGE>
Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
voting power of Switchboard, together with a description of the party with
whom Switchboard or Banyan intends to effect such a transaction, for the
purpose of ascertaining CBS's opinion whether, as of the date of the notice,
such party is a CBS Competitor. CBS shall have five (5) days from the
receipt of such notice to respond to Switchboard or Banyan. CBS's opinion
shall be based solely on the information provided to CBS in the notice and
CBS shall have no independent duty whatsoever to investigate or inquire
further. No opinion provided by CBS hereunder is or shall be deemed to be a
waiver of any right of CBS pursuant to this Article 6.
(e) Any CBS Competitor (other than a CBS Competitor who acquired shares
of Switchboard capital stock directly from CBS) beneficially owns or controls,
directly or indirectly, fifteen percent (15%) or more of the then-outstanding
shares of Common Stock (as such term is defined in the Ad and Promotion
Agreement) of Switchboard or fifteen percent (15%) or more of the total voting
power of Switchboard.
(f) For purposes of this Article 6.1: (i) the term "beneficial
ownership" shall have the meaning set forth in Section 13(d) of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder;
(ii) the term "total voting power" shall mean at any time , the total number of
votes that may be cast in the election of directors of Switchboard at any
meeting of the holders of voting securities at such time for such purpose; and
(iii) the term "voting securities" shall mean the Common Stock and any other
securities issued by Switchboard having the power to vote in the election of
directors of Switchboard, including without limitation any securities having
such power only upon the occurrence of a default or any other extraordinary
contingency.
CBS may exercise its right to terminate pursuant to this Article 6.1 by sending
Switchboard the appropriate notice.
6.2 Switchboard shall have the right to terminate this Agreement if (i) CBS
breaches any material term or condition of this Agreement, and fails to cure
such breach within [**] days after written notice thereof; or (ii) CBS breaches
any material term or condition of the Ad and Promotion Agreement and fails to
cure such breach in accordance with the applicable cure and arbitration
provisions therein. Switchboard may exercise its right to terminate by so
notifying CBS under the preceding sentence. In the event of such termination,
the following shall apply:
(a) (i) CBS [**] for each year [**] of the term of this Agreement; and
(ii) Switchboard shall have the right to terminate the rights and
obligations of the parties concerned, as set forth in Sections 9.2 through
9.6 of the Ad and Promotion Agreement.
6.3 No exercise by either party of its rights under this Article 6 will
limit such party's remedies by reason of the other party's default, the
terminating party's rights to exercise any other rights under this Agreement, or
any of the terminating party's other rights under any other agreement.
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<PAGE>
6.4 EXCEPT WITH RESPECT TO THIRD PARTY CLAIMS FOR WHICH EACH PARTY SHALL
FULLY INDEMNIFY THE OTHER (PURSUANT TO PARAGRAPH 5.2 ABOVE), IN NO EVENT SHALL
EITHER PARTY BE LIABLE HEREUNDER TO THE OTHER, OR TO ANY PARTY CLAIMING THROUGH
SUCH OTHER PARTY, FOR ANY CONSEQUENTIAL, SPECIAL, OR INDIRECT DAMAGES OR FOR ANY
LOSS OF PROFITS OR SALES, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT,
TORT, OR OTHERWISE, EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES OR LOSS.
6A. ACCOUNTINGS
6A.1 Switchboard will compute Net Revenues as of each March 31, June 30,
September 30 and December 31 for the prior three (3) months. Within forty-five
(45) days after the calendar quarterly period, Switchboard will send CBS a
statement covering Net Revenues and will pay CBS CBS's share of Net Revenues
due. Acceptance by CBS of any statement or payment shall not preclude CBS from
challenging the accuracy thereof.
6A.2 Switchboard will maintain accurate books and records which report the
recognition of Net Revenues. CBS may, at its own expense, examine and copy
those books and records, as provided in this paragraph. CBS may make those
examinations only during Switchboard's usual business hours, and at the place
where it keeps the books and records. Such books and records shall be kept at
the Switchboard office in Westboro, Massachusetts, unless otherwise notified.
CBS will be required to notify Switchboard at least ten (10) days before the
date of planned examination.
7. GENERAL
7.1 No party may assign this Agreement, or their respective rights and
obligations hereunder, in whole or in part, without each other party's prior
written consent. Any attempt to assign this Agreement without such consent
shall be void and of no effect. Notwithstanding the foregoing, a party hereto
may assign this Agreement or any of its rights and obligations hereunder to any
entity controlling, controlled by or under common control with such party, or to
any entity that acquires such party by purchase of stock or by merger or
otherwise, or by obtaining substantially all of such party's assets (a
"Permitted Assignee"), provided that any such Permitted Assignee, or any
division thereof, (i) is not a CBS Competitor and (ii) thereafter succeeds to
all of the rights and is subject to all of the obligations of the assigning
party under this Agreement.
7.2 Each party hereto irrevocably submits to the exclusive jurisdiction of
(a) the Supreme Court of the State of New York, New York County; and (b) the
United States District Court for the Southern District of New York, for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby or thereby. Each party hereto shall
commence any such action, suit or proceeding either in the United States
District Court for the Southern District of New York or if such suit, action or
other proceeding may not be brought in
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<PAGE>
such court for jurisdictional reasons, in the Supreme Court of the State of New
York, New York County. Service of any process, summons, notice or document by
U.S. registered mail to a party's address set forth below shall be effective
service of process for any action, suit or proceeding in New York with respect
to any matters to which it has submitted to jurisdiction in this paragraph 7.2.
Each party hereto irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (i) the Supreme Court of the State of
New York, New York County; or (ii) the United States District Court for the
Southern District of New York, and hereby and thereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in any inconvenient forum.
7.3 Each party shall comply in all material respects with all laws and
regulations applicable to its activities under this Agreement.
7.4 If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any Person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other Persons or circumstances.
7.5 All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or sent, postage
prepaid, by registered, certified or express mail or reputable overnight courier
service and shall be deemed given when so delivered by hand, or if mailed, three
days after mailing (one business day in the case of express mail or overnight
courier service), as follows:
(a) if to Switchboard,
Switchboard Incorporated
115 Flanders Road
Westboro, Massachusetts 01581
Attention of President
with a copy to:
Switchboard Incorporated
115 Flanders Road
Westboro, Massachusetts 01581
Attention of General Counsel
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<PAGE>
(b) if to CBS Corporation,
CBS Corporation
51 West 52nd Street
New York, New York 10019
Attention of Chief Financial Officer.
with copies to:
CBS Corporation
51 West 52nd Street
New York, New York 10019
Attention of General Counsel
7.6 The parties to this Agreement are independent contractors. There is no
relationship of partnership, joint venture, employment, franchise, or agency
between the parties. No party shall have the power to bind any other party or
incur obligations on any other party's behalf without such other party's prior
written consent.
7.7 The waiver by any party of a breach or default of any provision of this
Agreement by any other party shall not be construed as a waiver of any
succeeding breach of the same or any other provision, nor shall any delay or
omission on the part of any party to exercise or avail itself of any right,
power or privilege that it has, or may have hereunder, operate as a waiver of
any right, power or privilege by such party.
7.8 This Agreement, including any agreement incorporated herein by
reference, and any Exhibits hereto or thereto, contains 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. No party shall be liable or bound to any other party in any
manner by any representations, warranties or covenants relating to such subject
matter except as specifically set forth herein.
7.9 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 entirely within such State, without regard to the conflicts of law
principles of such State.
7.10 This Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any Person, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.
7.11 This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each party and delivered
to each other party.
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7.12 This Agreement may not be amended except by an instrument in writing
singed on behalf of each party hereto. By an instrument in writing CBS or
Switchboard, as the case may be, may waive compliance by the other party with
any term or provision of this Agreement that CBS or Switchboard, as the case may
be, was or is obligated to comply with or perform.
7.13 The headings contained in this Agreement or in any Exhibit or Schedule
hereto are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All Exhibits and Schedules annexed
hereto or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any capitalized terms used in any
Schedule or Exhibit but not otherwise defined therein, shall have the meaning as
defined in this Agreement. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
Switchboard Incorporated CBS Corporation
By: /s/ Dean Polnerow By: /s/ Fredric G. Reynolds
----------------------------- ----------------------------------
Name: Dean Polnerow Name: Fredric G. Reynolds
----------------------------- ----------------------------------
Title: President Title: Chief Financial Officer
----------------------------- ----------------------------------
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EXHIBIT A
(Attached to and forming a part of the Agreement, made as of June 30, 1999
between CBS Corporation and Switchboard Inc.)
- --------------------------------------------------------------------------------
CBS LICENSE GUIDELINES AND RESTRICTIONS
---------------------------------------
I. GENERAL
1. The Switchboard Site shall not include the following Content (nor
establish links from the Site to the following Content): (i) cigarettes,
(ii) hard liquor, (iii) massage parlors, (iv) abortion clinics, (v) firearms
and ammunition, (vi) head shops, (vii) lotteries, (viii) gambling, (ix)
sexually explicit content, (x) Content that contains profanity, (xi) Content
that denigrates a particular group based on gender, race, creed, religion,
sexual preference or handicap and (xii) any advertisements (covering a
particular product, issue or service) proscribed by the CBS Television
Network Advertising Guidelines attached hereto as Exhibit D ("Proscribed
Content").
2. Notwithstanding anything to the contrary in this Agreement, including
without limitation, the CBS License Guidelines and Restrictions, as same may
be updated from time to time upon written notice to Switchboard, and any
further requirements or restrictions which CBS may impose in accordance with
its rights under this Agreement, the following shall not be deemed a breach
of this Agreement:
(a) In connection with the directory feature/function of the
Switchboard Site, Switchboard's display/inclusion of the name, address,
email address or phone number of a Person which is engaged in a
business related to Proscribed Content;
(b) Switchboard may display a Permissible Local Ad on the Switchboard
Site in response to a user's location specific search for a business,
provided that: (i) such searched location is within the purview of a
designated market area ("DMA") which would permit the broadcast of such
Permissible Local Ad; and (ii) such Permissible Local Ad is displayed
within the geographic parameters of the user's search. "Permissible
Local Ads" in this paragraph means any advertisement for the product(s)
or service(s) which, pursuant to CBS policy may be broadcast on a local
CBS owned or affiliated television or radio station (i.e. broadcast to
a local audience) but which would be deemed Proscribed Content if
advertised on the CBS Television Network pursuant to CBS policy. If
there is no CBS owned or affiliated television or radio station in the
DMA concerned, then the applicable standard (with respect to the
display of a Permissible Local Ad on the Switchboard Site) shall be
that of the nearest DMA to the searched location.
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<PAGE>
(c) In connection with the web search feature/function on the
Switchboard Site, the display of web site URLs related to Proscribed
Content (e.g., pornography), provided that, upon CBS's request in each
instance, Switchboard shall place a warning page between the search
page and the initial results page (based on mutually agreed-on
keywords), which warning page alerts the viewer: (i) of the type of
Content appearing in the upcoming pages (e.g., "adult language"); (ii)
that the Switchboard Site is not the sender of the information; (iii)
that by proceeding forward, the viewer has chosen to receive the
information, (iv) that the viewer may choose not to proceed and (v) any
other related notices that CBS may require (the "Warning Page"). CBS
and Switchboard will consult each other on an ongoing basis with
respect to the insertion of Warning Pages. (The foregoing paragraph
shall not limit CBS's rights under paragraph 2.3 of this Agreement.)
(d) If Switchboard links to an Internet website that exhibits
Proscribed Content, provided that: (i) the Proscribed Content
represents an insignificant portion or aspect of such website; and (ii)
Switchboard derives no revenues or other financial benefit from such
Proscribed Content. For avoidance of doubt, "financial benefit from
Proscribed Content" includes the realization (or accrual) of any
revenue from page views of Proscribed Content or advertisements
displayed on website pages containing Proscribed Content. The foregoing
shall not be deemed an implied right to link to Content that violates
any law or infringes the rights of any Person. (This subparagraph (d)
shall not limit CBS's rights under paragraph 2.3 of this Agreement.)
(e) Placement by Switchboard Site users of Proscribed Content on
personal web pages, bulletin boards or other places on the Switchboard
Site where users are permitted by Switchboard to place personal
content, provided that Switchboard will remove any such Content if
requested by any Person who claims its, his or her rights are being
infringed.
II. TRADEMARKS
Switchboard shall place a trademark notice to be furnished by CBS on all
items or materials utilizing CBS Marks. CBS shall provide Switchboard with
the manner, style and placement of such notice, which shall be deemed
incorporated into this Section.
III. CROSS-LINKS
Except as set forth in Section I, paragraph 2. above, Switchboard shall not
establish any links from the Switchboard Site to, or authorize any links to
the Switchboard Site from, any gambling, pornography, obscenity Content or
Content covering abortion clinics.
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EXHIBIT B
(Attached to and forming a part of the Agreement, made as of June 30, 1999
between CBS Corporation and Switchboard Inc.)
CBS Marks
[Eye Logo] CBS
CBS
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EXHIBIT C
(Attached to and forming a part of the Agreement, made as of June 30, 1999
between CBS Corporation and Switchboard Inc.)
- --------------------------------------------------------------------------------
UNITED STATES TRADEMARK REGISTRATIONS
-------------------------------------
(To be produced)
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EXHIBIT D
(Attached to and forming a part of the Agreement, made as of June 30, 1999
between CBS Corporation and Switchboard Inc.)
- --------------------------------------------------------------------------------
CBS
TELEVISION
NETWORK
ADVERTISING
GUIDELINES
(To be provided)
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EXHIBIT 10.5
------------
WARRANT PURCHASE AGREEMENT
--------------------------
This Warrant Purchase Agreement (this "Agreement") dated as of June 1, 1999
is entered into by and between Banyan Systems Incorporated, a Massachusetts
corporation (the "Company"), and CBS Corporation, a Pennsylvania corporation
(the "Purchaser").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Sale of Securities.
------------------
1.1 Securities. Subject to the terms and conditions of this
Agreement, at the Closing (as defined below), Banyan will sell and issue to the
Purchaser, and the Purchaser will purchase from Banyan a warrant to purchase
250,000 shares of Common Stock, $.01 par value per share, of (the "Common
Stock") in the form attached hereto as Exhibit A (the "Warrant"), for the
consideration set forth in Section 1.2 of this Agreement (the "Purchase Price").
1.2 Purchase Price. The Purchase Price is two hundred fifty thousand
dollars ($250,000) and shall be paid as set forth on Schedule 1.2 attached
hereto.
2. The Closing.
-----------
(a) The closing (the "Closing") of the sale and purchase of the
Warrant under this Agreement shall occur simultaneously with and at the same
place as the closing of the transactions contemplated by the Common Stock and
Warrant Purchase Agreement of even date herewith among Switchboard Incorporated,
Banyan and the Purchaser (the "Switchboard Purchase Agreement"). The date of
the Closing is hereinafter referred to as the "Closing Date."
(b) At the closing:
(i) Banyan shall deliver (or cause to be delivered) to the
Purchaser the various certificates, instruments and documents required to
be so delivered by Banyan pursuant to Section 7.2 of this Agreement.
(ii) The Purchaser shall deliver (or cause to be delivered) to
Banyan the various certificates, instruments and documents required to be
so delivered by the Purchaser pursuant to Section 7.3 of this Agreement.
<PAGE>
(iii) Banyan shall deliver to the Purchaser the Warrant being
purchased at the Closing by the Purchaser, registered in the name of the
Purchaser.
3. Representations of Banyan. Except as disclosed by Banyan in Exhibit B
hereto, Banyan hereby represents and warrants to the Purchaser that the
statements contained in this Section 3 are true, complete and correct as of the
date of this Agreement. Exhibit B shall be organized into sections
corresponding with the sections of this Section 3 and the disclosure in any
section of Exhibit B shall be deemed to qualify (i) the corresponding section of
this Section 3 and (ii) other sections of this Section 3 to the extent it is
clearly apparent (notwithstanding the absence of a specific cross reference)
from a reading of such disclosure that such disclosure is applicable to such
other sections.
3.1 Organization and Standing. Banyan is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has the corporate power and authority to
conduct its business as presently conducted and as presently proposed to be
conducted by it and to enter into and perform this Agreement and to carry out
the transactions contemplated by this Agreement.
3.2 Issuance of Warrant. The issuance, sale and delivery of the
Warrant in accordance with this Agreement, and the issuance and delivery of the
shares of Common Stock issuable upon exercise of the Warrant (the "Warrant
Shares"), have been duly authorized by all necessary corporate action on the
part of Banyan, and all such Warrant Shares have been duly reserved for
issuance. The Warrant Shares, when issued upon exercise of the Warrant
following payment of the exercise price therefor, will be duly and validly
issued, fully paid and nonassessable.
3.3 Authority for Agreement; No Conflict. The execution, delivery
and performance by Banyan of this Agreement, and the consummation by Banyan of
the transactions contemplated hereby has been duly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by Banyan
and constitutes a valid and binding obligation of Banyan enforceable in
accordance with its terms, subject as to enforcement of remedies to applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
similar laws affecting generally the enforcement of creditors' rights and
subject to a court's discretionary authority with respect to the granting of a
decree ordering specific performance or other equitable remedies. The execution
of and performance of the transactions contemplated by this Agreement and
compliance with its provisions by Banyan will not (a) conflict with or
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violate any provision of the Articles of Organization or By-laws of Banyan, (b)
other than as may be required by the Hart-Scott-Rodino Antitrust Improvements
Act ("HSR Act"), require on the part of Banyan any filing with, or any permit,
authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency (each of the foregoing is hereafter referred to as a
"Governmental Entity"), (c) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest (as
defined below) or other arrangement to which Banyan is a party or by which
Banyan is bound or to which its assets are subject, (d) result in the imposition
of any Security Interest upon any assets of Banyan or (e) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Banyan or
any of its properties or assets, other than any of the foregoing events listed
in clauses (c), (d) or (e) of this Section 3.3 that would not have a material
adverse effect on the business, assets or financial condition of Banyan (a
"Banyan Material Adverse Effect"). For purposes of this Agreement, "Security
Interest" means any mortgage, pledge, security interest, encumbrance, charge, or
other lien (whether arising by contract or by operation of law) other than (i)
mechanic's, materialmen's, and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, (iii) liens on goods in transit incurred pursuant to documentary
letters of credit, and (iv) statutory liens with respect to current taxes not
yet due and payable.
3.4 Governmental Consents. Except as may be required by the HSR Act,
no consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any Governmental Entity is required on
the part of Banyan in connection with the execution and delivery by Banyan of
this Agreement, the offer, issuance, sale and delivery of the Warrant, the
issuance and delivery of the Warrant Shares or the other transactions to be
consummated at the Closing, as contemplated by this Agreement, except such
filings as shall have been made prior to and shall be effective on and as of the
Closing and such filings required to be made after the Closing under applicable
federal and state securities laws, and except any filings that, if not made as
required, would not have a Banyan Material Adverse Effect. Based on the
representations made by the Purchaser in Section 4 of this Agreement, the offer
and sale of the Warrant to the Purchaser will be in compliance with applicable
federal and state securities laws.
3.5 Reports and Financial Statements. Banyan has previously
furnished to the Purchaser complete and accurate copies, as amended or
supplemented, of its (a) Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1999, as filed with the Securities and Exchange Commission, (the
"Commission"), and
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(b) Annual Report on Form 10-K for the fiscal year ended December 31, 1998, as
filed with the Commission (such reports are collectively referred to herein as
the "Banyan Reports"). As of their respective dates, the Banyan Reports did 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, in
light of the circumstances under which they were made, not misleading. The
audited financial statements and unaudited interim financial statements of
Banyan included in the Banyan Reports (i) comply in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission with respect thereto, (ii) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby (except as may be indicated therein or in
the notes thereto, and in the case of quarterly financial statements, as
permitted by Form 10-Q under the Securities Exchange Act of 1934, as amended),
and (iii) fairly present the consolidated financial condition, results of
operations and cash flows of Banyan as of the respective dates thereof and for
the periods referred to therein.
3.6 Litigation. There is no action, suit or legal proceeding, or
governmental inquiry or investigation, pending against Banyan, or, to Banyan's
knowledge, threatened against, Banyan which questions the validity of this
Agreement or the right of Banyan to enter into this Agreement.
3.7 Absence of Certain Changes. Except as disclosed in the Banyan
Reports, since December 31, 1998, there has been no material adverse change in
the business, assets or financial condition of Banyan, other than changes
occurring in the ordinary course of business.
3.8 Undisclosed Liabilities. Banyan has no liability (whether
absolute, accrued, contingent or otherwise) of a nature required by GAAP to be
shown on a balance sheet which is material to Banyan, except for (i) liabilities
reflected in the Banyan Reports, (ii) liabilities which have arisen since March
31, 1999 in the ordinary course of business and (iii) contractual liabilities
incurred in the ordinary course of business.
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4. Representations of the Purchaser. Except as disclosed by the
Purchaser in Exhibit B-3 hereto, the Purchaser hereby represents and warrants to
Banyan that the statements contained in this Section 4 are true, complete and
correct as of the date of this Agreement. Exhibit B-3 shall be organized into
sections corresponding with the sections of this Section 4 and the disclosure in
any section of Exhibit B-3 shall be deemed to qualify (i) the corresponding
section of this Section 4 and (ii) other sections of this Section 4 to the
extent it is clearly apparent (notwithstanding the absence of a specific cross-
reference) from a reading of such disclosure that such disclosure is applicable
to such other sections.
4.1 Investment. The Purchaser is acquiring the Warrant and the
Warrant Shares 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, the Purchaser has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness or commitment providing for
the disposition thereof. The Purchaser is an "accredited investor" as defined
in Rule 501(a) under the Securities Act of 1933, as amended (the "Securities
Act").
4.2 Experience. The Purchaser is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Warrant and the Warrant Shares. The
Purchaser has been furnished with and has had access to such information as the
Purchaser considered necessary to make a determination as to the purchase of the
Warrant and the Warrant Shares.
4.3 Organization and Standing. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the corporate power and authority to
conduct its business as presently conducted by it and to enter into and perform
this Agreement and to carry out the transactions contemplated by this Agreement.
4.4 Authority for Agreement; No Conflict. The execution, delivery
and performance by the Purchaser of this Agreement, and the consummation by the
Purchaser of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by the Purchaser and constitutes a valid and binding
obligation of the Purchaser enforceable in accordance with its terms, subject as
to enforcement of remedies to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws affecting generally the
enforcement of creditors' rights and subject to a court's discretionary
authority with respect to the granting of a decree ordering specific performance
or other equitable remedies. The execution of and
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performance of the transactions contemplated by this Agreement and compliance
with its provisions by the Purchaser will not (a) conflict with or violate any
provision of the Articles of Incorporation or By-laws of the Purchaser, (b)
other than as may be required by the HSR Act, require on the part of the
Purchaser any filing with, or any permit, authorization, consent or approval of,
any Governmental Entity, (c) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest or
other arrangement to which the Purchaser is a party or by which the Purchaser is
bound or to which its assets are subject, (d) result in the imposition of any
Security Interest upon any assets of the Purchaser or (e) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the
Purchaser or any of its properties or assets, other than any of the foregoing
events listed in clause (c), (d) or (e) of this Section 4.4 that would not have
a material adverse effect on the ability of the Purchaser to perform its
obligations under this Agreement (a "Purchaser Material Adverse Effect").
4.5 Governmental Consents. Except as may be required by the HSR
Act, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental Entity
is required on the part of the Purchaser in connection with the execution and
delivery by the Purchaser of this Agreement, except such filings as shall have
been made prior to and shall be effective on and as of the Closing, and except
any filings that, if not made as required, would not have a Purchaser Material
Adverse Effect.
4.6 Litigation. There is no action, suit or legal proceeding, or
governmental inquiry or investigation, pending against the Purchaser or, to the
Purchaser's knowledge, threatened against the Purchaser which questions the
validity of this Agreement or the right of the Purchaser to enter into this
Agreement, or which would have a Purchaser Material Adverse Effect.
5. Reservation of Common Stock. Banyan will at all times reserve and
keep available, solely for issuance and delivery upon the exercise of the
Warrant, such number of Warrant Shares and other stock, securities and property,
as from time to time shall be issuable upon the exercise of the Warrant.
6. Transfer of Warrant. Neither the Warrant nor any interest therein
is transferable in any respect.
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7. Conditions to Closing.
---------------------
7.1 Conditions to Each Party's Obligation. The obligation of
Purchaser to purchase the Warrant and the obligation of Banyan to sell and issue
the Warrant shall be subject to the satisfaction prior to (or, in the case of
the condition set forth in Section 7.1(d) of this Agreement, simultaneously
with) the Closing of the following conditions:
(a) HSR Act Waiting Period. Any waiting period (and any extension
thereof) under the HSR Act applicable to any of the transactions contemplated
hereby shall have expired or been earlier terminated.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other legal restraint or prohibition
preventing or materially restricting or altering the consummation of the
transactions contemplated by this Agreement shall be in effect; provided,
however, that the provisions of this Section 7.1(b) shall not be available to
any party that has directly or indirectly solicited or encouraged any such
order, injunction or other restraint or prohibition.
(c) Government Action. There shall not be any pending action by or
before any governmental authority challenging or seeking to restrain or prohibit
or materially alter the consummation of the transactions contemplated by this
Agreement in any material respect or seeking to obtain any damages from the
Purchaser or Banyan in connection with the transactions contemplated by this
Agreement; provided, however, that the provisions of this Section 7.1(c) shall
not be available to any party that has directly or indirectly solicited or
encouraged any such action.
(d) Switchboard Purchase Agreement. The closing of the transactions
contemplated by the Switchboard Purchase Agreement shall occur simultaneously
with the Closing.
7.2 Additional Conditions to Purchaser's Obligations.niN The
obligations of the Purchaser to purchase the Warrant at the Closing are subject
to the fulfillment to its satisfaction, on or prior to the Closing Date, of the
following conditions, any of which may be waived by the Purchaser in its sole
discretion:
(a) Representations and Warranties Correct; Performance of
Obligations. The representations and warranties of Banyan set forth in Section 3
shall be true and correct in all respects as of the Closing Date as though made
as of the Closing Date (other than those made as of a particular date, which
shall be true and correct in all respects as of such date), except in each case
for such failures of representations and warranties to be true and correct (i)
as the result of changes expressly contemplated by this Agreement, and (ii) that
would not have a Banyan Material Adverse Effect (it being agreed that the clause
(ii) shall be inapplicable to any portion of a representation and warranty which
already contains a Banyan Material
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Adverse Effect or other materiality qualification or, if an entire
representation and warranty is so qualified, to all of such representation and
warranty), and the Purchaser shall have received a certificate signed by an
authorized officer of Banyan attesting to the foregoing. Banyan shall have
performed or complied in all material respects with all obligations and
conditions herein required to be performed or observed by it.
(b) Consents and Waivers. Banyan shall have obtained in a timely
fashion any and all consents, permits and waivers necessary for consummation of
the transactions contemplated by this Agreement, other than any which if not
obtained or effected would not reasonably be expected to have a Banyan Material
Adverse Effect.
(c) Certificates and Documents. Banyan shall have delivered to the
--------------------------
Purchaser:
(i) the Articles of Organization of Banyan, as amended and in
effect as of the Closing Date, certified as of a recent date
by the Secretary of State of the Commonwealth of
Massachusetts;
(ii) certificates, as of a recent date, as to the corporate good
standing of Banyan issued by the Secretary of State of the
Commonwealth of Massachusetts;
(iii) by-laws of Banyan, certified by its Clerk or Assistant
Clerk as of the Closing Date; and
(iv) copies of the resolutions of Banyan's Board of Directors
authorizing the transactions contemplated by this Agreement,
certified by its Clerk or Assistant Clerk as of the Closing
Date.
(d) Opinion of Counsel. The Purchaser shall have received an opinion
from the Company's counsel in form and substance of Exhibit C.
7.3 Additional Conditions to Banyan's Obligations.nN The obligations
of Banyan to sell and issue the Warrant at the Closing are subject to the
fulfillment to its satisfaction on or prior to the Closing Date, of the
following conditions, any of which may be waived by Banyan in its sole
discretion:
(a) Representations and Warranties Correct. The representations and
warranties of the Purchaser set forth in Section 4 shall be true and correct in
all respects as of the Closing Date as though made as of the Closing Date (other
than those made as of a particular date, which shall be true and correct in all
respects as of such date),
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except in each case for such failures of representations and warranties to be
true and correct (i) as the result of changes expressly contemplated by this
Agreement, and (ii) that would not have a Purchaser Material Adverse Effect (it
being agreed that the clause (ii) shall be inapplicable to any portion of a
representation and warranty which already contains a Purchaser Material Adverse
Effect or other materiality qualification or, if an entire representation and
warranty is so qualified, to all of such representation and warranty), and
Banyan shall have received a certificate signed by an authorized officer of the
Purchaser attesting to the foregoing. The Purchaser shall have performed or
complied in all material respects with all obligations and conditions herein
required to be performed or observed by it.
(b) The Company shall have received an opinion from the Purchaser's
counsel substantially in form and substance of Exhibit D.
8. Indemnification
---------------
8.1 Indemnification by Banyan. Banyan shall indemnify the Purchaser
and its affiliates and their respective officers, directors, employees, agents
and representatives against, and hold them harmless from, any loss, liability,
claim, damage or expense (including reasonable legal fees and expenses)
("Losses"), actually incurred by them, as incurred (payable promptly upon
written request), arising from, in connection with or otherwise with respect to:
(a) any breach of any representation or warranty of Banyan contained
in this Agreement or in the closing certificate delivered at the Closing
pursuant to Section 7.2(a); and
(b) any breach of any covenant of Banyan contained in this Agreement.
8.2 Indemnification by Purchaser. The Purchaser shall indemnify
Banyan and its affiliates and their respective officers, directors, employees,
agents and representatives against, and hold them harmless from, any Losses,
actually incurred by them, as incurred (payable promptly upon written request),
arising from, in connection with or otherwise with respect to:
(a) any breach of any representation or warranty of the Purchaser
contained in this Agreement or in the closing certificate delivered at the
closing pursuant to Section 7.3(a); and
(b) any breach of any covenant of the Purchaser contained in this
Agreement.
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8.3 Calculation of Losses. The amount of any Loss for which
indemnification is provided under this Section 8 shall be calculated net of any
amounts actually recovered by the indemnified party under insurance policies
with respect to such Loss and shall be (i) increased to take account of any net
tax cost incurred by the indemnified party arising from the receipt of indemnity
payments hereunder (grossed up for such increase) and (ii) reduced to take
account of any net tax benefit realized by the indemnified party arising from
the incurrence or payment of any such Loss. In computing the amount of any such
tax cost or tax benefit, the indemnified party shall be deemed to recognize all
other items of income, gain, loss deduction or credit before recognizing any
item arising from the receipt of any indemnity payment hereunder or the
incurrence or payment of any indemnified Loss.
8.4 Termination of Indemnification. The obligations to indemnify and
hold harmless any party, pursuant to this Section 8, shall terminate upon the
second anniversary of the Closing Date; provided, however, that such obligations
to indemnify and hold harmless shall not terminate with respect to any item as
to which the person to be indemnified shall have, before such anniversary date,
previously made a claim by delivering a notice of such claim (stating in
reasonable detail the basis of such claim) pursuant to Section 8.5 to the party
to be providing the indemnification.
8.5 Procedures.
-----------
(a) In order for a party (the "indemnified party"), to be entitled to
any indemnification provided for under this Agreement in respect of, arising out
of or involving a claim made by any person against the indemnified party (a
"Third Party Claim"), such indemnified party must notify the indemnifying party
in writing of the Third Party Claim promptly following receipt by such
indemnified party of written notice of the Third Party Claim; provided, however,
that failure to give such notification shall not affect the indemnification
provided hereunder except to the extent the indemnifying party shall have been
actually prejudiced as a result of such failure. Thereafter, the indemnified
party shall deliver to the indemnifying party, promptly following the
indemnified party's receipt thereof, copies of all notices and documents
(including court papers) received by the indemnified party relating to the Third
Party Claim and not also addressed to the indemnifying party.
(b) If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party; provided, however, that such counsel is not reasonably
objected to by the indemnified party. Should the indemnifying party so elect to
assume the defense of a Third Party Claim, the indemnifying party shall not be
liable to the indemnified party for any legal expenses subsequently incurred by
the indemnified party in connection with the defense thereof. If the
indemnifying party assumes such defense, the
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indemnified party shall have the right to participate in the defense thereof and
to employ counsel, at its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the fees and
expenses of counsel employed by the indemnified party for any period during
which the indemnifying party has not assumed the defense thereof. If the
indemnifying party chooses to defend or prosecute a Third Party Claim, all the
indemnified parties shall cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the indemnifying party's
request) the provision to the indemnifying party of records and information that
are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the indemnifying
party assumes the defense of a Third Party Claim, the indemnified party shall
not admit any liability with respect to, or settle, compromise or discharge,
such Third Party Claim without the indemnifying party's prior written consent
(which consent shall not be unreasonably withheld). If the indemnifying party
assumes the defense of a Third Party Claim, the indemnified party shall agree to
any settlement, compromise or discharge of a Third Party Claim that the
indemnifying party may recommend and that by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the indemnified party completely in
connection with such Third Party Claim and that would not otherwise adversely
affect the indemnified party. Notwithstanding the foregoing, the indemnifying
party shall not be entitled to assume the defense of any Third Party Claim (and
shall be liable for the fees and expenses of counsel incurred by the indemnified
party in defending such Third Party Claim) if the Third Party Claim seeks an
order, injunction or other equitable relief or relief for other than money
damages against the indemnified party that the indemnified party reasonably
determines, after conferring with its outside counsel, would reasonably be
expected to have a material adverse effect on the assets, business, financial
condition of results of operations of the indemnified party and cannot be
separated from any related claim for money damages; provided, however, that the
indemnifying party will not be bound by any determination in such Third Party
Claim so defended by the indemnified party, or any compromise or settlement
effected without its consent. If such equitable relief or other relief portion
of the Third Party Claim can be so separated from that for money damages, the
indemnifying party shall be entitled to assume the defense of the portion
relating to money damages.
(c) Other Claims. In the event any indemnified party has a claim
against any indemnifying party under Section 8.1 or 8.2 that does not involve a
Third Party Claim being asserted against or sought to be collected from such
indemnified party, the indemnified party shall deliver notice of such claim with
reasonable promptness to the indemnifying party. The failure by any indemnified
party so to notify the indemnifying party shall not relieve the indemnifying
party from any
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liability that it may have to such indemnified party under Section 8.1 or 8.2,
except to the extent the indemnifying party shall have been actually prejudiced
as a result of such failure. If the indemnifying party does not notify the
indemnified party within 30 calendar days following its receipt of such notice
that the indemnifying party disputes its liability to the indemnified party
under Section 8.1 or 8.2, such claim specified by the indemnified party in such
notice shall be conclusively deemed a liability of the indemnifying party under
Section 8.1 or 8.2 and the indemnifying party shall pay the amount of such
liability to the indemnified party on demand or, in the case of any notice in
which the amount of the claim (or any portion thereof) is estimated, on such
later date when the amount of such claim (or such portion thereof) becomes
finally determined. If the indemnifying party has timely disputed its liability
with respect to such claim, as provided above, the indemnifying party and the
indemnified party shall proceed in good faith to negotiate a resolution of such
dispute and, if not resolved through negotiations, any party may commence
litigation in an appropriate court of competent jurisdiction.
8.6 Survival of Representations. The representations and warranties
contained in this Agreement and in the closing certificates delivered at the
closing pursuant to Sections 7.2(a) and 7.3(a) shall survive the Closing and
shall terminate at the close of business two years following the Closing Date.
8.7 Limitations.
-----------
(a) Except with respect to claims based on actual fraud, from and
after the Closing, the rights of the indemnified parties under this Section 8
shall be the sole and exclusive remedies of the indemnified parties and their
respective affiliates with respect to claims resulting from or relating to any
actual or alleged breach of representation or warranty or failure to perform any
covenant contained in this Agreement or otherwise relating to the transactions
that are the subject of this Agreement. Without limiting the generality of the
foregoing, in no event shall Banyan or the Purchaser, their successors or
permitted assigns, be entitled to claim or seek rescission of the transactions
consummated under this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the aggregate liability of Banyan for the sum of all Losses under
this Section 8 shall not exceed $250,000.
(c) In no event shall any indemnifying party be responsible and liable
for any Losses or other amounts under this Section 8 that are consequential,
incidental, in the nature of lost profits, diminution in value, damage to
reputation or the like, special or punitive or otherwise not actual Losses.
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9. Termination.
-----------
9.1 Termination of Agreement. This Agreement shall terminate prior
------------------------
to the Closing as provided below:
(a) the parties may terminate this Agreement by mutual written
consent;
(b) this Agreement shall terminate simultaneously with the termination
of the Switchboard Purchase Agreement in accordance with the terms thereof.
9.2 Effect of Termination. If this Agreement terminates pursuant
to Section 9.1 of this Agreement, all obligations of the parties hereunder shall
terminate without any liability of any party to the other parties.
10. Miscellaneous.
-------------
10.1 HSR Act Filings. Each of the parties shall promptly file (or
cause to be filed) any Notification and Report Forms and related material that
it may be required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the HSR Act, shall use
commercially reasonable efforts to obtain an early termination of the applicable
waiting period, and shall make any further filings or information submissions
pursuant thereto that may be necessary, proper or advisable; provided, however,
that no party shall be required to divest any of their respective businesses or
assets, or to take or agree to take any other action or agree to any limitation
that would reasonably be expected to have a material adverse effect on such
party's business, assets or financial condition.
10.2 Expenses. Each party shall pay its own fees and expenses in
connection with the preparation and evaluation of this Agreement and the other
agreements contemplated hereby and the closing of the transactions contemplated
hereby and thereby.
10.3 Brokers. Banyan and the Purchaser will indemnify and save the
other 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 by this Agreement asserted by any
person on the basis of any agreement, statement or representation alleged to
have been made by such indemnifying party.
10.4 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.
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10.5 Specific Performance. In addition to any and all other
remedies that may be available at law in the event of any breach of this
Agreement, each party shall be entitled to specific performance of the
agreements and obligations hereunder and to such other injunctive or other
equitable relief as may be granted by a court of competent jurisdiction.
10.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York (without
reference to the conflicts of law provisions thereof).
10.7 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 Banyan, at 120 Flanders Road, Westboro, MA 01581, Attention: Chief
Financial Officer, or at such other address or addresses as may have been
furnished in writing by Banyan to the Purchaser, with a copy to Hale and Dorr
LLP, 60 State Street, Boston, MA 02109 Attention: Mark G. Borden, Esq.;
If to the Purchaser, at CBS Corporation, 51 West 52nd Street, New York, NY
10019, Attention: Chief Financial Officer, or at such other address or addresses
as may have been furnished to Banyan in writing by the Purchaser, with a copy to
CBS Corporation, 51 West 52nd Street, New York, NY 10019, Attention: General
Counsel.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
10.8 Complete Agreement. This Agreement (including its Exhibits) and
the Other Agreements constitute 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.
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10.9 Amendments and Waivers. Except as otherwise expressly set
forth in this Agreement, 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 Banyan and the Purchaser. 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.
10.10 Pronouns. Whenever the context may require, any pronouns used
in this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa.
10.11 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 shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.
10.12 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.
10.13 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Neither party may assign its respective rights or obligations
under this Agreement without the prior written consent of the other party
hereto.
[signatures on following page]
-15-
<PAGE>
Executed as of the date first written above.
BANYAN:
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
---------------------------------
Name: Richard M. Spaulding
Title: Vice President and Chief Financial
Officer
PURCHASER:
CBS CORPORATION
By: /s/ Frederic G. Reynolds
----------------------------------
Name: Frederic G. Reynolds
Title: Executive VP and Chief Financial
Officer
(signature page to warrant purchase agreement)
-16-
<PAGE>
SCHEDULE 1.2
Payment of Purchase Price
-------------------------
The Purchase Price of two hundred fifty thousand dollars ($250,000) shall
be paid, in the discretion of the Purchaser, by one of the following three
methods:
(i) the Purchaser shall arrange for the placement of advertising and
promotion of Banyan in the Placement Possibilities and the Available
Placement Types set forth below, with an aggregate value of two
hundred and fifty thousand dollars ($250,000) (with prices of
advertising determined on the same basis as in the Advertising and
Promotion Agreement);
(ii) the Purchaser shall purchase from Banyan an amount of information
technology services (of the type described on Annex 1.2-I attached to
this Schedule 1.2) sufficient for Banyan to realize a Margin (as
defined in this Schedule 1.2) of two hundred and fifty thousand
dollars ($250,000); or
(iii) a combination of the foregoing clauses (i) and (ii) which has an
aggregate value of two hundred and fifty thousand dollars ($250,000).
The Purchaser shall make the election described in this Schedule 1.2 by
delivering to Banyan written notice thereof pursuant to Section 10.7 of the
Agreement within 30 days of the date of the Agreement. The obligation of the
Purchaser to pay the Purchase Price is a binding obligation of the Purchaser.
As used in this Schedule 1.2, the term "Margin" shall mean the difference
between the price(s) agreed upon by Banyan and the Purchaser for any information
technology service(s) to be performed by Banyan pursuant to Section 1.2 of the
Agreement and this Schedule 1.2 and Banyan's cost to perform the applicable
service(s).
To the extent that the Purchaser elects pursuant to this Schedule 1.2 to
constitute the Purchase Price in whole or in part with the purchase from Banyan
of information technology services, the Margin shall apply to all services
performed by or on behalf of Banyan during the period ending one year after the
date of the Agreement. For purposes of this Schedule 1.2, "performance" shall
include services which are contracted for by the Purchaser during the period
ending one year after the date of the Agreement but are not performed or
completed by Banyan within that period for reasons which are attributable to the
Purchaser. Notwithstanding the foregoing, the terms and conditions to govern
any services performed by Banyan for the Purchaser shall be governed by a
separate Services Agreement which shall be substantially in the form attached to
this Schedule 1.2 as Annex 1.2-II.
1.2(a)-1
<PAGE>
PLACEMENT POSSIBILITIES
1. CBS Television Network programming
2. CBS Owned and Operated (a) Television and (b) Radio Stations programming
3. CBS outdoor billboards
4. CBS Internet Sites
5. CBS Cable
AVAILABLE PLACEMENT TYPES:
- -- 30 second units, where available
- -- 15 second units, where available
- -- 10 second units, where available
- -- URL Scrolls (5 seconds)
- -- On-air mention (15 seconds)
- -- Banner ads (10 seconds), buttons and sponsorships
- -- Credit rolls/sign-offs (5 seconds)
1.2(a)2
<PAGE>
EXHIBIT 10.6
------------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE (THE "WARRANT
SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED
UNDER THE ACT. THE WARRANT SHARES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT (I) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT, OR (II) IN COMPLIANCE WITH THE
LIMITATIONS OF RULE 144 UNDER THE ACT, OR (III) PURSUANT TO AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION OR COMPLIANCE IS
NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS EXERCISE ARE ALSO
SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT.
Warrant No. BNYN-CBS-#1 Number of Shares: 250,000
(subject to adjustment)
Date of Issuance: June 30, 1999
BANYAN SYSTEMS INCORPORATED
Common Stock Purchase Warrant
-----------------------------
Banyan Systems Incorporated, a Massachusetts corporation (the "Company"),
for value received, hereby certifies that CBS Corporation, a Pennsylvania
corporation (the "Registered Holder"), is entitled, subject to the terms set
forth below, to purchase from the Company, at any time or from time to time on
or after the date of issuance and on or before June 30, 2000 at not later than
5:00 p.m. (Boston, Massachusetts time), 250,000 shares of Common Stock, $.01 par
value per share, of the Company, at a per share purchase price of $11.27. The
shares purchasable upon exercise of this Warrant, and the purchase price per
share, each as adjusted from time to time pursuant to the provisions of this
Warrant, are hereinafter referred to as the "Warrant Shares" and the "Purchase
Price," respectively.
<PAGE>
1. Exercise.
--------
(a) This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the purchase form appended hereto
as Exhibit I duly executed by the Registered Holder or by the Registered
Holder's duly authorized attorney, at the principal office of the Company, or at
such other office or agency as the Company may designate, accompanied by payment
(by wire transfer) in full, in lawful money of the United States, of the
Purchase Price payable in respect of the number of Warrant Shares purchased upon
such exercise.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day (the "Exercise
Date") on which this Warrant shall have been surrendered to the Company as
provided in subsection 1(a) above. At such time, the Registered Holder shall be
deemed to have become the holder or holders of record of the Warrant Shares.
(c) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 15 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder (upon payment by the Registered Holder of any applicable
transfer taxes):
(i) a certificate or certificates for the whole number of duly
authorized, validly issued, fully paid and non-assessable Warrant Shares to
which the Registered Holder shall be entitled upon such exercise plus, in lieu
of any fractional share to which the Registered Holder would otherwise be
entitled, cash in an amount determined pursuant to Section 3 hereof; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the number of such shares purchased by the Registered
Holder upon such exercise.
2. Adjustments.
-----------
(a) General. The Purchase Price shall be subject to adjustment from
time to time pursuant to the terms of this Section 2.
(b) Recapitalizations. If outstanding shares of the Company's Common
Stock shall be subdivided into a greater number of shares or a dividend in
Common Stock shall be paid in respect of Common Stock, the Purchase Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of
-2-
<PAGE>
Common Stock shall be combined into a smaller number of shares, the Purchase
Price in effect immediately prior to such combination shall, simultaneously with
the effectiveness of such combination, be proportionately increased.
(c) Mergers, etc. If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a change in par value
or a subdivision or combination as provided for in subsection 2(b) above), or
any consolidation or merger of the Company with or into another corporation, or
a transfer of all or substantially all of the assets of the Company, then, as
part of any such reorganization, reclassification, consolidation, merger or
sale, as the case may be, lawful provision shall be made so that the Registered
Holder shall have the right thereafter to receive upon the exercise hereof the
kind and amount of shares of stock or other securities or property which such
Registered Holder would have been entitled to receive if, immediately prior to
any such reorganization, reclassification, consolidation, merger or sale, as the
case may be, such Registered Holder had held the number of shares of Common
Stock which were then purchasable upon the exercise of this Warrant. In any
such case, appropriate adjustment (as reasonably determined in good faith by the
Board of Directors of the Company) shall be made in the application of the
provisions set forth herein with respect to the rights and interests thereafter
of the Registered Holder, such that the provisions set forth in this Section 2
(including provisions with respect to adjustment of the Purchase Price) shall
thereafter be applicable, as nearly as is reasonably practicable, in relation to
any shares of stock or other securities or property thereafter deliverable upon
the exercise of this Warrant.
(d) Adjustment in Number of Warrant Shares. When any adjustment is
required to be made in the Purchase Price pursuant to Section 2(c), the number
of Warrant Shares purchasable upon the exercise of this Warrant shall be changed
to the number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such adjustment,
by (ii) the Purchase Price in effect immediately after such adjustment.
(e) Certificate of Adjustment. When any adjustment is required to be
made pursuant to this Section 2, the Company shall promptly mail to the
Registered Holder a certificate setting forth the Purchase Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. Such certificate shall also set forth the kind and amount of stock
or other securities or property into which this Warrant shall be exercisable
following such adjustment.
3. Fractional Shares. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the fair market value per share of
Common Stock, based on the last sale price on the Exercise Date.
-3-
<PAGE>
4. Requirements for Transfer. Neither this Warrant nor any interest
-------------------------
herein is transferrable in any respect.
5. No Impairment. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate, including such action as may be necessary or
appropriate in order that the Company may validly and legally issue or sell
fully paid and non-assessable Warrant Shares upon exercise of this Warrant, in
order to protect the rights of the holder of this Warrant against impairment.
6. Notices of Record Date, etc. In case:
---------------------------
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right; or
(b) of any capital reorganization of the Company, any reclassification
of the Common Stock of the Company, any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the surviving entity), or any transfer of all or substantially
all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder a notice specifying, as the case may be, (i) the record date
for such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be mailed at least ten (10) days
prior to the record date or effective date for the event specified in such
notice.
-4-
<PAGE>
7. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant. All Warrant
Shares shall be duly authorized and, when issued upon such exercise, shall be
validly issued, fully paid and non-assessable and free and clear of all
preemptive rights, and free from all taxes, liens and other charges with respect
to the issue thereof by the Company. The Company will take all actions as may
be necessary to assure that the Warrant Shares issued upon a valid exercise
hereof may be issued by the Company without violation of any law or regulation,
or of any requirement of any domestic securities exchange upon which any capital
stock of the Company may be listed.
8. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
9. Mailing of Notices, etc. All notices and other communications from
the Company to the Registered Holder shall be mailed by first-class certified or
registered mail, postage prepaid, to the address last furnished to the Company
in writing by the Registered Holder. All notices and other communications from
the Registered Holder or in connection herewith to the Company shall be mailed
by first-class certified or registered mail, postage prepaid, to the Company at
120 Flanders Road, Westboro, MA 01581, Attn: Chief Financial Officer, with a
copy to Hale and Dorr LLP, 60 State Street, Boston, MA 02109, Attn: Mark G.
Borden, Esq. If the Company should at any time change the location of its
principal office to a place other than as set forth below, it shall give prompt
written notice to the Registered Holder and thereafter all references in this
Warrant to the location of its principal office at the particular time shall be
as so specified in such notice.
10. No Rights as Stockholder. Until the exercise of this Warrant, the
Registered Holder shall not have or exercise any rights by virtue hereof as a
stockholder of the Company.
11. Change or Waiver. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
12. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the Registered Holder hereof
(in the case of a breach by the
-5-
<PAGE>
Company), or the Company (in the case of a breach by the Registered Holder), may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including, but not limited to, an action for damages as a result
of any such breach and/or an action for specific performance of any such
covenant or agreement contained in this Warrant.
13. Headings. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
14. Governing Law. This Warrant will be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts (without reference
to the conflicts of law provisions thereof).
15. Waiver of Jury Trial. THE COMPANY AND THE REGISTERED HOLDER WAIVE THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON.
[signatures on following page]
-6-
<PAGE>
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
----------------------------------------
Name: Richard M. Spaulding
Title: Vice President and Chief Financial
Officer
ATTEST:
/s/ Dean Polnerow
- -------------------------
(signature page to Banyan warrant)
-7-
<PAGE>
EXHIBIT I
---------
PURCHASE FORM
-------------
To: Banyan Systems Incorporated Dated:
120 Flanders Road ------------
Westboro, MA 01581
Attn: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase _____ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________, representing the full purchase price for such shares at the price
per share provided for in such Warrant. Such payment takes the form of $______
in lawful money of the United States.
Signature:
-----------------------------
Address:
-----------------------------
-----------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 19,960 15,160
<SECURITIES> 42,626 7,128
<RECEIVABLES> 18,013 24,309
<ALLOWANCES> 3,102 2,917
<INVENTORY> 950 890
<CURRENT-ASSETS> 77,523 45,302
<PP&E> 40,633 40,559
<DEPRECIATION> 36,105 35,609
<TOTAL-ASSETS> 89,805 56,210
<CURRENT-LIABILITIES> 31,342 35,053
<BONDS> 0 0
0 0
0 3
<COMMON> 242 208
<OTHER-SE> 54,650 18,188
<TOTAL-LIABILITY-AND-EQUITY> 89,805 56,210
<SALES> 38,285 35,889
<TOTAL-REVENUES> 38,285 35,889
<CGS> 16,150 10,382
<TOTAL-COSTS> 37,357 36,482
<OTHER-EXPENSES> 240 453
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 66 33
<INCOME-PRETAX> 5,145 (173)
<INCOME-TAX> 226 223
<INCOME-CONTINUING> 4,919 (396)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,919 (396)
<EPS-BASIC> 0.25 (0.02)
<EPS-DILUTED> 0.19 (0.02)
</TABLE>
